International Association of Machinists and Aerospace Workers, District 9 Pension and Welfare trusts v Spirit Aerospace Holdings, Inc.

Trusts appealed the dismissal of their securities fraud claims against Spirit and four executives. The panel, with one judge dissenting in part, affirmed. The majority held that Spirit was at least as likely to have withheld information about cost overruns at certain projects as it was to maliciously suppress the cost amounts for fraudulent purposes or through recklessness, Spirit lacked a motive to lie about the financial situation at the three projects, information about cost overruns had to go through multiple layers of review before they could arrive at the executive defendants and thus the testimony of lower level witnesses sheds little if any light on what the executives knew or would have learned  if they had reviewed the documents Trusts argue prove scienter, one executive’s instructions to include lower costs was more plausibly understood to be acts of over optimism rather than fraud, position and attending meetings about the costs on the projects did not support an inference of scienter nor does the existence of recovery plans for the projects as those more plausibly support the inference the executives believed they had found a way to stanch the losses, there was no evidence that the chief executive knew about the cost overruns when he made statements about the project, warnings in required filings of the risks of overruns were only warnings and not evidence of the executives knew about the overruns and maliciously suppressed them , and the mere magnitude of the losses eventually announced do not prove scienter absent other probative evidence. The partial dissent agreed that statements about the future were not actionable, but argued the statements about one project being on plan were demonstrably false as the costs for that program were known to be rising, the cost information was distributed to two executives who nevertheless made statements that all was well with the project and the project was important to Spirit as it was a large contract for the company.

The Home Loan Investment Company v The St. Paul Mercury Insurance Company

St. Paul appealed the statutory bad faith verdict against it. The panel, 2-1, affirmed. The majority held that St. Paul’s motion for judgment as a matter of law was properly rejected because, under Colorado law, as set out by the Colorado Court of Appeals, the fact that a claim is fairly debatable does make denying the claim reasonable, under the plain language of the bad faith statute, Colorado Revised Statutes 10-2-1101 and -115, bad faith can occur in both underwriting and claims handling context and, under the plain language of Colorado Revised sattute10-2-1116, Home Loan was entitled to its benefits under the wrongly cancelled policy plus a penalty of twice that amount. The majority held that St. Paul did raise a sufficiency of the evidence challenge at the district court through a Rule of Civil Procedure 50(b) motion after trial or at the appellate level through argument in the opening brief and thus waived review. The dissent argued that St. Paul made a sufficiency argument on appeal by arguing a lack of evidence of unreasonable conduct during claims handling in its brief and this argument was preserved below through its post-verdict Rule 50 motion and in any event Home Loan concedes the issue was preserved. As to the merits, the dissent argued that St. Paul reasonably beloved that Home Loan was not in possession of the property in question as another person had the keys to the property and otherwise exercised passion and control of the property and  Home Loan admitted another person had possession and control of the property. Thus, investigation of and denial of the claim were reasonable and the verdict should be reversed.