Ansin v. River Oaks Furniture, 1st Cir. (1997)

7/26/2019 Ansin v. River Oaks Furniture, 1st Cir. (1997)

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USCA1 Opinion

United States Court of Appeals

For the First Circuit

____________________

Nos. 96-1734 and 96-1735

HAROLD S. ANSIN, ET AL.,

Plaintiffs, Appellees,

v.

RIVER OAKS FURNITURE, INC., ET AL.,

Defendants, Appellants.

____________________


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APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge] ___________________

____________________

Before

Cyr, Boudin, and Lynch,

Circuit Judges. ______________

____________________

Edward P. Leibensberger, with whom John C. Fitzpatrick, Gl_______________________ ___________________ _

Deegan, and Nutter, McClennen & Fish, LLP were on brie______ _________________________________

appellees.

Ames Davis, with whom Nancy S. Jones and Waller Lansden__________ _______________ _______________

Davis were on brief, for appellants. _____


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____________________

February 3, 1997

____________________

LYNCH, Circuit Judge. This case arises fromLYNCH, Circuit Judge.

_____________


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series of transactions among former fellow shareholders of

Mississippi close corporation, River Oaks Furniture, In

The Ansins,1 Massachusetts investors, allege that Tho

Keenum and Stephen Simons, officers and directors of Ri

Oaks, fraudulently induced them to sell their shares in Ri

Oaks ten months before a successful initial public offeri

("IPO"). The Ansins also allege that Keenum and Simo

violated the contractual terms of a stock subscripti

agreement and other corporate documents by causing

unauthorized transfer of a number of the Ansins' shares

other corporate insiders. The Ansins sued Keenum, Simons a

River Oaks Furniture in federal court in Massachusett

alleging securities law violations under Section 10(b) of t


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Securities Exchange Act of 1934, conversion, breach

contract, breach of fiduciary duty, common law fraud, le

malpractice and a violation of Mass. Gen. Laws ch. 93A.

The jury found for the plaintiffs on all coun

then remaining in the case and awarded both compensatory a

punitive damages. Defendants appeal from the judgme

against them, arguing that they were entitled to judgment

a matter of law on all counts, that the action was barr

____________________

1. The plaintiffs in this action are Harold S. Ansi

Lawrence J. Ansin (by the executor of his estate), and t

Ansin Foundation (a private charitable trust), collective

"the Ansins."

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because of laches and related doctrines, and that both t

compensatory and punitive damages awards are legal

unsustainable. The Ansins cross-appeal the pre-tri

dismissal of their Mass. Gen. Laws ch. 93A claim, and al

argue that the district judge improperly denied their reque

for prejudgment interest. They also ask this court

correct a clerical error in the judgment.


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I.

When the losing party challenges the sufficiency

the evidence, as defendants do here, this court views t

record in the light most favorable to the jury's verdic

See Correa v. Hospital San Francisco, 69 F.3d 1184, 1188 (1 ___ ______ ______________________

Cir.), cert. denied, 116 S. Ct. 1423 (1995). The facts a ____________

described as the jury might have found them, drawi

reasonable inferences in favor of the plaintiffs.

A. The Ansin Investment in River Oaks _____________________________________

Lawrence (Larry) Ansin, a Massachusetts fabr

manufacturer, met Stephen Simons, then a furniture buyer wi

a Texas retailer, in the mid-1970s. What began as a busine

relationship grew, over the next decade, into a friendship.


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The two men vacationed together and visited each other

homes. In 1987, Simons started his own upholster

furniture company in Mississippi. The company had s

original investors in addition to Simons; five of these me

including Thomas Keenum, had been involved with the start-

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and eventual IPO of another Mississippi upholste

manufacturer. The sixth investor was Larry Ansin, who wa

at that time, the chief executive officer and so

shareholder of Joan Fabrics, a Massachusetts-based company.

River Oaks Furniture, Inc. was incorporated

August 1987. Larry Ansin's total investment in the ventu

was $100,000, for which he was issued a certificate, dat

September 1, 1987, for 7,500 shares of common stock. T

was 10% of the then-issued shares. Simons owned 30,0

shares and was president of the company; Keenum owned 7,5

shares and was secretary and treasurer. Keenum and Simo

were two of the three members of the Board of Directors.

In March 1988, the River Oaks investors set


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another Mississippi corporation, R-O Realty, Inc., to o

real estate which would then be leased to River Oaks. Ea

of the original investors contributed another $500 in capit

and Larry Ansin was issued a share certificate for 437

shares in R-O Realty.

