seventh circuit. glickenhaus & co. v ... -...

Glickenhaus & Co. v. Household Intern., Inc., 787 F.3d 408 (2015)

Fed. Sec. L. Rep. P 98,527

© 2016 Thomson Reuters. No claim to original U.S. Government Works. 1

787 F.3d 408United States Court of Appeals,

Seventh Circuit.

GLICKENHAUS & COMPANY, et al.,on behalf of themselves and all others

similarly situated, Plaintiffs–Appellees,v.

HOUSEHOLD INTERNATIONAL,INC., et al., Defendants–Appellants.

No. 13–3532.|

Argued May 29, 2014.|

Decided May 21, 2015.|

Rehearing Denied July 1, 2015.

SynopsisBackground: Investors brought class action for securitiesfraud under § 10(b) and Rule 10b-5, naming corporationand three top executives as defendants, and allegingmisrepresentation of corporation's consumer lendingpractices, loan delinquency rates, and earnings fromcredit-card agreements. The United States District Courtfor the Northern District of Illinois, Ronald A. Guzmán,J., entered judgment on jury's verdict awarding investors$2.46 billion.

Holdings: The Court of Appeals, Sykes, Circuit Judge,held that:

[1] evidence did not show that leakage model preparedby investors' expert witness on loss causation adequatelyaccounted for possibility of firm-specific, nonfraud-related information;

[2] corporate insiders who lack ultimate authority to makestatements are not makers of misrepresentations;

[3] error in failing to instruct jury about requirement ofultimate authority to make statements was prejudicial tocorporation's chief executive officer (CEO); and

[4] preliminary interrogatory, to determine whether toallow discovery to rebut presumption of reliance underfraud on the market theory, was proper.

Reversed and remanded.

West Headnotes (25)

[1] Securities RegulationManipulative, Deceptive or Fraudulent

Conduct

For a securities fraud claim under Rule10b-5, the plaintiff must prove: (1) amaterial misrepresentation or omission bythe defendants; (2) scienter; (3) a connectionbetween the misrepresentation or omissionand the purchase or sale of a security;(4) reliance upon the misrepresentation oromission; (5) economic loss; and (6) losscausation. Securities Exchange Act of 1934,§ 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. §240.10b–5.

1 Cases that cite this headnote

[2] Federal CourtsTaking case or question from jury;

judgment as a matter of law

The court of appeals reviews de novo thedenial of a motion for judgment as a matterof law (JMOL), and will reverse only if theevidence was legally insufficient for the jury tohave found as it did. Fed.Rules Civ.Proc.Rule50(a)(1), 28 U.S.C.A.


[3] Federal CourtsNew Trial, Rehearing, or

Reconsideration

The court of appeals reviews the denial of amotion for a new trial for abuse of discretion.


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[4] Federal Civil ProcedureGrounds

Federal Civil ProcedureWeight of evidence

On a motion for new trial, a new trial isappropriate if the jury's verdict is against themanifest weight of the evidence or if the trialwas in some way unfair to the moving party.


[5] Federal CourtsInstructions

Jury instructions are reviewed de novo to testwhether they fairly and accurately stated thelaw.

Cases that cite this headnote

[6] Federal Civil ProcedureInstructions

A new trial is warranted, based oninstructional error, only if the instructionalerror caused prejudice.


[7] Federal CourtsDepositions and discovery

The court of appeals reviews discovery rulingsfor abuse of discretion.


[8] Securities RegulationCausation; existence of injury

To prove loss causation, as element ofsecurities fraud claims under § 10(b) and Rule10b-5, investors had the burden to establishthat the price of the securities they purchasedwas inflated, that is, it was higher than itwould have been without the false statements,and it declined once the truth was revealed.Securities Exchange Act of 1934, § 10(b), 15U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.



A plaintiff's causal losses are measured,for purposes of loss causation element forsecurities fraud claims under § 10(b) and Rule10b-5, by the amount the share price wasinflated when he bought the stock minusthe amount it was inflated when he sold it.Securities Exchange Act of 1934, § 10(b), 15U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.



In order to prove loss causation in a securitiesfraud action under § 10(b) and Rule 10b-5,plaintiffs need to isolate the extent to which adecline in stock price is due to fraud-relatedcorrective disclosures and not other factors.Securities Exchange Act of 1934, § 10(b), 15U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.


[11] Securities RegulationPresumptions and burden of proof

Securities RegulationQuestions of law or fact; jury questions

When a leakage model, positing a gradualexposure of fraud rather than full andimmediate disclosure, is offered to showthe loss causation element of securitiesfraud under § 10(b) and Rule 10b-5, ifplaintiffs' expert testifies that no firm-specific,nonfraud-related information contributed todecline in stock price during relevant timeperiod and explains in nonconclusory termsthe basis for this opinion, then it is reasonableto expect defendants to shoulder the burdenof identifying some significant, firm-specific,nonfraud-related information that could haveaffected the stock price, and if they cannot,then the leakage model can go to the jury,but if they can, then the burden shifts back

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to plaintiffs to account for that specificinformation or provide a loss-causation modelthat does not suffer from the same problem.Securities Exchange Act of 1934, § 10(b), 15U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.


[12] Securities RegulationWeight and Sufficiency

Evidence did not show that leakagemodel prepared by investors' expert witnesson loss causation, positing a gradualexposure of fraud rather than full andimmediate disclosure, adequately accountedfor possibility that firm-specific, nonfraud-related information may have affected declinein corporation's stock price during relevanttime period, in securities fraud action under§ 10(b) and Rule 10b-5; expert merelyprovided a general statement that firm-specific, nonfraud-related information wasinsignificant. Securities Exchange Act of 1934,§ 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. §240.10b–5.


[13] Securities RegulationIn general; control persons

The rule that the maker of a statement,for purposes of liability for securities fraudunder Rule 10b-5, is the person or entitywith ultimate authority over the statement,including its content and whether and howto communicate it, applies generally, not justto corporate outsiders, and thus, a corporateinsider who lacks ultimate authority over astatement is not a maker. 17 C.F.R. § 240.10b–5.


[14] Securities RegulationInstructions

Erroneous instruction, which failed to advisejury that corporation's top executives werenot makers of misrepresentations, as would be

required for executives' liability for securitiesfraud under Rule 10b-5, unless they hadultimate authority over the statements, wasnot prejudicial to corporation; corporationstipulated that it made the challengedstatements, and corporation was liable forstatements by employees who had apparentauthority to make them. 17 C.F.R. § 240.10b–5.


[15] Securities RegulationEmployers; respondeat superior

A corporation is liable for securities fraud,under § 10(b) and Rule 10b-5, for statementsby employees who have apparent authority tomake them. Securities Exchange Act of 1934,§ 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. §240.10b–5.



Securities RegulationInstructions

With respect to liability based onmisrepresentations in corporation's pressreleases, corporation's chief executive officer(CEO) was prejudiced by erroneousinstruction that failed to advise jury thatcorporation's top executives were not makersof misrepresentations, as would be requiredfor executives' liability for securities fraudunder Rule 10b-5, unless they had ultimateauthority over the statements; evidence didnot reflect that CEO's signature or nameappeared in press releases in the sense of anattribution, or that he actually delivered thestatements in the press releases himself, suchas by reading them at a press conference, orthat he had actually exercised control over thepress releases. 17 C.F.R. § 240.10b–5.


[17] Securities Regulation





































In general; control persons


Corporation's chief executive officer (CEO)was not prejudiced, with respect to liabilitybased on vice chairman's false statement to themedia, by erroneous instruction that failed toadvise jury that corporation's top executiveswere not makers of misrepresentations, aswould be required for executives' liabilityfor securities fraud under Rule 10b-5,unless they had ultimate authority overthe statements; evidence was presented thatCEO drafted the false statement in responseto growing protests about corporation'spredatory lending practices, that CEO sentthe statement to vice chairman, and that vicechairman read the statement verbatim to themedia. 17 C.F.R. § 240.10b–5.



A false statement can have multiple makers,under the rule that the maker of a statement,for purposes of liability for securities fraudunder Rule 10b-5, is the person or entitywith ultimate authority over the statement. 17C.F.R. § 240.10b–5.




Corporation's chief executive officer (CEO)was prejudiced, with respect to liabilitybased on chief financial officer's (CFO)false statements during investor relationsconference, by erroneous instruction thatfailed to advise jury that corporation'stop executives were not makers ofmisrepresentations, as would be requiredfor executives' liability for securities fraudunder Rule 10b-5, unless they had ultimateauthority over the statements; properly

instructed jury might conclude that CEO'spresence in the room during the conference,and his participation in question-and-answersession afterward, did not constitute ultimateauthority over CFO's false statements. 17C.F.R. § 240.10b–5.




Corporation's chief executive officer (CEO)was prejudiced, with respect to liability basedon false statements made by corporationin its press releases and by chief financialofficer (CFO) at investor relations conference,by erroneous instruction that failed toadvise jury that corporation's top executiveswere not makers of misrepresentations, aswould be required for executives' liabilityfor securities fraud under Rule 10b-5,unless they had ultimate authority over thestatements, though jury found that CEOwas control person for corporation, CFO,and vice chairman, as basis for CEO'ssecondary liability; proper instruction mighthave changed jury's apportionment of faultbetween CEO, corporation, CFO, and vicechairman, and CEO might be able to seekcontribution. Securities Exchange Act of1934, § 20(a), 15 U.S.C.A. § 78t(a); PrivateSecurities Litigation Reform Act of 1995,§ 101(b), 15 U.S.C.A. § 78u–4(f)(2)(A); 17C.F.R. § 240.10b–5.



