State v. Marsh & McLennan Cos.
Decision Date | 11 February 2015 |
Docket Number | 050808454, A139453. |
Citation | 269 Or.App. 31,346 P.3d 504 |
Parties | STATE of Oregon, acting by and through the OREGON STATE TREASURER, and the Oregon Public Employee Retirement Board, on behalf of the Oregon Public Employee Retirement Fund, Plaintiff–Appellant, v. MARSH & McLENNAN COMPANIES, INC. and Marsh, Inc., Defendants–Respondents, and Jeffrey GREENBERG and Ray Groves, Defendants. |
Court | Oregon Court of Appeals |
Joshua L. Ross, Portland, argued the cause for appellant. With him on the briefs were Scott A. Shorr and Keith A. Ketterling, Special Assistant Attorneys General; and Stoll Stoll Berne Lokting & Shlachter P.C. With him on the supplemental briefs on remand were Frederick M. Boss, Deputy Attorney General, Anna M. Joyce, Solicitor General, Denise G. Fjordbeck, Attorney–in–Charge, Civil/Administrative Appeals, Matthew J. Lysne, Senior Assistant Attorney General; Keith A. Ketterling, Keith S. Dubanevich, Scott A. Shorr, Special Assistant Attorneys General; and Stoll Stoll Berne Lokting & Shlachter P.C.
James T. McDermott, Portland, argued the cause for respondents. With him on the briefs were Dwain M. Clifford and Ball Janik LLP. With him on the supplemental briefs on remand was Dwain M. Clifford.
Before DUNCAN, Presiding Judge, and ARMSTRONG, Judge, and SCHUMAN, Senior Judge.
In State Treasurer v. Marsh & McLennan Companies, Inc., 241 Or.App. 107, 250 P.3d 371 (2011) (Marsh I ), we held that a stock purchaser seeking to recover under ORS 59.137 for securities law violations must prove direct reliance rather than utilize a presumption of reliance under the “fraud-on-the-market” doctrine recognized under federal securities law. The Supreme Court subsequently reversed our decision, concluding that the Oregon legislature intended to incorporate the fraud-on-the-market doctrine when it enacted ORS 59.137. State Treasurer v. Marsh & McLennan Companies, Inc., 353 Or. 1, 23, 292 P.3d 525 (2012) (Marsh II ). The Supreme Court then remanded the case to us to consider two questions that, because of our rejection of the fraud-on-the-market doctrine, we had not reached in Marsh I. The first is whether, on the summary judgment record, defendants successfully rebutted any presumption of reliance. The second is whether, as applied to defendants, ORS 59.137 is unconstitutional because it does not require plaintiff to prove scienter —that is, that defendants acted with a guilty state of mind when they made the alleged misrepresentations. For the reasons that follow, we hold (1) that there are genuine issues of material fact with regard to whether defendants rebutted the presumption of reliance; and (2) ORS 59.137 includes a scienter requirement and is not unconstitutional as applied to defendants. Accordingly, we reverse the trial court's grant of summary judgment and remand for further proceedings.
This case arises under the Oregon Securities Law, ORS chapter 59. Plaintiff is the State of Oregon, acting by and through the Oregon State Treasurer, and the Oregon Public Employee Retirement Board, on behalf of the Oregon Public Employee Retirement Fund (OPERF) (collectively, “the state”). In its complaint, the state alleged that defendants Marsh & McLennan Companies, Inc. and Marsh, Inc. (collectively, “Marsh”) violated ORS 59.135 by making false and misleading statements that caused the state to lose approximately $10 million on investments in Marsh stock, and that those defendants were therefore liable under ORS 59.137. The Supreme Court summarized those claims in Marsh II:
Marsh II, 353 Or. at 4, 292 P.3d 525.
Marsh II, 353 Or. at 3 n. 1, 292 P.3d 525. The trial court ruled that the state failed to prove reliance under the fraud-on-the-market theory, both because the doctrine is not available under Oregon law and because, in any event, Marsh had rebutted the presumption.
In Marsh I, we affirmed the trial court on the narrow grounds that the state had not produced any evidence of direct reliance and that Oregon law does not recognize a presumption of reliance under the fraud-on-the-market doctrine. We did not address whether, if that doctrine were available, Marsh had rebutted it. We also declined to address the court's alternative reasoning regarding the existence and constitutional implications of a scienter requirement, other than to note in passing that the constitutional question was properly analyzed under preemption principles rather than the dormant Commerce Clause. 241 Or.App. at 112 n. 3, 250 P.3d 371.
In Marsh II, the Supreme Court reversed our decision and held that “the requisite reliance [under ORS 59.137 ] may be established by a plaintiff who purchases stock in an open and efficient market by means of the rebuttable presumption available under the fraud-on-the-market doctrine.” 353 Or. at 23, 292 P.3d 525. The court then remanded the case to us to address two unresolved issues that flowed from that holding: First, notwithstanding the availability of the fraud-on-the-market doctrine, should Marsh prevail because the evidence in the record successfully rebutted the presumption of reliance? 353 Or. at 21 n. 8, 292 P.3d 525. Second, is ORS 59.137 “unconstitutional because it does not contain a requirement that the defendant act with scienter to be found liable”? Id. at 23 n. 10, 292 P.3d 525. As for the latter question, the Supreme Court agreed with our observation that the constitutional issue implicated a preemption rather than dormant Commerce Clause analysis. Id. at 5 n. 2, 292 P.3d 525.
On remand, the parties have submitted supplemental briefing on both questions. As we will explain, we hold (1) that there are genuine issues of material fact with regard to whether Marsh rebutted the presumption of reliance; and (2) that, consistently with analogous federal law, a purchaser has the burden of proving scienter under ORS 59.137(1) and, for that reason, the statute is not preempted by federal law and does not violate the federal constitution. Accordingly, we reverse and remand for further proceedings.
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