Mitchell v. Texas Gulf Sulphur Co.

446 F.2d 90 (10th Cir.), cert. denied, 404 U.S. 1004 (1971)

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Nature of the Case

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Facts

Mitchell and others (P) were stockholders in Texas (D) for several years. After several years of mineral exploration on the Canadian Shield of eastern Canada, D detected a promising anomaly on a plot of land known as Kidd 55. High ore content was indicated by visual examination and after the core of one of the drillings was split and sent to the lab, it was discovered that an average mineral content of 1.18% copper, 8.25% zinc, and 3.94 ounces of silver per ton over a length of 602 feet were present. This was considered ore grade, but a memo regarding this find suggested that a great deal of caution must be exercised in extrapolating this intersection to tonnage estimates. D only owned a fraction of Kidd 55. By March 1964, D had acquired substantially all interest in the promising acreage adjacent to the drill site. Another drill was completed, and that sample was compared with the first sample. When all the various drillings were finished, it was becoming clearer that there may be a significant find (see facts on page 410 Choper 5th). The rumor mill was in full force, and eventually all the land around was staked, and eventually the rumors started to reach the U.S. Eventually on April 12th, all this speculation caused D to issue a press release that though things looked good it could not be determined if there was commercial grade ore as further drilling was necessary. Press went to the drill sites and stated that this was one of the most impressive drill holes completed in modern times. Another press conference was given on April 16 and statements were released which revealed the magnitude of the discovery. Ps sold their stock after the April 12th release but before becoming aware of the April 16th release and lost substantial money. The trial court found that the press release of April 12th was false, misleading, deceptive and fraudulent. Appeals and cross-appeals were taken. Many of the parties had sold stock after the April 16th release but were still trying to get damages for those sales even though the market was aware of the information and per se so were the sellers.