Fed. Sec. L. Rep. P 93,906 Herbert J. Rowe, Cross-Appellants v. Maremont Corporation, Cross-Appellee

Herbert J. Rowe, his wife, Ann M. Rowe, and the Continental Illinois National Bank 1 sued Maremont Corporation for securities fraud under Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5. 2 The suit arose from a face-to-face transaction in July, 1977 in which Maremont purchased 225,986 shares of stock in Pemcor, Inc. from the Rowes. After a bench trial, the district court entered judgment for the Rowes for $745,423.80 plus prejudgment interest and costs. Mar-emont appeals the district court’s judgment. The Rowes cross-appeal, claiming that the district court awarded inadequate damages. We reject the contentions made in both the appeal and cross-appeal, and affirm.

I.

In a thorough published opinion, the district court set out detailed findings of fact. Rowe v. Maremont Corp., 650 F.Supp. 1091, 1093-1104 (N.D.Ill.1986). Therefore, we will only summarize the pertinent facts. We will discuss any other facts necessary to our discussion of the legal issues as we discuss those issues.

In early 1977, Herbert and Ann Rowe owned 8,921 shares of stock in Pemcor, Inc. The Rowes were also co-trustees, with Continental Illinois Bank, of a trust Mrs. Rowe’s father had established in his will. The trust owned 216,965 shares of Pemcor stock. Together, the Rowes’ and the trust’s shares comprised 1 V-h percent of Pemcor’s outstanding stock. (We will refer to the shares collectively as the “Rowe shares” or “Rowe block,” as did the district court.)

Although Pemcor was listed on the New York Stock Exchange, the Rowes could not sell their shares on the open market because the shares were not registered. The Rowe shares were also subject to an agreement between the Rowes and Potter-En-glewood Corporation (the corporate predecessor to Pemcor) providing that the Rowes would not sell the shares before notifying Pemcor and receiving an opinion from Pem-cor’s counsel that the sale would not violate the 1933 Securities Act.

By early 1977, the Rowes had decided to sell their Pemcor shares. The Rowes ex *1229 plored selling the shares both by private placement and by a secondary public offering. In a secondary offering, the Rowe shares would have fetched between $5 and $6V2 per share. At that time, Pemcor’s market price was around $12-$13 per share.

The investment bankers whom the Rowes had contacted concerning a private placement were having no luck finding a buyer. However, at around the same time the Rowes became interested in selling their shares, Maremont had become interested in expanding its operations by acquiring new companies. As part of this expansion program, Maremont retained Skadden, Arps, Slate, Meagher & Flom, a New York law firm active in mergers and acquisitions. In January, 1977, Maremont executed a commission agreement with The Illinois Company, a Chicago brokerage firm. The Illinois Company recommended Pemcor to Maremont as a potential acquisition and arranged meetings between Pem-cor’s and Maremont’s executives. Although the meetings were cordial, Pemcor was not interested in a merger or affiliation at that time.

Around July 13, 1977, The Illinois Company informed Richard Black, Maremont’s president, that the Rowe shares might be available. On July 18, pursuant to Black’s instructions, Gordon Teach of The Illinois Company offered, on behalf of an undisclosed principal, to purchase the Rowe shares for that day’s closing market price, $13 per share. Although Mrs. Rowe agreed the price was good (it was, in fact, an all-time high), she refused to sell the shares without knowing the purchaser’s name. Therefore, Mrs. Rowe arranged to fly from her home in Virginia to Chicago the next day to meet Teach.

