Jack M. Bass, J R. v. Janney Montgomery Scott , Inc.; Garry A. Fuld

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0135P (6th Cir.)
File Name: 00a0135p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
J ACK M. BASS, J R.,
Plaintiff-Appellant/
Cross-Appellee,
v.
J ANNEY M ONTGOMERY
S COTT , INC.; GARRY A. FULD ,
Defendants-Appellees/
Cross-Appellants,
TECHNIGEN C ORPORATION ;
J OYTEC, LTD .; LAWRENCE A.
NESIS,
Defendants,
J OHN GRAY ; NORMAN T.
W ILDE , J R.,
Defendants-Appellees.
;>

1
Nos. 98-6150/6226
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 91-00097—Robert L. Echols, Chief District Judge.
Argued: September 14, 1999

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2 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
Decided and Filed: April 17, 2000
Before: GUY, RYAN, and MOORE, Circuit Judges.
_________________
COUNSEL
ARGUED: Daniel Wallace Small, Nashville, Tennessee, for
Appellant. Ames Davis, WALLER, LANSDEN, DORTCH
& DAVIS, Nashville, Tennessee, for Appellees. ON BRIEF:
Daniel Wallace Small, Nashville, Tennessee, Jeffrey Alan
Greene, CASTLEMAN & GREENE, Goodlettsville,
Tennessee, for Appellant. Ames Davis, Kathryn S.
Crenshaw, James W. White, WALLER, LANSDEN,
DORTCH & DAVIS, Nashville, Tennessee, for Appellees.
RYAN, J., delivered the opinion of the court, in which
GUY, J., joined. MOORE, J. (pp. 26-31), delivered a
separate opinion concurring in the judgment.
_________________
OPINION
_________________
RYAN, Circuit Judge. Foremost among the issues we must
decide in this appeal is whether the inclusion of stock
purchase warrants along with a promissory note given in
consideration of a loan renders the transaction subject to
federal and Tennessee securities laws. We hold that it does,
and because the district court ruled to the contrary, we
reverse, in part, the judgment for the defendants.
The case came to litigation because the plaintiff, Jack M.
Bass, Jr. , made two loans totaling $600,000 to a company
called Technigen Corporation, and Technigen defaulted on
repayment. The loans were intended to serve as “bridge
loans” to help Technigen meet its operations costs in the
period leading up to the issuance of Technigen securities in a
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
31
the plan of distribution in part signals that the notes might not
be securities, but that factor by itself is not dispositive.”);
Trust Co. of Louisiana v. NNP Inc., 104 F.3d 1478, 1489 (5th
Cir. 1997) (“A debt instrument may be distributed to but one
investor, yet still be a security.”). The fact that Bass and
Technigen entered into the transaction for investment reasons
combined with the fact that there are no risk-reducing factors
other than federal and Tennessee securities laws weigh in
favor of the notes being securities. Because the defendants
have failed to rebut the presumption that the notes are
securities, I would hold that the district court erred when it
concluded that the promissory notes at issue in this case do
not qualify as securities for the purpose of federal and
Tennessee securities laws.

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30 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
[1933 and 1934] Acts were held not to apply.” Id. The
magistrate judge in the present case, apparently focusing on
the Supreme Court’s statement that the notes in Reves were
uncollateralized, concluded that the fourth factor weighed
against a finding that the notes were securities because “[i]n
the present case plaintiff sought to obtain, and did obtain,
certain collateral in order to reduce his exposure to loss.” J.A.
at 474 (Magistrate Judge’s R & R at 22).
Several circuit courts, however, have not focused on
whether the loans were secured or collateralized when
considering the fourth factor; instead, they have interpreted
the Supreme Court’s analysis of the fourth factor in Reves to
emphasize whether there is a risk-reducing factor such as
another regulatory scheme that reduces the risk of the
investment. Stoiber, 161 F.3d at 751 (“The fourth and final
inquiry looks to the adequacy of regulatory schemes other
than the federal Securities Acts in reducing risk to the
lender.”); Wright v. Downs, 1992 WL 168104, *3 (6th Cir.
July 17, 1992) (unpublished) (“[T]he fourth factor is whether
some regulatory scheme exists to reduce the risk of the
investment.”); see also Pollack, 27 F.3d at 814-15. In this
case, the defendants have provided no evidence to show that
there is another regulatory scheme available to reduce the risk
of Bass’s investment other than federal and state securities
laws. Furthermore, the lien that Bass received as collateral
was insufficient to reduce significantly the risk of his
investment. Thus, the fourth factor weighs in favor of the
notes being securities in this case.
The defendants have failed to rebut the presumption of the
“family resemblance” test, which initially considers all notes
to be securities, because the notes in this case do not
resemble any of the non-securities enumerated in Reves and
an examination of the four factors does not indicate that the
notes should be added to the list of non-securities. Although
the second factor — the method of distribution — weighs
against the notes being considered securities, this factor alone
is not dispositive. See Stoiber, 161 F.3d at 752 (“Admittedly
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
3
private placement. The defendant, Janney Montgomery Scott,
Inc., was the lead underwriter of the private placement; it was
also Janney that solicited the participation of Bass in the loan
transaction. When the private placement failed, Technigen
was unable to repay the loans, and Bass brought suit against
both Technigen and Janney for federal and Tennessee
securities fraud, for other federal and Tennessee securities law
violations, and for common law fraud. Bass subsequently
settled with Technigen, but the suit against Janney went to
trial.
At trial, the district court granted Janney’s motion for
summary judgment with regard to the securities law claims,
on the ground that the bridge loans were not securities. The
jury found Janney liable for negligent misrepresentation only,
and awarded Bass damages of $350,000. Because the jury
found Bass contributorily negligent, the award was reduced to
$192,500 under Tennessee’s comparative fault rule. Both
sides appeal.
We conclude that because the consideration given in
exchange for the bridge loans included warrants for the
purchase of Technigen common stock, the federal and state
securities laws were invoked as a matter of law. We therefore
reverse the dismissal of Bass’s state and federal securities
fraud claims and in all other respects affirm the judgment of
the district court.
I.
Bass is a sophisticated investor, having worked since 1955
as an investment broker and analyst, and having served on the
National Association of Securities Dealers’ disciplinary
committee.
Bass’s first dealings with the Janney defendants were in
1988 in a matter unrelated to this case, when Bass agreed to
provide a bridge loan to a company called Cardinal
Technologies. Janney was the underwriter for the subsequent
financing whose proceeds would, in part, be used to repay the

