Sawant et al v. Ramsey et al

Filing 451

ORDER denying 437 Motion for Judgment as a Matter of Law; denying 438 Motion for New Trial; denying 439 Motion for Judgment as a Matter of Law; denying 440 Motion for New Trial; denying 438 Motion for Remittitur. See attached Memorandum of Decision. Signed by Judge Vanessa L. Bryant on 8/9/12. (Hildebrand, J.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT 

ANIL SAWANT, ET AL.,
Plaintiffs,
v.
GEOFFREY W. RAMSEY, ET AL.,
Defendants.

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CIVIL ACTION NO. 
No. 3:07-cv-980 (VLB) 

August 9, 2012 

MEMORANDUM OF DECISION DENYING [Dkt. #437, 439] RENEWED MOTIONS
FOR JUDGMENT AS A MATTER OF LAW AND [Dkt. #438, 440] MOTIONS FOR A
NEW TRIAL
Defendants Murphy and Ramsey have filed these renewed motions for
judgment as a matter of law and motions for a new trial in the wake of a threeweek long trial after which the jury returned a verdict against both Defendants,
finding that both Murphy and Ramsey violated Securities and Exchange
Commission Rule 10b-5. Alternatively, if the Court declines to set aside the
verdict or grant a new trial, the Defendants request that the Court grant a
remittitur reducing the Plaintiffs’ damages to zero dollars, contending that the
jury lacked sufficient evidence to determine an amount of damages. As the basis
for these requests for relief, the Defendants summarily argue, without reference
to any specific evidence, that none of the Plaintiffs introduced sufficient evidence
to satisfy several of the elements of their 10b-5 claims, despite the fact that each
Plaintiff testified individually regarding the circumstances of his or her decision
to purchase Host America stock.
As the Motions for a New Trial and the Renewed Motions for Judgment as a
Matter of Law raise the same arguments, the Court will address these motions
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together. Additionally, the Court notes that Defendant Murphy and Defendant
Ramsey’s motions are virtually identical, raising the same arguments verbatim,
except for a few instances in which Defendant Murphy raises arguments which do
not apply to Defendant Ramsey. Thus, the Court will consider the Defendants’
motions together, noting when appropriate where Defendant Murphy has raised
an argument which applies to him individually.

I.

Procedural History
During the month of June 2012, the Court conducted a nearly three-week

long jury trial regarding the Plaintiffs’ claims of securities fraud against
Defendants Murphy and Ramsey. In light of the evidence presented at trial, the
jury could have reasonably found the following facts to have been directly or
circumstantially proved by a preponderance of the evidence:
A meeting occurred between employees of RS Services and Walmart to
discuss the LightMasterPlus. Neither Ramsey nor Murphy was present at the
meeting with Walmart. Ramsey drafted the July 12, 2005 Press Release
announcing a transaction with Walmart. Murphy received and reviewed the July
12, 2005 Press Release. Walmart reviewed the draft and instructed Ramsey not to
use the term “purchase order” because there was no commitment to purchase
the LightMasterPlus. Host America then substituted the word “transaction” for
the phrase “purchase order.” The revised Press Release was sent to Walmart and
issued without waiting for Walmart to comment. Murphy sent the release to the
SEC. Walmart called Murphy directly to object to the accuracy of the release and
asked to speak to Host America’s legal counsel. Murphy made no inquiry of those
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present at the meeting to confirm the veracity of the Press Release. Murphy
subsequently gave statements to the press confirming the veracity of the Press
Release. Host America’s stock price and the volume of shares traded skyrocketed
following the issuance of the Press Release and Murphy’s statements to the
press. MSNBC reported the increased stock price and trading volume. Walmart
objected to Murphy’s statements to the press. The SEC suspended trading on
Host America stock. A corrective press release was issued admitting that no
transaction existed with Walmart and explaining that Host America was in the
exploratory phase seeking to propose the sale of its product to Walmart. Trading
resumed in Host America stock at which time Host America’s stock price and
trading volume plummeted.
Following the close of evidence, the Defendants filed a joint motion for
judgment as a matter of law. The Court denied the motion in a reasoned ruling
from the bench addressing each of the Defendants’ arguments in support of their
motion. Defendants now renew these arguments, each raising renewed motions
for judgment as a matter of law. Along with their renewed motions for judgment
as a matter of law, the Defendants move for a new trial.
II.

Legal Standard
Fed. R. Civ. P. 59 permits a court, on motion, to “grant a new trial on all or

some of the issues . . . after a jury trial, for any reason for which a new trial has
heretofore been granted in an action at all in federal court.” Fed. R. Civ. P.
59(a)(1)(A). “A motion for new trial ordinarily should not be granted unless the
trial court is convinced that the jury has reached a seriously erroneous result or
that the verdict is a miscarriage of justice” Lightfoot v. Union Carbide Corp., 110
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F.3d 898, 911 (2d Cir. 1997) (internal quotation marks and alterations omitted).
“[A] decision is against the weight of the evidence . . . if and only if the verdict is
[(1)] seriously erroneous or [(2)] a miscarriage of justice.” Farrior v. Waterford Bd.
of Educ., 277 F.3d 633, 635 (2d Cir. 2002). In reviewing motions for a new trial, the
judge “may weigh the evidence and the credibility of witnesses and need not view
the evidence in the light most favorable to the verdict winner.” Raedle v. Credit
Agricole Indosuez, 670 F.3d 411, 418 (2d Cir. 2012)(citing United States v. Landau,
155 F.3d 93, 104 (2d Cir. 1998)). However, the Second Circuit has “counsel[ed]
that trial judges must exercise their ability to weigh credibility with caution and
great restraint, as a judge should rarely disturb a jury’s evaluation of a witness’s
credibility, and may not freely substitute his or her assessment of the credibility
of witnesses for that of the jury simply because the judge disagrees with the
jury.” Id. (internal quotations and citations omitted). Where “a verdict is
predicated almost entirely on the jury’s assessments of credibility, such a verdict
generally should not be disturbed except in an egregious case, to correct a
seriously erroneous result, or to prevent a miscarriage of justice.” Raedle, 670
F.3d at 418-19.
Fed. R. Civ. P. 50(b) permits parties to file a renewed motion for judgment
as a matter of law after a case has been submitted to the jury. “A court should
grant a motion for judgment as a matter of law after the jury has returned a
verdict only when there is ‘such a complete absence of evidence supporting the
verdict that the jury’s findings could only have been the result of sheer surmise
and conjecture, or . . . such an overwhelming amount of evidence in favor of the

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movant that reasonable and fair minded men could not arrive at a verdict against
[it]. Ladenburg Thalmann & Co., Inc. v. Modern Contintental Const. Holding Co.,
Inc., 408 Fed. Appx. 401, 403-04 (2d Cir. 2010) (quoting Song v. Ives Labs, Inc.,
957 F.2d 1041, 1046 (2d Cir. 1992)). In reviewing a renewed motion for judgment
as a matter of law, “[t]he court may not itself weigh credibility or otherwise
consider the weight of the evidence; rather, it must defer to the credibility
assessments that may have been made by the jury and the reasonable factual
inferences that may have been drawn by the jury.” Williams v. Cnty. Of
Westchester, 171 F.3d 98, 101 (2d Cir. 1999) (citations omitted).
III.