Over the next three days, the Rowes and their representatives met with Maremont representatives to negotiate the stock sale. On July 19, Mrs. Rowe, the Rowes’ attorney, Robert Fuchs, and two Continental Illinois trust department officers, Darryl Hoovel and Gordon Martin, met with Teach in Chicago. After Mrs. Rowe insisted on knowing the purchaser’s name, Teach told her that Maremont was the purchaser. Teach asked the Rowes not to disclose Mar-emont’s name to anybody until twenty-four hours after the sale. Teach also told the Rowes that Maremont had recently sold a division, that it wanted the Rowe shares as an investment, that it wanted to protect its investment by electing a director, and that it wanted to purchase up to 20 percent of Pemcor’s stock. At the close of the meeting, Mrs. Rowe agreed to sell the Rowes’ Pemcor shares to Maremont for $13 per share. Before the Rowes and Maremont could close the deal, however, they needed to agree to and prepare written documents. Therefore, further meetings were necessary.

The next day, July 20, the Rowes’ representatives (but not Mrs. Rowe, who had returned to Virginia) met with Maremont representatives to negotiate the sales agreement. Early on, Milton Shapiro, Mar-emont’s treasurer, and William Penner of The Illinois Company repeated Teach’s statements that Maremont wanted to invest in Pemcor stock with cash it had from selling its division, that it wanted to elect a director, and that it wanted to acquire 20 percent of Pemcor’s stock. Shapiro also stated that the funds for the purchase would be wire-transferred from California. In fact, Maremont paid for the stock with money from its revolving account with Continental Illinois.

During the afternoon of July 20, Robert Pirie and Milton Strom, two Skadden Arps lawyers, arrived to handle the transaction for Maremont. Although Maremont had specifically retained Skadden Arps to work on a possible Pemcor acquisition, Shapiro introduced Pirie and Strom as two New York lawyers in Chicago on other business who were “stopping by” to help Maremont with the Rowe transaction.

Sometime during one of the meetings, on July 20 or 21, Marvin Temple, Fuchs’ law partner, asked Shapiro whether Maremont was going to make a tender offer for Pem-cor. Shapiro replied, “No.”

During the times relevant to this case, an FTC consent order prohibited Maremont from acquiring without FTC approval the *1230 stock of any company “engaged in the manufacture or remanufacture or the wholesale distribution of automotive replacement parts, accessories, or equipment.” Since Pemcor manufactured automotive stereo speakers, Maremont asked outside counsel whether the FTC order would prevent Maremont from acquiring Pemcor stock. Several attorneys informed Maremont that the order would not apply, although one attorney cautioned Maremont to expect a “challenge” from the FTC. John Mills, Maremont’s general counsel, harbored some doubts about the issue but he never expressed those doubts to the Rowes.

During the July 20 meeting, Pirie insisted that Fuchs remove a clause stating that Maremont would “warrant and represent that we are not in competition with Pem-cor” from the written documents Fuchs had prepared. This prompted Fuchs to ask whether any antitrust problems existed. Pirie replied that there were none. Based on Pirie’s answer, Fuchs agreed to drop the antitrust language from the documents.

By the end of the afternoon on July 21, the Rowes and Maremont had agreed on the final form of the documents necessary to complete the sale. Those documents were: a sale agreement; an escrow agreement; a supplementary indemnification agreement; irrevocable proxies coupled with an interest; and stock powers and certificates. The parties included the escrow agreement because the Rowes could not close the deal until Pemcor’s counsel issued its opinion that the sale would not violate the 1933 Securities Act. The escrow agreement was intended to lock in the $13 sales price while delaying the actual “closing” until Pemcor issued its opinion letter. Maremont and the Rowes subsequently executed all the documents.

During the days immediately following the execution of the Rowe contract, Mare-mont took steps to acquire the rest of Pemcor’s stock. Black contacted Edward Anixter, Pemcor’s president, to discuss a friendly takeover. Anixter was not receptive to the idea; a hostile tender offer thus seemed the most likely course. Skadden Arps’ attorneys drafted “anticipatory tender offer documents” so that Maremont could move quickly. Maremont also arranged financing for its offer. On Friday, July 29, Black sent Anixter a “bear hug” letter advising Anixter that Maremont intended to offer $16.75 per share for all Pemcor shares. Pemcor did not respond to the letter. On August 1, Maremont publicly announced that it intended to make a tender offer. Pemcor opposed the tender offer. On August 2, Pemcor notified the FTC about the acquisition, and the FTC ordered Maremont to explain why the purchase did not violate the 1971 consent order. On August 3, Pemcor sued both Mar-emont and the Rowes to prevent the Rowes from transferring the shares to Maremont. Pemcor’s complaint sought $30 million in damages and injunctive relief.