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4 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
bridge loan. This transaction was successfully completed to
the satisfaction of all parties, and as a result, Bass indicated to
Janney that he would be receptive to any offers to repeat the
experience.
In December 1989, Janney approached Bass to learn
whether he would be interested in providing a bridge loan in
a transaction substantially similar to that with Cardinal
Technologies. The borrower this time would be a Canadian
company called Technigen Corporation; this was the first time
Bass had heard of Technigen. Technigen had at one time
been involved in oil and mineral operations, but since its 1986
acquisition of Joytec, Ltd., a company involved in the
development and manufacture of indoor computerized golf
simulators, had been primarily concerned with the
manufacture and development of Joytec’s golf simulator
technology.
Through one of Bass’s brokers, Janney sent Bass a packet
of information about Technigen/Joytec and their simulator, as
well as documents outlining the securities offering for which
the proposed loan was to be made, and Janney’s internal
projections concerning Technigen’s prospects. Technigen
was seeking $3-$5 million from the offering to get Joytec’s
simulator into production, and needed approximately
$500,000 to fund its operations until the offering was
complete. Bass agreed to provide the loan.
The initial loan, closed February 6, 1990, was in the amount
of $500,000, in return for which Bass received a promissory
note in a like amount, bearing an interest rate of 12%, and
having a one-year term. If the private placement closed
successfully before the end of the one-year term, the note
would become due upon that closing. Joytec guaranteed the
loan, and it was additionally secured by a lien on virtually all
assets of Technigen and Joytec. Bass also received a purchase
warrant for Technigen common stock exercisable for 250,000
to 750,000 shares. Finally, Bass received a hypothecation and
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
29
The third factor addresses the reasonable expectations of
the investing public. The magistrate judge concluded that
“[t]his factor is not particularly helpful because there was no
investing public in this case, there was only plaintiff.” J.A. at
473-74 (Magistrate Judge’s R & R at 21-22). The third Reves
factor, however, is an objective test that turns on whether a
reasonable purchaser would have perceived the notes to be an
investment. Reves, 494 U.S. at 68-69. It therefore makes
little difference that there was only one investor in this case
because the fact that the notes were offered only to Bass does
not affect the objective expectations of a reasonable purchaser
in his position.
I believe that a reasonable purchaser in Bass’s position
would have considered the notes to be securities. First, the
sellers in this case explicitly designated the notes as
securities. J.A. at 116 (Mem. of Financing Terms). As the
District of Columbia Circuit explained, “When a note seller
calls a note an investment, in the absence of contrary
indications ‘it would be reasonable for a prospective
purchaser to take the [offeror] at its word.’” Stoiber v.
Securities and Exchange Commission, 161 F.3d 745, 751
(D.C. Cir. 1998) (quoting Reves, 494 U.S. at 69) (alteration in
original), cert. denied, --- U.S. ---, 119 S. Ct. 1464 (1999).
Moreover, Bass has testified that the defendants referred to
the notes as securities when they contacted him about the
investment. Thus, the evidence, when considered in the light
most favorable to Bass, demonstrates that a reasonable
purchaser would have considered the notes to be investments
given the circumstances in this case.
The fourth factor assesses whether there is some risk-
reducing factor that suggests that the instruments were not in
fact securities. Reves, 494 U.S. at 69-70. When analyzing the
fourth factor in Reves, the Supreme Court mentioned that the
notes in that case were “uncollateralized and uninsured.” Id.
at 69. The Court then went on to conclude that the fourth
factor weighed in favor of the notes being securities because
the notes “would escape federal regulation entirely if the

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28 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
securities. Thus, the only question at issue in this case is
whether the promissory notes should be added as a new
category of non-securities — a question that turns solely on
the four factors articulated in Reves.
Unlike the majority, I believe that the first Reves factor —
the motivations that would prompt reasonable parties to enter
into the transaction — weighs in favor of the notes being
securities. The Supreme Court explained in Reves that the
first factor suggested that the notes were securities because
“[the issuer] sold the notes in an effort to raise capital for its
general business operations, and purchasers bought them in
order to earn a profit in the form of interest.” Id. at 67-68
(footnote omitted); see also Pollack v. Laidlaw Holdings,
Inc., 27 F.3d 808, 812 (2nd Cir.) (“The inquiry is whether the
motivations are investment (suggesting a security) or
commercial or consumer (suggesting a non-security).”), cert.
denied, 513 U.S. 963 (1994). Like the parties in Reves, both
of the parties in this case were motivated by investment
considerations: Technigen issued the notes to obtain capital
for its general business and manufacturing operations, and
Bass purchased the notes because he hoped to earn a profit in
the form of interest on the notes. Joint Appendix (“J.A.”) at
951-52 (Bass Test.).
The second factor requires an examination of the plan of
distribution for the notes. If the notes are offered and sold to
a broad segment of the public or if the notes are instruments
that are commonly traded for speculation or investment, then
this factor suggests that the notes are securities. Reves, 494
U.S. at 66. In the present case, this factor weighs against the
notes qualifying as securities. Bass acknowledges that
“unlike in the Reves case, the particular note [that he
received] was not itself widely issued.” Bass’s Reply Br. at
7. Indeed, as the magistrate judge explained, “The only
solicitation connected with the note was directed toward
plaintiff and was done in a limited and private manner.” J.A.
at 473 (Magistrate Judge’s Report and Recommendation (“R
& R”) at 21).
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
5
pledge of all Joytec shares held by Technigen, and assignment
of a debenture held by Technigen.
Three months later, Bass provided a second bridge loan to
Technigen in the amount of $100,000. The second loan was
to come due on the same date as the first, and the promissory
note was amended to include the second loan in its principal
amount. The guarantee, hypothecation and pledge of shares,
and debenture assignment were all also extended to the
second loan, and the warrant was amended to cover the
purchase of 362,500 to 1,087,500 shares of Technigen
common stock. In addition, Bass received a hypothecation
and pledge of 200,000 shares of Technigen common stock
owned by its president.
In May 1990, Janney commenced the private placement of
Technigen securities as promised, but in June was forced to
withdraw the offering due to insufficient subscription. As a
result, Technigen was unable to repay the bridge loans.
Immediately before and during the period of the two bridge
loans, Technigen and its president, Lawrence A. Nesis, had
been receiving considerable bad press as well as unwanted
attention from Canadian government regulators. Specifically,
Nesis had been accused of issuing misleading press releases
for the purpose of manipulating Technigen’s stock price. In
these press releases, Nesis claimed that Joytec’s simulator
was enjoying huge success in Japan and North America, with
large orders pouring in from reputable companies, including
Sony. These claims were false. As a result, Technigen and
Nesis were investigated by the British Columbia Securities
Commission (BCSC). Ultimately, Nesis and the BCSC
entered into a consent decree whereby Nesis agreed that the
press releases were misleading and that he would not act as an
officer or director of any company whose shares were listed
on the Vancouver Stock Exchange. Shortly before the
consent decree was entered, Technigen delisted on the
Vancouver Stock Exchange; it continued trading on the
NASDAQ, where it had been listed for almost two years.