Analysis
A. The jury’s verdict was not against the weight of the evidence.
The first basis upon which Murphy and Ramsey seek a new trial is a

contention that the verdict returned by the jury is against the weight of the
evidence introduced at trial. Defendants assert that the Plaintiffs failed to meet
their burden of proving several of the essential elements of a 10b-5 claim such
that the jury’s verdict in favor of the Plaintiffs is against the weight of the
evidence.
First, Defendants contend that Plaintiffs failed to establish by a
preponderance of the evidence that the statements at issue were materially false
or misleading. In particular, Defendant Ramsey argues that “[n]ot a single Plaintiff
has testified that the statements made by the Defendant Ramsey was [sic] false
or misleading.” [Dkt. #438, Motion for a New Trial, p. 3]. Similarly, Defendant
Murphy asserts that “[i]t must be noted that the plaintiffs never presented a shred

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of evidence that any statements made by Murphy were false or misleading.” [Dkt.
#440, Motion for a New Trial, p. 3].
The Court addressed these arguments in ruling from the bench on the
Defendants’ motion for judgment as a matter of law raised at the conclusion of
the presentation of evidence, summarizing the evidence presented regarding the
statements made by Murphy and Ramsey which permitted the jury to conclude
that such statements or omissions were materially false or misleading. These
arguments remain unavailing.
Defendants’ assertion that the verdict could only have been based on the
Plaintiffs’ testimony articulating the statements to be false or misleading is
mistaken. The jury can consider evidence offered by either party, whether on
direct or cross-examination, including the testimony of the Defendants. Moreover,
Defendants overlook the fact that the jury could have relied upon the
documentary evidence offered at trial to find that a materially misleading
statement or omission was made. The July 12 Press Release itself, along with the
Host with the Most article in which Defendant Murphy is quoted regarding the
non-existent Walmart transaction were entered into evidence. The Press Release
was entitled “Host America’s Energy Division Announces Wal-Mart TransactionTen Store First Phase for LightMasterPlus.” The jury could have relied upon the
title alone to have found the Press Release to be materially misleading. The term
“transaction” is defined as “an exchange or transfer of goods, services or funds.”
See

Transaction

Definition,

Merriam-Webster.com,

http://www.merriam-

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webster.com/dictionary/transaction (last visited August 7, 2012).1 The testimony
offered at trial clearly established that no transaction occurred or existed with
Walmart at the time of the Press Release. Walmart had merely agreed to allow
Host America to access its lighting fixtures for the purpose of running tests
which would enable Host to make a proposal for Walmart to enter into a
transaction for the purchase of Host’s equipment and services in exchange for
compensation by Walmart.
Further, Defendant Murphy testified at trial that Walmart had objected to
the use of the phrase “purchase order” in a prior draft of the Press Release, and
subsequently Host America substituted the phrase “purchase order” for the word
“transaction.” The phrase purchase order is self-defined, referring to an order to
purchase goods and services. The phrase purchase order is therefore
synonymous with the term transaction. Thus, this testimony could have also
provided a sufficient basis for the jury to conclude that the statements at issue
were materially misleading,
Moreover, Defendants Murphy and Ramsey themselves testified and were
cross-examined regarding the lack of any Host America transaction with Walmart
at the time the Press Release was issued. The jury heard testimony that Walmart
immediately contacted Host America following the issuance of the Press Release
contesting the accuracy of the contents of the Press Release.

Specifically,

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The meaning of the term “transaction” is well-established and commonly
known. Further, the jury was instructed to pose questions to the Court to the
extent necessary, and the jury did not ask for a definition of the term
“transaction.” Thus, the Court infers, given the absence of a question relating to
the use or meaning of the term “transaction,” that the jury understood this
common term.
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Defendant Murphy testified that an employee of Walmart called him following the
issuance of the Press Release and informed him that Walmart felt that the Press
Release was false and misleading and requested to speak to Host America’s legal
counsel. This evidence alone was also sufficient to allow the jury to conclude that
the Defendants’ statements were materially false or misleading, having
misrepresented the nature of the concession made by Walmart, as well as the
scope of any arrangement by referencing a multi-phase scenario when in fact
only one phase had been discussed.
Additionally, the jury heard testimony about the SEC suspending trading
on Host America stock and conducting an investigation into the dramatic
increase in the stock price. In light of this evidence, the Court cannot conclude
that the jury has reached a seriously erroneous result. See Lightfoot, 110 F.3d at
911. Nor can the Court conclude that the jury’s findings could only have been the
result of sheer surmise and conjecture. See Ladenburg Thalmann & Co., 408 Fed.
Appx. at 403-04.
Second, Defendant Murphy asserts that the evidence presented at trial
established that he did not play a role in drafting or preparing the Press Release
and therefore he cannot be liable for any of the statements or omissions
contained in the Press Release. Defendant Murphy also notes that the Court’s
decision on summary judgment explicitly held that Defendant Murphy “cannot be
held liable under Section 10(b) for the statements made in the Press Release
because there is insufficient evidence in the record that Murphy was involved in