In 1988, Larry Ansin decided to sell Joan Fabrics

Larry Ansin expected that, as part of such a transaction,

would have to sign a non-competition agreement, which wou

preclude him from owning stock in another furniture compan

Accordingly, Larry Ansin arranged to sell his River Oa

shares to his father, Harold Ansin, for the $100,000 he

originally invested. The Ansins executed a Stock Purcha

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Agreement dated May 31, 1988. Harold Ansin did not know

many shares he was purchasing, but understood that he

buying his son's entire 10% interest in River Oaks.

In April 1992, Larry Ansin learned that he had

inoperable brain tumor. He died on June 24, 1993, before t

commencement of this litigation.

B. The Reduction of the Ansin Interest to 4,000 Shares


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______________________________________________________

Harold Ansin did not sell any of the River Oa

shares until 1992. Nonetheless, at some point in 1989, t

Ansin ownership interest was reduced from 7,500 to 4,0

shares, or from 10% to 4% of the company.2 The compa

issued 25,000 new shares in 1989, but that legitima

dilution would only have reduced the Ansin stake to 7.5%.

Following Harold Ansin's purchase of his son

shares, River Oaks did not issue a new stock certificate

Harold Ansin's name. Harold Ansin was upset about this a

kept asking Larry to do something about it. Larry Ans

wrote to Simons twice in 1989 requesting a new sha

certificate for Harold. Eventually, a certificate was issu

on September 22, 1989 which indicated that, as of January


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1988, Harold Ansin owned 4,000 shares of River Oaks.

____________________

2. The River Oaks 1988 tax return lists Harold Ansin

owning 7,500 shares. Harold Ansin's River Oaks 1988 K-1,

tax form issued to shareholders by the corporation, stat

that Ansin owned 10% of the company. Ansin's 1989 K-

however, indicated that Ansin now owned only 4% of t

company.

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The Stock Transfer Ledger of River Oaks Furnitur

which was not actually typed up (from Keenum's notes) unt

1993, shows Lawrence Ansin as originally owning 7,500 share

However, according to the Ledger, Ansin transferred on

4,000 shares to his father on January 1, 1988, and t

transferred 1,000 shares to Simons and 2,500 shares to Dona

Franks, another of the original River Oaks investors,

January 1, 1989.

Simons testified that these transfers of stock

Larry Ansin were part of a general reallocation of shar

undertaken in early 1989. According to Simons, durin

telephone conversation in February or March 1989, he to

Larry Ansin that, in order to recruit talented new employee


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the company wished to issue 25,000 new shares of stoc

Simons further testified that Larry Ansin then orally agre

to reduce his ownership interest to 4%. However, Simo

acknowledged that there is no record of this conversation n

any contemporaneous records or correspondence memorializi

the transfers to Simons and Franks. Simons also testifi

that he and Ansin only discussed percentages of ownership,

opposed to numbers of shares, and that Ansin did not recei

any money for the transfers. Simons did not speak to Haro

Ansin about the transfers.

Thomas Keenum, who, as company secretary,

responsible for maintaining the Stock Transfer Ledge


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-6- 6

testified that no document, other than his personal note

records these stock transactions, and that only Simons, a

not the Ansins, ever communicated with him about the decrea

in the Ansin ownership interest. Although other capit

transactions are recorded in the minutes of the Board

Directors, the Ansin transfers were not, nor to Keenu


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legal representatives," recited that "[e]ach Stockhol

agrees that all shares of Stock of the Company . . . shall

subject to the terms and conditions of Paragraph Number 12

the Articles of Incorporation." The By-Laws, which char

the secretary with maintaining the stock transfer books

the corporation,

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stated that:

Transfer of shares of the corporation

shall be made only on the stock transfer

books of the corporation by the holder of

record thereof or by his legal

representative . . . .

At trial, the plaintiffs argued that these documen

constituted an enforceable contract, and that defendant

unauthorized transfer of 3,500 River Oaks shares to Simo

and Franks amounted to a breach of that contract.

C. The Repurchase of the Ansin Interest and the IPO

___________________________________________________

The original investors in River Oaks had hope

from the beginning, eventually to take the company publi

During the first quarter of 1992, the company took the fir


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-8- 8

Keenum stated that a value of $25 million was "about right

Analyses prepared by J.C. Bradford for internal use project

a range of values from $16.3 million to $31 millio

depending on the assumptions used, and similar valuatio

were discussed with River Oaks personnel.

