Broker-Dealer Litigation - Greenberg Traurig LLP

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Emposimato v. CIFC Acquisition Corp., 932 N.Y.S.2d 33 (App. Div. 2011).
CIFC sought damages based on alleged violations of a stock purchase agreement.
Defendants sought summary judgment, arguing (among other things) that the fair market value
of the stock to be sold was equal to the contract price for the stock at the time of the purported
breach, and thus that there were no damages. The court of appeals held that the motion court
properly denied summary judgment, because there was a difference of opinion regarding fair
market value, even though the contract price constitutes evidence of fair market value that is
entitled to significant weight. The court of appeals further held that the damages sought by CIFC
were not consequential damages (which would have been precluded by the agreement). Rather,
CIFC sought expectation damages, and expectation damages in the case of a breach of a contract
to sell securities are calculated as the difference between the agreed price of the shares and the
fair market value at the time of the breach. This formulation awards expectation damages to the
extent of putting plaintiff in the same economic position he would have occupied had the
breaching party performed the contract.
Allen v. Devon Energy Holdings, L.L.C., 2011 WL 3208234 (Tex. App. Hous. (1st Dist.) July 28,
2011).
The trial court granted summary judgment in favor of defendants on securities fraud
claims under the Texas Securities Act (TSA) and other state law. Defendants argued that
summary judgment was proper because plaintiff had not suffered damages as a matter of law and
because any damages would be speculative. The court of appeals noted that disgorgement of
profits was an equitable remedy for fraud and violations of securities law, and should have been
available as a remedy in this case. The court further found that “income” under the TSA could
include capital appreciation. The court found that whether plaintiff’s damages were speculative
was a factual question that should not have been resolved on summary judgment under the facts
presented.
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3. Punitive Damages
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Picard v. Madoff (In re Bernard L. Madoff Inv. Sec. LLC), 458 B.R. 87 (Bankr. S.D.N.Y. 2011).
A trustee appointed under the Securities Investor Protection Act to liquidate assets
belonging to a business operated as a Ponzi scheme filed an adversary proceeding against four
individuals who worked for the business. The trustee claimed that the four individuals breached
their fiduciary duties when they did not discover and report the fact that the business was a Ponzi
scheme and accepted millions of dollars from the business. The court found that the defendants
were unjustly enriched. Under New York law, a defendant is liable for punitive damages if the
defendant’s actions “constitute willful or wanton negligence or recklessness.” Furthermore, acts
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