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drafting the Press Release.” [Dkt. #313, Order on Summary Judgment, p. 33]. This
argument is unavailing for several reasons.
First, Defendant Murphy did not raise this argument in his Motion for
Judgment as a Matter of Law at the close of evidence, and is thus precluded from
doing so now on his Renewed Motion for Judgment as a Matter of Law. See
Broadnax v. City of New Haven, 415 F.3d 265, 268 (2d Cir. 2005)(“[I]f an issue is
not raised in a previous motion for a directed verdict, a Rule 50(b) motion should
not be granted unless it is required to prevent manifest injustice.”). The Court
finds that it is not necessary to set aside the jury’s verdict finding that Defendant
Murphy violated Rule 10b-5 to prevent manifest injustice.
Second, Defendant Murphy’s argument is unpersuasive because the
Court’s decision on summary judgment, while finding that Murphy was not
involved in drafting the Press Release, recognized that Murphy could have
violated the securities laws in connection with the Press Release by failing to
correct the statements made by Host America in the Press Release. [Dkt. #313, p.
35-36]. In fact, the evidence presented at trial was far more expansive than the
evidence on summary judgment and established that Defendant Murphy had
reason to believe, in light of the SEC suspension of trading and Walmart’s
expressed disagreement to him personally regarding the contents of the Press
Release, that a correction was necessary to prevent the Press Release from being
misleading, and despite these warning signs, Host America did not issue a
corrective disclosure until August 31, 2005. The jury instructions informed the
jury that liability could be found on the basis of a failure to correct where a duty

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to correct exists. Moreover, neither the jury instructions nor the verdict form
predicated a finding of Defendant Murphy’s liability under 10b-5 on a material
misstatement or omission made by Defendant Murphy through the Press Release.
Rather, the jury instructions summarize the three possible factual predicates for
the Defendants’ 10b-5 liability, including by issuing the Press Release, failing to
timely correct or update the Press Release, or by making misleading statements
in the “Host with the Most” article, and then the instructions subsequently refer
generally to the making of a material misstatement or omission in connection
with the purchase or sale of securities.
Additionally, absent from the evidence offered on summary judgment but
included in the more expansive evidence offered at trial, was testimony regarding
Defendant Murphy’s omissions in reviewing, discussing, performing due
diligence regarding and otherwise assuring the accuracy of the Press Release. He
testified that at the time the Press Release was drafted and issued he was
preoccupied by indoctrinating a new employee and closing the books for the
immediately preceding quarter. He further testified that he read but did nothing
else with respect to the Press Release, notwithstanding his responsibility to
assure its accuracy as the Chief Financial Officer of the corporation, responsible
for Host America’s filings with the SEC. In light of the testimony that Defendant
Murphy filed Host America’s retraction of the July 12, 2005 Press Release in a 8K
with the SEC and that he was responsible for making SEC filings on behalf of the
company, the jury could have reasonably inferred that he filed the inaccurate
Press Release as well.

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Accordingly, even if Defendant Murphy had raised this argument in his
50(a) motion for judgment as a matter of law, such argument would have failed
where the jury was presented with ample evidence to find that Defendant Murphy
violated Rule 10b-5 on the basis of an omission to correct the Press Release, and
where neither the Court’s jury instructions nor the verdict form predicated a
finding of Murphy’s liability under 10b-5 on a material misstatement or omission
in connection with the Press Release.
Third, Defendants argue that the jury’s verdict was against the weight of
the evidence as the evidence established that the statements made in the Press
Release and Host with the Most article contained opinions and not facts.
Defendants rely on Fait v. Regions Financial Corporation, 655 F.3d 105, 110 (2d
Cir. 2011) for the proposition that a statement of opinion is not actionable unless
“the statement as both objectively false and disbelieved by the defendant[s] at
the time it was expressed.” This argument reflects a misunderstanding of the
definition of the word opinion. The Court considered this argument in reviewing
both the Defendants’ motion for judgment as a matter of law and their request for
jury instruction on the basis of Fait. The Court declined to include the proposed
instruction, finding that unlike the statements held to be statements of opinion in
Fait, the statements at issue in this case were statements of fact and not opinion.
Thus, the Court found that the proposed instruction was not relevant and would
likely confuse the jury.
“[A] trial court has considerable discretion in the formulation and style of
jury instructions.” Patalano v. American President Lines, 250 Fed. Appx. 425, 427-

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28 (2d Cir. 2007) (citing Parker v. Sony Pictures Entm’t, Inc., 260 F.3d 100, 106 (2d
Cir. 2001)). “[A] new trial is only warranted if, taken as a whole, the jury
instructions gave a misleading impression or inadequate understanding of the
law.” Id. at 428 (citing Plagianos v. American Airlines, 912 F.2d 57, 59 (2d Cir.
1990)). “A defendant who challenges a jury instruction must establish that he
requested an instruction that ‘accurately represented the law in every respect.’”
Id. at 427 (quoting United States v. Yousef, 327 F.3d 56, 130 (2d Cir. 2003)). “A jury
instruction is erroneous if it misleads the jury as to the correct legal standard of
does not adequately inform the jury on the law.” Id. (quoting LNC Invs., Inc. v.
First Fidelity Bank, 173 F.3d 454 (2d Cir. 1999)).
The statements in Fait involved allegedly overstated goodwill, a figure
which the Court recognized is calculated following an acquisition and represents
“any excess of the purchase price over the value of the assets acquired and
liabilities assumed.” Fait, 655 F.3d at 108, n. 1. The Second Circuit held that the
allegations regarding goodwill did not involve misstatements or omissions of
material fact, but rather a misstatement of opinion, as “[e]stimate of goodwill
depend on management’s determination of the ‘fair value’ of the assets acquired
and liabilities assumed, which are not matters of objective fact.” Id. at 110.
Here, however, the statements made do contain matters of objective fact.
For example, the Press Release states that Host America “will start surveying 10
Wal-Mart stores in the southwest, in preparation for its installation of its
LightMasterPlus on the flourescent light system of each store.” Further, the Press
Release uses the term “first-phase roll-out” and refers to “the next phase,”