In the meantime, the Rowes, knowing about neither the FTC order nor Mare-mont’s contemplated tender offer, went about the business of trying to complete the sale of their Pemcor stock. Immediately after the documents were signed, Fuchs phoned Chuck Kaufman, Pemcor’s outside counsel, to ask Kaufman to cooperate in obtaining the necessary opinion letter. During that conversation, Kaufman asked Fuchs whether Maremont would make a tender offer. Fuchs replied that Maremont had advised him there would be no tender offer.

Fuchs did not learn about the FTC decree until July 29, when Kaufman called to tell him about it. Upon learning about the FTC decree, Fuchs phoned Shapiro and Mills at Maremont to ask them why nobody had told him about the order before the sale. Shapiro and Mills replied that the FTC order did not apply.

Fuchs and the Rowes learned about Mar-emont's tender offer on August 2. The Rowes were angry, and told Fuchs they wanted their stock back. Gordon Martin of Continental Illinois complained to Fuchs that the Rowes and the trust had been “taken.” Fuchs, however, decided to move cautiously and to keep the Rowes’ options open. The Rowes thus moved on a dual track, taking the necessary steps to com- *1231 píete the transaction while at the same time exploring the possibility of rescission.

Between August 4 and August 23, Fuchs contacted Maremont representatives three times. On August 4, Fuchs wrote to Mare-mont concerning Pemcor’s complaint and the FTC order. That letter stated only that “serious legal problems” could occur if the FTC order prevented Maremont from acquiring the Rowe shares. The letter did not mention any representations by Mare-mont, the tender offer, or any desire to rescind. On August 15, Fuchs spoke by phone with Pirie. Fuchs’ notes of the conversation indicate that he asked Pirie why he had not told the Rowes about the FTC order. At trial, Fuchs testified that he also told Pirie that it was “incredible” that Mar-emont had not disclosed that it was going to make a tender offer, and that the Rowes were entitled to rescission. Fuchs did not, however, formally request rescission at that time. On August 23, Fuchs sent Mar-emont a letter formally requesting rescission. Although the rescission letter mentioned several alleged misstatements and omissions by Maremont (e.g., the representation that Maremont planned to obtain only up to 20 percent of Pemcor’s stock), the letter did not mention Shapiro’s statement that Maremont would not make a tender offer.

On August 30, the Rowes filed a counterclaim against Pemcor. Part of the relief the Rowes requested was an order directing Pemcor to transfer the Rowe shares to Maremont. On October 27, 1977, the Rowes filed a cross-claim against Mare-mont, alleging securities fraud (among other things). The cross-claim, like the rescission letter, did not mention the “No” tender offer representation.

The FTC eventually approved Mare-mont’s purchase of Pemcor stock. On April 8, 1978, the escrow agent (over the Rowes’ objections) delivered the Rowe shares to Maremont. Pemcor successfully rebuffed all merger attempts by Maremont until a white knight, Esmark, came to Pem-cor’s rescue. Pemcor merged into Esmark, and Maremont exchanged the Rowe shares for a block of Esmark shares. In August, 1979, Maremont sold the Esmark shares for $7,039,439. Thus, Maremont made a total profit of $4,056,834 from purchasing the Rowe shares.

II.

