The court held that that American Savings was not entitled to have each investor’s claim individually litigated on the issues of reliance, causation, materiality and due diligence. The state filed suit against the company alleging that it operated and elaborate pyramid scheme and its security disclosures misrepresented the structure of its investments. The court found that the disclosures were so technical that only an advanced accountant could make sense of the disclosures and even then, the illegal nature of the program would not have been evident. The company appealed, claiming that it was entitled to have each investor individually prove their loss. However, the court ruled that the company has an affirmative duty not to mislead investors. If the disclosure statements were found to be misleading, then there was no need to prove reliance on those statements by individual investors. Since the court found the statements to be misleading, the company was not entitled to have each investor prove their claims, and the trial court's ruling was upheld.
Case and case summary are also available online at: www.mlmlegal.com/legal-cases/Trimble_v_AmericanSavingsLifeInsuranceCompany.php
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