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without any conditioning language designating such terms to be opinions rather
than facts. The Press Release stated as a matter of fact, and not opinion, that
Host America was preparing to install the LightMasterPlus when in fact Host was
not preparing to install the LightMasterPlus, but was preparing to temporarily
install the device to gather data showing that Walmart could achieve energy
savings, savings which it intended to rely upon to make a proposal to purchase
the device. The Press Release was therefore definitive and unequivocal. The only
language in the Press Release which was equivocal was the statement that Host
believed Walmart would like the savings.
In a similar context in which the distinction between a statement of fact and
a statement of opinion is dispositive as to liability, namely the context of a
defamation claim, the Second Circuit recognized that this distinction presents a
question of law to be resolved by the court. See Celle v. Filipino Reporter
Enterprises, Inc., 209 F.3d 163, 178 (2d Cir. 2000). Accordingly, where the Court
determined as a matter of law that the statements made by Defendants Murphy
and Ramsey were statements of facts and not statements of opinion, this request
to charge was not applicable and thus the Court did not provide the jury with an
“inadequate understanding of the law.” See Patalano, 250 Fed. Appx. at 427.
Fourth, the Defendants assert that the jury’s verdict was against the weight
of the evidence as the Plaintiffs failed to present evidence to establish that
Defendants Murphy and Ramsey acted recklessly or knowingly. The evidence
presented at trial established that neither Ramsey nor Murphy were present at the
meeting with Walmart prior to the issuance of the Press Release. Rather, Rusty

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Sparks reported to Ramsey what transpired at the meeting. Notwithstanding what
Sparks told him, Ramsey elected to use the word “transaction,” despite the fact
that this term, as previously discussed, is synonymous with the term “purchase
order” to which Walmart objected, he misrepresented that the non-existent
transaction included multiple phases, and he implied that Walmart had agreed to
purchase the LightmasterPlus.
As previously discussed, the testimony at trial established that Murphy
received a draft of the Press Release for his review, yet neglected to give the draft
more than a cursory review. As the Chief Financial Officer of Host America,
Murphy had a duty to inquire into the details of the transaction, including its
financial implications for the company and the company’s reporting obligations
related to the transaction, as Murphy admitted that in his capacity as CFO, he was
responsible for the company’s filings with the SEC. Murphy admitted that at the
time that the Press Release was drafted, submitted for his review, and ultimately
issued, he was preoccupied with other matters, specifically the training of a new
employee and the review of the company’s quarterly financial records. Murphy
admitted that he did not suggest any changes, and that he did not contact anyone
from Walmart to verify their consent to its contents, nor did he contact any Host
employees who attended the meeting to verify the accuracy of the statement.
Moreover, the testimony established that Murphy neglected to contact Ramsey
about the purported transaction, nor did Murphy receive, read, or learn of the
existence of any agreements, correspondence, or other documents evincing a
transaction with Walmart. In fact, Murphy admitted that despite the significance of

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such a transaction to Host, which at the time was in a financially precarious state,
he gave the Press Release only brief consideration because of his preoccupation
with other matters. The jury heard testimony that Host America needed to
purchase materials to make the devices used to conduct the test in the Walmart
stores, indicating that the purported transaction would have significant expense
implications for which Murphy was responsible due to his position as Chief
Financial Officer. Murphy thus failed to discharge his obligations as the Chief
Financial Officer by failing to meaningfully consider and investigate the
substance of the Press Release to determine its accuracy.  
The inaccuracy of the Defendants’ statements was reflected by the reaction
of Rusty Sparks, who expressed anger about the inaccuracy of the Press Release
and requested that for future press releases his approval be sought.
Accordingly, Defendants’ request for a new trial or to have the jury’s verdict set
aside for failure to establish that the Defendants acted with the requisite mental
state must be denied, as the jury was presented with sufficient evidence with
which to find that the Defendants acted knowingly or recklessly.
Fifth, the Defendants contend that the Plaintiffs failed to establish the
element of justifiable reliance. Defendants argue that the Plaintiffs’ testimony
demonstrated that each of the Plaintiffs neglected to do research into Host
America’s history or the realm of public information available regarding Host
America at the time they decided to purchase stock. Moreover, Defendants
contend that the Plaintiffs testified that they encountered no bad news about Host
America despite the fact that press releases had been issued about the SEC

15

investigation as early as July 20, 2005. Thus, Defendants assert that the Plaintiffs
“closed their eyes” and refused to investigate the circumstances or disregarded
known risks. In making this argument, Defendants cite to absolutely no legal
authority for the proposition that Plaintiffs’ failure to conduct a thorough
investigation of Host America and its stock prior to the purchase of the stock
constitutes unjustifiable reliance. In fact, Defendants inexplicably asked the
Plaintiffs on cross examination whether they had personally called Host America
to seek out non-public information prior to buying Host America stock. The
Defendants are misguided in their understanding of the securities laws.
Reliance is unjustifiable where the falsity of a misrepresentation is
palpable. See Treacy v. Simmons, 1991 WL 67474, at *5 (S.D.N.Y. 1991) (quoting
Grubb v. Fed. Deposit Ins. Co., 868 F.2d 1151, 1163 (10th Cir. 1989). “[A] plaintiff
may not close his or her eyes and refuse to investigate in disregard of a known
risk or a risk so obvious that the plaintiff must have been taken to have been
aware of it.” Id. (emphasis added). For example, reliance has been held to be
unjustifiable where the offering materials issued to prospective investors in a
limited partnership were “replete with statements emphasizing the speculative
nature of the investment,” such that “[a]nyone who had taken even a cursory
glance at the Prospectus and Supplement would have been alerted to the many
risks and uncertainties inherent in the investment.” Brown v. E.F. Hutton Group,
735 F.Supp. 1196, 1201 (S.D.N.Y. 1990).
Here, however, the evidence presented at trial did not establish any
“palpable” or “known” risk, or a risk so obvious that Plaintiffs should have been

16

alerted to conduct further investigation into the value of Host America stock. In
denying the Defendants’ motion for judgment as a matter of law, the Court
rejected the assertion that the evidence presented at trial established that the
Plaintiffs were willfully blind, declining to investigate apparent risks. Rather, the
evidence presented at trial demonstrates that each Plaintiff reviewed the Press
Release along with a few other sources which all spoke favorably of Host
America’s stock in deciding to purchase the stock, including MSNBC news
reports, Yahoo Finance articles, and the escalating stock price. Although
Defendants offered testimony to establish that at the time of the Press Release
Host America had recently decided to redirect its corporate focus from the food
services industry to energy services which could indicate a certain level of risk
inherent in new endeavors, the Defendants did not establish any negative or
critical information regarding Host America stock which was publically available
at the time that the Plaintiffs’ purchased the stock.
Accordingly, the Court reiterates its conclusion that the evidence
presented at trial was sufficient to establish the element of justifiable reliance. As
such, it cannot be said that the jury reached a seriously erroneous result, or that
the jury’s verdict was supported by a complete absence of evidence such that
their finding could only have been the result of sheer surmise or conjecture. See
Lightfoot, 110 F.3d at 911; Ladenburg, 408 Fed. Appx. at 403-04.
Additionally, the Court also rejects Defendant Murphy’s assertion that
because five of the nine Plaintiffs testified that they had not read the Host with
the Most article prior to purchasing Host America stock the evidence was