Shortly thereafter, J.C. Bradford determined tha


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given all the circumstances, including market condition

River Oaks was not a candidate for an IPO in 1992. J.

Bradford advised River Oaks to wait until the end of 1992

early 1993 to see if the company met its projections befo

proceeding further.

At approximately the same time, April 1992, Lar

Ansin learned that he had a brain tumor. After

diagnosis, Ansin asked Patrick Maraghy, his tax planner,

act as an intermediary in his financial dealings. Ans

continued to make his own decisions.

In July 1992, Walter Billingsley, the River Oa

controller, and Simons contacted Maraghy about refinanci

River Oaks' debt. Ansin, like the other origin


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shareholders, had previously signed personal guarantees f

bank loans to River Oaks; now, the Bank of Mississippi want

another personal guarantee from Ansin for $550,000 of n

financing. Maraghy communicated the request to Ansin,

declined to provide new guarantees because he was very i

and because he was no longer a shareholder of River Oaks.

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Through August and into September of 1992, Simo

continued to call Maraghy frequently, pressuring him to

Larry Ansin to reconsider his decision. At no time

Simons tell Maraghy that the bank had agreed, on August

1992, to proceed with the refinancing without a new guarant

from Larry Ansin. Instead, Simons represented that t

company would have problems without the new Ansin guarante

and that people would be thrown out of work. In ear

September, Simons asked if Harold Ansin would sign a person

guarantee, but Harold Ansin declined.

In mid- to late-September, Simons called Mara

and asked if the Ansins would be willing to sell their sto


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back to River Oaks so that someone else could purchase it a

provide the guarantee. The Ansins agreed, believing that t

sale would help Simons obtain the needed financing.

On October 19, 1992, Keenum called Maraghy

discuss an offer of $300,000 for the Ansin River Oa

Furniture and R-O Realty shares. Keenum told Maraghy t

River Oaks had recently bought out Keith Franklin, the on

other non-management shareholder, for $60,000 per

interest, indicating that $300,000 was a fair price for t

Ansin's 4% interest in River Oaks. Keenum also told Mara

that the R-O Realty shares were valueless, as R-O Realty

properties were heavily encumbered with debt.


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-10- 10

The Ansins agreed to the sale, believing that t

price was fair and that they were accommodating Simons' ne

for bank financing. Simons wrote to Maraghy, thanking

"for helping me resolve this problem."4 The sale of t

Ansin shares for $300,000 was closed in November 1992.

In board meetings on November 19, 1992, a


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were no ongoing negotiations in November 1992, Billingsl

testified that River Oaks' management knew by October

November 1992 that the company would meet its sal

projections for 1992 and so would meet the condition set

____________________

4. Before finalizing the sale, Harold Ansin transferred t

shares to the Ansin Foundation, a family charitable trus

for tax reasons.

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J.C. Bradford for following up on the IPO. During

conference call on December 7, 1992, less than two wee

after the Ansin repurchase, Ron Ashby, River Oaks' outsi

auditor, discussed the impact of an IPO on River Oa

accounting for employee loans with Keenum and other Ri

Oaks personnel. Ashby's notes, made in the month or t

prior to that call, indicate that River Oaks was looking

an IPO in July or August 1993.

Simons testified that, in one phone conversation

early 1992, he told Larry Ansin that River Oaks had ma

initial contact with an unspecified investment banker, a

that Larry Ansin thought going public was a great ide


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However, Harold Ansin, Maraghy, and Susan Ansin, Larry

wife, all testified that Larry Ansin never mentioned t

possibility of an IPO, even though they all stated that Lar

discussed business with them regularly.

The River Oaks board approved an IPO on March

1993. Maraghy first learned that an IPO was being plann

from a June 1993 newspaper article. By this time, Larry Ans

had died.

River Oaks went public on August 26, 1993 for $

per share. As part of the transaction, River Oaks effecte

28.8 for 1 stock split on June 23, 1993. This meant that t

Ansins' 7,500 shares would have become 216,000 share

Additionally, R-O Realty was merged into River Oa


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-12- 12

furniture, and the R-O Realty shareholders received $1

million of River Oaks stock. From the proceeds of t

offering, River Oaks distributed $2,465,000 of previo

earnings to its pre-IPO shareholders.

