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Financial Industrial Fund, Inc. was a mutual fund that purchased 80,000 shares of McDonnell Douglas (D) stock in the open market. Two days later D announced a sharp earnings decline due to delays in delivery of component parts for jets it was manufacturing. The record at trial showed that the president of D was advised that his aircraft division was experiencing delays of component parts. He sent a group of corporate officials to determine the extent of the problems. That group reported back four days later that the delivery of 18 airplanes would be put into the next fiscal year thus causing an adverse effect on earnings. The announcement of this delay was made public the next day. D had just completed the call of existing convertible debentures most of which were converted to common stock. On the same day of the public announcement of the delay, D also announced the issuance of new debentures with Merrill Lynch as the underwriter. The prospectus for that issuance was made on June 7th six days from the announcement. The profit figures showed a profit slightly below the same period for the prior fiscal year. However, profit figures were given to the Aircraft Division on June 14th, and they showed a loss of several million dollars for the month of May. It was determined on June 17 that an investigation was warranted. Things were determined to be worse than expected and this would result in an inventory write-down and that would reduce earnings from 49 cents per share to 12 cents per share. A press release was ordered to announce the bad news and it was done on June 24. The market price of the stock declined $2.75 per share and by the time P sold its stock it had gone from $78.75 to $64.50 on July 8th. P claimed that the special earnings report should have been issued days before it was. The issue before the court was D's silence before actual issuance of the bad news. P was given the verdict for $712,500.

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