The Seventh Circuit Court of Appeals granted a HSBC Holdings PLC unit a new trial in the securities lawsuit that had resulted in a record $2.5 billion verdict against its mortgage unit. The appeals court found that the jury hadn’t considered how some true statements made by the company brass had affected its stock price. HSBC Finance Corp., formerly known as Household International Inc., had argued that the Plaintiff’s expert who quantified for the jury how much fraudulent statements by Household executives had boosted the company’s stock price hadn’t also shown the jury how much non-fraud information had moved the price up or down.
The appeals court agreed with that argument and sent the case back for consideration of the issue. The panel wrote in the ruling:
We conclude that the evidence at trial did not adequately account for the possibility that firm-specific, nonfraud related information may have affected the decline in Household’s stock price during the relevant time period. As things stand, the record reflects only the expert’s general statement that any such information was insignificant. That’s not enough.
The appeals court agreed a new trial was warranted on the loss-causation issue and on an issue about the way the jury was instructed as to the three executives, but on no other grounds.
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