The federal judge presiding over the former Marriott Corp. securities fraud case declared a mistrial yesterday after the jury was unable to reach a verdict during three days of deliberations.
Judge Alexander Harvey II dismissed the 10-member panel after jurors deadlocked with eight jurors favoring a judgment for Marriott and two in favor of the plaintiffs, according to one juror. The jurors could not agree on how much information the company was required to disclose to investors and when that disclosure should have occurred, key points of argument in the three-week trial.
"The majority of us felt the investors took a risk when they invested, and that hindsight was 20/20," said the juror, who asked not to be identified.
At one point, the panel debated siding with institutional investors who had purchased $400 million inbonds from Marriott Corp. in April 1992 and claimed Marriott and its top officials failed to disclose plans to divide the hotel owner and operator into two companies.
But as part of those discussions on the jury, the four women and six men agreed that they would assess damages of only $1, the juror said. The bondholders were seeking $18 million.
Under federal securities law, companies engaged in significant events such as proposed mergers or division splits are required to inform investors of their plans in a timely fashion.
Despite the mistrial and expressions of disappointment over the outcome, attorneys for both sides declared victory.
"Obviously the hung jury means they didn't buy their story," said Arne Sorenson, a Marriott attorney. "And the plaintiffs as a practical matter get nothing. I'm convinced the jury found for Marriott in regard to the core facts of the case."
Lawrence Kill, a New York attorney representing 11 institutional investors, said the case "sends a strong message to corporate America. . . . Investors have a right to know about material events, even if they are contingent on future events."
The bondholders contended that Marriott sold the bonds at the same time they were working to form Marriott International Inc., a management and operations concern spun off from Marriott Corp. and that the company expected the bonds' value to drop afterward.
As part of the spinoff, Marriott International shed roughly $1.4 billion in under-performing real estate and $3 billion worth of debt. Those assets -- including the assignment of the bonds -- were purchased by Host Marriott Corp. following Marriott International's initial public offering in October 1993.
Although the bonds have since regained their original value, they fell 30 percent in the month following Marriott's October 1992 announcement concerning Marriott International's creation.
Marriott executives and attorneys denied that they were liable to disclose information about the split before the announcement and that the plan to do so was not conceived until May 1992, after the bonds were sold.
Judge Harvey indicated a new trial probably would not be scheduled until early next year.
"This strengthens our resolve because we feel it shows that a significant number of jurors felt as we did, that material information was withheld," Mr. Kill said. "We're ready to go again."