U.s. Bank National Ass'n v. Sterne, Agee & Leach, Inc.

dissenting:

I respectfully dissent. I agree that the district court did not apply the proper standard for materiality, but I see no good reason not to honor its factual finding that the original investors did not actually rely upon defendant or its alleged omissions.

The district court did not overlook the rebuttable presumption in favor of plaintiff on the reliance issue. Its written order made explicit reference to it: “Where an omission forms the basis for the claim, however, positive proof of reliance is not a prerequisite to recovery. Rather, a rebut-table presumption of reliance is created; which defendant can rebut by showing that the plaintiffs decision would have been *743 unaffected even if the omitted fact has been disclosed” (internal quotation marks and citation omitted). There is nothing wrong with that articulation of the presumption, and the majority does not identify anything that is incorrect about it.

The same order subsequently stated an explicit finding that the investors did not actually rely upon the underwriter and instead placed “sole reliance on the creditworthiness of those banks issuing letters of credit or, later acting as Trustee to preserve the…

MEMORANDUM **

U.S. Bank National Association (“USB”) appeals the district court’s judgment pursuant to Fed.R.Civ.P. 52(c) dismissing its action against Sterne, Agee & Leach, Inc. (“SAL”) for violation of the Washington State Securities Act (“WSSA”). Our review of the district court’s legal conclusions is de novo. Price v. United States Navy, 39 F.3d 1011, 1021 (9th Cir.1994). Because the district court applied the wrong legal standards of materiality and reliance, we vacate the judgment and remand for appropriate proceedings.

USB, standing in the shoes of the original investors by reason of the assignment of their claims, alleged that SAL sold securities issued by the Eel River Investment Company (“ERIC”) using material misrepresentations or omissions. Specifically, USB alleged that SAL failed to disclose: (1) the litigation, debt, and criminal history of ERIC’s president and chairman, Veril Olsen; (2) the dual role of attorney Michael Ross as both counsel to and director of ERIC, in connection with his issuance of an opinion letter respecting ERIC’s securities; and (3) the fact that the shares were not lawfully issued under Washington law. After a five-day bench trial, the…