At trial, the Rowes presented two liability theories. First, the Rowes contended that Maremont deliberately deceived them about its intent to use the Rowe shares as a springboard for acquiring Pemcor. According to the Rowes, Maremont created the false impression that it only wanted a limited amount (up to 20 percent) of Pem-cor’s stock as an investment, and that Shapiro, Maremont’s treasurer, lied when Temple asked him whether Maremont planned to make a tender offer. The Rowes’ second theory was that Maremont misrepresented and knowingly concealed the FTC order.

The district court refused to find Mare-mont liable based on the FTC order. 650 F.Supp. at 1111-12. The district court did find Maremont liable based upon its representations and omissions about its intent to acquire Pemcor. Id. at 1107-11. Specifically, the court found that Maremont falsely stated that it only wanted enough Pem-cor stock to elect a director to Pemcor’s board, that it intended to acquire only “up to” 20 percent of Pemcor’s stock, and that it would not make a tender offer for Pem-cor. The court also found that Maremont failed to disclose that 20 percent was merely a “ ‘fall-back’ position,” and that its true goal was to acquire Pemcor. Id. at 1110. The court found that Pemcor had a duty to disclose its control intentions because absent such disclosure, Maremont’s statements about its limited investment intentions were misleading. Id. at 1109; see 17 C.F.R. § 240.10b-5(b) (making it unlawful to omit to state a material fact necessary to make other statements not misleading). The court found that the information about Maremont’s intent to acquire Pemcor was material, that the Rowes reasonably relied on Maremont’s misstatements, and that Maremont intended to deceive the Rowes. 650 F.Supp. at 1109-11.

*1232 Maremont challenges the district court’s finding of liability on several bases. Mare-mont contends that the district court clearly erred in finding that Shapiro made the “No” tender offer statement to Temple and Fuchs. According to Maremont, the “No” tender offer statement was (in the district court’s words) “[b]y far the most crucial of the representations ...” id. at 1107; without the “No” tender offer statement, Mare-mont maintains that the district court’s finding of liability cannot stand. Mare-mont also asserts that the district court erred in finding that any alleged misrepresentations or omissions concerning its control intentions were material, that the Rowes reasonably relied on the misinformation, or that Maremont acted with scien-ter. We will discuss each of Maremont’s contentions in turn. 3

1. The “No” tender offer statement.

At trial, both Temple and Fuchs testified that Temple asked Shapiro if Mare-mont was going to make a tender offer. Fuchs and Temple testified that Shapiro answered, “No.” The district court, based largely on its determination that Temple and Fuchs were credible witnesses, found that Shapiro did make the “No” tender offer statement. See 650 F.Supp. at 1107-08. We may overturn that finding only if it is clearly erroneous. Fed.R.Civ.P. 52(a); Anderson v. Bessemer City, 470 U.S. 564, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). “When findings are based on determinations regarding the credibility of witnesses, Rule 52(a) demands even greater deference to the trial court’s findings; for only the trial judge can be aware of the variations in demeanor and tone of voice that bear so heavily on the listener’s understanding of and belief in what is said.” Id. at 575, 105 S.Ct. 1512.

Even findings ostensibly based on credibility determinations may be clearly erroneous if “[documents or objective evidence ... contradict the witness’ story” or if the witness’ story is internally inconsistent. Id. Maremont asserts that the district court’s finding that Shapiro made the “No” tender offer statement is clearly erroneous because the extrinsic and documentary evidence contradict Fuchs’ and Temple’s testimony. The “No” tender offer statement appears in none of the relevant documents, including the transaction documents, Fuchs’ detailed notes of the negotiations, Fuchs’ August rescission letter, and the Rowes’ original cross-claim against Mare-mont. Moreover, no Rowe representative ever mentioned the “No” tender offer statement until Temple mentioned it in his deposition two years after the transaction. Finally, Maremont points out that Fuchs’ characterization of Shapiro’s statement as “dramatic” contradicts the district court’s findings that the statement occurred in a “side exchange,” 650 F.Supp. at 1108, and that only Fuchs and Temple heard the statement.