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6 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
At the time he agreed to make the first bridge loan to
Technigen, Bass knew about both the BCSC investigation and
the delisting from the Vancouver Stock Exchange. However,
Technigen characterized the investigation as a
misunderstanding, and the delisting as an effort to avoid
stigma by leaving an exchange reputed to be riddled with
corruption. Apparently, both Bass and Janney accepted
Technigen’s characterization at face value.
As underwriter of the private placement of securities for
which the Bass loans were bridge financings, Janney was
required to perform a “due diligence” investigation of
Technigen. However, Janney’s performance does not appear
to have been markedly diligent; although its Lexis-Nexis
search for news articles mentioning Technigen turned up a
number of hits, no one at Janney reviewed the uncovered
articles until well after the commitment to underwrite the
offering was firm. Indeed, although the titles to the articles
were compiled into a list, it is not clear that even the titles
were reviewed for content. According to the trial testimony
of one of Janney’s officers, had any of the more provocatively
entitled articles (“Scam Capital of the World,” “A Strange
Way to Run a Company”) been brought to the attention of a
responsible decision-maker at Janney, Janney would not have
agreed to underwrite the offering.
In March 1990, Janney first received information that
Technigen’s president, Nesis, had entered into the November
20, 1989, consent decree with the BCSC. As part of a
memorandum sent in the regular course of business in April
or May of 1990, Janney forwarded the information to Bass.
In hindsight, this method of disclosure appears lax, but may,
as the defendants suggest, have been in keeping with the fact
that, at the time, Janney did not consider the information to be
a deal-breaker for itself, and therefore not likely to be for
Bass.
The Technigen offering failed in June 1990, and, as we
have said, Technigen defaulted on the loans. Soon thereafter,
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
27
2Those notes that, according to the Supreme Court, are not securities
include:
[T]he note delivered in consumer financing, the note secured by
a mortgage on a home, the short-term note secured by a lien on
a small business or some of its assets, the note evidencing a
‘character’ loan to a bank customer, short-term notes secured by
an assignment of accounts receivable, [] a note which simply
formalizes an open-account debt incurred in the ordinary course
of business (particularly if, as in the case of the customer of a
broker, it is collateralized)[,and] . . . notes evidencing loans by
commercial banks for current operations.
Reves, 494 U.S. at 65 (quotations omitted).
The Supreme Court has adopted the “family resemblance”
test for determining whether certain promissory notes qualify
as securities. Reves, 494 U.S. at 63-66. In Reves, the Court
was careful to point out that, according to the family
resemblance test, every note is initially presumed to qualify as
a security. Id. at 65-67. Indeed, this presumption that all
notes are securities can only be overcome in one of two ways:
the notes must bear a strong resemblance, in terms of the four
factors considered in the Reves decision, to one of the
judicially created categories of notes that do not qualify as
securities,2 or the notes must have characteristics that, after
considering the four Reves factors, weigh in favor of adding
the notes as a new category to the enumerated list of non-
securities. Id.
The four Reves factors that determine the note’s status as a
security are: (1) “the motivations that would prompt a
reasonable seller and buyer to enter into [the transaction],” (2)
“the ‘plan of distribution’ of the instrument,” (3) “the
reasonable expectations of the investing public,” and (4)
“whether some factor such as the existence of another
regulatory scheme significantly reduces the risk of the
instrument, thereby rendering application of the Securities
Acts unnecessary.” Id. at 66-67 (quotation omitted). In the
present case, the defendants do not argue that the promissory
notes bear a strong resemblance to any of the notes that the
Supreme Court has explicitly identified as being non-

