Backman v. Polaroid Corp.

910 F.2d 10 (1st Cir. 1990)

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Nature of the Case

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Facts

Polaroid (D) developed Polavision, an instant motion picture system, and projected sales at 200,000 units in 1978. In its third quarter 1978 statement, the record reflected substantial expenses with Polavision. Two other statements noted that Polavision expenses had also raised D's overall cost of sales. Polavision sales were well below expectations and D had already begun to reduce production. In February 1979, D took a $6.8 million reserve for expense associated with Polavision and at the same time the founder of D directed his foundation to sell 300,000 shares of stock. In late February, D issued a press release that announced Polavision costs substantially exceeded revenues. D's stock fell from $49.63 to $39.87 per share. Ps were buyers of D stock or call options in the open market during early January 1979 to late February 1979. Ps sued under 10b-5. The jury found for Ps on the issue of liability. D moved for judgment n.o.v. That was denied. The Appeals court at first agreed with the trial court but then decided to hear the issue en banc.