Finally, the plaintiffs learned from the prospect


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of the existence of River Wood Products, Inc. River Wood

been established in 1991 to produce furniture frames f

River Oaks. Although there were no significant financi

benefits to setting up River Wood as a separate corporatio

a 1991 memo from Ashby indicated that "a political reason f

setting up . . . separate corporations would be to exclu

certain current River Oaks shareholders." Harold Ansin

one of the shareholders excluded. At the time of the IP

River Wood shareholders received shares of River Oa

Furniture stock.

At trial, plaintiffs' expert testified that if t

Ansins had held 7,500 shares prior to the IPO and then so

them at the end of the restricted period, they would ha

received a total of $4,179,140. This figure inclu


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proportional allocations of River Oaks Furniture shares f

the Ansin R-O Realty shares and for a hypothetical 7.

interest in River Wood Products. It also included a share

the S-corporation distribution.

II.

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The Ansins filed suit on October 4, 1993, allegi

securities law violations, fraud, breach of fiduciary dut

malpractice and Mass. Gen. L. ch. 93A claims arising fr

defendants' failure to disclose the planned IPO. Aft

discovery, on June 17, 1994, plaintiffs filed a Seco

Amended Complaint, adding a conversion claim for t

reduction of the Ansin interest to 4,000 shares. T

district court granted a defense motion to dismiss the c

93A and malpractice claims on October 12, 1994. On July

1995, a Third Amended Complaint was filed, which include

breach of contract claim arising from the same facts as t

conversion claim.


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On November 15, 1995, the district court grant

defendant's motion for summary judgment on the conversi

claim, finding that the Massachusetts three-year statute

limitations for torts barred any conversion claim that t

Ansins should have discovered prior to October 4, 1990. T

district court found that various 1989 tax documents, sign

by Harold Ansin and indicating that he owned a 4,000 share

4% interest in River Oaks, should have alerted Ansin to t

alleged conversion.

The remaining claims were tried to a jury. T

jury returned a special verdict form finding that:

defendants violated the Securities Exchange Act and enga

in common law fraud by failing to disclose the publ


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offering discussions with J.C. Bradford; 2) River Oa

committed a breach of contract when the Ansin interest

reduced to 4,000 shares; 3) Simons and/or Keenum breached t

fiduciary duty owed by a dominant shareholder to a minori

shareholder by failing to disclose the discussions with J.


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A. The Federal Securities and Common Law Fraud Claims _____________________________________________________

The federal securities claim alleged violations

10(b) of the Securities Exchange Act and Rule 10b-

Defendants argue that the district court erred in denyi

their motion for a judgment as a matter of law on the feder

securities law and Mississippi common law fraud clai

Specifically, defendants assert that there was no evidence

omission or misrepresentation, of fraudulent intent,

materiality or of reliance.

Review of the district court's denial of a moti

for judgment as a matter of law is plenary. See Correa,___ ______


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jury need not do, the jury could reasonably find t

information about the IPO negotiations was omitted.

As to evidence of intent, defendants contend t

there was no possible motive for fraud, because River Oa

resold the Ansin shares to other insiders at the same pri

the corporation had paid for them, thereby depriving t

corporation of the fruits of its fraud. However, the ju

could reasonably infer, from the evidence, that t

individual defendants, officers and directors of River Oa

were working to exclude the Ansins, the only remaining no

management shareholders, from the River Oaks IPO, and we

seeking ultimately to benefit themselves and the ot

Mississippi management shareholders at the Ansins' expense.


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Defendants also argue that there was no eviden

that the undisclosed information was material. T

materiality standard under the federal securities laws is

familiar one: Information is material if "there is

reasonable likelihood that a reasonable investor wou

consider it important." Glassman v. Computervision Corp.,________ ____________________

F.3d 617, 632 (1st Cir. 1996); see also Shaw v. Digit _________ ____ ____

Equip. Corp., 82 F.3d 1194, 1219 (1st Cir. 1996)(citi _____________

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evidence showed that less than two weeks after the Ans

repurchase, River Oaks' management was "looking at a July

August 1993" IPO, and adjusting its accounting strategi

accordingly. This is not a case where the defendan

themselves "placed no special significance" on the omitt

information. Cf. Jackvony v. RIHT Fin. Corp., 873 F.2d 41 ___ ________ _______________

415 (1st Cir. 1989); Taylor v. First Union Corp., 857 F. ______ __________________

240, 244 (4th Cir. 1988)("vague agreement" as to futu

merger not material where neither "the factual nor the lega

predicates for transaction were in place). The jury

conclusion that the earlier negotiations were material

patently reasonable.