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26 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
1The Supreme Court has repeatedly held that “‘[t]he definition of a
security in § 3(a)(10) of the 1934 Act, . . . is virtually identical [to the
definition in the Securities Act of 1933] and, for present purposes, the
coverage of the two Acts may be considered the same.’” Reves, 494 U.S.
at 61 n.1 (quotation omitted). Furthermore, the Tennessee statutory
definition of the term “security” is virtually identical to the definition in
the 1934 Act. See TENN. CODE A NN. § 48-2-102(12).
______________________
CONCURRENCE
______________________
KAREN NELSON MOORE, Circuit Judge, concurring. I
concur in the judgment of the majority, but I write separately
with respect to Part II.A.1.a of Judge Ryan’s opinion because
I believe that the promissory notes at issue in this case, like
the stock purchase warrants, should be characterized as
securities for the purpose of federal and Tennessee securities
laws.
As the majority has explained, Plaintiff Jack Bass cannot
sustain his securities claims unless he shows, as a threshold
matter, that the financial instruments at issue in this case
qualify as securities within the meaning of the Securities Act
of 1933 and the Securities Exchange Act of 1934. See Reves
v. Ernst & Young, 494 U.S. 56, 60 (1990). The definition of
“security” contained in § 2(a)(1) of the Securities Act of
19331 states that a security includes:
[A]ny note, stock, treasury stock, bond, debenture,
evidence of indebtedness, . . . or, in general, any interest
or instrument commonly known as a “security,” or any
certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the
foregoing.
15 U.S.C. § 77b(a)(1); see also 15 U.S.C. § 78c(a)(10).
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
7
news articles were brought to Bass’s attention which revealed
both that Technigen/Joytec had never had any technology or
product worth investing in, and that Technigen’s delisting
from the Vancouver Stock Exchange might have been in
anticipation of the BCSC consent decree. Bass brought these
articles to the attention of Janney at that time; at trial he
described the Janney officer to whom he showed the articles
as “shocked.” In February 1991, Bass brought suit against
Technigen and Janney.
After Technigen reached a $350,000 settlement agreement
with Bass and dropped out of the case, the charges remaining
against Janney were for the violations of :
1. Section 10(b) of the Securities Exchange Act of
1934 (manipulative and deceptive devices in
connection with the purchase or sale of any
security), 15 U.S.C. § 78j(b);
2. Section 12(a)(1) of the Securities Act of 1933
(civil liabilities arising from sale of unregistered
securities or sale of securities without a
prospectus), 15 U.S.C. § 77l(a)(1);
3. Section 12(a)(2) of the Securities Act of 1933
(civil liabilities arising from misrepresentation
of a material fact in a prospectus), 15 U.S.C.
§ 77l(a)(2);
4. Section 15 of the Securities Act of 1933 and
Section 20(a) of the Securities Exchange Act of
1934 (controlling person vicarious liability), 15
U.S.C. §§ 77o, 78t(a);
5. Sections 21 and 22 of the Tennessee Securities
Act of 1980 (fraudulent acts or devices in
connection with the sale or purchase of any
security), Tenn. Code Ann. §§ 48-2-121, 48-2-
122; and

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8 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
6. the common law against intentional and
negligent misrepresentation.
All securities law claims were dismissed on summary
judgment but the district court retained jurisdiction on
diversity grounds. The jury returned a verdict of no liability
for intentional or reckless misrepresentation, but found
Janney liable for negligent misrepresentation. The jury also
found that Bass had been contributorily negligent, and
apportioned liability 45% to Bass and 55% to Janney. Bass
was awarded $350,000 in damages, which was reduced under
Tennessee’s comparative fault rule to $192,500 due to Bass’s
contributory negligence. Bass appeals the summary judgment
in Janney’s favor with regard to the securities law claims; the
denial of his own motion for summary judgment with regard
to certain securities law claims; the district court’s exclusion
of certain documentary evidence and expert witness
testimony; and the amount of the damage award. The Janney
defendants cross-appeal the denial of their motion for
judgment as a matter of law, as well as the amount of the
damage award.
II.
A. Securities Law Claims
The district court dismissed all of Bass’s federal and state
securities law claims on the ground that the promissory notes
Bass received were not securities. Bass appeals the dismissal
of the securities law claims on the ground that both the
promissory notes and the warrants for the purchase of
Technigen common stock he received in exchange for the
$600,000 he made to Technigen were securities as a matter of
law.
The district court adopted the Report and Recommendation
of a United States Magistrate Judge applying the “family
resemblance” test announced by the United States Supreme
Court in Reves v. Ernst & Young, 494 U.S. 56 (1990), to
determine that the notes were not securities. Neither the
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
25
such tort-feasor “has paid more than the proportionate share
of the shared liability.” Tenn. Code Ann. § 29-11-102.
When the jury awarded Bass $350,000 in damages, it was
aware that he had requested $600,000 in damages, plus
interest and punitive damages. It was also aware that he had
already received $350,000 in settlement from Technigen. It
does not appear that the jury failed to take into account the
amount of the Technigen settlement, nor that requiring Janney
to pay its 55% share of the jury award resulted in a payment
by Janney of a portion attributable to Technigen.
Furthermore, there has been no showing that Technigen and
Janney were tort-feasors jointly causing Bass’s damages.
Indeed, on the face of it, Technigen was liable to Bass in
contract, on the defaulted promissory notes, and not as a joint
tort-feasor with Janney. The point is clinched by the fact that
the jury expressly assessed the fault in tort of “others” at zero
on the verdict form. In other words, not only was Janney not
required to pay more than its pro rata share of Bass’s
damages, it had no joint tort-feasor from whom to seek
contribution under the statute. The district court committed
no error in refusing to reduce the damage award pursuant to
the Act.
III.
For the foregoing reasons, we REVERSE the district
court’s grant of summary judgment dismissing the plaintiff’s
federal and state securities law claims and REMAND those
claims for reconsideration, but AFFIRM the judgment of the
district court in all other respects.

