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In re Allstate Life Insurance Company Litigation

United States District Court, Ninth Circuit

June 10, 2013

In re: Allstate Life Insurance Company Litigation.

ORDER

G. MURRAY SNOW, District Judge.

Pending before the Court is Stinson Morrison Hecker's ("Stinson") Motion for Summary Judgment. (Doc. 581.) For the reasons discussed below, Stinson's Motion is granted in part and denied in part.

BACKGROUND

At issue in this lawsuit is the offering and sale of $35 million in revenue bonds (the "Bonds") used to finance the construction of a 5, 000-seat Event Center in the Town of Prescott Valley, Arizona. The facts of the case are set out in greater detail in this Court's earlier Order of November 4, 2010. (Doc. 212.) Plaintiffs in this case are entities and individuals who purchased in the Bond offering in November 2005 (the "Bondholders"). They include Allstate Life Insurance Company and a number of individual plaintiffs whose interests are represented by the Indenture Trustee of the Bonds, Wells Fargo.

The Defendants in this case are numerous. They include the underwriters for the bonds, attorneys for the underwriters, and the various entities that received the proceeds for the bonds and built the Event Center. For the purposes of this motion, the relevant defendant is law firm Stinson, who served as underwriters' counsel for the offering. Stinson initially represented only the underwriter Stern, but later represented all the underwriters participating in the offering.

This action is based on a number of misstatements purportedly made by all Defendants. These misstatements were allegedly made in the Preliminary Official Statement and the Official Statement, collectively entitled as the Official Statements ("OS"). The OS provided two sources for paying debt service on the Bonds: (1) the net operating income from the Event Center and (2) Transaction Privilege Tax Revenues ("TPT Revenues"), allegedly pledged by the Town of Prescott Valley, consisting of sales taxes generated by the Event Center and certain areas near the Event Center. The alleged misstatements pertained to (1) the annual attendance and profitability of the Event Center and (2) the existence of a lien or other security device on the TPT Revenues for the benefit of the Bondholders.

The alleged misstatements regarding the Event Center's attendance and profitability are based on figures in the OS that projected an annual attendance of approximately 480, 000. Based on this number, the OS projected that the Event Center would generate approximately $5 million in total revenues in the first year. Plaintiffs allege that Defendants put these figures in the OS despite their knowledge of material information that would undermine the Event Center's ability to generate the projected attendance and revenue. Two reports-the "2001 ICC Report" and the "2005 ERA Report"-were conducted on the feasibility of the Event Center. These reports concluded that the Center would generate substantially less revenue than what was stated in the OS. Plaintiffs allege that the defendants failed to disclose the existence of these feasibility reports, and that the OS stated that no feasibility reports had been prepared on its projections at all. Since its opening, the Event Center has in fact failed to recognize profit at the level of the projections set forth in the OS.

Plaintiffs also assert claims based on alleged drafting errors in the bond documents. Plaintiffs claim that the OS falsely stated that the debt service on the Bonds would be "secured" by a first lien on the TPT Revenues. They allege that due to defective drafting in certain Bond documents, no such lien exists. Plaintiffs allege that, because of these drafting errors, the Town of Prescott Valley has refused to deliver TPT Revenues for debt servicing on the Bonds, thus harming the Bondholders.

DISCUSSION

I. Legal Standard

Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows "that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

Substantive law determines which facts are material. Anderson, 477 U.S. at 248; see Jesinger, 24 F.3d at 1130. Because "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, ... [t]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor" at the summary judgment stage. Id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)); Harris v. Itzhaki, 183 F.3d 1043, 1051 (9th Cir. 1999) ("Issues of credibility, including questions of intent, should be left to the jury.") (citations omitted).

Furthermore, the party opposing summary judgment "may not rest upon the mere allegations or denials of [the party's] pleadings, but... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995); Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989); see also LRCiv. 1.10(l)(1) ("Any party opposing a motion for summary judgment must... set[] forth the specific facts, which the opposing party asserts, including those facts which establish a genuine issue of material fact precluding summary judgment in favor of the moving party."). If the nonmoving party's opposition fails to specifically cite to materials either in the court's record or not in the record, the court is not required to either search the entire record for evidence ...


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