treatment; he entrusts the psychiatrist with information in the course of treatment which the psychiatrist is duty-bound not to appropriate for his own use. In short, as noted by Judge Cedarbaum, "it is difficult to imagine a relationship that requires a higher degree of trust and confidence than the traditional relationship of physician and patient." United States v. Willis, 737 F. Supp. at 272.
Materiality With Respect to the BankAmerica Information
Sloate again argues that the SEC's Complaint fails to state how the alleged nonpublic information regarding Weill's BankAmerica plans was material. As this Court previously noted, the question of materiality cannot be resolved on a motion to dismiss unless the undisclosed facts are "so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985).
Although Sloate characterizes Weill's plan to run BankAmerica a "fantasy," the Court cannot conclude on this motion to dismiss that, at the time Sloate allegedly possessed the information and traded on it, such plans were so obviously unimportant that reasonable investors would not have considered them important in the context of the "total mix" of information available. See Basic, Inc. v. Levinson, 485 U.S. 224, 99 L. Ed. 2d 194, 108 S. Ct. 978 (1988). In Basic, the Supreme Court rejected a bright line test for defining "materiality" in favor of a balancing test which takes into account the magnitude of a proposed event and the probability of its occurrence. 485 U.S. at 232-41. Since it is purely a factual inquiry, the probability of Mr. Weill's becoming CEO of BankAmerica cannot presently be determined. Nor can we say at this time that the event, had it occurred, would not have had a significant impact on the company's fortunes. Moreover, Weill's ultimate failure to accomplish his plan does not necessarily lead to the conclusion that the company's investors would not have considered information about those plans to be material.
As the Court noted in its previous Opinion and Order, the allegations of the Complaint are sufficient to support an inference that material, nonpublic information was tipped to Sloate. The Complaint alleges that in January or February of 1986, Weill "was considering a proposal to change the management of BankAmerica, including becoming its Chief Executive Officer." Cmplt. at P40. It also alleges that Weill was engaged in confidential discussions concerning these plans and his steps to secure a commitment from Shearson to invest capital in BankAmerica if, among other things, Weill succeeded in becoming CEO. Cmplt. at PP40-41. According to the Complaint, Weill told his wife material, nonpublic information concerning his possible takeover of BankAmerica, about confidential meetings, and about the $ 1 billion commitment from Shearson, provided Weill became CEO. Cmplt. at P42. The Complaint alleges that Mrs. Weill confided certain material, nonpublic information to Willis concerning the BankAmerica plans (Cmplt. at P47) and that Willis communicated material, nonpublic information concerning those plans to Sloate (Cmplt. at P52). The SEC need not prove these allegations on this motion to dismiss -- proof of the detailed substance of these communications must await trial, at which time it will be determined whether a reasonable investor would have considered what Sloate was told to be important in the total mix of information.
For the foregoing reasons, the Court reaffirms its Opinion and Order of November 15, 1991.
Dated: New York, New York
March 19, 1992
William C. Conner
United States District Judge