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24 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
(1) It does not discharge any of the other tort-feasors
from liability for the injury or wrongful death unless its
terms so provide; but it reduces the claim against the
others to the extent of any amount stipulated by the
release or the covenant, or in the amount of the
consideration paid for it, whichever is the greater; and
(2) It discharges the tort-feasor to whom it is given
from all liability for contribution to any other tort-feasor.
(b) No evidence of a release or covenant not to sue
received by another tort-feasor or payment therefor may
be introduced by a defendant at the trial of an action by
a claimant for injury or wrongful death, but may be
introduced upon motion after judgment to reduce a
judgment by the amount stipulated by the release or the
covenant or by the amount of the consideration paid for
it, whichever is greater.
Tenn. Code Ann. § 29-11-105. This statute was rendered
obsolete in 1992 by Tennessee’s adoption of a system of
comparative fault. McIntyre v. Balentine, 833 S.W.2d 52
(Tenn. 1992). However, the Tennessee Supreme Court
expressly retained the statutory remedy of contribution among
tort-feasors for “cases in which prior to McIntyre the cause of
action arose, the suit was filed and the parties had made
irrevocable litigation decisions based on pre-McIntyre law.”
General Elec. Co. v. Process Control Co., 969 S.W.2d 914,
916 (Tenn. 1998). Bass’s complaint was filed in February
1991; the settlement with Technigen took place in March
1992; McIntyre was decided in May 1992. The defendants
argue that therefore they may set off the damage award
against them by the $350,000 Bass received from Technigen
in his settlement with them, pursuant to the statute.
The defendants mischaracterize the Act, which was
intended to cover the situation in which two tort-feasors are
“jointly or severally liable in tort for the same injury to person
or property or for the same wrongful death,” but “judgment
has not been recovered against all or any of them” and one
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
9
Report and Recommendation nor the Order of the district
court adopting it addressed the matter of the warrants, but
because our review of the judgment below is de novo and
because we think resolution of this issue is critical to a proper
decision in the case, we shall address it.
1. Presence of Securities
a. Promissory Notes
In a matter as fundamental to the federal securities laws as
the very definition of a security, analysis must begin with the
plain language of the Securities Acts themselves. The
Securities Act of 1933 defines securities as
any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in
any profit-sharing agreement, . . . put, call, straddle,
option, or privilege on any security, . . . or, in general,
any interest or instrument commonly known as a
“security”, or any certificate of interest or participation
in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing.
15 U.S.C. § 77b(a)(1) (emphasis supplied). The definition
in the Securities Exchange Act of 1934, 15 U.S.C.
§ 78c(a)(10), is identical except that it exempts notes with a
repayment term of less than nine months; despite this subtle
difference, the Supreme Court treats these definitions as
functionally indistinguishable in almost all cases, Reves, 494
U.S. at 61 n.1. The definition includes both “any note” and
“any . . . warrant or right to subscribe to or purchase” any
security. 15 U.S.C. § 78c(a)(10).
Under the Tennessee Securities Act of 1980,
“[s]ecurity” means any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of
interest or participation in any profit-sharing agreement,

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10 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
. . . or, in general, any interest or instrument commonly
known as a “security,” or any certificate of interest or
participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe
to or purchase, any of the foregoing.
Tenn. Code Ann. § 48-2-102(12). This language closely
tracks the language of the federal statutory definition. With
regard to notes and warrants, the language is identical to that
of the 1933 Act’s definition.
In Reves, the Supreme Court explained, with disarming
candor, that for purposes of giving judicial interpretation to
the plain meaning of language employed by Congress in
enacting a statute, that words do not always mean what they
say:
While common stock is the quintessence of a security,
and investors therefore justifiably assume that a sale of
stock is covered by the Securities Acts, the same simply
cannot be said of notes, which are used in a variety of
settings, not all of which involve investments. Thus, the
phrase “any note” [in the definition of security] should
not be interpreted to mean literally “any note,” but must
be understood against the backdrop of what Congress
was attempting to accomplish in enacting the Securities
Acts.
Reves, 494 U.S. at 62-63 (citation omitted).
The Reves Court adopted a “family resemblance” test to
determine whether particular notes could be classified as
securities.
The test begins with the language of the statute; because
the Securities Acts define “security” to include “any
note,” we begin with a presumption that every note is a
security. We nonetheless recognize that this presumption
cannot be irrebuttable. As we have said, . . . Congress
was concerned with regulating the investment market,
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
23
D. Damage Award
Both parties appeal the amount of the damages awarded by
the jury. In a diversity case, this court will review a jury’s
damage award under an extremely deferential standard, not
disturbing it “‘unless it manifests plain injustice, or is so
grossly excessive as to be clearly erroneous.’” Chatman v.
Slagle, 107 F.3d 380, 385 (6th Cir. 1997) (citation omitted).
1. The Plaintiff’s Argument
Bass argues that because only he presented evidence at trial
as to how damages ought properly to be calculated, the jury
was not empowered to award damages in an amount lower
than that which he requested. Not surprisingly, Bass was able
to produce no case law to support the proposition that the jury
was under some compulsion to accept at face value the
calculations he presented. Because the jury could quite
properly have included in its own calculations the amount of
Bass’s settlement with Technigen or his retention of the
Technigen stock and warrants, we cannot conclude that the
jury’s award was either plainly unjust or clearly erroneous on
these grounds.
2. The Defendants’ Argument
The Janney defendants, for their part, argue that Tennessee
law provides a statutory right to a setoff of the judgment
against them by an amount equal to the settlement between
the plaintiff and Janney’s erstwhile codefendant, Technigen.
The relevant Tennessee statute, a section of the Uniform
Contribution Among Tort-feasors Act (the Act), reads as
follows:
(a) When a release or covenant not to sue or not to
enforce judgment is given in good faith to one (1) of two
(2) or more persons liable in tort for the same injury or
the same wrongful death:

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22 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
which [Bass] subsequently assert[ed],” nor did Bass appear to
act with “the intention or expectation that such conduct will
be acted upon by the other party.” Janney, for its part, did not
have “a lack of knowledge and an inability to learn the truth
as to the facts in question; . . . reliance on [Bass’s] conduct[;
or] action based thereon which change[d its] position
prejudicially” with regard to Bass’s actions and omissions.
Ratification is a doctrine unrelated to the purpose the
defendants attempt to bend it to.
The defendants’ arguments based on principles of waiver,
estoppel, and ratification are entirely without merit.
3. Reliance
The defendants’ final argument is that Bass could not as a
matter of law have relied reasonably or justifiably upon the
defendants’ investigations in connection with the bridge loan
transaction. Under Tennessee law, “[g]enerally, a party
dealing on equal terms with another is not justified in relying
upon representations where the means of knowledge are
readily within his reach.” Solomon v. First Am. Nat’l Bank of
Nashville, 774 S.W.2d 935, 943 (Tenn. Ct. App. 1989).
Furthermore, the defendants argue, Bass was highly
experienced as an investor and should have known better than
to assume that Janney’s interests were aligned with his. In
addition, the information regarding Technigen’s reputation
was as available to him as to the defendants, and Bass had his
own attorney able to conduct any investigations Bass thought
necessary.
Despite the defendants’ protestations, the question of
whether Bass’s reliance was reasonable is beyond doubt a
question of fact for a jury to decide, and not a fit subject for
judgment as a matter of law. This argument, too, is without
merit.
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
11
not with creating a general federal cause of action for
fraud.
Id. at 65 (footnote omitted). “In an attempt to give more
content to that dividing line,” the Supreme Court, in a
strikingly creative exercise in statutory construction identified
the following list of notes which are not securities: notes
delivered in consumer financing, notes secured by a mortgage
on a home, notes secured by a lien on a small business or
some of its assets, notes relating to a “character” loan to a
bank customer, short-term notes secured by an assignment of
accounts receivables, notes which formalize an open-account
indebtedness incurred in the ordinary course of business, and
notes given in connection with loans by a commercial bank to
a business for current operations. Id.
The Court then established a four-factor framework for
determining, first, whether a note bears a resemblance to one
of the identified seven instruments, and second, whether an
additional category should be added to the list.
The first factor is the motivation prompting the transaction:
if the seller’s motivation is “to raise money for the general use
of a business enterprise . . . and the buyer is interested
primarily in the profit the note is expected to generate, the
instrument is likely to be a ‘security.’” Id. at 66.
Second is the plan of distribution: if there is “‘common
trading for speculation or investment,’” the note looks more
like a security. Id. (citation omitted). This factor has
historically been problematic in application; in Marine Bank
v. Weaver, 455 U.S. 551 (1982), the Supreme Court held that
the arrangement in that case, by virtue of being a “unique
agreement, negotiated one-on-one by the parties,” was not a
security. Id. at 560. However, it is clear that paradigmatic
securities, such as stocks, can be offered and sold to a single
person, while yet remaining securities. See Landreth Timber
Co. v. Landreth, 471 U.S. 681, 692 (1985).

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12 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
The third factor is “the reasonable expectations of the
investing public.” Reves, 494 U.S. at 66. Reasonable public
expectations will govern the characterization, even where the
underlying economic realities belie those expectations. Id. at
66-67.
The final consideration is “whether some factor such as the
existence of another regulatory scheme significantly reduces
the risk of the instrument, thereby rendering application of the
Securities Acts unnecessary.” Id. at 67. In application, this
factor comprises, in addition to comprehensive regulatory
schemes, the presence or absence of risk-reducing factors
such as collateral or insurance. Id. at 69.
Although the promissory notes received by Bass bear
similarities to at least two of the enumerated categories of
notes which are not securities—notes secured by a lien on a
small business or some of its assets, and notes given in
connection with loans by a commercial bank to a business for
current operations, see id. at 65—we decline to struggle to fit
an atypical peg into a standardized hole when the Supreme
Court has provided, in its four-factor test, a tool for custom
fitting.
Applying the Supreme Court’s test, the first factor is a
washout, since the motivation prompting the transaction on
Technigen’s end is one typical in commercial loan
transactions, that is, an effort to raise interim funds to launch
a new enterprise, but from Bass’s perspective looks more like
a transaction for profit. The second factor, the plan of
distribution, tilts against the notes being securities, since the
transaction was unique, negotiated with a single buyer and
negotiated term by term, rather than being offered in a
wholesale or potentially wholesale fashion. The third factor
is again largely a washout, since the reasonable expectation of
the investing public would normally be that bridge loans are
not securities, and yet, as Bass points out repeatedly, the term
sheet for the transaction prepared by Janney—probably a form
document usually used in venture financings—referred to the
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
21
failing to act, as to induce a belief that it was his
intention and purpose to waive.”
Brewer v. Brewer, 869 S.W.2d 928, 934 (Tenn. Ct. App.
1993) (citations omitted).
The Tennessee Court of Appeals has stated that the
elements of equitable estoppel as related to the party
estopped are (1) conduct which amounts to a false
representation or concealment of material facts, or
conduct which is calculated to convey the impression that
the facts are otherwise than, and inconsistent with, those
which the party subsequently asserts; (2) the intention or
expectation that such conduct will be acted upon by the
other party; and (3) actual or constructive knowledge of
the real facts. The elements as related to the party
claiming the estoppel are (1) a lack of knowledge and an
inability to learn the truth as to the facts in question; (2)
reliance on the conduct of the estopped party; and (3)
action based thereon which changes his position
prejudicially.
Aussenberg v. Kramer, 944 S.W.2d 367, 371 (Tenn. Ct. App.
1996).
Finally, in Tennessee, “[a] ratification occurs when the
party, knowing all the facts necessary to form an opinion,
deliberately assents to be bound.” Yearby v. Shannon, No.
03A01-9509-CV-00345, 1996 WL 87446, at *3 (Tenn. Ct.
App. Feb. 29, 1996). In general it is a principle of agency,
whereby one person assents explicitly or implicitly to be
bound by the actions of another.
None of Bass’s actions or omissions complained of are
such “as to induce a belief that it was his intention and
purpose to waive.” Similarly, the acts and omissions do not
amount to “a false representation or concealment of material
facts, or conduct which is calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those