Despite what Maremont would have us believe, the district court did not base its finding that Shapiro made the “No” tender offer statement on whim or caprice; instead, the district judge carefully considered and analyzed all the evidence in light of Maremont’s contentions. See id. at 1107-08. We need not repeat the district court’s analysis. We note, though, that Fuchs’ statement to Kaufman, Pemcor’s outside counsel, that Maremont had told him there would be no tender offer corroborates Fuchs’ and Temple’s testimony. Maremont does not challenge the district court’s finding that Fuchs made this statement. Based on this corroborating evidence, the district court’s careful analysis, and the district court’s unique opportunity to evaluate witness credibility, we find that the district court did not clearly err in finding that Shapiro made the “No” tender offer statement.

2. Materiality and Reliance.

A court may predicate Rule 10b-5 liability only on material omissions or mis *1233 statements. An omission or misstatement is material if a substantial likelihood exists that a reasonable investor would find the omitted or misstated fact significant in deciding whether to buy or sell a security, and on what terms to buy or sell. Basic, Inc. v. Levinson, — U.S. -, 108 S.Ct. 978, 983, 99 L.Ed.2d 194 (1988); see also Michaels v. Michaels, 767 F.2d 1185, 1194-95 (7th Cir.1985); Robert Clark, Corporate Law § 8.10.4 (1986). Put another way, an omission or misstatement is material under Rule 10b-5 if it is substantially likely that a reasonable investor would have viewed the omitted or misstated fact as significantly altering the “ ‘total mix’ of information made available.’ ” Levinson, 108 S.Ct. at 983 (quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976)).

Besides showing that the defendant’s misrepresentations and omissions were material, a plaintiff must also show a causal connection between his decision to buy or sell securities and the defendant’s misconduct. See Levinson, 108 S.Ct. at 992; Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1283-84 (9th Cir.1982); Wilson v. Comtech Telecommunications Corp., 648 F.2d 88, 92 (2d Cir.1981). Reliance is one way to supply this casual connection. Levinson, 108 S.Ct. at 989; Bell, 669 F.2d at 1283; Wilson, 648 F.2d at 92; see also Kademian v. Ladish Co., 792 F.2d 614, 627-28 (7th Cir.1986) (linking reliance and causation). To say that a plaintiff “relied” on a defendant’s misstatement or omission is to say that the plaintiff’s belief in the defendant’s misstatement or omission played a substantial part in the plaintiff’s investment decision. See Wilson, 648 F.2d at 92 n. 6; see also Bell, 669 F.2d at 1283 (“A finding of nonrelianee implies that plaintiffs would have acted no differently had they known the truth.”) 4

Courts have traditionally held that a plaintiff’s reliance must be reasonable or “justifiable.” See Thomas Hazen, Securities Regulation § 13.5, at 464-65. But in Flamm v. Eberstadt, 814 F.2d 1169 (7th Cir.1987), cert., denied, — U.S. -, 108 S.Ct. 157, 98 L.Ed.2d 112 (1987), we stated that “ ‘reliance’ means only materiality and causation in conjunction,” and that reliance is no longer “an element independent of causation and materiality in a case under Rule 10b-5.” Id. at 1173, 1174; see also Teamsters Local 282 Pension Trust Fund v. Angelos, 762 F.2d 522, 527-30 (7th Cir.1985). As we have discussed, showing that a plaintiff relied on a defendant’s misstatement is simply one common way to demonstrate the causal link between the defendant’s misconduct and the plaintiff’s decision to buy or sell. Under Flamm and Ange-los, materiality subsumes justifiability; if a plaintiff relies on a material misstatement, his reliance is justifiable. This is logical because to say a fact is material is to say that a reasonable investor, knowing what the plaintiff knew, would have considered the information important in determining whether to buy or sell. See Levinson, 108 S.Ct. at 983; Flamm, 814 F.2d at 1173. The upshot of all this is that to recover on their Rule 10b-5 claim, the Rowes had to show: that a reasonable investor knowing what the Rowes knew would have viewed the information about Maremont’s intent to *1234 acquire Pemcor significant in deciding whether and on what terms to sell their Pemcor stock to Maremont; and that Mare-mont’s misstatements about its intent to acquire Pemcor caused the Rowes to sell on the terms they did (in this case by showing that they relied on Pemcor’s misstatements).

