In fraud action against a publisher concerning false circulation numbers used to increase advertising fees, circuit took judicial notice of the price of the company’s stock before and after the disclosure of the overstated circulation numbers, in Pugh v. Tribune Co., 521 F.3d 686 (7th Cir. April 2, 2008) (Nos. 06-3898, 06-3909)
FRE 201 provides a procedure for judicial notice of adjudicative facts, obviating any need to formally prove the matter through the use of other federal evidence rules. Judicial notice may be taken of many matters so long as the fact is “one not subject to reasonable dispute.” While judicial notice is frequently taken at the district court stage, it may also be taken on appeal. FRE 201(f) expressly provides that judicial notice may be taken “at any stage of the proceedings.” A Seventh Circuit case highlighted these principles concerning stock prices.
The case involved two consolidated appeals concerning false newspaper circulation figures of two newspapers, Newsday and Hoy, which were used to increase advertising fees. The first case was a securities class action filed by stock purchasers. The second was an ERISA class action filed by pension plan participants who owned stock in an employee stock ownership plan. After the fraud was discovered and reported, the company took a $90 million charge against earnings. The district court dismissed both actions under Fed. R. Civ. P. 12(b)(6), for failure to state a claim. See Hill v. The Tribune Co., Nos. 05 C 2602, 05 C 2927, 06 C 0741 (N.D. Ill. Sept. 29, 2006).
On appeal, Seventh Circuit took “judicial notice of documents in the public record, including publicly reported stock prices, without converting a motion to dismiss into a motion for summary judgment.” Pugh, 521 F.3d 686, 691 n.2 (7th Cir. 2008) (citing Radaszewski v. Maram, 383 F.3d 599, 600 (taking “judicial notice of the contents of certain matters in the public record, including administrative findings about Eric’s medical status and needs”)). The judicial notice of the stock prices was also useful to the circuit’s analysis of the allegations in the complaint. Specifically, the circuit noted that the stock price information:
“refutes the plaintiffs’ allegation that the disclosures regarding the overstated circulation figures caused a 25 percent drop in the value of Tribune’s stock. As [District] Judge Hart correctly observed, even if the defendants possessed the power of clairvoyance, they would have foreseen a $90-$95 million charge against earnings due to the circulation fraud, representing less than 2 percent of one year’s revenues for Tribune. Such circumstances would not cause a reasonable fiduciary to believe that the plan’s drafters would have intended that he cease compliance with the [employee stock ownership plan] ESOP’s direction to invest exclusively in Tribune securities. Accordingly, if it were necessary to resolve this issue, we would likely find that the complaint fails to adequately allege that the defendants acted imprudently by not discontinuing the company stock fund.”
Pugh, 521 F.3d at 701-02.
For another case in which judicial notice was taken of stock prices, see Ieradi v. Mylan Labs., Inc., 230 F.3d 594, 600 & n.3 (taking judicial notice of stock prices; “After a closing high of 35 on July 17, 1998, Mylan’s stock price declined every successive day thereafter except one, even without any information pertaining to the exclusive supply contracts, until the close of 25 on August 4, 1998.”).
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