Fill and Sign the Jury Instruction 442 Rule 10b 5b Misrepresentations Omissions of Material Facts Form

4.2 Securities Act - Rule 10b-5(b) 17 C.F.R. § 240,10b-5(b) Misrepresentations/Omissions Of Material Facts The Plaintiff's first claim in this case is asserted under the Securities Exchange Act of 1934. The Securities Exchange Act is a federal statute that, among other things, allows the Securities Exchange Commission to promulgate, in the public interest or for the protection of investors, rules and regulations prohibiting certain conduct in the purchase or sale of securities. Among such regulations is Rule 10b-5(b) which makes it unlawful for anyone to commit a fraud in connection with the sale of a security. A “security” is commonly defined as a stock, bond, note, convertible debenture, warrant or other document representing a share of stock in a company or a debt owed by a company. In order to prevail on the claim under Rule 10b-5(b), the Plaintiff must prove each of the following facts by a preponderance of the evidence: First: That the Defendant used an "instrumentality of interstate commerce" [a facility of a national securities exchange] in connection with the securities transaction involved in the case; Second: That the Defendant's conduct in connection with such transactions violated Rule 10b-5(b) as hereafter explained; Third: That the Defendant acted "knowingly," as that term is defined in these instructions; Fourth: That the Plaintiff "justifiably relied" upon the Defendant's conduct as that term is defined in these instructions; and Fifth: That the Plaintiff suffered damages as a result of the Defendant's wrongful conduct. [In the verdict form that I will explain in a moment, you will be asked to answer a series of questions concerning each of these factual issues.] With regard to the first of these facts - - that an "instrumentality of interstate commerce" was used in some phase of the transaction - - the term "instrumentality of interstate commerce" means, for example, the use of the mails or the telephone or some other form of electronic communication. It is not necessary, however, that any misrepresentation or omission actually occur during the use of the interstate instrumentality of communication. What is required is that the interstate instrumentality of communication be used in some phase of the transaction; but it need not be that part of the transaction in which the fraud occurs. [Some facility of a national securities exchange may include a computer trading program or an online discount brokerage service that was used in some phase of the transaction. Again, it is not necessary that the facility of an exchange be the means by which any misrepresentation was transmitted, only that such facility was used in some phase of the transaction.] The second fact the Plaintiff must establish is that the Defendant engaged in conduct that violated Rule 10b-5(b). Included in the list of prohibited acts in Rule 10b-5(b) is the making of any untrue statement of material fact, or omitting the statement of a material fact, which would tend to mislead the prospective buyer or seller of securities. In this instance the alleged misrepresentations [or omissions] asserted by the Plaintiff are as follows: [Here describe the specific statements or omissions claimed to have been fraudulently made.] So, in order to establish the second essential part of the claim under Rule 10b-5(b), the Plaintiff must prove first, that the Defendant made one or more of those alleged misrepresentations of fact [or omitted to state facts that would be necessary to make other statements by the Defendant not misleading to the Plaintiff] and second, that the misrepresentation [or omission] involved “material” facts. A “misrepresentation” is simply a statement that is not true. [Predictions, expressions of opinion, and other forward-looking statements, so long as they are not worded as guarantees, are not representations of material facts, and thus do not require revision or amendment, unless the speaker does not have a basis to reasonably believe them. If, at the time the predictions, expressions of opinion, or projections were made, the speaker actually believed them or there was a reasonable basis for making them, then the statements are not materially misleading statements of fact. The focus is on whether the statements were false or misleading at the time they were made. Subsequent events proving the forward-looking statement to have been erroneous will not give rise to a violation of Rule 10b-5.] [With regard to an omission to state facts that would be necessary to know in order to keep other statements from being materially misleading, the Defendant’s duty is a continuing one. That is to say that, if the Defendant has made statements regarding material facts in the past such as statements made in reports filed with the Securities Exchange Commission, or information which was sent out to investors, or statements made in press releases issued by the company, there is a duty to correct statements of material fact if it is learned that the statement, though correct at the time it was made, would be misleading if left unrevised. Likewise, a Defendant has a duty to update prior statements when, though the statement was reasonable when made, subsequent events have rendered the statement materially misleading.] The third fact the Plaintiff must prove under Rule 10b-5(b) is that the Defendant acted "knowingly." It is not enough to show that the Defendant acted accidentally or merely made a mistake or even that the Defendant was negligent. Rather, it must be shown that the Defendant acted with a mental intent to deceive, manipulate or defraud; that the Defendant stated material facts that were known by the