Securities RegulationReliance

Securities RegulationPresumptions and burden of proof

Reliance on a misrepresentation, ortransaction causation, is an essential elementof a Rule 10b–5 action for securities fraud,






















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but a rebuttable presumption of relianceexists, under the fraud on the market theory,for anyone who purchased a security in anefficient market. 17 C.F.R. § 240.10b–5.


[22] Securities RegulationFraud on the market

To invoke the rebuttable presumption ofreliance under the fraud on the market theory,in a Rule 10b–5 action for securities fraud,a plaintiff must prove that: (1) the allegedmisrepresentations were publicly known; (2)they were material; (3) the stock traded inan efficient market; and (4) the plaintifftraded the stock between the time themisrepresentations were made and when thetruth was revealed. 17 C.F.R. § 240.10b–5.



The presumption of reliance under the fraudon the market theory, in a Rule 10b–5 actionfor securities fraud, can be rebutted by anyshowing that severs the link between thealleged misrepresentation and either the pricereceived or paid by the plaintiff, or his decisionto trade at a fair market price. 17 C.F.R. §240.10b–5.


[24] Federal Civil ProcedureNumber, Form and Importance

Securities RegulationFraud on the market

Preliminary interrogatory that district courtrequired all class members to answer inRule 10b–5 action for securities fraud, forpurposes of determining whether to allowdefendants to conduct discovery to determinewhether individual class members boughtor sold corporation's stock without relyingon integrity of market, as would rebutpresumption of reliance under fraud on

the market theory, properly asked classmembers whether they would have purchasedcorporation's stock if they had known thatprice was inflated, though defendants wouldhave preferred asking whether investorswould have purchased stock if they hadknown that statements made by defendantswere false; defendants' preferred phrasingwould have swept in too many class membersbecause some investors might have purchasedstock even if they had known the truth, butthey would not have paid the price they did,and these investors would have to answer“yes” to defendants' version of the question.17 C.F.R. § 240.10b–5.



If a defendant can show that a plaintiffwould have bought or sold the stock evenhad he been aware that the stock's price wastainted by fraud, then the fraud on the marketpresumption of reliance will not apply, ina Rule 10b–5 action for securities fraud. 17C.F.R. § 240.10b–5.


Attorneys and Law Firms

*412 Michael J. Dowd, Spencer Alan Burkholz, JosephD. Daley, Eric A. Isaacson, Attorney, Robbins GellerRudman & Dowd LLP, San Diego, CA, for Plaintiffs–Appellees.

Paul D. Clement, David Zachary Hudson, WilliamRanney Levi, Attorney, Bancroft PLLC, Washington,DC, Jason M. Hall, Attorney, Cahill, Gordon & Reindel,New York, N.Y., R. Ryan Stoll, Attorney, Skadden,Arps, Slate, Meagher & Flom LLP, Chicago, IL, forDefendants–Appellants.

Before BAUER, KANNE, and SYKES, Circuit Judges.




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Opinion

SYKES, Circuit Judge.

This securities-fraud class action was tried to a juryand produced an enormous judgment for the plaintiffs—

$2.46 billion, apparently one of the largest to date. 1 Thedefendants are Household International, Inc., and three of

its top executives. 2 They challenge the judgment on manygrounds, but their primary contention is that the plaintiffsfailed to prove loss causation. Proving this element takessophisticated expert testimony, and the plaintiffs hiredone of the best in the field.

*413 The defendants broadly attack the expert's loss-causation model. They also make the more modest claimthat his testimony did not adequately address whetherfirm-specific, nonfraud factors contributed to the collapsein Household's stock price during the relevant time period.This latter argument has merit, as we explain below.

The defendants also raise a claim of instructional errorunder Janus Capital Group, Inc. v. First Derivative Traders,––– U.S. ––––, 131 S.Ct. 2296, 180 L.Ed.2d 166 (2011),which clarified what it means to “make” a false statementin connection with the purchase or sale of a security. Thisclaim too has merit, but only for the three executives andonly for some of the false statements found by the jury.Household itself “made” all the false statements, as Janusdefined that term.

The remaining challenges fail. A new trial is warranted onthese two issues only. We remand for further proceedingsconsistent with this opinion.

I. Background

This case is complex and has a lengthy procedural historydating to 2002; retracing it would require a tome. Tosimplify, we'll start with the view from 10,000 feet and adddetails relevant to particular issues as needed.

Household's business centered on consumer lending—mortgages, home-equity loans, auto financing, and credit-card loans. In 1999 company executives implementedan aggressive growth strategy in pursuit of a higherstock price. Over the next two years, the stock price

rose dramatically, but the company's growth was drivenby predatory lending practices. This in turn increasedthe delinquency rate of Household's loans, which theexecutives then tried to mask with creative accounting.Their technique was to “re-age” delinquent loans todistort a popular metric that investors use to gauge thequality of loan portfolios: the percentage of loans thatare two or more months delinquent. Household alsoimproperly recorded the revenue from four credit-cardagreements, though it ultimately issued corrections inAugust 2002.

Between the summers of 1999 and 2001, Household'sstock rose from around $40 per share to the mid $60s,and by July of 2001 was trading as high as $69. Butthe reality of Household's situation eventually caughtup with its stock price. The truth came to light over aperiod of about a year through a series of disclosures thatbegan when California sued Household over its predatorylending. Other states also launched investigations andeventually collaborated in multi-state litigation. The so-called “disclosure period” culminated when Householdsettled the multi-state litigation for $484 million. Betweenthe filing of California's suit on November 15, 2001,and the multistate settlement on October 11, 2002,Household's stock dropped 54%, from $60.90 to $28.20.Comparatively, declines in the S & P 500 and S & PFinancials indexes during this period were 25% and 21%,respectively.

In 2002 the plaintiffs filed this securities-fraud class actionunder § 10(b) of the Securities Exchange Act of 1934,15 U.S.C. § 78j(b), and the Securities and ExchangeCommission's Rule 10b–5, 17 C.F.R. § 240.10b–5, allegingthat on numerous occasions Household and its executivesmisrepresented its lending practices, delinquency rates,and earnings from credit-card agreements. The partiesstipulated to class certification, and most issues weretried to a jury over a period of more than three weeks.Jurors were given 40 separate statements that the plaintiffsclaimed were actionable misrepresentations. For eachstatement they were asked to determine: *414 (1) whetherthe statement was actionable (that is, was it false ormisleading, material, and caused loss); (2) who amongthe four defendants was liable for it; (3) which of thethree bad practices the statement related to; and (4)whether the particular statement was made knowingly orrecklessly by each defendant. Of the 40 possibilities, the


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jury found 17 actionable misrepresentations and answeredthe remaining questions.

The jury was also asked to determine how muchHousehold's stock was overpriced due to themisrepresentations. The plaintiffs' expert presented twomodels for measuring stock-price inflation. Each modelgenerated a table that estimated inflation on any given dayduring the class period. The jury adopted one of the twomodels and used the figures from the corresponding tableto complete the special verdict. (We will have more to sayabout the loss-causation models later.)

This concluded Phase I of the proceedings. In PhaseII the parties addressed reliance issues and calculateddamages for individual class members. In the meantime,the defendants challenged the jury's verdict in a motion forjudgment as a matter of law, or alternatively, for a newtrial. See FED.R.CIV.P. 50(b). The district court deniedthe motions.

Some individual claims have yet to be resolved, but thedistrict court entered final judgment on claims totaling$2.46 billion, finding no just reason for delay. See FED.R. CIV. P. 54(b). This appeal followed.

II. Discussion

[1] The basic elements of a Rule 10b–5 claim arefamiliar. The plaintiffs had to prove “(1) a materialmisrepresentation or omission by the defendant [s]; (2)scienter; (3) a connection between the misrepresentationor omission and the purchase or sale of a security;(4) reliance upon the misrepresentation or omission; (5)economic loss; and (6) loss causation.” Halliburton Co. v.Erica P. John Fund, Inc., ––– U.S. ––––, 134 S.Ct. 2398,2407, 189 L.Ed.2d 339 (2014) (internal quotation marksomitted).

The issues on appeal cluster around three elements. First,and most prominently, the defendants attack the evidenceof loss causation. This argument has several layers, but ingeneral the defendants claim that the plaintiffs' evidenceof loss causation was legally insufficient, entitling them tojudgment as a matter of law, or at the very least a newtrial. Second, they argue that the district court incorrectlyinstructed the jury on what it means to “make” a falsestatement in violation of Rule 10b–5, also warranting a

new trial. Finally, they contend that discovery rulingsduring the Phase II proceedings deprived them of ameaningful opportunity to prove that class members didnot rely on the misrepresentations.

[2] [3] [4] [5] [6] [7] Different standards of reviewapply. We review de novo the denial of a motion forjudgment as a matter of law; we will reverse only if theevidence was legally insufficient for the jury to have foundas it did. Venson v. Altamirano, 749 F.3d 641, 646 (7thCir.2014); FED.R.CIV.P. 50(a)(1). We review the denialof a motion for a new trial for abuse of discretion. Venson,749 F.3d at 656. “A new trial is appropriate if the jury'sverdict is against the manifest weight of the evidence orif the trial was in some way unfair to the moving party.”Id. Jury instructions are reviewed de novo to test whetherthey fairly and accurately stated the law; a new trial iswarranted only if an instructional error caused prejudice.Burzlaff v. Thoroughbred Motorsports, Inc., 758 F.3d 841,846–47 (7th Cir.2014). We review discovery rulings forabuse of discretion. Thermal Design, Inc. v. Am. *415Soc'y of Heating, Refrigerating & Air–Conditioning Eng'rs,Inc., 755 F.3d 832, 837 (7th Cir.2012).

