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May 1, 1991


The opinion of the court was delivered by: MORAN


 Economic developments of the last several years have taken their toll on many segments of society. On March 29, 1990, The First Chicago Corporation ("First Chicago") announced that it too was suffering from economic woes: net income was down 45 percent, provisions for loan losses had been increased, and nonperforming loans were up. Contrasting this performance with earlier reports of conservative loaning practices, diversified portfolios, adequate loan loss reserves, and a rigorous new credit management process, plaintiffs, a class comprising all persons who, between January 13, 1989, and March 29, 1990, acquired First Chicago common stock either through purchase on the open market or in exchange for Ravenswood common stock, charge First Chicago and six of its officers and directors with misrepresenting the health of the corporation. Now before this court is defendants' motion to dismiss the complaint. For the following reasons, that motion is granted.

 I. Section 10(b) and Rule 10b-5 Allegations

 A. The Complaint

 In their fifty-page complaint, plaintiffs quote extensively from various press releases, letters to shareholders, annual reports, 10-Q and 10-K forms, results and dividend announcements, and miscellaneous statements in an attempt to document the allegedly fraudulent statements of the defendants. In paragraphs 18 through 72, plaintiffs target quotations that highlight the achievements and tout the strength of the company in general and in certain areas of operation in particular. Without detailing each quoted statement, we offer a synopsis of these allegations:

(i) General statements of First Chicago's strong performance. Defendants are quoted as boasting of the high level of performance in the record year 1988 (para. 21), the excellent performance in the first quarter of 1989 (para. 38), and the record results in the second quarter of 1989 (para. 45). Defendants also point to the continuation of 1988's momentum in 1989 (para. 43), downplay minor setbacks in the third quarter of 1989 by stressing the strength of the balance sheet (para. 54), note a 4 percent increase in operating earnings in the fourth quarter of 1989 (para. 58), and attribute the corporation's success to the broad diversity of its earnings sources (para. 38).
(ii) Dividend Increases. The complaint asserts that defendants announced dividend increases during the first quarter of 1989 (para. 20) and the fourth quarter of 1989 (paras. 58, 60, 64).
(iii) Strength of Credit Management Process. The complaint contains numerous statements by defendants boasting of their strong credit management process (paras. 22, 64), which was restructured in 1984 (see paras. 22, 33). The review process was described as strict and disciplined (paras. 27, 32, 65) and a high priority for First Chicago (paras. 28, 65). Loan portfolios and credit risks, defendants continued, were monitored closely and reviewed continually, and attention was given to the continuing change and volatility of the marketplace (paras. 50, 57, 65); estimates of potential losses were made quarterly for the purpose of assessing the adequacy of the allowance for credit losses (paras. 50, 57). The restructured credit process, which promoted diversification of risk (paras. 32, 65) was credited with contributing to the corporation's healthy performance in 1988 (paras. 28, 32). First Chicago's "strong credit management" was listed as one of the corporation's greatest strengths and a distinct and valuable competitive advantage (paras. 42, 64) and, defendants claimed, was "designed to result in above-average industry performance" (para. 64).
(iv) High Quality of Loan Portfolios: General. Defendants repeatedly touted the quality of their credit, especially in the commercial loan portfolio (paras. 19, 22, 38, 41, 45, 61, 64) and stated that excellent credit quality was a priority (para. 28). The improved quality of its loan portfolio, defendants claimed, was reflected in the low level of net charge-offs (paras. 32, 50) and in the decreased allowance for credit losses in 1988 (paras. 19, 28, 31, 32) and in the first quarter of 1989 (paras. 38, 40, 41); the allowance level, defendants explained, represents management's judgment of the level necessary to provide for probable credit losses (paras. 28, 34). The low credit loss provision in 1988, defendants observed, suggested a moderate level of newly identified probable losses (para. 32). The level of nonperforming assets were reported to be decreasing (paras. 19, 28, 32, 38, 41). Defendants attributed the improvement in the credit quality in 1988 to the disciplined credit process and the strengthening Midwest economy (para. 32).
(vi) High Quality of Loan Portfolios: Real Estate Lending. Defendants conceded that real estate lending, like the HLT portfolio, required special attention but exposure and risk were minimized by defendant's disciplined lending practices (para. 25). Identifying commercial real estate lending as "an important portfolio segment for them," defendants indicated that the portfolio had experienced only modest growth recently in contrast to the increasing exposure industry-wide (paras. 30, 64), a conscious management strategy in light of industry conditions (para. 64). Real estate portfolios were described as diversified by project type and geography (paras. 30, 64), and the experience and expertise of the management team were touted (para. 30). Defendants also represented that First Chicago's real estate customers were "upper-tier and experienced" (para. 64).
(vii) High Quality of Loan Portfolios: Troubled Country Debt. The recognized "credit problems" of the troubled-country debt ("TCD") portfolio, defendants advised, were dealt with aggressively (para. 23) with conservative but assertive management (paras. 23, 27, 45), which actively sought to decrease the level of exposure in this area (paras. 24, 43). Defendants boasted that the troubled-country debtor reserve was effective and one of the strongest in the industry (paras. 38, 39, 43, 60).
(viii) Optimism about the Future: Three Objectives. Defendants on several occasions adverted to three goals to be achieved by 1991: (1) a return on target equity of 16 or greater; (2) a common equity ration of at least 5.5 percent of assets; and (3) a reduction in the TCD portfolio to at least $ 1.5 billion while retaining a strong reserve level (paras. 26, 64). Following the report of second quarter 1989 results, defendants credited the corporation with making "continued progress toward these financial goals" (para. 45) and expressed their determination to "sustain this momentum . . . and achieve even further gains" (para. 46). Defendants pointed to stock dividend increases announced by the Board of Directors as evidence of their confidence that the three objectives would be met (paras. 27, 64, 60). Defendants also revealed their optimism about the corporation's potential for future success in more general terms (paras. 27, 64).

 After cataloguing these statements of confidence and optimism, the complaint proceeds to allege that on March 29, 1990,

First Chicago announced that serious problems in its real estate loan portfolio had caused the provision for loan losses for the first quarter of 1990 to triple . . . to approximately $ 150 million to $ 160 million, and that net income for the first quarter of 1990 would be approximately 50% of the net income reported in the first quarter of 1989 . . . . First Chicago also estimated that ...

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