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insufficient to support the jury’s verdicts against Defendant Murphy as to these
Plaintiffs. As previously noted, the verdict forms and jury instructions directed
the jury to consider whether each Defendant made a material misstatement or
omission in connection with the purchase or sale of Host America securities
without referencing particular statements or documents containing statements.
Additionally, the jury instructions indicated that 10b-5 liability could be
predicated upon a failure to correct when a duty to correct existed. Accordingly,
the Court cannot conclude that jury’s verdict against Defendant Murphy as to
these Plaintiffs was supported by insufficient evidence where the verdict could
have been predicated on a failure to correct the Press Release.
Sixth, Defendants contend that the evidence at trial was insufficient to
establish loss causation. Defendants rely on Dura Pharmaceuticals, Inc. et al. v.
Broudo et al., 544 U.S. 336 (2005) for the proposition that “a claim of purchasing
stock at an inflated price due to alleged fraud and subsequently suffering a loss
was not sufficient for proving loss causation, as it does not adequately account
for ‘the tangle of factors affecting stock price such as changed economic
circumstances, changed investor expectations, new industry-specific or firmspecific facts, conditions, or events.’” [Dkt. #438, p. 10-11] (quoting Dura, 544 U.S.
at 343. Defendants have misconstrued the holding of Dura and of other relevant
cases to suggest that these cases demonstrate the insufficiency of the evidence
presented at trial. Such cases in fact support, rather than undermine the jury’s
verdict against Defendants Murphy and Ramsey.

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“Loss causation is the causal link between the alleged misconduct and the
economic harm ultimately suffered by the plaintiff.” Lentell v. Merill Lynch & Co.,
396 F.3d 161, 172 (2d Cir. 2005). Loss causation as an element of a 10b-5 claim
has consistently been characterized “as similar to the tort concept of proximate
causation.” In re Vivendi Universal, S.A. Securities Litigation, 634 F.Supp.2d 352,
360 (S.D.N.Y. 2009). Thus, similar to a proximate cause analysis, “courts
assessing plaintiff’s case for loss causation look to whether the alleged damages
were reasonably foreseeable given the alleged false or misleading statements.”
Id. (citation omitted).
In Dura, the Supreme Court held that a plaintiff cannot satisfy loss
causation by alleging only that the he or she paid more for the stock than it was
worth due to a material misrepresentation or omission, reasoning that “as a
matter of pure logic, at the moment the transaction takes place, the plaintiff has
suffered no loss; the inflated purchase payment is offset by ownership of a share
that at that instant possesses equivalent value.” Dura, 544 U.S. at 342. Rather,
“plaintiffs suffer a loss only when the shares they possess decline in value below
the purchase price. Alleging a connection between the overstated price and the
false statements was therefore not enough to establish causation. Plaintiffs
needed to draw a causal connection between the false statements and the
subsequent decline in share value.” In re Vivendi, 634 F.Supp.2d at 361. The
Supreme Court in Dura acknowledged that loss is not inevitable following a
falsely inflated sales price, rather, a purchaser might sell the shares “quickly
before the relevant truth begins to leak out,” such that “the misrepresentation will

19

not have led to any loss.” Dura, 544 U.S. at 342. Even if a loss does result
following later sales of the stock, “that lower price may reflect, not the earlier
misrepresentation, but changed economic circumstances, changed investor
expectations, new industry-specific or firm-specific facts, conditions, or other
events, which taken separately or together account for some or all of that lower
price.” Dura, 544 U.S. at 343. Thus, Dura established that “[f]or a fact-finder to
conclude that the fraud caused a decline in the share price, there must be at least
evidence that the truth had begun to leak out into the market and that the shares
traded at lower prices as a consequence of this leak.” In re Vivendi, 634
F.Supp.2d at 362 (discussing Dura, 544 U.S 336).
In Lentell, another case relied upon by the Defendants, the Second Circuit
clarified the foreseeability component of loss causation, stating that “a
misstatement or omission is the ‘proximate cause’ of an investment loss if the
risk that caused the loss was within the zone of risk concealed by the
misrepresentations and omissions alleged by a disappointed investor.” Lentell,
396 F.3d at 173.
In sum, to establish loss causation, Plaintiffs needed to show that the
Defendants’ misstatement or omission concealed something from the market
that, when disclosed, negatively affected the value of the security. Id. The
evidence at trial was more than sufficient to satisfy this standard for loss
causation.
Plaintiffs’ expert, R. Alan Miller, testified as to the general impact of press
releases on the stock market, and also testified regarding the impact of this

20

particular press release, noting other factors which might also have resulted in
the dramatic increase and subsequent decrease in Host America’s stock price.
On July 11, 2005, Host America’s stock was trading at $3.12 per share. The stock
price doubled on July 12, 2005, the day the Press Release was issued, trading at
$6.35. On July 22, 2005, the day that trading in Host America stock was
suspended by the SEC, the stock was trading at $14.25. When stock resumed
trading on September 1, 2005, the stock traded at $3.71.
Miller ultimately concluded that the inflation in stock price was caused by
the July 12, 2005 Press Release, and the subsequent decline in stock price was
caused by the corrective press release issued on August 31, 2005. There was no
evidence introduced at trial that any factor, aside from the Press Release,
contributed to much less caused the dramatic increase in the Host America stock
price. Nor was any evidence introduced that anything other than the exposure of
the Defendants’ false and misleading statements contributed to or caused the
subsequent and dramatic decrease in Host America’s stock price.
Mr. Miller also testified as to the specific prices at which Plaintiffs
purchased their stock and the amount for which they ultimately sold their stock,
articulating a specific loss amount for each Plaintiff. Moreover, several Plaintiffs
acknowledged that they purchased and sold Host America stock after the
issuance of the false and misleading July 12, 2005 Press Release but before the
corrective press release which triggered the resumption of trading in Host
America stock. These Plaintiffs did not seek damages for those earlier
transactions which were completed before the release of the corrective