A. Loss Causation[8] [9] We begin, as the defendants do, with loss

causation. To prove this element of the claim, the plaintiffshad the burden to establish that the price of the securitiesthey purchased was “inflated”—that is, it was higher thanit would have been without the false statements—and thatit declined once the truth was revealed. See Dura Pharm.,Inc. v. Broudo, 544 U.S. 336, 342–44, 125 S.Ct. 1627,161 L.Ed.2d 577 (2005); Ray v. Citigroup Global Mkts.,Inc., 482 F.3d 991, 995 (7th Cir.2007) (“[P]laintiffs mustshow both that the defendants' alleged misrepresentationsartificially inflated the price of the stock and that thevalue of the stock declined once the market learned of thedeception.”). A plaintiff's causal losses are measured bythe amount the share price was inflated when he boughtthe stock minus the amount it was inflated when he soldit. See Dura Pharm., 544 U.S. at 342–44, 125 S.Ct. 1627.

It's very difficult to know exactly how much stock-priceinflation a false statement causes because it requiresknowing a counterfactual: what the price would have beenwithout the false statement. It's tempting to think thatinflation can be measured by observing what happens tothe stock immediately after a false statement is made.But that assumption is often wrong. For example, say the

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president of a company lies to the public about earnings(“We made $200 million more than we predicted thisyear!”) and immediately afterward the company's stockprice rises by $10. The new price could be inflated byexactly $10 if in reality the company had merely metexpectations and its stock price would have remained thesame had the president told the truth. Or the inflationcould be less than $10 if, say, the company really onlymade $100 million more than predicted and the stock pricewould have risen by only $5 had the president told thetruth. And the inflation might be significantly more than$10 if the company had actually made less than predictedand the stock price would have fallen had the truth beenknown.

Note too that a stock can be inflated even if the priceremains the same or declines after a false statementbecause the price might have fallen even more (e.g., “Weonly lost $100 million this year,” when actually losseswere $200 million). So the movement of a stock priceimmediately after a false statement often tells us very littleabout how much inflation the false statement caused.

The best way to determine the impact of a false statementis to observe what happens when the truth is finallydisclosed and use that to work backward, on theassumption that the lie's positive effect on the share priceis equal to the additive inverse of the truth's negativeeffect. (Put more simply: what goes up, must come down.)The plaintiffs hired an expert to do exactly that kindof financial analysis: Daniel R. Fischel, founder andpresident of Lexecon, an economics consulting firm, whoat the time also was Professor of Law and Business atNorthwestern University and Professor Emeritus at the

University of Chicago Law School. 3

Fischel prepared two economic models to quantify theimpact of the truth on Household's stock price. The partiescall *416 the simpler of the two the “specific disclosure”model. Fischel identified each major disclosure event andthen measured the disclosure's effect on the stock priceon that specific day. This process is more difficult thansimply observing how much the price declined; part ofthe decline may have been caused by market or industrytrends. To compensate for this, Fischel used regressionanalysis to generate a model that predicted the movementof Household's stock based on the movements in the S & P500 and the S & P Financials Index, an index of S & P 500companies in the same industry category as Household.

The effect of a disclosure event was calculated as the actualreturn on the day of the disclosure minus the predictedreturn (using the regression model and the broader marketreturns that day). The amount of inflation in the stockprice on any given day is then just the sum of the effects ofall subsequent disclosures of prior false statements.

To illustrate how the specific-disclosure model works,assume that on the day the world discovers that a companymisrepresented its earnings, its stock drops 5%. That sameday, however, the market dropped 2% (assume furtherthat the model predicts the company will follow themarket generally). The effect of the disclosure is then 3%.If the stock was trading at around $100, then for every dayprior to the disclosure, the stock was overpriced by $3. Ifthere was a second disclosure that also caused a $3 dropin price, then for every day prior to both disclosures, thestock was overpriced by $6.

In this case there were a total of 14 separate disclosureevents, and the net effect of these (some actually causedthe stock price to rise) was a decline of $7.97 in the stockprice. The final result of the expert's analysis was a largetable listing the amount Household's stock was overpricedon any given day during the class period, the maximumbeing $7.97.

One problem with the specific-disclosure model is that theinformation contained in a major disclosure event oftenleaks out to some market participants before its release. Ifthis happens, the model will understate the truth's effecton the price and thus the amount that the stock wasoverpriced before the truth became known. This is sobecause the specific-disclosure model only measures pricechanges on the identified disclosure days and not the effectof more gradual exposure of the fraud. For this reasonFischel provided a second model that the parties referto as the “leakage” model. This model calculates everydifference, both positive and negative, between the stock'spredicted returns (using the same regression analysisdescribed above) and the stock's actual returns during thedisclosure period. The total sum of these residual returnsis assumed to be the effect of the disclosures. The amountthe stock is overpriced on any given day is the sum of allsubsequent residual returns.

As with the specific-disclosure model, the expert's finalproduct using the leakage model was a table listing theseamounts. The total sum of the residual returns during the




class period was $23.94, so that figure was treated as aceiling. In other words, if on any given day the sum ofsubsequent residual returns exceeded this amount (dueto the ups and downs of the market), the number wasreplaced with $23.94. Although this model accounts forthe movement of the market generally, it does not accountfor company-specific information unrelated to fraud-corrective disclosures (more on this point in a moment).

The most important thing to understand about bothmodels is that they don't directly measure inflation causedby false *417 statements; instead they measure the valueof the truth. The models tell us that value even if no falsestatement is ever made because investors might not knowthe truth for reasons other than false statements (say, forexample, if earnings deteriorate before the company needsto report them). As soon as a lie is told, however, theinflation caused by the false statement becomes equal tothe value of the truth (as measured by the model) becausehad the statement been truthful, the stock price would

have done what it did do once the truth was revealed. 4

The jurors were given the tables from each model listingthe amount the stock was overpriced on each day duringthe class period (June 30, 1999 to October 11, 2002).They were also given a second table that covered thesame period but had blank spaces for each day. Theirtask was to fill in the amount the stock was overpriceddue to misrepresentations. To do so, they had to decidetwo things: (1) when the first actionable misrepresentationoccurred (the plaintiffs claimed there were 40); and (2)which model more accurately measured the effect ofdisclosures (i.e., the value of the truth). On any date priorto the first actionable misrepresentation, the jurors weretold to write a zero. On any date subsequent, they weretold to copy the number from the model they chose.

The jury followed these instructions perfectly. Ofthe 40 possibilities, the jury found 17 actionablemisrepresentations, the first of which occurred on March23, 2001. As instructed, the jurors found zero stock-priceinflation prior to that date. But starting on that datethey adopted and applied the leakage model. That modelestimated that the stock was overpriced by $23.94 onMarch 23, 2001, so the jury's table does too. The jury'stable thus goes from zero inflation on March 22 to $23.94worth of inflation on March 23.

The defendants argue that this is absurd. After all, therewere 40 possible misrepresentations, 17 of which werefound actionable, so how could a single false statementhave caused the entire $23.94 of inflation? They alsonote that Household's stock only went up $3.40 betweenMarch 22 and March 23, and the leakage model's inflationnumber only changed by $0.67 (remember, the modelonly adds on the residual return, which is actual returnminus predicted return). The defendants intimate thatthe March 23 statement couldn't possibly have causedinflation to increase by any more than these amounts.They make similar observations about the 16 othermisrepresentations found by the jury, noting that inflationchanges only slightly and sometimes even goes down aftereach one.

These objections rest on a fundamental misconceptionabout the leakage model. Recall that the amount ofinflation caused by a false statement is the differencebetween the stock price after the false statement and whatit would have been had the statement reflected the truth.What the model measures is the effect the truth wouldhave had on the price. Since the net sum of price declinesdue to corrective disclosures under this model was $23.94,the stock was overpriced by that amount prior to thosedisclosures. As soon as the *418 first false statementwas made, that overpricing became fully attributable tothe false statement, even if the stock price didn't changeat all, because had the statement been truthful, the pricewould have gone down by $23.94—after all, that's whatit did once the truth was fully revealed. Similarly, everysubsequent false statement caused the full amount ofinflation to remain in the stock price, even if the pricedidn't change at all, because had the truth become known,the price would have fallen then.

Another way to think about it is to see that there aretwo senses of “inflation.” One is “actual inflation”—just the difference between the stock price and what theprice would have been if the truth had been known;this is what the expert's model measures. The otheris “fraud-induced inflation”—the difference between thestock price and what the price would have been if thedefendants had spoken truthfully; this is what the jurydetermined using the model plus its findings regardingfalse statements. Before the first false statement is made,there is “actual inflation” in the stock price but no“fraud-induced inflation” because although the stock isoverpriced, misrepresentations are not the cause. But as




soon as the first false statement is made, fraud-inducedinflation becomes equal to actual inflation. Thus, fraud-induced inflation can go from zero to a very large number,even if the stock price doesn't change at all. In fact, thedefendants' own expert acknowledged that inflation—ofthe fraud-induced type—can increase even if the stockprice doesn't change and that it must be zero before thefirst false statement.