Appellate courts will normally reverse a district court’s findings of materiality and reliance only if those findings are clearly erroneous. See, e.g., Lucas v. Florida Power & Light Co., 765 F.2d 1039, 1040-41 (11th Cir.1985). Maremont, however, urges us to adopt what it calls a “put-it-in-writing” rule. According to Mar-emont, “when there is a negotiated contract pertaining to the sale of securities, failure to state an oral representation in the written agreement ... precludes later contention by the party drafting the agreement that the oral representation was material or that the drafter could justifiably rely on it.”

In a common law fraud case, we rejected an argument similar to the argument Mare-mont makes and held instead that the trier-of-fact can best decide whether a plaintiff reasonably relied on a defendant’s misstatements. Contractor Utility Sales Co. v. Certain-Teed Products Corp., 638 F.2d 1061, 1083 (7th Cir.1981). Maremont protests that Contractor Utility should not apply in a Rule 10b-5 action because common law fraud requires a more stringent standard of proof (clear and convincing) than a Rule 10b-5 claim (which requires proof by a preponderance of the evidence). This distinction, however, is not controlling. The district court correctly applied Contractor Utility in holding that the Rowes’ failure to reduce Maremont’s misrepresentations to writing in the final agreement did not defeat materiality and reliance as a matter of law. See 650 F.Supp. at 1106.

The Supreme Court’s recent discussion of materiality in Basic, Inc. v. Levinson, supra, reinforces our holding. In Levin-son, the Court rejected the proposition that preliminary merger discussions are not material as a matter of law until the would-be merger partners agree in principle to the merger’s price and structure. 108 S.Ct. at 983-86. The Court also rejected the opposite proposition that merger discussions are always material if the corporation denies the discussions. Id. at 986. The Court stressed that determining whether a misstatement or omission is material “ ‘requires delicate assessments of the inferences a “reasonable shareholder” would draw from a given set of facts and the significance of those inferences to him....’” Id. at 985-86 (quoting TSC Industries, 426 U.S. at 450, 96 S.Ct. at 2133). Materiality is necessarily a fact-specific inquiry, so “any approach that designates a single fact or occurrence determinative of ... materiality must necessarily be over or underin-clusive.” Id. 108 S.Ct. at 985; see also McGrath v. Zenith Radio Corp., 651 F.2d 458, 466 (7th Cir.1981) (Materiality is a question “peculiarly ... for the trier of fact.”)

Reliance, like materiality, also depends on each case’s facts. A plaintiff’s failure to insist that a defendant put his representations in writing may indicate that the plaintiff did not consider the representation important. Other facts, however, may explain that failure. As with materiality, the trier-of-fact is best able to sort out the conflicting evidence and inferences to determine if a plaintiff did, in fact, rely on the defendant’s misstatements. For these reasons, we reject Maremont’s proposed “put-it-in-writing” rule. 5

*1235 The district court found, as matters of fact, that Maremont’s misstatements and omissions concerning its intent to acquire Pemcor were material, and that the Rowes relied on Maremont’s statements. Maremont contends these findings are clearly erroneous.