Finally, defendants contend that there was


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evidence of reliance on the omissions. Because of t

logical impossibility of proving that plaintiffs relied

information that they did not have, "[p]ositive proof

-18-

18

reliance on omissions is not necessary where materiality

been established." Holmes v. Bateson, 583 F.2d 542, 558 (1 ______ _______


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Cir. 1978). In any case, Harold Ansin testified that he

rely on information obtained from Simons.

Thus, defendants' insufficiency arguments wi

regard to the securities law and fraud claims are unavailin

A reasonable jury could, and did, conclude that defendan

intentionally defrauded plaintiffs by failing to disclo

material information about the contemplated IPO.

B. The Breach of Contract Claim _______________________________

The defendants also argue that what plaintif

styled a breach of contract claim is essentially a conversi

claim, and therefore barred by the statute of limitation

They also claim that the evidence was insufficient to suppo


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the Massachusetts three-year tort statute of limitatio

(Mass. Gen. Laws ch. 260, 2A), rather than the Massachuset

six-year contract statute (Mass. Gen. Laws ch. 260, 2).7

Defendants cite Massachusetts caselaw for t

principle that "the determination of whether the contract

tort statute of limitations applies is controlled by t

essential nature of [the] claim." Oliveira v. Pereira, 6 ________ _______


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were transferred without their knowledge or consent,

derogation of contractual terms -- can be fair

____________________

judgment on that claim and that his ruling did not reach t

count.

7. The parties agree that Massachusetts law supplies t

applicable statute of limitations.

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characterized as either an action for conversion or an acti

for breach of contract. It does not involve the type

"accident[] resulting in injuries to person or property"

which the draftsmen of Massachusetts' three-year tort statu

focussed. Royal-Globe Ins. Co. v. Craven, 585 N.E.2d 31 ____________________ ______

320 (Mass. 1992). Rather, it does involve a claim "

recover from another money which in equity and go

conscience he is not entitled to keep." The latter type

claim, according to the Supreme Judicial Court, is usual

advanced in a contract action. Kagan v. Levenson, 134 N.E. _____ ________

415, 417 (Mass. 1956). In these circumstances, it was n

error for the district court to apply the six-year contra


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statute of limitations to plaintiffs' contract claim.

2. Insufficiency of the Breach of Contract Evidence a __________________________________________________________

Enforceability of Rights ________________________

The defendants assert that there is no eviden

that Larry Ansin did not agree to the reduction in share

They also deny that the foundation corporate documents

River Oaks created enforceable rights in the plaintiff

This is simply not so.

As with the fraud claims, defendants rely

Simons' uncorroborated report of his phone conversation wi

Larry Ansin. With regard to the contract claim, Simo

testified that, in early 1989, Ansin orally agreed to


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recipients of the shares). Simons and Keenum bo

acknowledged that there was no documentation of the

transfers.

Simons described a complex reallocation of share

undertaken to allow shares to be issued to new key personne

However, Keenum acknowledged that 25,000 new shares we

issued in 1989, and that the new employees were issu

exactly 25,000 shares. This negated the reallocation as

reason for the reduction in Ansin's shares. Additionally,

the reallocation described by Keenum, only Harold Ansin

to give up shares; Simons' percentage of ownership

diluted by the new issuance, but he actually gained 1,0

shares (from the alleged transfer from Ansin).


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Even if the jury credited Simons' description

Larry Ansin's oral consent, the jury could have reasonab

inferred that Ansin only consented to dilution, and not to

transfer of shares. Additionally, when evaluating a seri

of events that, judging from the trial exhibits, left a hea

paper trail, the jury was entitled to draw inferences fr

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the complete absence of contemporaneous documentation of t ________________

purported Ansin transfers.

Defendants also contend that the foundation

documents of River Oaks did not create any rights in t

Ansins with regard to transfers. Defendants do not challen

the basic premise that, under Mississippi law, such documen

may form a contract. Rather, they contend that the specif

transfer provisions were only for the benefit of t

corporation, and thus created no rights in the shareholder

However, the plain language of the Subscription Agreeme

states that "this Agreement shall be binding upon and sha


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inure to the benefit of each individual Stockholder . . . a ___________________________________________________

to the Company . . . ." While the transfer provisions of t

Articles of Incorporation and the By-Laws may have be

primarily intended to prevent the unauthorized sale of shar

to outsiders, as defendants contend, this does not mean t

they served no other purpose.