The defendants argue that the leakage model of losscausation was legally insufficient because the plaintiffs“made no attempt to prove how Household's stock pricebecame inflated in the first instance,” but, rather, just“assumed that Household's stock price was artificiallyinflated on the first day of the Class Period dueto unspecified pre-Class Period misrepresentations andomissions.” They note that Fischel's tables—under boththe specific-disclosure model and the leakage model—show the stock as inflated on the very first dayof the class period. True, but neither model assumedthat Household's share price was inflated due tomisrepresentations. Instead, the models measure what wehave called “actual inflation”—inflation due to investorsnot knowing the truth. Actual inflation could haveresulted from prior misrepresentations or just from thecompany's fundamentals having deteriorated withoutinvestors knowing about it. How the stock becameinflated in the first place is irrelevant because eachsubsequent false statement prevented the price fromfalling to its true value and therefore caused the price toremain elevated.

The plaintiffs point all this out in their brief. In replythe defendants object that the plaintiffs are vacillatingbetween two separate and legally distinct theories of losscausation. A false statement that prevents a stock pricefrom falling is an “inflation-maintenance theory,” which(they say) requires the plaintiffs to prove how the inflationwas introduced into the stock price in the first place.(There is no law to support this proposition.) If, onthe other hand, the plaintiffs are using an “inflation-introduction theory,” then the jury couldn't possibly haveattributed the full $23.94 of inflation to the March 23statement because the model assumed there was inflationbefore that date. (This argument conflates actual inflationwith fraud-induced inflation, as we've just explained.)

More fundamentally, theories of “inflation maintenance”and “inflation introduction” are not separate legal

categories. Our decision in *419 Schleicher v. Wendt,618 F.3d 679 (7th Cir.2010), is instructive on this point.There the parties argued about the distinction betweenmisrepresentations that cause a stock price to rise andthose that prevent it from falling, as if that distinction hadsome legal significance in the loss-causation analysis. Weexplained why it does not:

When an unduly optimistic falsestatement causes a stock's price torise, the price will fall again when thetruth comes to light. Likewise whenan unduly optimistic statement stopsa price from declining (by addingsome good news to the mix): oncethe truth comes out, the price dropsto where it would have been hadthe statement not been made.... Butit should be clear that this is justa mirror image of the situation forthe same figures in black ink, ratherthan red.... Whether the numbersare black or red, the fraud lies inan intentionally false or misleadingstatement, and the loss is realizedwhen the truth turns out to be worsethan the statement implied.

Id. at 683–84.

The Eleventh Circuit agrees:

The district court erroneouslyassumed that simply becauseconfirmatory false statements haveno immediate effect on an alreadyinflated stock price in an efficientmarket, these statements cannotcause harm. But the inflation levelneed not change for new investorsto be injured by a false statement.Fraudulent statements that preventa stock price from falling cancause harm by prolonging the periodduring which the stock is traded atinflated prices. We therefore holdthat confirmatory information thatwrongfully prolongs a period ofinflation—even without increasing







the level of inflation—may beactionable under the securities laws.

FindWhat Investor Grp. v. FindWhat.com, 658 F.3d 1282,1314 (11th Cir.2011).

In short, what the plaintiffs had to prove is that thedefendants' false statements caused the stock price toremain higher than it would have been had the statementsbeen truthful. Fischel's models calculated the effect ofthe truth, once it was fully revealed, and the jury foundthat the defendants concealed the truth through falsestatements. That is enough.

The defendants have two additional arguments thatstand on stronger ground, however. First, they arguethat the leakage model, which the jury adopted, didnot account for firm-specific, nonfraud factors that mayhave affected the decline in Household's stock price.That is true; Fischel acknowledged this in his testimony.The model assumes that any changes in Household'sstock price—other than those that can be explainedby general market and industry trends—are attributableto the fraud-related disclosures. If during the relevantperiod there was significant negative information aboutHousehold unrelated to these corrective disclosures (andnot attributable to market or industry trends), then themodel would overstate the effect of the disclosures and inturn of the false statements. Of course, this can cut bothways. If during the relevant period there was significantpositive information about Household, then the modelwould understate the effect of the disclosures.

Firm-specific, nonfraud factors were not entirely ignored,however. Although the leakage model doesn't account fortheir effect, Fischel testified that he looked for company-specific factors during the relevant period and did not findany significant trend of positive or negative informationapart from the fraud-related disclosures:

Q. And did you also analyze whether company-specificfactors unrelated to *420 the alleged fraud can explainHousehold's stock price decline during [the disclosureperiod]?

A. Yes, I did. I looked at that carefully.

I noticed that there were a lot of disclosures that hadsome fraud-related information in it and some other ...

part ... [that] dealt with something other [than thatwhich] was fraud related.

There were some ... of those disclosures that had apositive effect, some had a negative effect; but overall itwas impossible to conclude that the difference betweenthe true value line and the actual price would have beenany different had there been no disclosures about non-fraud-related information during this particular period.Some positive, some negative. They cancel each otherout.

The plaintiffs also introduced e-mails and reports fromHousehold executives attributing the entirety of thestock's decline to the fraud-related disclosures, and therecord contains various reports from market analystsprimarily focused on this information. In addition,other evidence loosely corroborates the inflation figureproduced by the leakage model ($23.94). For example,when Household embarked on its aggressive growthstrategy, one executive (Gary Gilmer, a defendant here)suggested that the stock price could increase by “over 22dollars a share.”

The defendants contend that this was not enough. Becauseit was the plaintiffs' burden to prove loss causation, theyargue that the leakage model needed to eliminate anyfirm-specific, nonfraud related factors that might havecontributed to the stock's decline. This argument relies onthe Supreme Court's opinion in Dura Pharmaceuticals.

The precise issue in Dura is unimportant here, so we'lldescribe the case only briefly. The Ninth Circuit had heldthat in order to plead loss causation in a securities-fraudcase, plaintiffs need only allege that the share price wasinflated when they purchased their stock. The SupremeCourt disagreed, holding that plaintiffs must also allegethat the stock price declined once the truth was revealed,because if they also sold their stock while it was stillinflated, there would be no loss. 544 U.S. at 342, 125 S.Ct.1627.

In our case the plaintiffs proved that Household's shareprice declined after the truth came out, so the problemidentified in Dura is not present here. But the Court'sopinion also contains this very important passage:

If the purchaser sells later after the truth makes itsway into the marketplace, an initially inflated purchaseprice might mean a later loss. But that is far from








inevitably so. When the purchaser subsequently resellssuch shares, even at a lower price, that lower pricemay reflect, not the earlier misrepresentation, butchanged economic circumstances, changed investorexpectations, new industry-specific or firm-specificfacts, conditions, or other events, which taken separatelyor together account for some or all of that lower price.(The same is true in respect to a claim that a share'shigher price is lower than it would otherwise have been—a claim we do not consider here.) Other things beingequal, the longer the time between purchase and sale,the more likely that this is so, i.e., the more likely thatother factors caused the loss.

Given the tangle of factors affecting price, the mostlogic alone permits us to say is that the higher purchaseprice will sometimes play a role in bringing about afuture loss.

*421 Id. at 342–43, 125 S.Ct. 1627 (second emphasisadded).

[10] So in order to prove loss causation, plaintiffs insecurities-fraud cases need to isolate the extent to whicha decline in stock price is due to fraud-related correctivedisclosures and not other factors. See Hubbard v. BankAtl.Bancorp, Inc., 688 F.3d 713, 725–26 (11th Cir.2012);Miller v. Asensio & Co., Inc., 364 F.3d 223, 232 (4thCir.2004).

Fischel's models controlled for market and industryfactors and general trends in the economy—the regressionanalysis took care of that. But the leakage model, whichthe jury adopted, didn't account for the extent to whichfirm-specific, nonfraud related information may havecontributed to the decline in Household's share price.Fischel testified—albeit in very general terms—that heconsidered this possibility and ruled it out. The questionis whether that's enough or whether the model itselfmust fully account for the possibility that firm-specific,nonfraud factors affected the stock price.

On this point the defendants refer us to several casesrejecting leakage models similar or identical to the oneused here. Each of these cases, however, is different inan important respect. For example, one case rejecteda leakage model where the plaintiff hadn't identifiedany mechanism of corrective disclosure. In re WilliamsSec. Litig.–WCG Subclass, 558 F.3d 1130, 1137–38 (10thCir.2009) (“To satisfy the requirements of Dura, ... any

theory—even a leakage theory that posits a gradualexposure of the fraud rather than a full and immediatedisclosure—will have to show some mechanism for howthe truth was revealed.... The inability to point to asingle corrective disclosure does not relieve the plaintiff ofshowing how the truth was revealed; he cannot say, ‘Well,the market must have known.’ ”). Here, however, theplaintiffs identified 14 separate disclosure events, and theyalso presented evidence that the content of the disclosureswas leaking out to the market gradually prior to theirrelease.

The other cases cited by the defendants rejectedthe leakage model for failing to account for firm-specific, nonfraud-related information that was bothclearly identified and significant in proportion to the

disclosures. 5 Here, in contrast, Fischel testified thatalthough there were mixed disclosures during the relevanttime period—disclosures that contained both fraud-related and nonfraud information—the nonfraud relatedinformation wasn't significantly positive or negative.Unfortunately, his *422 testimony was very general onthis point; neither side bothered to develop it. And thedefendants haven't identified any firm-specific, nonfraudrelated information that could have significantly distortedthe model.