21

statement, and thus the jury’s verdict is consistent with the principles of Dura
regarding loss causation which require the loss to be attributed to the exposure
of the misleading statements.
Mr. Miller’s testimony was therefore sufficient to establish that the material
misstatement concealed the true nature of Host America’s arrangement with
Walmart, information, which, when disclosed through the corrective press
release, negatively affected the value of Host America’s stock price resulting in
substantial losses for the Plaintiffs. See Lentell, 396 F.3d at 173. No evidence was
introduced of any fact or event other than the press release which could
conceivably have influenced the exponential increase nor was any fact or event
introduced other than the corrective press release which could have influenced
their exponential decline. Accordingly, the Court finds that the Defendants’
argument that the evidence presented at trial was insufficient to establish loss
causation remains unpersuasive.
Seventh, Defendants contend that the jury’s verdict entering damages
against the Defendants was unsupported by the evidence for several reasons.
Defendants argue that the amount of damages awarded was identical to the
amount of damages articulated by Plaintiffs’ expert, R. Alan Miller, despite the
fact that no admissible evidence was presented as to the specific amounts of loss
sustained by the Plaintiffs, thereby rendering the jury’s verdict sheer guesswork
or speculation. Although Defendants acknowledge that pursuant to Rule 703 of
the Federal Rules of Evidence, an expert’s opinion may be based on inadmissible
evidence, the Defendants assert that the Plaintiffs are obligated to present

22

independent admissible evidence as to damages in order to sustain their burden
of proof. To support this argument, Defendants rely on the Supreme Court’s
recent decision in Williams v. Illinois, 132 S.Ct. 2221 (2012). In particular,
Defendants note that Williams held that “[u]nder settled evidence law, an expert
may express an opinion that is based on facts that the expert assumes, but does
not know, to be true. It is then up to the party who calls the expert to introduce
other evidence establishing the facts assumed by the expert.” Williams, 132 S.Ct.
at 2228.
This argument cannot undermine the jury’s verdict, where, the jury first
heard each individual Plaintiff testify as to the amount of shares of Host America
stock purchased, the purchase price, the ultimate sale price, and the resulting
loss sustained, which testimony was later corroborated by Miller’s expert
testimony. Therefore the jury’s verdict did not rely solely upon the expert’s
testimony, but rather, the jury heard independent evidence from each Plaintiff as
to the loss sustained. The jury was specifically instructed that their award of
damages could not be based on speculation or guesswork. Specifically, the
instruction stated:
You may award only actual damages in that amount
which will reasonably and fairly compensate the Plaintiff
for the economic loss which he she or it suffered. You
may not award punitive damages. Your award must be
based on evidence and not upon speculation,
guesswork or conjecture.
The Court must presume that the jury has understood and complied with the
Court’s instructions. See Chalmers v. Mitchell, 73 F.3d 1262, 1267 (2d Cir. 1996)
(“[W]e assume that a jury applies the instructions it is given.”). There was no
23

indication of jury misconduct, other than the fact that Defendant Murphy was
observed by Court personnel having a lengthy discussion with a juror in violation
of the Court’s admonition, resulting in the juror’s excusal. Neither Defendant cites
any fact which would so much as suggest that any other member of the jury
failed to follow any element of the Court’s instructions.
Thus, where the jury was presented with Plaintiffs’ individual testimony as
to the loss sustained, which testimony was corroborated closely by the Plaintiffs’
expert, the Court cannot conclude that the jury reached a seriously erroneous
result, that the verdict is a miscarriage of justice, or that the jury’s findings could
only have been the result of sheer surmise or conjecture. See Lightfood, 110 F.3d
at 911; see also Ladenburg, 408 Fed. Appx. at 403-04.
The Defendants also challenge the sufficiency of the evidence as to
damages by arguing that the jury was not presented with evidence which allowed
them to calculated damages in the manner instructed by the Court. The Court’s
instructions regarding damages stated as follows:
You should determine the amount of damages suffered
by such Plaintiff by identifying the excess of what such
Plaintiff paid over the value of what the Plaintiff actually
purchased. You may award only actual damages in the
amount which will reasonably and fairly compensate the
plaintiff for the economic loss which he, she, or it
suffered. You may not award punitive damages. Your
award must be based on evidence and not upon
speculation, guesswork or conjecture.
The jury heard each Plaintiff testify as to the purchase price of Host America
stock, and the subsequent proceeds obtained after selling the Host America
stock, thereby arriving at a loss amount. This testimony was corroborated by
24

Plaintiffs’ expert, R. Alan Miller. Such evidence is more than sufficient to sustain
the jury’s verdict awarding damages against the Defendants. Moreover, the Court
notes that this argument was not raised in the Defendants’ motion for judgment
as a matter of law, and therefore cannot be raised now on a renewed motion for
judgment as a matter of law. See Broadnax, 415 F.3d at 268
Defendants next challenge the jury’s verdict as to damages by contending
that “it is apparent that the jury adopted the damage amounts found by Mr. Miller
based on his formula. This is also improper and against the weight of the
evidence,” again reiterating their argument that Mr. Miller’s calculations were
based on inadmissible hearsay. [Dkt. #440, p. 16-17]. For the reasons previously
articulated, Mr. Miller’s figures merely corroborated the testimony offered by the
individuals Plaintiffs as to their damages and therefore to the extent the jury
relied upon Mr. Miller’s testimony they were also relying on the Plaintiffs’
testimony and not merely on “inadmissible hearsay,” as the Defendants attempt
to suggest. Moreover, this argument is essentially disputes the credibility of Mr.
Miller’s testimony. The Second Circuit has cautioned that to the extent a verdict is
predicated on the jury’s assessments of credibility, such verdict should not be
disturbed to grant a new trial “except in an egregious case, to correct a seriously
erroneous result, or to prevent a miscarriage of justice.” Raedle, 670 F.3d at 41819. The Court does not find this case to present an egregious situation or a
miscarriage of justice. Nor can the Court rely on this argument to enter judgment
as a matter of law, as the Second Circuit has instructed that a court may not
“itself weigh credibility or otherwise consider the weight of the evidence” in