Whether information concerning speculative or contingent events (such as a possible future tender offer) is material depends “ ‘upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity.’ ” Basic, Inc. v. Levinson, 108 S.Ct. at 986-87 (quoting SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2d Cir.1968)). That balancing supports the district court’s conclusion that the information concerning Maremont’s intent to acquire Pemcor was material. Maremont had been interested in merging with or acquiring Pemcor for seven months before it learned about the Rowe stock, and had taken a number of actions to pursue that interest. See 650 F.Supp. at 1094-95. Moreover, “[tjender offers entail substantial premia compared with the prices shares carry before the bids — and afterwards, should the offers be defeated.” Flamm, 814 F.2d at 1174. That this is so was illustrated in this case by Maremont’s “bear hug” letter, announcing to Pemcor its intent to make a cash tender offer for all outstanding Pemcor shares at $16.75 per share — a price more than one point above Pemcor’s market price on that date, and well above the $13 per share Maremont paid the Rowes. See 650 F.Supp. at 1101, 1104. These facts, standing alone, would allow the district court to conclude that Maremont’s intent to acquire Pemcor would have been significant to a reasonable investor in deciding whether to sell Pemcor stock at $13 per share.

The facts we have noted, however, did not stand alone, and materiality depends in any given case upon whether a certain bit of information would have affected the “total mix” of information available to the plaintiff. See Levinson, 108 S.Ct. at 983; Flamm, 814 F.2d at 1174. Maremont argues that the Rowes possessed reliable information that contradicted any information it withheld from or misstated to them about its intent to acquire Pemcor. Specifically, Maremont argues that during the negotiations Pirie informed the Rowes that, “Maremont might well have intentions with respect to the securities of Pemcor, other than simply the purchase of this interest of the Rowes....” Maremont also argues that at a breakfast meeting with Mr. Rowe, Edward Anixter, Pemcor’s president, told Mr. Rowe that “obviously if they are buying your shares of stock, they are probably going to buy the rest of the company.” Finally, Maremont argues that Maremont’s willingness to pay market price for restricted shares indicated that Maremont might have had acquiring control of Pemcor in its plans. According to Maremont, all this information should have put the Rowes on notice that any statements by Maremont representatives indicating that Maremont did not intend to acquire all of Pemcor’s stock were false.

Having sufficient information to call a representation into question may preclude an investor from later claiming that the representation was material. See Angelos, 762 F.2d at 530; Flamm, 814 F.2d at 1173. This flows logically from the definition of materiality: information is material only if it “ ‘significantly alterfs] the “total mix” of information’ that the investor possesses.” Angelos, 762 F.2d at 530; see also Flamm, 814 F.2d at 1173. But not all information that may cast some doubt on a representation’s reliability will automatically preclude materiality. “Knowledge of a risk does not prevent recovery if the additional information would have been a significant increment to the total available knowledge.” Flamm, 814 F.2d at 1173. (Emphasis in original.) The trier-of-fact is best able to sort out the “total mix” of information and determine whether the plaintiffs were even aware of certain information, whether that *1236 information actually conflicted with the representation at issue, and whether, if conflicting, that information was sufficient to put the plaintiffs on notice that contrary representations were not reliable.

The district court did not clearly err in finding that Maremont’s misstatements and omissions about its control intentions were material, despite the alleged mixed signals. The Rowes presented witnesses at trial who consistently testified that Mar-emont never revealed that it wanted the Rowe stock as a springboard for acquiring Pemcor. On the other hand, the district court found Pirie’s deposition testimony somewhat vague. Pirie did not testify at trial, so the district court had no opportunity to question him about specific statements. After reviewing the record, we cannot say the district court clearly erred in finding Pirie’s testimony “insufficient to outweigh the live, credible, consistent and contrary testimony of the Rowe witnesses.” 650 F.Supp. at 1107.