To our knowledge, no court has either upheld or rejectedthe use of a leakage model in circumstances similar to thiscase—probably because these cases rarely make it to trial.That said, the Supreme Court has generally recognizedthat the truth can leak out over time. See Dura, 544 U.S.at 342, 125 S.Ct. 1627 (“But if, say, the purchaser sellsthe shares quickly before the relevant truth begins to leakout, the misrepresentation will not have led to any loss.”)(emphasis added). So have we. See Schleicher, 618 F.3dat 686 (“[T]ruth can come out, and affect the marketprice, in advance of a formal announcement.”). And othercircuits have acknowledged the viability of the leakagetheory, at least in principle. See, e.g., In re Flag TelecomHoldings, Ltd. Sec. Litig., 574 F.3d 29, 40–41, 40 n. 5 (2dCir.2009) (noting the “plausibility” of a “leakage” theorybut rejecting it in that particular case because the plaintiffs“failed to demonstrate that any of the information [had]‘leaked’ into the market”).

The defendants argue that to be legally sufficient, anyloss-causation model must itself account for, and perfectlyexclude, any firm-specific, nonfraud related factors that


















may have contributed to the decline in a stock price. 6 Itmay be very difficult, if not impossible, for any statisticalmodel to do this. See Janet Cooper Alexander, The Valueof Bad News in Securities Class Actions, 41 UCLA L.REV.1421, 1452, 1469 (1994); Esther Bruegger & FrederickC. Dunbar, Estimating Financial Fraud Damages withResponse Coefficients, 35 J. CORP. L. 11, 25 (2009);Frederick C. Dunbar & Arun Sen, Counterfactual Keysto Causation and Damages in Shareholder Class–ActionLawsuits, 2009 WIS. L. REV. 199, 242 (2009). Acceptingthe defendants' position likely would doom the leakagetheory as a method of quantifying loss causation. On theother hand, if it's enough for a loss-causation expert tooffer a conclusory opinion that no firm-specific, nonfraudrelated information affected the stock price during therelevant time period, then it may be far too easy forplaintiffs to evade the loss-causation principles explainedin Dura.

[11] There is a middle ground. If the plaintiffs'expert testifies that no firm-specific, nonfraud relatedinformation contributed to the decline in stock priceduring the relevant time period and explains innonconclusory terms the basis for this opinion, thenit's reasonable to expect the defendants to shoulderthe burden of identifying some significant, firm-specific,nonfraud related information that could have affected thestock price. If they can't, then the leakage model can goto the jury; if they can, then the burden shifts back tothe plaintiffs to account for that specific information orprovide a loss-causation model that doesn't suffer from

the same problem, like the specific-disclosure model. 7

One possible way to address the issue is to simply excludefrom the model's calculation *423 any days identifiedby the defendants on which significant, firm-specific,nonfraud related information was released. See AllenFerrell & Atanu Saha, The Loss Causation Requirementfor Rule 10B–5 Causes of Action: The Implications of DuraPharmaceuticals, Inc. v. Broudo, 63 BUS. LAW. 163, 169(2007).

[12] Because this case is one of the few to make it to trialon a leakage theory, the process of submitting the loss-

causation issue to the jury was understandably ad hoc. 8

In light of Dura, however, we conclude that the evidenceat trial did not adequately account for the possibilitythat firm-specific, nonfraud related information may haveaffected the decline in Household's stock price during

the relevant time period. As things stand, the recordreflects only the expert's general statement that any suchinformation was insignificant. That's not enough. A newtrial is warranted on the loss-causation issue consistentwith the approach we've sketched in this opinion.

The defendants have one final argument about losscausation, which they raise for the first time on appeal.We'll address it anyway since the problem is easily resolvedon remand. The plaintiffs' leakage model calculates theeffect of full disclosure of all three of Household's badpractices: predatory lending, re-aging delinquent loans,and misrepresenting earnings. The first actionable falsestatement found by the jury, however, only addressedpredatory lending. Based on the assumptions underlyingthe leakage model, it can't be the case that the stock pricewould have fallen fully had this statement reflected thetruth; investors would not yet have learned of Household'sre-aging practices or true earnings.

The defendants correctly note this problem, but it happensto only have a minor effect in this case. The secondactionable false statement came on March 28, 2001,only three trading days later, and it covered all threebad practices. Had this statement been true, the marketwould have been fully informed and the stock would havedropped to its true value. The defendants maintain thatthis problem undermines the entire model: The effect maybe modest here, but what if the jury had found a differentfirst false statement and the gap was much larger?

As support for this position, the defendants rely onComcast Corp. v. Behrend, ––– U.S. ––––, 133 S.Ct. 1426,185 L.Ed.2d 515 (2013), but that case doesn't require usto wholly reject the leakage model. Comcast was a classaction alleging that a cable-television provider's pricingviolated the Sherman Act in four separate ways. Id. at1430. The plaintiffs submitted a damages model thatcomputed what the cable services would have cost but forall four categories of antitrust violations. The issue waswhether class certification was appropriate. The districtcourt held that only one of the four theories of antitrustimpact was capable of class-wide proof, but the court alsoheld that damages could be proved on a class-wide basisvia the plaintiffs' model. Id. at 1431. The Supreme Courtreversed because the model did not separate damages bycategory. In other words, because the class could onlyproceed on one theory of antitrust impact, the plaintiffs

http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=0104725590&pubNum=0003041&originatingDoc=I93df9bea004011e5b86bd602cb8781fa&refType=LR&fi=co_pp_sp_3041_1452&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.UserEnteredCitation)#co_pp_sp_3041_1452




















were left with no correspondingly limited class-wide wayto prove damages. Id. at 1434–35.

Here, on the other hand, the jury found that Householdand its executives lied *424 about all three categories ofbad practices. Accordingly, the Comcast principle applies,at most, to the period between the first false statementand the date—just three days later—on which the juryfound actionable false statements addressing all three bad

practices. 9

There is a simple solution to this problem: instruct thejurors that if the first actionable misrepresentation relatesonly to one or two of the three categories of fraud,they should find zero inflation in the stock (or somefraction of the model they've chosen) until there areactionable misrepresentations addressing all three. Thisoption wasn't considered below because the defendantsnever raised this specific objection (they objected to theleakage model more generally), but the point is that theproblem doesn't defeat the expert's model.

The defendants do not challenge the jury'smisrepresentation findings, so the 17 actionable falsestatements are fixed; we need only worry about those threetrading days. If the plaintiffs can supply evidence thatsome fraction of their model is a reasonable estimate ofthe effect of predatory lending alone, then the new jurymay consider that number. Otherwise, the jury should beinstructed to enter zero inflation for those three days.

B. Janus ErrorNext up is a claim of instructional error. The defendantsargue that the jury was incorrectly instructed on whatit means to “make” a false statement in violation of thesecurities laws. The relevant part of the instruction was asfollows (with the offending phrase italicized):

To prevail on their 10b–5 claim against any defendant,plaintiffs must prove ...:

(1) the defendant made, approved, or furnishedinformation to be included in a false statement of fact ...during the relevant time period between July 30, 1999and October 11, 2002....

After the Phase I trial concluded, and while Phase IIproceedings were underway, the Supreme Court issuedits decision in Janus narrowly construing what it means

to “make” a false statement in violation of Rule 10b–5.The specific issue in Janus was whether a mutual fundinvestment advisor could be held liable for false statementscontained in the prospectuses of its client mutual funds.131 S.Ct. at 2299. The investment advisor in Janus waswholly owned by the company that created its clientmutual funds, and there also was some managementoverlap. Id. Although the advisor had substantiallyassisted in the preparation of the prospectuses, it arguedthat it was not the “maker” of the false statements forpurposes of Rule 10b–5. The Supreme Court agreed:

For purposes of Rule 10b–5, themaker of a statement is the personor entity with ultimate authorityover the statement, including itscontent and whether and how tocommunicate it. Without control, aperson or entity can merely suggestwhat to say, not “make” a statementin its own right. One who preparesor publishes a statement on behalfof another is not its maker. Andin the ordinary case, attributionwithin a statement or implicit fromsurrounding circumstances is strongevidence that a statement was madeby—and only by— *425 the partyto whom it is attributed. This rulemight best be exemplified by therelationship between a speechwriterand a speaker. Even when aspeechwriter drafts a speech, thecontent is entirely within the controlof the person who delivers it. And itis the speaker who takes credit—orblame—for what is ultimately said.

Id. at 2302.

In light of Janus, the defendants moved for a new trial,arguing that the “approved or furnished information”language in the jury instruction misstated the law andhad the effect of holding some of them liable for falsestatements that they did not “make,” as the SupremeCourt construed that term. The judge denied the motion,reasoning that the Court's holding applied only to legallyindependent third parties (like the investment advisor inJanus itself), not corporate insiders like the individual

defendants here, all top executives at Household. 10







[13] That was error. Nothing in Janus limits its holdingto legally independent third parties. The Court interpretedthe language of Rule 10b–5, which makes it “unlawful forany person ... [t]o make any untrue statement of materialfact” in connection with the purchase or sale of securities.17 C.F.R. § 240.10b–5(b). The Court's interpretation

applies generally, not just to corporate outsiders. 11

And there can be little doubt that the instruction usedhere directly contradicts Janus. The judge instructedthe jury that the plaintiffs could prevail on their Rule10b–5 claim if they proved that the defendant “made,approved, or furnished information to be included in a falsestatement.” (Emphasis added.) This goes well beyond thenarrow interpretation adopted in Janus. See 131 S.Ct. at2303 (“Adopting the Government's definition of ‘make’would ... lead to results inconsistent with our precedent ...[because it] would permit private plaintiffs to sue a personwho ‘provides the false or misleading information thatanother person then puts into the statement.’ ”). Theinstruction plainly misstated the law.