25

considering a renewed motion for judgment as a matter of law. Williams, 171 F.3d
at 101.
B. The Court did not improperly instruct the jury
The Defendants also seek judgment as a matter of law, or alternatively a
new trial, on the basis of several challenges to the jury instructions.
As previously noted, “a trial court has considerable discretion in the
formulation and style of jury instructions.” Patalano v. American President Lines,
250 Fed. Appx. 425, 427-28 (2d Cir. 2007) (citing Parker v. Sony Pictures Entm’t,
Inc., 260 F.3d 100, 106 (2d Cir. 2001)). “[A] new trial is only warranted if, taken as a
whole, the jury instructions gave a misleading impression or inadequate
understanding of the law.” Id. at 428 (citing Plagianos v. American Airlines, 912
F.2d 57, 59 (2d Cir. 1990)). “A defendant who challenges a jury instruction must
establish that he requested an instruction that ‘accurately represented the law in
every respect.’” Id. at 427 (quoting United States v. Yousef, 327 F.3d 56, 130 (2d
Cir. 2003)). “A jury instruction is erroneous if it misleads the jury as to the correct
legal standard of does not adequately inform the jury on the law.” Id. (quoting
LNC Invs., Inc. v. First Fidelity Bank, 173 F.3d 454 (2d Cir. 1999)).
1. Damages Instruction
Defendants challenge the Court’s instruction to the jury regarding
damages, asserting that the Court failed to instruct the jury on a limitation on
damages contained in the Securities and Exchange Act of 1934 which provides
that in a private action for securities fraud, any award of damages “shall not
exceed the difference between the purchase or sale price paid or received, as
appropriate, by the plaintiff for the subject security and the mean trading price of
26

that security during the 90-day period beginning on the date on which the
information correcting the misstatement or omission that is the basis for the
action is disseminated to the market. 15 U.S.C. §78u-4(e).
Defendants failed to raise this objection to the jury instructions at any time
prior to trial, during the charge conference, or during trial, despite the fact that
the Court entertained multiple rounds of objections to the jury charge and verdict
form until the morning that the jury instruction was delivered. “The Federal Rules
of Civil Procedure are clear that a party bears the affirmative duty to raise an
objection to charge or special verdict before the jury retires.” Thorsen v. Cnty. of
Nassau, 722 F.Supp.2d 277, 287 (E.D.N.Y. 2010) (citing Fed. R. Civ. P. 49, 51). “The
objecting party is required to object at the charging conference, or at the very
least prior to the jury being charged.” Id. (citing Fed. R. Civ. P. 51(b)).
Defendants’ initial proposed jury instructions [Dkt. #352] contained no
requested instruction as to damages whatsoever. Plaintiffs’ initial proposed jury
instructions did contain a request for charge regarding damages. [Dkt. #361]. On
May 23, 2012, the Court allowed the parties to request proposed changes to the
instructions and to respond to the opposing party’s requests for change. Once
trial began, the Court entertained several more requests for charge by the
Defendants. The Court repeatedly waived deadlines and entertained the
Defendants’ importunate requests for charge after the charge conference. At no
time in the month preceding trial, following the submission of the Joint Trial
Memorandum, nor during the three-week long trial, did the Defendants raise this
request for charge regarding damages. Thus the Court finds that where the Court

27

utilized the damages charge absent any objection by Defendants, such an
instruction cannot be held to be a miscarriage of justice. See Shade v. Housing
Auth. of Cty. of New Haven, 251 F.3d 307, 313 (2d Cir. 2001) (holding defendants
to jury verdict which faithfully followed instruction and verdict form that
defendants urged upon the court did not give rise to miscarriage of justice).
2. Maker of a Statement
Defendant Murphy contends that the Court’s instruction to the jury
regarding the “maker” of a statement erred. The Court instructed the jury
regarding the “maker” of a statement as follows:
The first element that Plaintiffs must establish by a
preponderance of the evidence is that either Defendant
Murphy or Defendant Ramsey or both made a materially
false statement or omitted a material fact necessary in
order to make a statement made not misleading. In order
to find that either or both of the Defendants “made” a
false or misleading statement, you must first find that
one or both of the Defendants was the “maker” of a
statement.
An individual is considered the “maker” of a statement if
the individual is sufficiently responsible for making the
statement. An individual is sufficiently responsible for
making a statement where the individual is involved with
the production or dissemination of the statement, such
as through drafting, producing, reviewing, or assisting
with the preparation of the statement. Dissemination
includes distributing the statement to the public through
traditional channels such as the internet or the news
media, or by filing the statement with a public agency,
such as the SEC, which agency then makes the
statement publicly accessible.
This instruction was crafted in reliance on S.E.C. v. KPMG LLP., 412 F.Supp.2d
349 (S.D.N.Y. 2006), which summarized Second Circuit precedent regarding the
circumstances under which primary liability may be imposed under Section 10(b).
28

The KPMG Court held that primary liability “may attach in a discrete set of
circumstances in which the defendant was not identified to the public as the
speaker.” 412 F.Supp.2d at 374-75. In particular, the Court noted that in In re
Scholastic Corp. Securities Litigation, 252 F.3d 63 (2d Cir. 2001), the Second
Circuit found that primary Section 10(b) liability had been sufficiently alleged
against a book publisher’s vice president for finance and investor relations even
where the company’s misleading statements had not been publically attributed to
him, where it was alleged that he was involved in the “drafting, producing,
reviewing, and/or disseminating of the false and misleading statements issued.”
252 F.3d at 75-76.
In selecting this instruction, the Court rejected, on multiple occasions,
Defendant Murphy’s request for an instruction on the basis of Janus Capital
Group v. First Derivative Traders, 131 S.Ct. 2296 (2011), finding that Janus
pertained to a wholly distinct factual scenario involving a secondary actors. As
the District of New Jersey astutely summarized in

In re Merck

Co., Sec.

Derivative & “ERISA” Litig., MDL No. 1658, 2011 WL 3444199 (D.N.J. Aug. 8, 2011),
Janus did not “alter the well-established rule that ‘a corporation can act only
through its employees and agents.’” Merck, 2011 WL 3444199, at 25 (quoting Suez
Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 101 (2d Cir. 2001).
The Court in Merck found that a senior Merck executive was liable for statements
in

the

company’s

public

filings

containing

material

misrepresentations,

distinguishing Janus by noting that the executive “made the statements pursuant

29

to his responsibility and authority to act as an agent of Merck, not as in Janus, on
behalf of some separate and independent entity.” Id.
Accordingly, as the Court has discussed at length on several occasions,
Defendant’s request to charge regarding Janus is entirely inappropriate to the
facts of the current case.

