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By Jonathan Stempel
CHICAGO, May 21 (Reuters) - A U.S. appeals court on Thursdayreversed a $2.46 billion judgment against HSBC Holdings Plc in a long-running securities fraud class actionstemming from a consumer finance business it bought more than adecade ago.
The 7th U.S. Circuit Court of Appeals in Chicago said HSBCand three former Household International Inc executives wereentitled to a new trial over whether "firm-specific, nonfraudfactors" contributed to the stock price decline that was thebasis for the shareholder lawsuit, which began in August 2002.
"As things stand, the record reflects only the expert'sgeneral statement that any such information was insignificant,"Circuit Judge Diane Sykes wrote, referring to an expert witnessfor the plaintiffs, law professor Daniel Fischel. "That's notenough."
The three-judge appeals court panel also said the formerHousehold officials - Chief Executive Officer William Aldinger,Chief Financial Officer David Schoenholz and consumer lendingpresident Gary Gilmer - deserve a new trial over their allegedliability for making false statements.
HSBC spokesman Rob Sherman said the British bank has longargued that "the verdict was defective and needed to bereversed, and the court of appeals has now agreed. We lookforward to the new proceedings."
Michael Dowd, a partner at Robbins Geller Rudman & Dowdrepresenting the plaintiffs, did not immediately respond torequests for comment.
The $2.46 billion judgment included $1.48 billion of damagesand $986 million of interest. It was imposed in October 2013 byU.S. District Judge Ronald Guzman in Chicago.
Robbins Geller said at the time it was the largest judgmentin a U.S. securities class action that went to trial.
Former Household shareholders accused the Prospect Heights,Illinois-based company of inflating its share price by engagingin predatory lending and misleading them about the quality ofits loans.
HSBC agreed in November 2002 to buy Household for $14.2billion and completed the purchase the following year.
But the purchase soured, leading HSBC to write down tens ofbillions of dollars of bad loans and in March 2009 announce theclosing of much of its U.S. consumer finance business.
"With the benefit of hindsight, this is an acquisition wewish we had not undertaken," Stephen Green, then the bank'schairman, said at the time.
Household was ultimately merged into what is now known asHSBC Finance Corp.
The case is Glickenhaus & Co et al v. HouseholdInternational Inc et al, 7th U.S. Circuit Court of Appeals, No.13-3532. (Reporting by Jonathan Stempel in Chicago; Editing by ChrisReese and Lisa Shumaker)