Still, we must decide whether this error caused the

defendants any prejudice. 12 *426 See Jimenez v. Cityof Chicago, 732 F.3d 710, 717 (7th Cir.2013). Thefour defendants in this case are William Aldinger,Household's CEO; David Schoenholz, the CFO; Gilmer,Vice–Chairman and President of Consumer Lending; andHousehold itself. Of the 17 actionable false statements,14 were contained in SEC filings or official Householdpress releases. The remaining three were delivered by theexecutives: one was a statement by Gilmer to the media;another was a presentation by Aldinger to GoldmanSachs; and the third was a presentation by Schoenholz atHousehold's annual “Investor Relations Conference.”

1. Household[14] [15] The prejudice analysis is easiest for Household,

so we'll start there. The company stipulated that it “made”all statements in its SEC filings and press releases. Thatleaves only the three false statements delivered by the threeexecutives. Nothing in Janus undid the long-standing rulethat “[a] corporation is liable for statements by employeeswho have apparent authority to make them.” MakorIssues & Rights, Ltd. v. Tellabs, Inc., 513 F.3d 702, 708(7th Cir.2008) (citing Am. Soc. of Mech. Eng'rs, Inc. v.Hydrolevel Corp., 456 U.S. 556, 568, 102 S.Ct. 1935, 72

L.Ed.2d 330 (1982)); see also Fulton Cnty. Emps. Ret. Sys.v. MGIC Inv. Corp., 675 F.3d 1047, 1051 (7th Cir.2012)(noting that executives speak for themselves and for theirorganization). The instructional error clearly did notprejudice Household.

2. Aldinger[16] Aldinger concedes that he “made” all the statements

in Household's SEC filings and in his own presentationto Goldman Sachs. The plaintiffs claim that Aldinger alsoagrees that he “made” the statements in the press releases,but we can't find that concession anywhere in the record.

We're hesitant to hold as a matter of law that a CEO“makes” all statements contained in a company pressrelease, as that term was narrowly defined in Janus. Wehaven't been directed to evidence showing that Aldinger'ssignature or name appeared in the press releases in thesense of an attribution. See Janus, 131 S.Ct. at 2302 (“[I]nthe ordinary case, attribution within a statement ... isstrong evidence that a statement was made by—and onlyby—the party to whom it is attributed.”); cf. Peterson v.Winston & Strawn LLP, 729 F.3d 750, 752 (7th Cir.2013)(noting that the defendant law firm would probably notbe liable for the contents of a circular it helped preparebecause it “did not sign the document or warrant thetruth of its contents”). Nor does it appear that he actuallydelivered the statements in the press releases himself—say, for example, by reading them at a press conference.See Janus, 131 S.Ct. at 2302 (“One ‘makes' a statementby stating it.”). Absent *427 either attribution or actualdelivery, the Janus inquiry turns on control. Id. at 2303(“[T]he rule we adopt today [is] that the maker of astatement is the entity with authority over the content ofthe statement and whether and how to communicate it.”).

As CEO, Aldinger of course had authority over thepress releases in the sense that he could have exercisedcontrol over their content. But if that were enoughto satisfy Janus, then CEOs would be liable for anystatements made by their employees acting within thescope of their employment. That wouldn't square withthe Court's reminder about “the narrow scope that wemust give the implied private right of action” under Rule10b–5. Id. Instead, as we understand Janus, Aldingermust have actually exercised control over the contentof the press releases and whether and how they werecommunicated. That's an inherently fact-bound inquiry,and it can't be answered on this record. Accordingly, as to






















Aldinger's liability for the press releases, the Janus errorwas prejudicial, and he is entitled to a new trial.

[17] The error was not prejudicial as to Aldinger's liabilityfor Gilmer's false statement to the media, however. Theevidence at trial clearly established that Aldinger “made”this statement in the sense meant by Janus. Aldingerdrafted the statement in response to growing protestsabout Household's predatory lending practices, and hesent it to various executives, including Gilmer, in an e-mail that said, “Attached to this [e-mail] is our mediaholding statement....” Gilmer simply read the statementverbatim to the media. As the CEO and the actual authorof the statement, Aldinger had the “ultimate authority”over its content and whether and how to communicate it,the touchstone of Janus. Id. at 2302.

[18] The defendants contend that the question ofprejudice must be considered in light of the jury's findingson scienter. They note, for example, that the jury foundHousehold and Aldinger responsible for “making” theGilmer statement knowingly, while Gilmer, who actuallydelivered it, was found to have made it recklessly. Thedefendants suggest that this kind of combination isimpossible after Janus. We do not see why. Nothingin Janus precludes a single statement from havingmultiple makers. See In re Pfizer Inc. Sec. Litig., 936F.Supp.2d 252, 268–69 (S.D.N.Y.2013); City of Pontiac,875 F.Supp.2d at 374; City of Roseville Emps.' Ret.Sys. v. EnergySolutions, Inc., 814 F.Supp.2d 395, 417(S.D.N.Y.2011). And it's not illogical to conclude thatAldinger, who wrote the statement and instructed Gilmerto deliver it, acted knowingly, while Gilmer, who simplyparroted it, was merely reckless as to its falsity.

[19] That leaves the presentation by Schoenholz at theInvestor Relations Conference. The plaintiffs argue thatAldinger's presence in the room, and his participationin a question-and-answer session afterward, demonstratethat he controlled the content of the presentation, andthat's enough to satisfy Janus. We agree that post-Janus,liability for “making” a false statement can be establishedby inferences drawn from surrounding circumstances. Butwe can't say with confidence that Aldinger's actions at theconference satisfy the Janus standard. They may, but aproperly instructed jury might conclude otherwise.

[20] Finally, the plaintiffs argue that the Janus errorcannot have prejudiced Aldinger because he was found

secondarily liable under § 20(a) of the Securities ExchangeAct, which provides that “[e]very person who ... controlsany person liable under any provision of this chapter ...shall also be liable jointly and severally *428 with andto the same extent as such controlled person.” 15 U.S.C.§ 78t(a). The jury found, for purposes of § 20(a), thatAldinger and Schoenholz were controlling persons withrespect to each other and with respect to Householdand Gilmer. Because Household issued the press releasesand Schoenholz gave the presentation, this means thatAldinger is secondarily liable for their statements.

Even so, Aldinger may have been affected by the jury'sallocation of responsibility for the plaintiffs' losses. Whenmultiple defendants are found liable, the jury is requiredto apportion fault between them. Id. § 78u–4(f)(3). Thejury allocated 55% responsibility to Household, 20%to Aldinger, 15% to Schoenholz, and 10% to Gilmer.With a proper instruction on what it means to “make”a false statement, the jury might allocate responsibility

differently. 13

Accordingly, Aldinger is entitled to a new trial on whetherhe “made” the false statements in Household's pressreleases and in Schoenholz's presentation at the InvestorRelations Conference.

3. SchoenholzSchoenholz's situation is almost identical to Aldinger's.He concedes that he “made” the false statements in theSEC filing and in his own presentation at the InvestorRelations Conference. He was not found liable forGilmer's statement to the media. That leaves only the pressreleases and Aldinger's presentation to Goldman Sachs.For the reasons already discussed, Schoenholz is entitledto a new trial on whether he “made” those particular falsestatements, as that term was defined in Janus.

4. GilmerAs for Gilmer, he actually delivered only one of the 17actionable false statements. The plaintiffs argue that hewas also a “maker” of the false statements in the SECfilings and press releases because as a high-ranking officer,he reviewed and approved them. But the same could havebeen said for the investment advisor in Janus. And as we'vealready explained, Janus can't be ignored simply becauseGilmer is a corporate insider. So for all but the statement











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to the media that he himself delivered, the Janus errorprejudiced Gilmer.

* * *

To summarize, Aldinger is entitled to a new trial todetermine whether he was the “maker,” in the Janus sense,of the false statements in Household's press releases andSchoenholz's presentation. Schoenholz is entitled to a newtrial to determine whether he “made” the false statementsin the press releases and in Aldinger's presentation *429to Goldman Sachs. Gilmer is entitled to a new trial todetermine whether he “made” any of the actionable falsestatements beyond the one he personally delivered to themedia.

For clarity's sake, we add that the defendants may notrelitigate whether any of the 17 statements were falseor material. The jury's secondary liability findings alsoremain undisturbed. Those issues were not challenged onappeal and do not need to be retried. Of course, theplaintiffs likewise can't relitigate the other 23 statements.The new trial should focus on whether the three executives“made” the particular statements we've identified andwhether they did so knowingly or recklessly. The new jurywill also have to reallocate responsibility between the fourdefendants.

