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Jaffe v. Household International, Inc.

United States District Court, Seventh Circuit

July 30, 2013

LAWRENCE E. JAFFE PENSION PLAN, ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, Plaintiffs,
v.
HOUSEHOLD INTERNATIONAL, INC., ET AL., Defendants.

Paul D. Clement, BANCROFT PLLC, Washington, DC.

R. Ryan Stoll, Mark E. Rakoczy, SKADDEN, ARPS, SLATE, MEAGHER & FLOM, Chicago, IL.

Thomas J. Kavaler, Patricia Farren, Jason M. Hall, CAHILL GORDON & REINDEL LLP, New York, NY, Attorneys for Defendants Household International, Inc., William F. Aldinger, David A. Schoenholz, and Gary Gilmer.

DEFENDANTS' RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW OR, IN THE ALTERNATIVE, A NEW TRIAL

RONALD A. GUZMAN, District Judge.

Defendants Household International, Inc., William F. Aldinger, David A. Schoenholz, and Gary Gilmer (collectively "Defendants"), respectfully move for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, or, in the alternative, a new trial pursuant to Rule 59 of the Federal Rules of Civil Procedure. In support of this motion, and pursuant to this Court's Order, Doc. 1856, Defendants submit herewith, and expressly incorporate herein, Defendants' Memorandum of Law In Support of Defendants' Renewed Motion For Judgment As A Matter of Law Or, In The Alternative, A New Trial ("Memorandum of Law").

As more fully set forth in the Memorandum of Law incorporated herein, Defendants are entitled to judgment as a matter of law pursuant to Rule 50(b) on multiple grounds, including:

1. Plaintiffs failed to present competent evidence to prove the essential element of loss causation. See Memorandum of Law at 5-22. Plaintiffs' "leakage model" failed to establish loss causation as a matter of law for multiple reasons, including: (1) the leakage model failed to identify the misrepresentations alleged to have introduced inflation into Household's Stock Price, see Memorandum of Law at 8-11; (2) the leakage model failed to establish a causal connection between an alleged misrepresentation and a loss, see Memorandum of Law at 11-16; (3) the leakage model failed to account properly for stock price declines resulting from non-fraud firm-specific factors, see Memorandum of Law at 16-20; and (4) the leakage model had numerous additional infirmities that reinforce the model's structural errors, see Memorandum of Law at 20-22.

2. The jury's finding that the March 23, 2001 statement introduced the leakage model's sum total of inflation into the stock price precludes, as a matter of law, either materiality or application of the "fraud-on-the-market" presumption of reliance as to other statements. See Memorandum of Law at 31-34. Independently, because the jury found that all inflation in the market price of Household stock was attributable to the March 23, 2001 statement, but that Defendant Schoenholz was not liable for that statement, Defendant Schoenholz is entitled to judgment as a matter of law. See Memorandum of Law at 34.

3. Judgment in Defendants' favor is further required because there was no legally tenable basis for the jury to find the three theories of fraud presented by Plaintiffs-restatement, predatory lending, and re-aging-to be actionable. As a matter of law, the record evidence fails to meet the requisite standards of scienter to sustain a finding of liability in a private securities fraud cause of action. See Memorandum of Law at 34-39.

4. Plaintiffs' failure to prove a primary violation of § 10(b) and Rule 10b-5 by any Defendant renders Plaintiffs' § 20(a) claims for controlling person liability against Aldinger and Schoenholz subject to dismissal as a matter of law. See Memorandum of Law at 49. Moreover, the evidence was insufficient as a matter of law to support the imposition of § 20(a) liability as to the statements at issue. See Memorandum of Law at 49.

* * *

As more fully set forth in the Memorandum of Law incorporated herein, Defendants are, in the alternative, entitled to a new trial pursuant to Rule 59 for numerous reasons, including:

1. The jury's ad hoc, partial adoption of Plaintiffs' leakage model resulted in an irrational and unsupported verdict. See Memorandum of Law at 22-31. The Jury's finding that a March 23, 2001 statement concerning solely "predatory lending" introduced the leakage model's total sum of inflation into the stock price is legally impossible and foreclosed by the model itself, see Memorandum of Law at 25-29, and resulted in a wholly unsupported, irrational verdict, see Memorandum of Law at 29-31.

2. The jury instruction on the first element of Plaintiffs' claim misstated the law on this essential element, as the Supreme Court's decision in Janus Capital Group, Inc. v. First Derivative Traders, 131 S.Ct. 2296 (2011), now unequivocally establishes. See Memorandum of Law at ...


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