In the
United States Court of Appeals
For the Seventh Circuit
No. 11-3457
R OBERT M. A NDERSON,
Plaintiff-Appellant,
v.
A ON C ORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 C 6241—Rebecca R. Pallmeyer, Judge.
S UBMITTED M ARCH 10, 2012—D ECIDED M ARCH 29, 2012
Before E ASTERBROOK, Chief Judge, and W ILLIAMS and
T INDER, Circuit Judges.
E ASTERBROOK, Chief Judge. The first time this case was
here, we held that California law applies and remanded
for consideration of Anderson’s “holder” claims—because
California, unlike federal securities law, permits a
person who did not purchase or sell stock in reliance on
a fraudulent representation to maintain a suit for dam-
ages. 614 F.3d 361 (7th Cir. 2010). On remand the
district court dismissed the complaint, ruling that it did
2 No. 11-3457
not adequately allege defendants’ state of mind and
Anderson’s reliance on any particular false statements
Aon had made. 2011 U.S. Dist. L EXIS 111217 (N.D. Ill.
Sept. 29, 2011). The judge also suggested that Anderson
had not shown a plausible way to disentangle the effects
of corporate mismanagement (which is actionable only
through derivative litigation) from the effects of delay
in disclosing that mismanagement to the public.
In response to Anderson’s appeal, Aon advances an
additional argument in support of its judgment—an
argument flagged for attention by our first decision. 614
F.3d at 367. Anderson contends that he was damaged
because Aon’s unduly optimistic statements caused him
to hold rather than sell his stock. We observed that Aon
is a large firm with many active and professional
traders, so the price of its stock adjusts rapidly to public
disclosures. If Aon had disclosed the truth earlier, we
noted, the price of its stock would have fallen before
Anderson could have sold. This left a puzzle: How
could Anderson show that delayed disclosure caused
his injury?
Anderson replies that the California decision estab-
lishing the state’s “holder” doctrine, Small v. Fritz
Companies, Inc., 30 Cal. 4th 167 (2003), did not worry
about causation. That may be because the question had
not been briefed. The problem that our opinion high-
lighted arises only with respect to securities traded in
efficient markets, where disclosure will cause the price
to change before any amateur investor (such as Ander-
son) can react; this requires some inquiry into the nature
No. 11-3457 3
of the market in which an issuer’s stock is listed. But
it does not matter why Small bypassed this subject. Our
opinion did not bypass it and is the law of the case.
Anderson has never attempted to explain how he
could have avoided a loss on the shares he held, had
Aon made an earlier disclosure. As Anderson describes
things, Aon’s stock was overpriced for years because the
firm was concealing mismanagement. That mismanage-
ment, not any fraud, is the cause of investors’ loss.
The price of its stock was doomed to fall no matter even-
tually in line with its real value. The fraud (if there was
one) just delayed the inevitable and affected which in-
vestors bore the loss. Because Anderson cannot show
that earlier disclosure would have enabled him to sell
(and thus shift the loss to other investors) before the
stock’s price dropped, he cannot establish causation.
He tries to get around this problem by pointing to a
different series of transactions. In October 2000, three
years after acquiring the Aon stock, Anderson bought a
“collar” from Merrill Lynch. A securities collar is a pair
of offsetting options that puts a floor under the stock’s
price in exchange for a ceiling. See SEC v. Lehman Bros.,
Inc., 157 F.3d 2, 4 (1st Cir. 1998). Anderson bought a
put option from Merrill Lynch, entitling him to require
Merrill Lynch to buy about 83,000 of his approximately
95,000 Aon shares at a price of $33.19 per share. (At the
time the option was created, Aon was selling for about
$40.) Anderson gave Merrill Lynch a call option, entitling
it to acquire the same 83,000 shares for a price around
$50. Hence the term “collar”: from Anderson’s perspec-
4 No. 11-3457
tive, the stock’s effective price was constrained in both
directions while the options lasted (two years). In
June 2002, while Aon’s stock was trading for $30,
Anderson sold the put option back to Merrill Lynch,
receiving about $200,000. He contends that, had the
truth about Aon come out earlier (or at any time before
October 2002, when the collar expired), he would have
saved about $19 per share on all of the shares covered
by the collar. (Aon’s stock fell to $14 in late 2002.) This
isn’t the whole difference between Anderson’s purchase
price ($69 a share) and the $14 minimum (a total loss
of about $5.2 million), nor did the collar apply to about
12,000 of his shares, but $19 times 83,000 shares is
about $1.6 million, which is better than the $200,000
Anderson received when he sold the put option.
Arguments based on the option go nowhere, however,
because they are barred by the statute of limitations.
An option on exchange-traded securities is itself a secu-
rity. 15 U.S.C. §78c(a)(10). Anderson’s contention that
he suffered a $1.4 million net loss on the sale of an
option differs substantially from the contention that he
suffered a $5.2 million loss on the non-sale of stock. The
latter is a “holder” action under California law; the
former isn’t. The district court in 2008 held that any
securities-law claim is barred by the statute of limita-
tions. 2008 U.S. Dist. L EXIS 103010 at *7-8 (N.D. Ill. Dec. 22,
2008). Anderson did not make a securities-law claim in
2003, when this litigation began, and the district court
held that the securities-law claim advanced several
years later does not relate back to the original com-
plaint. Anderson did not contest that decision in his
No. 11-3457 5
initial appeal. On remand after our first decision, the
district court reiterated its conclusion that any claim
based on the sale of the put option is untimely. 2011
U.S. Dist. L EXIS 111217 at *22-25 & n.8. Anderson has
not contested that decision on this second appeal.
Anderson’s reply brief faults us for not discussing the
put option in our 2010 opinion. The reason we didn’t
discuss it is that the claim had been ruled untimely,
and Anderson did not contest that decision; the word
“option” does not appear in the briefs he filed in the
first appeal. The sale of the put option has been out of
this case since 2008 and cannot be used to resuscitate
the holder action.
Anderson closes his brief by asking for yet another
opportunity to amend his complaint. This litigation is
almost a decade old. It is far too late to introduce new
claims. The district court did not abuse its discretion
by denying Anderson’s motion to amend the complaint.
A FFIRMED
3-29-12