Furthermore, the district court did not clearly err in finding liability even in light of Anixter’s statement and the fact that Maremont paid market price for restricted stock. Anixter never mentioned his contacts with Black to Mr. Rowe. Nor did Anixter mention Maremont’s interest in acquiring Pemcor. At most, Anixter merely informed Rowe that companies who buy large blocks of another company's stock often make tender offers for the rest of the company’s stock. This was not the kind of firm-specific information that would have “necessarily giv[en] [the Rowes] a reason for disbelieving Maremont’s inconsistent representations.” Id. at 1110; cf. Flamm, 814 F.2d at 1173. Likewise, the fact that Maremont paid the Rowes market price for restricted shares was not something that would necessarily lead somebody to believe that Maremont’s representations about its limited intentions were untrue.

Maremont also argues that the district court clearly erred in finding that the Rowes relied on Maremont’s misstatements about its intentions. According to Mare-mont, several facts disprove reliance. The Rowes did not mention either the “No” tender offer statement, or Maremont’s statements concerning its intentions, in the written agreement. Furthermore, Fuchs failed to include the “No” tender offer statement in the contemporaneous written notes he kept of the negotiations. In fact, no Rowe representative mentioned the “No” tender offer statement to Maremont until Temple mentioned it in his deposition, two and one-half years after Shapiro made it. Maremont also asserts that the Rowes’ post-transaction conduct disproves reliance. Briefly stated, 6 after the transaction, Fuchs did not object immediately to Maremont’s alleged fraud but instead went forward with the deal. The Rowes did not formally demand rescission until three weeks after learning about the tender offer. Moreover, while the Rowes eventually filed a cross-claim against Maremont seeking damages under Rule 10b-5, they had previously filed a counterclaim against Pemcor, requesting that Pemcor transfer the Rowe shares to Maremont, and pressed forward with that counterclaim until Pemcor dismissed its suit. According to Maremont, all these facts show that the Rowes simply did not care about Maremont’s intentions toward the rest of Pemcor’s stock and that the Rowes would have sold their stock to Mare-mont for $13 per share even if they had known the truth.

On the record before us, we do not find that the district court clearly erred in finding reliance. Mr. and Mrs. Rowe both testified that if they had known the truth they would not have sold the stock to Maremont on the terms they did. Fuchs testified that if he had known the truth he would have advised the Rowes not to sell the stock for $13 per share. Hoovel and Martin (two Continental Bank officers with no financial interest in the litigation) also testified that if they had known the truth they would have attempted to negotiate for a higher price. The district court was entitled to credit the Rowes’ witnesses’ testimony.

*1237 Fuchs’ failure to mention the “No” tender offer statement could raise the inference that he did not consider Mare-mont’s intent or lack of intent to acquire Pemcor important. The district court, based on Fuchs’ testimony, concluded instead that Fuchs simply forgot to mention the statement because he considered it unremarkable in light of Maremont’s earlier representations about its limited intentions regarding Pemcor. 650 F.Supp. at 1108. This may show bad judgment on Fuchs’ part but it does not automatically preclude reliance. Fuchs’ statement to Kaufman that Maremont had told him it would not make a tender offer also supports the district court’s finding that Fuchs believed Maremont’s representations and acted on that belief.

The Rowes’ failure to put Maremont’s representations into the written agreement could also raise an inference that the Rowes were not concerned about what Maremont did in the future with Pemcor. However, the district court found that the Rowes’ failure to include the representations in the agreement “was predicated on their impression that Maremont had only limited intentions at the time of purchase.” Id. at 1110. In other words, the written agreement’s contents were a product of Maremont’s misrepresentations and omissions. Again, this may show poor judgment but it does not necessarily preclude reliance.

We also agree with the district court that the Rowes’ post-transaction conduct did not necessarily disprove reliance. It is true that Fuchs did delay in complaining to Mar-emont about its deception. But Martin, the Continental Bank officer, testified that immediately after hearing about Maremont’s proposed tender offer he told Fuchs that the Rowes had been “taken,” and the Rowes testified that they wanted their stock back right away but followed Fuchs’ advice to be cautious. Moreover, Pemcor had sued the Rowes on August 2 for $30 million; this understandably dictated caution before entering an advers