Defendant to be false [or stated untrue facts with reckless disregard for their truth or falsity] [or knew of the existence of material facts that were not disclosed although the Defendant knew that knowledge of those facts would be necessary to make the Defendant’s other statements not misleading]. The fourth essential part of the Plaintiff's claim under Rule 10b-5(b) is the requirement of proof that the Plaintiff "relied" upon the alleged misrepresentations [or omissions] and was "justified" in doing so. In other words, if you find that the Plaintiff would have engaged in the transactions anyway, and that the misrepresentation [or omission] had no effect upon the Plaintiff’s decision, then there was no reliance and there can be no recovery. Further, the Plaintiff must prove that reliance upon the Defendant was justified; that the Plaintiff did not intentionally ignore suspicious circumstances and refuse to investigate them in disregard of a risk that was either known to the Plaintiff or so obvious that the Plaintiff should have been aware of it, and so great as to make it highly probable that harm would follow. [In considering whether the Plaintiff justifiably relied on the Defendant’s alleged misrepresentations, you should consider the presence or absence of all relevant factors including: 1. the sophistication and expertise of the Plaintiff in financial and securities matters 2. the existence of long-standing business or personal relationships between the Plaintiff and the Defendant 3. the Plaintiff’s access to relevant information 4. the existence of a fiduciary relationship owed by the Defendant to the Plaintiff 5. concealment of fraud by the Defendant 6. whether the Plaintiff initiated the stock transaction or sought to expedite the transaction 7. the generality of specificity of the misrepresentations. No single factor is dispositive and all must be considered in determining whether reliance was justified.] [In the case of omissions or non- disclosures of material facts, if such an omission is proved, then the matter of reliance on the part of the Plaintiff may be presumed. The law infers or assumes that the Plaintiff would have relied upon facts that are shown to be material and intentionally withheld. The Defendant, however, may rebut or overcome this presumption if the Defendant is able to prove, by a preponderance of the evidence, that even if the material facts had been disclosed, the Plaintiff’s decision concerning the transaction would have been the same.] The fifth and last essential part of the plaintiff’s claim under rule 10b-5(b) is the requirement that the Plaintiff prove injury or damage to the Plaintiff as a proximate result of the misrepresentations [or omissions]. For damage to be the proximate result of a misrepresentation [or omission] the Plaintiff does not have to prove that the misrepresentation [or omission] was the only cause of the injury or damage. Rather, the Plaintiff must prove that the misrepresentation [or omission] was a substantial or significant contributing cause, so that, except for the misrepresentation [or omission], such damage would not have occurred. If you find for the Plaintiff on the claim under Rule 10b-5(b), you will then consider the issue of the amount of money damages to be awarded to the Plaintiff. In considering the issue of the Plaintiff’s damages, you are instructed that you should assess the amount you find to be justified by a preponderance of the evidence as full, just and reasonable compensation for all of the Plaintiff’s damages, no more and no less. Compensatory damages are not allowed as punishment and must not be imposed or increased to penalize the Defendant. Also, compensatory damages must not be based on speculation or guesswork because it is only actual damages that are recoverable. You should consider the following elements of damage, to the extent you find them proved by a preponderance of the evidence, and no others: (a) [Describe Plaintiff’s theory of recoverable compensatory or economic damages] 4.2 Securities Act - Rule 10b-5(b) 17 C.F.R. § 240.10b-5(b) Misrepresentations/Omissions Of Material Facts SPECIAL INTERROGATORIES TO THE JURY Do you find from a preponderance of the evidence: 1. That the Defendant used an “instrumentality of interstate commerce” in connection with the securities transactions involved in this case? Answer Yes or No 2. That the Defendant’s conduct in connection with such transactions violated Rule 10b-5(b) (as explained in the Court’s instructions)? Answer Yes or No 3. That the Defendant acted “knowingly” (as that term is defined in the Court’s instructions)? Answer Yes or No 4. That the Plaintiff “justifiably relied” upon the Defendant’s conduct (as that term is defined in the Court’s instructions)? Answer Yes or No 5. That the Plaintiff suffered damages as a result of the Defendant’s wrongful conduct? Answer Yes or No [Note: If you answered No to any of the preceding questions you need not consider the remaining question.] 6. That the Plaintiff should be awarded $ in compensatory damages. SO SAY WE ALL. Foreperson DATED: ANNOTATIONS AND COMMENTS “To succeed on a Rule 10b-5 fraud claim, a plaintiff must establish (1) a false statement or omission of material fact; (2) made with scienter; (3) upon which the plaintiff justifiably relied; (4) that proximately caused the plaintiff’s injury.” Robbins v. Koger Properties, Inc., 116 F.3d 1441, 1447 (11th Cir. 1997) (citing Bruschi v. Brown, 876 F.2d 1526, 1528 (11th Cir. 1989)). “[T]he fraud on the market theory, as articulated by the Supreme Court, is used to support a rebuttable presumption of reliance, not a presumption of causation.” Id. at 1448 (citing Basic v. Levinson, 485 U.S. 224, 241-242, 108 S.Ct. 978, 992, 99 L.Ed.2d 194 (1988)).