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20 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
arguable that he qualified as a Technigen insider, and as such
was prevented by the securities laws from selling Technigen
stock without disclosing his knowledge of Technigen’s true
worth. Finally, even if he was not absolutely barred from
selling the stock, the mitigation rule does not require parties
to unload junk stock on unwitting investors.
2. Waiver, Estoppel, and Ratification
The defendants’ second theory to explain why Bass should
not be permitted to recover against them is based on
principles of waiver, estoppel, and ratification. The
defendants argue that Bass’s own conduct prevents him from
complaining about the transaction. First, Bass knew that
Technigen’s president was under investigation at the time he
extended the first bridge loan. Second, he knew that Nesis
had entered into a consent decree with the BCSC at
approximately the time he extended the second bridge loan,
and yet did not at that time seek rescission of the transaction.
Third, he did not bring suit against the defendants until nearly
six months after the failure of the Technigen private
placement. Fourth, despite his concerns over Technigen’s
reputation, Bass sought to retain and did retain shares of
Technigen stock after the failure of the Technigen offering
and as part of his settlement with Technigen. Fifth, the failure
to sell the Technigen shares or to exercise the warrants itself
amounted to a ratification of the underlying transaction. In
sum, the argument amounts to a statement that one who
retains the benefits of a transaction should not be permitted to
complain about it.
This argument must be addressed in light of Tennessee law.
In Tennessee,
[w]aiver is a voluntary relinquishment or renunciation of
a known right. “It may be proved by express declaration;
or by acts and declarations manifesting an intent and
purpose not to claim the supposed advantage; or by a
course of acts and conduct, or by so neglecting and
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
13
notes under the rubric of securities. The fourth factor again
mitigates against these notes being securities, since, as
applied in Reves, the existence of collateral is significant as a
risk-reducing factor, and these notes were heavily secured by
the assets of both Technigen and Joytec, Technigen and
Joytec stock, and Joytec’s guarantee.
For these reasons, obedience to the Supreme Court’s
balancing formula in Reves requires that we affirm the district
court’s conclusion that the notes were not securities as a
matter of law.
b. Warrants
However, with regard to the warrants which were included
in the transaction as an additional means of enticing Bass into
a commitment, a different conclusion is called for. The
Janney defendants argue that in the context of a commercial
loan, warrants issued secondarily to the underlying loan
transaction are not to be considered securities; essentially, this
is a version of the “underlying economic reality” approach to
securities transactions. The only authority cited for this
proposition is Rispo v. Spring Lake Mews, Inc., 485 F. Supp
462 (E.D. Pa. 1980); our own independent research reveals no
supporting precedent from this circuit. In Rispo, the district
court held that a promise, made incidental to a commercial
loan transaction, to deliver three shares of stock was not the
sale or purchase of a security. Id. at 466. Overlooking for the
moment that this court is under no obligation to follow the
decision of a district court from outside the Sixth Circuit, the
holding in Rispo was dubious in 1980, in light of the plain
language of the definition section of both federal Securities
Acts, and increasingly so after 1985, when the Supreme Court
decided that stock is a security per se, regardless of the
particular circumstances in which it changes hands, and
further that an investment contract analysis was not applicable
to transactions involving paradigmatic securities. Landreth
Timber, 471 U.S. at 696-97.

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14 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
An analysis that departs from the plain language of the
statutory definition in order to give effect to the apparent
underlying intentions of the parties to a transaction is an
inappropriate application of judicial authority and flies in the
face of the fundamental purposes for which the federal
securities laws were drafted. Indeed, of predominant
importance is not whether a particular transaction ideally
should invoke the protections of the securities laws, but rather
the certainty enjoyed by the transacting parties that the
protections of those laws may be extended to every exchange
involving securities. The Securities Acts define warrants as
securities no matter what the context in which they change
hands and put parties on notice that the securities laws will
apply to any exchange of warrants. If the parties do not wish
the securities laws to apply to a given transaction, they need
only structure it as a straight loan. A contrary rule would be
little more than an invitation to litigation: How important a
role would the warrants need to play in a transaction for them
to rise to the level of securities? This is not the sort of
question this court has any mandate, or any inclination, to
address.
We believe that the district court erred as a matter of law in
dismissing all of Bass’s securities law claims on the ground
that the promissory notes were not securities. The notes
themselves were not securities, but the loan transaction also
involved the exchange of warrants, which are securities in
whatever context they change hands.
2. Reversible Error
Janney argues forcefully that even if the district court
committed error in holding that the warrants were not
securities, the error was necessarily harmless—at least with
regard to the securities fraud counts—in light of the jury
verdict which did not find the defendants liable for intentional
or reckless misrepresentation. We acknowledge that the
essential elements of fraud under the securities laws closely
track those for common law fraud. See Ockerman v. May
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
19
1. Failure to Mitigate
First, claiming that there was insufficient evidence to
support the verdict for the plaintiff, Janney argues that Bass
unjustifiably failed to mitigate his damages by attempting to
exercise his stock warrants, even at a time when the market
price of Technigen stock was sufficiently high that his profits
on sale would have exceeded $2 million.
Janney is correct that, under Tennessee law,
[g]enerally, one who is injured by the wrongful or
negligent act of another, whether by tort or breach of
contract, is bound to exercise reasonable care and
diligence to avoid loss or to minimize or lessen the
resulting damage, and to the extent that his damages are
the result of his active and unreasonable enhancement
thereof, or due to his failure to exercise such care and
diligence, he cannot recover.
Cook & Nichols, Inc. v. Peat, Marwick, Mitchell & Co., 480
S.W.2d 542, 545 (Tenn. Ct. App. 1971). However, to note
that Bass should have made efforts to mitigate where possible
is a far cry from demonstrating that he had an opportunity to
do so and squandered it. Warrants for the purchase of
unregistered stock cannot be exercised on a moment’s notice.
First, Bass would have had to inform Technigen of his desire
to exercise, and paid the exercise price. Second, he would
have had to request that Technigen register the converted
shares, an expensive and time-consuming process, and one
Technigen might have balked at entering into on behalf of an
opposing party in a lawsuit. Third, he would then have had to
sell the shares. It is probable that the attempt to sell so many
shares at once would have had an immediate effect on the
market price for Technigen common stock, especially given
the volatility it had demonstrated during the period in
question. There is therefore no reason to believe that Bass
would have been able to sell his shares for $2 million even
had he tried. In addition, as Bass pointed out at trial, it is

