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August 21, 1975

Lawrence S. Black, et al., Plaintiffs,
Riker-Maxson Corporation, et al., Defendants


The opinion of the court was delivered by: COOPER

I. Introduction

This litigation brought before us plaintiff Lawrence S. Black ("Black"), president of Black & Company, Inc., a brokerage firm in Portland, Oregon; plaintiffs Gerald Frank ("Frank") and Albert Starr ("Starr"), clients of Black; defendant Riker-Maxson Corp. ("Riker-Maxson"), a publicly-held company, a conglomerate centered around electronics; defendants Robert Dressler ("Dressler") and S. Marcus Finkle ("Finkle"), during the relevant time period, president and chairman of the board of directors, respectively, of Riker-Maxson. At the opening of trial, plaintiffs agreed to dismiss the action against Dressler.

 In January 1968 plaintiffs acquired through a private placement $400,000 face amount in Riker-Maxson 7% convertible notes. Black bought $200,000, and Frank and Starr $100,000 each. In an effort to restructure and refinance the company, Riker-Maxson in the fall of 1968 solicited its noteholders to determine whether they would convert their notes to shares of Riker-Maxson common stock. On December 10, 1968 Black met Finkle for breakfast at the Essex House in New York City to discuss the affairs of the company. No one else was present at that meeting. What was said on that occasion is the sole source of nutriment for this litigation. Plaintiffs allege that during the course of that conversation Finkle made three statements: (1) the earnings of Riker-Maxson would be $3.00 per share, $2.80 per share after full dilution (the "earnings statement"); (2) as chairman of the board, Finkle was not receiving a salary (the "salary statement"); and (3) the company had received a positive reaction from the other noteholders (the "noteholders statement"). Black promptly returned to Oregon and in short order all three plaintiffs converted their notes into common stock. After the exchange the value of the common stock declined from a range of $35 to $40 per share to about $3 per share.

 Plaintiffs subsequently began this action for damages, alleging that the three statements of Finkle were material misrepresentations of fact in violation of Section 10(b) of the Securities Exchange Act of 1934 and of Rule 10b-5 promulgated thereunder. The trial, started June 16, 1975, proceeded on the issue of liability only and, during the course of its deliberations, the Court submitted a special verdict pursuant to Fed. R. Civ. P. 49(a). On June 24, the jury returned a verdict in favor of defendants. Plaintiffs now move for an order granting a new trial of this action pursuant to Fed. R. Civ. P. 59 on the grounds that: (a) the jury delivered a less than unanimous verdict which was accepted by the Court as a unanimous verdict; and (b) the Court's charge to the jury was in error. Defendants have submitted papers in opposition to plaintiffs' motion and renew their own motions during trial for dismissal (at the end of plaintiffs' case) and/or a directed verdict (at the end of the trial), on which the Court had reserved decision. For the reasons set forth below, plaintiffs' motion for a new trial is denied, and the Clerk is directed to enter judgment in favor of defendants.

 II. Motion for New Trial

 (a) Lack of Unanimity

 We consider first plaintiffs' claim concerning the lack of unanimity of the verdict. At the close of trial, and with the approval of all parties, we submitted to the jury a special verdict form consisting of nine questions. *fn1" Their answers were succinct and unambiguous. *fn2" Question 2 asked whether the jury found that Finkle had made the three statements to Black as Black claimed; the jury reported "opinion divided" as to the earnings and salary statements (questions 2(a) and 2(b), respectively) and "Yes" as to the noteholders statement (2(c)). The jury also reported "opinion divided" as to whether any of those statements was a misrepresentation (question 3). We note that counsel for plaintiffs delayed in making this objection until after the jury had been dismissed. This deprived us of any opportunity to re-submit any appropriate question to the jury had we felt it necessary to do so. Our decision, we are confident, would have been the same.

 Plaintiffs cite no authority to support their argument that the failure of the jury to answer questions 2(a), 2(b) and 3 constitutes grounds for a new trial; actually the law is to the contrary. The failure by a jury to answer some of the questions in a special verdict does not vitiate an otherwise unanimous verdict where the unanimous answers to the verdict conclusively dispose of the case. Skyway Aviation Corp. v. Minneapolis, Northfield & Southern Railway Co., 326 F.2d 701 (8th Cir. 1964); Kissell v. Westinghouse Electric Corp., Elevator Division, 367 F.2d 375 (1st Cir. 1966); Pacific Indemnity Co. v. McDermott Brothers Co., 336 F. Supp. 963, 967 (M.D. Pa. 1971).

 Here, the jury did resolve unanimously sufficient questions to require judgment for defendants on all issues of the case. The jury unanimously decided that Black did not act as the agent for Frank and Starr at the December 1968 breakfast meeting with Finkle (question 7). This finding is amply supported by the record and has not been challenged in the instant motion. Since Black was not acting as the agent for Frank and Starr, they could not have been prejudiced by the lack of unanimity as to any statements made by Black. The jury's unanimous finding on this issue disposes of the claims asserted by Frank and Starr.

 The jury also decided unanimously that Finkle made the noteholders statement (2(c)) with no intent to defraud (question 5). While the jury could not decide whether the statement was a misrepresentation (question 3), its finding of lack of intent is conclusive, for intent to defraud is an imperative element of plaintiffs' case. Lanza v. Drexel & Co., 479 F.2d 1277, 1306 (2d Cir. 1973) (en banc). Furthermore, the jury found that the element of causation, also essential to plaintiffs' case, Globus v. Law Research Service, Inc., 418 F.2d 1276, 1291 (2d Cir. 1969), cert. denied, 397 U.S. 913, 25 L. Ed. 2d 93, 90 S. Ct. 913 (1970), was lacking (question 8). These findings necessarily dispose of plaintiffs' claims with respect to the noteholders statement.

 We turn now to the alleged statements on earnings and salary (questions 2(a) and (b)). The jury, unable to decide whether the earnings or salary statements were made, or whether any of the three statements was a misrepresentation (question 3), came to question 4, which asked whether any of the statements listed in answer to question 3 were about material facts. The jury then listed "2(c)" (the noteholders statement) as the only statement they found to be material. Since question 3 referred to each of the alleged statements, and the jury answered only "opinion divided" with respect thereto and proceeded nonetheless to question 4, the most reasonable explanation is that the jury had all three of the statements in mind, and found only 2(c) to be material.

 In Skyway Aviation, supra, the Eighth Circuit refused to overturn a judgment for plaintiff in an action resulting from a mid-air collision of two light airplanes. Upon conclusion of the trial the court submitted a special verdict to the jury. The jury did not answer the question "Was the operator of [plaintiff's] aircraft negligent?" but did answer "No" to the following question, "If so, was such negligence a proximate cause of the accident?" The trial court concluded that all pertinent questions had been answered and entered judgment for plaintiff. In affirming, the court held,

It mattered not that the jury was deadlocked on the special verdict's unanswered question with respect to this issue of plaintiff's negligence inasmuch as the jury must have agreed that even if plaintiff's violation of the rules amounted to negligence, it did not constitute a proximate cause of the collision. Plaintiff's negligence has no bearing on the ultimate decision of this case since the finders of ...

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