C. Reliance[21] Finally, the defendants argue that the district

court's Phase II rulings deprived them of a meaningfulopportunity to rebut the presumption of reliance. Relianceon a misrepresentation (sometimes called “transactioncausation”) is an essential element of a Rule 10b–5action, but the Supreme Court has recognized a rebuttablepresumption of reliance for anyone who purchased asecurity in an efficient market. See Basic Inc. v. Levinson,485 U.S. 224, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); seealso Halliburton, 134 S.Ct. 2398 (reaffirming Basic, butholding that defendants can rebut the presumption at theclass-certification stage). The presumption recognized inBasic is premised on the “fraud on the market” theory,which posits that “in an open and developed securitiesmarket, the price of a company's stock is determined bythe available material information regarding the companyand its business.... Misleading statements will thereforedefraud purchasers of stock even if the purchasers do notdirectly rely on the misstatements.” Basic, 485 U.S. at 241–42, 108 S.Ct. 978 (internal quotation marks omitted).

[22] To invoke the presumption, the plaintiffs mustprove: “(1) that the alleged misrepresentations werepublicly known, (2) that they were material, (3) thatthe stock traded in an efficient market, and (4) thatthe plaintiff traded the stock between the time themisrepresentations were made and when the truth wasrevealed.” Halliburton, 134 S.Ct. at 2408. There's nodispute that these prerequisites were met here.

[23] The Basic presumption is a strong one. The SupremeCourt noted that it's “hard to imagine that there ever isa buyer or seller who does not rely on market integrity.Who would knowingly roll the dice in a crooked crapgame?” Basic, 485 U.S. at 246–47, 108 S.Ct. 978 (quotingSchlanger v. Four–Phase Sys. Inc., 555 F.Supp. 535,538 (S.D.N.Y.1982)). Even so, the presumption can berebutted by “[a]ny showing that severs the link betweenthe alleged misrepresentation and either the price received(or paid) by the plaintiff, or his decision to trade at afair market price.” Halliburton, 134 S.Ct. at 2408 (quotingBasic, 485 U.S. at 248, 108 S.Ct. 978).

Basic identified three circumstances in which thepresumption might be rebutted. First, if “ ‘market makers'were privy to the truth,” then the price would not beaffected by misrepresentations. Basic, 485 U.S. at 248, 108S.Ct. 978. Similarly, if news of the truth had “entered themarket and dissipated the effects of the misstatements,those who traded ... after the corrective statements wouldhave no direct or indirect connection with the fraud.”Id. at 248–49, 108 S.Ct. 978. (These two methods ofrebutting the presumption are sometimes called “truthon the market” *430 defenses.) Finally, defendants mayrebut the Basic presumption by showing that individualplaintiffs traded “without relying on the integrity of themarket.” Id. at 249, 108 S.Ct. 978. “For example, aplaintiff who believed ... statements were false ... and ...that [the securities were] artificially underpriced, butsold ... [anyway] because of other unrelated concerns, ...could not be said to have relied on the integrity of a pricehe knew had been manipulated.” Id.

In Halliburton the Supreme Court summarized theseexamples as follows:

[I]f a defendant could show that thealleged misrepresentation did not,for whatever reason, actually affectthe market price, or that a plaintiff



















would have bought or sold the stockeven had he been aware that thestock's price was tainted by fraud,then the presumption of reliancewould not apply.

134 S.Ct. at 2408.

The defendants argue that the district court's Phase IIprocedures deprived them of a meaningful opportunity torebut the presumption for most class members. Resolvingthis argument requires some additional proceduralbackground.

1. Phase II ProceduresIn Phase I the jury addressed all issues that wereappropriate for class-wide resolution—e.g., whether anyof the 40 possible false statements were actionablemisrepresentations, whether they were material, whowas liable for which misrepresentations, and how muchinflation the actionable misrepresentations caused in thestock price. Phase II addressed the remaining issues—e.g.,reliance questions and the calculation of individual classmembers' damages.

The defendants wanted to conduct substantial discoveryduring Phase II in an attempt to rebut the presumptionof reliance for each class member. Initially, however, thejudge significantly limited the scope of this discovery. Hereasoned that the first two methods of rebutting the Basicpresumption—either showing that the market was privyto the truth all along or that the truth had entered themarket and dissipated the effects of the misstatements—had already been rejected by the jury in Phase I. Theonly remaining way to rebut the presumption was for thedefendants to show that individual plaintiffs bought orsold Household stock without relying on the integrity ofthe market.

To streamline discovery on that question, the judgerequired all class members to answer a preliminaryinterrogatory:

If you had known at the time ofyour purchase of Household stockthat defendants' false and misleadingstatements had the effect of inflatingthe price of Household['s] stock andthereby caused you to pay more for

Household stock than you shouldhave paid, would you have stillpurchased the stock at the inflatedprice you paid? YES ____ NO ____.

If class members answered this question “no,” then itdid not matter how or why they purchased Household'sstock (e.g., via a trading algorithm or as part of a hedgingstrategy) because they bought at the market price onthe assumption that there was no fraud cooked into theprice. Only if a class member answered “yes” would thedefendants be permitted additional discovery. The courtthought this protocol would “sensibly resolve the tensionbetween the rebuttable presumption of reliance and thepracticalities and purposes behind [class actions].”

The defendants objected and asked the judge toreconsider, arguing that this procedure unreasonablylimited their ability to rebut the presumption of reliance.The *431 judge reversed course and allowed Phase IIdiscovery to proceed while the class members returnedtheir answers to the preliminary question. The defendantsasked for a period of 120 days to conduct thisdiscovery. The judge granted the request. The defendantsthen served 98 class members with document requests,interrogatories, and deposition notices. Among otherthings, these discovery requests sought “all documentsthat you reviewed or relied upon in making any decisionto engage in any transaction with respect to Householdsecurities.”

The plaintiffs objected that the requests were harassingand far too broad, and that much of the informationsought was irrelevant. The court agreed that the requestswere overly broad and unnecessary, noting that classmembers “would have to list every issue of the Wall StreetJournal that every employee of that particular institutionthat dealt in trades read on the subway on the way into work and back.” So the judge limited the defendantsto asking class members about any nonpublic informationthey relied on in deciding whether to buy or sell Householdstock. The judge also permitted the defendants to askabout trading strategies and similar matters, provided thequestions were specific and not overly burdensome.

As for depositions, the defendants had earlier advised thecourt that they would need Phase II depositions fromonly 10 to 15 large institutional investors. They could notexplain why they now sought to depose 98 class members,so the judge imposed a limit of 15 depositions.





Following the court's limiting order, the defendants servedrevised written discovery on about 100 class membersasking about trading strategies, communications withHousehold, and any nonpublic information they relied on.They also deposed 12 large institutional investors. At theend of the 120–day discovery period, they asked for moretime, even though the judge had indicated at the beginningthat he was not inclined to grant any extension. The judgedenied the request.

When the time period for answering the court'spreliminary question expired, a large number of classmembers still had not yet responded. The plaintiffs arguedthey should not be required to answer the question,or alternatively, should be given more time. The judgeallowed the plaintiffs to send the question a secondtime and divided the class members into two groups:class members with claims larger than $250,000 and classmembers with claims below that amount. Class memberswith claims larger than $250,000 would be required toanswer the court's question.

For these larger claims, the case would proceed as follows.If a class member answered “no”—that he wouldn'thave bought the stock had he known it was inflated—and discovery had not produced any evidence indicatingotherwise, then the class member was entitled to judgmentbecause there was no triable issue as to reliance. If aclass member answered “yes,” then reliance would beresolved in a Phase II trial. And if a class member failedto answer the question, then the defendants were entitledto judgment as to that claim.

The second response period yielded the following results:10,902 claimants answered “no” to the court's question

(these are the claims at issue on this appeal); 14 133claimants answered “yes”; and 2,476 claimants failed toanswer the question. Approximately 30,000 claims remainunresolved. Most of these are claims of class *432members who failed to answer the court's question orclaims valued at less than $250,000.

2. The Defendants' ArgumentsThe defendants lodge a general objection that the processwe've just described unreasonably interfered with theirability to rebut the presumption of reliance. For the most

part, however, they don't specify what the court shouldhave done differently.

[24] The defendants' primary challenge relates to thephrasing of the preliminary question sent to classmembers. Instead of asking class members whether theywould have purchased Household's stock if they hadknown that the price was inflated, the defendants saythat class members should have been asked whetherthey would have transacted if they had known that thestatements were false. They argue that the court's choiceof phrasing “impermissibly baked the Basic presumptioninto [the] question.”

[25] We disagree. The court's question accurately reflectsthe Supreme Court's description of how the Basicpresumption can be rebutted. As the Court noted inHalliburton, “if a defendant could show that ... a plaintiffwould have bought or sold the stock even had hebeen aware that the stock's price was tainted by fraud,then the presumption of reliance would not apply.”134 S.Ct. at 2408 (emphasis added). Moreover, thedefendants' preferred phrasing would have swept in toomany class members. Some investors may have purchasedHousehold's stock even if they had known the truthbehind the defendants' misrepresentations, but they wouldnot have paid the price they did. These investors wouldhave to answer “yes” to the defendants' version of thequestion. But Basic was very clear that the way to rebutthe presumption is to show that the investor would havepaid the same price:

Any showing that seversthe link between the allegedmisrepresentation and either theprice received (or paid) by theplaintiff, or his decision to tradeat a fair market price, will besufficient to rebut the presumptionof reliance.... For example, aplaintiff who believed that Basic'sstatements were false ..., and whoconsequently believed that Basicstock was artificially underpriced,but sold his shares nevertheless ...,could not be said to have relied onthe integrity of a price he knew hadbeen manipulated.

Basic, 485 U.S. at 248–49, 108 S.Ct. 978.