Thus, this purported error in the jury instructions

cannot be found to have given a misleading impression or an inadequate
understanding of the law. See Patalano, 250 Fed. Appx. at 428.
3. References to Defendant Murphy with regards to the July 12,
2005 Press Release
Defendant Murphy contends that the Court improperly instructed the jury
on liability on the basis of his involvement with the July 12, 2005 Press Release.
However, Defendant Murphy does not cite any particular instruction to which he
objects. As noted above, neither the jury instructions nor the verdict form
predicated a finding of Defendant Murphy’s liability under 10b-5 on a material
misstatement or omission made by Defendant Murphy through the Press Release.
Rather, the jury instructions summarize the three possible factual predicates for
the Defendants’ 10b-5 liability, including by issuing the Press Release, failing to
timely correct or update the Press Release, or by making misleading statements
in the “Host with the Most” article, and then the instructions subsequently refer
generally to the making of a material misstatement or omission in connection
with the purchase or sale of securities.
Accordingly, Defendant Murphy’s assertion that the jury instructions made
“numerous references” to Mr. Murphy with respect to liability resulting from the

30

Press Release is patently false. The jury instructions generally presented the jury
with the possible bases for Rule 10b-5 liability and the specific elements required
to be satisfied to establish each basis of liability leaving it up to the jury to
determine whether either or both of the Defendants could be held liable on any of
the aforementioned bases. As such, Defendant Murphy has failed to establish
that the jury instructions gave a misleading impression or an inadequate
understanding of the law. See Patalano, 250 Fed. Appx. at 428.
4. Omissions and Duty to Correct
Defendant Murphy next contends that the Court “impermissibly allowed the
jury to find Murphy liable for omissions or failing to correct misstatements
contained in the press release,” because absent any evidence that Murphy
“made” a statement in the Press Release, he cannot be liable for an omission
either.
As discussed with respect to the Defendant’s objection to the Courts
instruction as to the “maker” of a statement, the Second Circuit has recognized
that an individual can be liable as the “maker” of a statement on the basis of the
individual’s

involvement

in

the

“drafting,

producing,

reviewing,

and/or

disseminating of the false and misleading statements issued.” In re Scholastic
Corp., 252 F.3d at 75-76. As previously summarized in this opinion, Defendant
Murphy admitted that he reviewed the July 12, 2005 Press Release, and the Court
has found that the jury could have reasonably inferred that Defendant Murphy
disseminated the Press Release in light of the fact that he testified that as the
Chief Financial Officer for Host America he was responsible for the company

31

filings with the SEC, and had in fact filed the corrective disclosure press release
with the SEC on August 31, 2005. Accordingly, where the jury could have
reasonably found Defendant Murphy to have “made” the misleading statement in
the July 12, 2005 Press Release consistent with Second Circuit authority,
Defendant Murphy could also have been liable for a failure to correct this
misleading statement. As such, Defendant Murphy has failed to establish that the
jury instructions gave a misleading impression or an inadequate understanding
of the law. See Patalano, 250 Fed. Appx. at 428.
5. Forward-Looking Statement
Lastly, Defendants argue that the Court erred in the instruction as to
forward-looking statements by instructing that the safe harbor for forwardlooking statements is available if the material misstatement or omission
constituted a forward-looking statement and the Plaintiff fails to prove that the
Defendants made the forward-looking statement with knowledge or with reckless
disregard that it was false or misleading, when in fact, the PSLRA holds that a
defendant must act with actual knowledge of falsity in order to be held liable for a
forward-looking statement.
Defendants correctly note that the PSLRA’s safe harbor for forward-looking
statements provides that an individual may not be held liable for a forwardlooking statement unless the individual is proved to have made the forwardlooking statement with “actual knowledge” that “the statement was false or
misleading.” 15 U.S.C. §78u-5(c). Although the Defendants accurately state the
standard under the PSLRA, a new trial is not warranted as the statements in issue

32

were not forward-looking statements.

As previously discussed, the Press

Release was entitled “Host America’s Energy Division Announces Wal-Mart
Transaction- Ten Store First Phase for LightMasterPlus,” stating affirmatively that
a transaction existed, not that a transaction was anticipated, and that the
transaction was currently in the first phase, thus indicating that multiple phases
existed, not that multiple phases were possible. Accordingly, a new trial is not
warranted on the basis of the PSLRA’s safe harbor for forward-looking
statements.
C. Daubert Hearing
The Defendants’ final ground for seeking judgment as a matter of law, or
alternatively a new trial, challenges the Court’s failure to conduct a Daubert
hearing as to the Plaintiffs’ expert, R. Alan Miller.
The Court notes that the Defendants did not raise this objection in their
motion for judgment as a matter of law, and as such are precluded from raising
this issue in their renewed motion for judgment as a matter of law. See Broadnax,
415 F.3d at 268. Assuming arguendo that Defendants had raised this argument in
their motion for judgment as a matter of law, the argument would have failed as
the Defendants request for a Daubert hearing recited only conclusory
deficiencies in Miller’s qualifications and failed to articulate a particularized
factual dispute necessitating a hearing or demonstrating that such a hearing
would be a productive use of the Court’s time.
Several courts within the Second Circuit have held that a Daubert hearing
is not required simply because a request to conduct such a hearing is raised.

33

See, e.g., Colon v. BIC USA, Inc., 199 F.Supp.2d 53, 71 (S.D.N.Y. 2001) (“Nothing
in Daubert, or any other Supreme Court or Second Circuit case, mandates that
the district court hold a Daubert hearing before ruling on the admissibility of
expert testimony.”); see also, Capellupo v. Nassau Health Care Corp., 2009 WL
1705749, at *9, n. 10 (E.D.N.Y. June 16, 2009) (Stating that Daubert hearings “are
unnecessary if the objections to the testimony being raised do not turn on factual
issues, and thus, can be decided based on the written submissions and
evidence.”). Accordingly, the Court’s resolution of the Defendants’ challenge to
Plaintiffs’ expert’s qualifications on the papers absent a Daubert hearing does not
justify a new trial.
IV.

Conclusion
For the aforementioned reasons, the Defendants’ renewed motions for

judgment as a matter of law, motions for a new trial, and request for remittitur
decreasing the damages awarded to each Plaintiff to zero are hereby DENIED.

IT IS SO ORDERED.
_______/s/__________
Hon. Vanessa L. Bryant
United States District Judge

Dated at Hartford, Connecticut: August 9, 2012

34