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18 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
Similarly, the court’s refusal to permit the plaintiff’s
securities law expert to testify was not an abuse of discretion.
Bass complains that his case for common law fraud was
prejudiced by the fact that the jury was never permitted to
hear testimony regarding Janney’s affirmative, statutory duty
of due diligence. In fact, that duty had no impact on the cause
of action for common law fraud.
The securities laws are relevant to the bridge loan
transaction solely by virtue of the presence of the Technigen
warrants, which were included as consideration for the bridge
loans Bass extended to Technigen. These warrants were not
warrants for the purchase of the securities Janney was
underwriting, but rather for previously issued Technigen
common stock. Therefore, with regard to the warrants whose
presence in the transaction invoked the federal and state
securities laws, Janney was not an underwriter, and therefore
owed no duty to Bass arising out of the securities laws.
With regard to the Technigen offering for which the Bass
loans were a bridge financing, Janney was an underwriter. As
an underwriter, Janney owed a duty of due diligence to
Technigen but not, we are satisfied, to Bass, because Bass had
no direct involvement in that offering. Any duty Janney owed
to Bass arose not from the securities laws but rather from
Janney’s role in soliciting Bass’s participation in the
transaction. The jury knew that Janney solicited Bass’s
participation when it found that Janney lacked intent to
defraud.
Bass has failed to demonstrate sufficient evidence of
prejudice against his case to warrant a finding that the district
judge abused his discretion in excluding the specified
evidence.
C. Jury Verdict on Common Law Fraud
The defendants cross-appeal the jury verdict on common
law fraud, advancing a number of theories as to why Bass
should not have been permitted to prevail at trial.
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
15
Zima & Co., 27 F.3d 1151, 1156 (6th Cir. 1994). However,
we are not persuaded that the structural similarity between the
two causes of action is necessarily dispositive of the dispute
in this case.
Although the essential elements of common law and
securities fraud are the same, the securities laws impose a
special duty on underwriters to perform a so-called “due
diligence” investigation of the issuer of any securities they
underwrite. Because the securities laws properly apply to the
bridge loan transaction as a result of the exchange of warrants
with the promissory notes, and because Janney was the lead
underwriter for the private placement of Technigen securities
for which the loans were a bridge financing, Janney was under
a statutorily imposed duty to perform due diligence on
Technigen and Joytec. The jury below was not instructed as
to Janney’s duty of due diligence. We therefore decline to
accept Janney’s invitation to treat the error as harmless as a
matter of law.
3. The Plaintiff’s Motion for Summary Judgment
Bass argues that it is he, rather than the defendants, who is
entitled to judgment as a matter of law on at least two of his
securities law claims, namely, the violation of Section 10(b)
of the Securities Exchange Act of 1934 and that of Section 21
of the Tennessee Securities Act of 1980. He alleges that the
Janney defendants omitted to supply material information
which reasonable minds could not disagree would influence
his decision to accept the Technigen securities. First, the
Janney defendants internally circulated a memo stating their
belief that the private placement of Technigen securities that
they were underwriting would not be successful unless the
price of Technigen common stock rebounded from
approximately $1.50 to $2.50; it had dropped to $1.50 from
a recent high of around $15.00. This memo was not provided
to Bass. Second, the defendants failed to disclose the
contents of the negative newspaper articles regarding
Technigen, although Bass acknowledges that the defendants

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16 Bass v. Janney Montgomery
Scott, et al.
Nos. 98-6150/6226
were not aware of the contents of these articles. Third, the
defendants delayed disclosure of the fact that Technigen’s
president had been banned from the Vancouver Stock
Exchange.
In addition, Bass claims that the remaining elements of a
claim under either anti-fraud provision have been met as a
matter of law; those elements are scienter, reasonable
reliance, and loss causation. Bass would have it that the
omissions enumerated above are reckless per se, and relies on
presumptions he describes as irrebuttable to demonstrate
reliance and causation.
We are not persuaded by the plaintiff’s reasoning.
“Summary judgment is appropriate only when there is no
genuine issue of material fact and the moving party is entitled
to judgment as a matter of law. Moreover, the court is to
construe the evidence and all inferences to be drawn from it
in the light most favorable to the nonmoving party.” Kraus v.
Sobel Corrugated Containers, Inc., 915 F.2d 227, 229 (6th
Cir. 1990) (citations omitted). Here, issues of material fact
abound. With regard first to the alleged omissions, Janney
produced testimonial evidence at trial disputing the
materiality of the undisclosed facts. Construing this
testimonial evidence in the light most favorable to Janney,
Bass’s motion could not have been granted by the district
court. Similarly, the Janney defendants dispute the
recklessness of the alleged omissions, creating another
genuine issue of material fact. Finally, Bass has not even
proven what portion, if any, of the $600,000 purchase price he
paid for the $600,000 interest-bearing promissory notes and
the stock purchase warrants could properly be allocated to the
warrants, let alone that any of his financial losses arose from
his purchase of the warrants.
In short, because genuine issues of material fact remain,
Bass was not entitled to judgment as a matter of law, and we
will therefore not disturb the judgment of the district court in
this respect.
Nos. 98-6150/6226 Bass v. Janney Montgomery
Scott, et al.
17
B. Evidentiary Rulings
Bass complains that the district court prevented him from
introducing some of his evidence regarding Technigen’s
reputation as a “scam company.” He argues that his common
law fraud case was prejudiced because he was not permitted
to demonstrate the extent and ubiquity of Technigen’s poor
reputation. He complains further that his own expert witness
was excluded from testifying, and that the defendants’ expert
witness was permitted to testify as to the industry standard of
care for underwriters with regard to bridge loan participants,
again, with prejudicial effect to his common law fraud case.
This court reviews evidentiary rulings of the kind
complained of here for abuse of discretion only, and “we will
not reverse a judgment unless we believe that errors at trial
had a substantial effect on the final result.” In re Air Crash
Disaster, 86 F.3d 498, 532-33 (6th Cir. 1996). In general,
[a]lthough relevant, evidence may be excluded if its
probative value is substantially outweighed by . . .
considerations of undue delay, waste of time, or needless
presentation of cumulative evidence.
Fed. R. Evid. 403.
In this case, the district judge was within his discretion to
determine that admission of the entire corpus of negative
articles would be cumulative, redundant, and a waste of time.
The point that Technigen had an easily ascertainable
reputation as a shady operation could easily be made with the
introduction of only a small number of articles, and indeed
was a fact not really contested by the defendants. To have
permitted a dead horse to be flogged at great length in the
jury’s presence would not merely have wasted judicial time
and resources; it also would have risked prejudicing the jury
well beyond the intrinsic probative value of the evidence.
The district judge did not abuse his discretion in excluding
some of the negative articles.

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