The defendants also generally object to the limitationsplaced on Phase II discovery. This is a nonstarter. Thedefendants were allowed to serve written discovery onas many class members as they wanted. And in light ofthe focus of the rebuttal inquiry, it was reasonable tolimit the scope of discovery to class members' tradingstrategies and any nonpublic information they relied on indeciding to purchase Household stock. As for depositions,the defendants had earlier advised the judge that 10 to 15would be enough; they were allowed 15.

Finally, the defendants argue that for most classmembers, a “no” answer to the preliminary questionwas “dispositive as to whether the presumption couldbe rebutted.” This is problematic, they say, because thecourt's question was essentially meaningless—all classmembers could see how they needed to respond in order torecover. The question is imperfect, to be sure, but not quiteso meaningless as the defendants suggest. Class memberswere required to answer under penalty of perjury, and anumber of them answered “yes.” An even greater numberfailed to respond; some may have done so knowingthey *433 would have to answer “yes.” True, the vastmajority answered “no,” but that's not unexpected giventhe strength of the Basic presumption. See Basic, 485 U.S.at 246–47, 108 S.Ct. 978; Schleicher, 618 F.3d at 682.

In any event, the preliminary question was not necessarilythe end of the inquiry. Class members were entitled to

judgment only if they answered “no” and discovery hadn'tturned anything up. The preliminary question was a usefultool for efficiently resolving most claims. As for the rest,discovery allowed the defendants to “attempt to pick offthe occasional class member.” Halliburton, 134 S.Ct. at2412.

Because the proceedings below were neatly divided intotwo phases, there's no need to redo anything in PhaseII, even though we are remanding for a new trial oncertain issues from Phase I. Assuming the plaintiffs canadequately prove loss causation, the district court mayrely on the results from Phase II.

III. Conclusion

In sum, the defendants are entitled to a new trial limitedto the two issues we've identified here: loss causation andwhether the three executives “made” certain of the falsestatements under Janus's narrow definition of that term.We reject all other claims of error.

REVERSED AND REMANDED.

All Citations

787 F.3d 408, Fed. Sec. L. Rep. P 98,527

Footnotes1 See Reuters, HSBC Faces $2.46 Billion Judgment in Securities Fraud Case, N.Y. TIMES, Oct. 17, 2013, http://

www.nytimes. com/2013/10/18/business/hsbc–is–fined–2–46–billion–in–securities–fraud–case.html.

2 Household International, Inc., is now known as HSBC Finance Corp. and is owned indirectly by HSBC Holdings plc.

3 The defendants acknowledge Fischel's prominence in the field. Apparently he's the expert for this kind of financialanalysis; the defendants tried to hire him as well, but they were too late. His consulting firm is now known as CompassLexecon.

4 This assumes, however, that the only alternative to a false statement is a true statement. If no statement was analternative, then the model is much less accurate because it measures the effect of the truth, not the effect of silence.We don't need to worry about this problem here because most of the misrepresentations were made in legally requiredcorporate filings. A few were made to the press or at conferences, but even these were in response to reports thatHousehold's true situation might not be as it appeared. Thus, “no statement” wasn't really an option.

5 In Fener v. Operating Engineers Construction Industry & Miscellaneous Pension Fund (Local 66), 579 F.3d 401 (5thCir.2009), the loss-causation model was used to determine the effect of a single press release that contained three parts,two of which were unrelated to disclosures of fraud, but the model failed to account for those parts. The Fifth Circuit“reject[ed] any event study that shows only how a stock reacted to the entire bundle of negative information, ratherthan examining the evidence linking the culpable disclosure to the stock-price movement.” Id. at 410 (internal quotationmarks omitted). In In re REMEC Inc. Securities Litigation, 702 F.Supp.2d 1202, 1274 (S.D.Cal.2010), the court rejectedthe expert's model because “each of the five identified disclosures, including the three corrective disclosures, contained













multiple pieces of company specific information, some negative, some positive, some allegedly fraud related, and somenot.” The other cases cited by the defendants are to the same effect. See United States v. Ferguson, 584 F.Supp.2d447, 453 n. 7 (D.Conn.2008) (“The defendants cited several confounding factors during the 30–day event window [thatthe model did not account for].”); In re Omnicom Grp., Inc. Sec. Litig., 541 F.Supp.2d 546 (S.D.N.Y.2008) (explainingthat a Wall Street Journal article that caused a drop in stock price was either unrelated to disclosures of fraud or wasalready known to market participants).

6 The defendants are joined in this argument by the Securities Industry and Finance Markets Association—an advocacygroup representing banks, securities firms, and asset managers—as amicus curiae.

7 Here, of course, the plaintiffs submitted Fischel's specific-disclosure model to the jury as an alternative method forquantifying loss causation. But this method might encounter the same problem, if indeed there was some additionalnegative firm-specific, nonfraud related information on the same day as a specific disclosure.

8 We intend no criticism of the district judge. To the contrary, he handled this complex and difficult case with thoroughnessand care.

9 So, for example, if the first false statement only addressed one of three categories of fraud and the second statementaddressed the other two categories (but not all three), then the model would be accurate after the second statementbecause at that point had both statements been truthful, the truth would have been fully known and the price would havefallen to the value it did fall to once the truth was disclosed.

10 As support for this ruling, the judge relied in part on In re Satyam Computer Services Ltd. Securities Litigation, 915F.Supp.2d 450 (S.D.N.Y.2013), and In re Smith Barney Transfer Agent Litigation, 884 F.Supp.2d 152 (S.D.N.Y.2012), butneither case held that Janus does not apply to corporate insiders. Smith Barney held that corporate executives who signdocuments are the “makers” of the statements contained in the documents even though the company has the ultimateauthority over the documents. 884 F.Supp.2d at 163–64. And Satyam held that Janus did not overturn the “group pleadingdoctrine,” 915 F.Supp.2d at 477 n. 16, a pleading rule for alleging scienter that we rejected long before Janus. See Pughv. Tribune Co., 521 F.3d 686, 693 (7th Cir.2008).

11 We note that this issue has divided the district courts. Compare, e.g., City of Pontiac Gen. Emps.' Ret. Sys. v. LockheedMartin Corp., 875 F.Supp.2d 359, 374 (S.D.N.Y.2012) (“Janus ... addressed only whether third parties can be held liablefor statements made by their clients.... [It] has no bearing on how corporate officers who work together in the sameentity can be held jointly responsible....”), with Haw. Ironworkers Annuity Trust Fund v. Cole, No. 3:10CV371, 2011 WL3862206, at *4 (N.D.Ohio Sept. 1, 2011) (“[Janus's ] interpretation of the verb ‘to make’ is an interpretation of the statutorylanguage ... and therefore cannot be ignored simply because the defendants are corporate insiders.”), and In re UBSAG Sec. Litig., No. 07 Civ. 11225(RJS), 2012 WL 4471265, at *10–11 (S.D.N.Y. Sept. 28, 2012), aff'd 752 F.3d 173 (2dCir.2014) (rejecting an argument that Janus applies only to third parties and not corporate insiders).

12 Citing Dawson v. New York Life Insurance Co., 135 F.3d 1158 (7th Cir.1998), the defendants argue that this kind oferror is always prejudicial and automatically requires a new trial. Dawson held that when a jury is instructed on multipletheories, one of which is incorrect, “its verdict must be set aside even if the verdict may have been based on a theory onwhich the jury was properly instructed.” Id. at 1165. Other cases suggest something similar. See, e.g., Byrd v. Ill. Dept.of Pub. Health, 423 F.3d 696, 709 (7th Cir.2005); Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191,1197 (7th Cir.1987); Simmons, Inc. v. Pinkerton's, Inc., 762 F.2d 591, 599 n. 3 (7th Cir.1985). This line of cases has beendisplaced by more recent Supreme Court decisions holding that this kind of error is reviewed for harmlessness, even ina criminal case. See Skilling v. United States, 561 U.S. 358, 414, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010); Hedgpeth v.Pulido, 555 U.S. 57, 59, 129 S.Ct. 530, 172 L.Ed.2d 388 (2008) (per curiam).

13 How exactly this would affect Aldinger legally is somewhat complicated. Liability is generally assigned proportionatelyusing the jury's determination of responsibility, see 15 U.S.C. § 78u–4(f)(2)(B), but a defendant can be jointly and severallyliable if he knowingly violated the law, see id. § 78u–4(f)(2)(A). The jury found him liable for one knowing violation (theone we've just described), though it's not clear whether that makes him jointly and severally liable for all misstatementsor only the one he knowingly made. See Regents of Univ. of Cal. v. Credit Suisse First Bos. (USA), Inc., 482 F.3d 372,404–07 (5th Cir.2007). Nor is it clear how proportional liability and § 20(a) interact. See Laperriere v. Vesta Ins. Grp.,Inc., 526 F.3d 715 (11th Cir.2008) (per curiam). We don't need to resolve these issues because even if Aldinger is jointlyand severally liable for all 17 misstatements—either through § 78u–4(f)(2)(A) or § 20(a) or some combination thereof—he is still entitled to seek contribution from the other defendants. See Musick, Peeler & Garrett v. Emp'rs Ins. of Wausau,508 U.S. 286, 113 S.Ct. 2085, 124 L.Ed.2d 194 (1993). So the size of his share of responsibility matters.

14 The $2.46 billion judgment—entered pursuant to Rule 54(b)—reflects claims totaling $1.48 billion plus $986 million ofprejudgment interest.





























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