To the contrary, the traditional common law

unauthorized transfers places heavy duties on t

corporation:

Courts held that a corporation whose

stock was transferable only on the books

of the company was, to a certain extent

at least, a trustee for its shareholders

in respect to their stock. . . . [I]t had

to respond in damages for any injury

sustained by them in consequence of its

negligence or misconduct. . . . This

liability rested . . . upon the ground of


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breach of contract upon the part of the

-23-

23

company, of this undertaking to hold the

stock for the benefit of the true owner

of the certificate.

12 Fletcher Cyclopedia of the Law of Corporations 5538,______________________________________________

406 (perm. ed. 1996)(footnotes omitted). Moreover, t


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Cyclopedia explains that:

The shareholders also have a right

to expect that the corporation will

observe its own bylaws in relation to the

transfer, and it is liable for any

damages resulting to them by reason of

its failure to do so.

Id. (footnotes omitted). ___

This authority is sufficient to rebut defendant

contention that the plain language of River Oaks' transf

provisions can only be read to create rights in t

corporation. The defendants point to nothing in either t

documents or in Mississippi law that would require a jury

conclude that River Oaks shareholders had no rights un

these documents as to transfers. Accordingly, the jury

verdict on the breach of contract claim stands.


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3. Standing ___________

The defendants assert that Harold Ansin and t

Ansin Foundation lack standing to bring a contract cla

because they were not in privity of contract with River Oa

However, defendants acknowledge that Larry Ansin's esta

would have standing to bring such a suit, were it not for t

fact that, in their view, Larry Ansin acquiesced in t

breach and suffered no damages. The jury plainly reject

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these assertions. Assuming arguendo that defendants a ________

correct that, as a matter of Mississippi law, Harold Ans

could not bring this suit, we find that, as Larry Ansin

estate indisputably had standing, this claim has no possib

bearing on the outcome of the case.

C. The Breach of Fiduciary Duty Claim _____________________________________

Defendants take the position that, un

Mississippi law, shareholders may not sue, as individual

for breach of fiduciary duty by the officers and directors

a close corporation. However, Mississippi case l


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recognizes the ability of shareholders in close corporatio

to sue for breach of fiduciary duty. See Fought v. Morri ___ ______ ____

543 So. 2d 167, 172-73 (Miss. 1989). The Mississippi Supre

Court has specifically stated, in the context of a suit f

diversion of corporate opportunity, that a trial court ma

"in the case of a closely held corporation, . . . treat

action raising derivative claims as a direct action . . . a

order an individual recovery." Derouen v. Murray, 604 So._______ ______

1086, 1091 n.2 (Miss. 1992). Defendants' argument as to t

fiduciary duty claim is without merit.

D. Affirmative Defenses _______________________

Defendants assert that equitable defenses barr

both the contract claim and the fraud claims. Defendants


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claim was barred by laches, based on the district court

finding, in the context of the conversion claim, that t

Ansins should have discovered the reduction in their intere

when signing the 1989 tax documents. The defense

prejudiced by plaintiffs' delay in filing suit until 199

defendants argue, because Larry Ansin died in the interim.

We review the district court's determination as

laches for abuse of discretion. See Murphy v. Timberla ___ ______ _______

Reg'l Sch. Dist., 973 F.2d 13, 16 (1st Cir. 1992). T _________________

parties have not adequately addressed which law governs t

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1. Securities Law _________________

The Supreme Court has held that damages under Ru

10b-5 should be "the difference between the fair value of a

that the . . . seller received and the fair value of what

would have received had there been no fraudulent conduct

Affiliated Ute Citizens v. United States, 406 U.S. 128, 1 _______________________ _____________

(1972); see also Holmes, 583 F.2d at 562. On the Ansin ________ ______

securities law claim, the court instructed the jurors to fi

"the difference between what the Ansins actually received f

their stock and what you believe they would have received

they refused to sell or, instead, insisted on differe

terms." The jury was told that "the issue is not hindsight


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-28- 28

and that they "must evaluate the Ansins' decision in light

the facts and circumstances that existed at the time that t

decision to sell was made."

Defendants argue that the district court's ju

instructions as to the damages for the fraud claims we


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than the simple application of a price index to the shares

Holmes, 583 F.2d at 564.

______

Here, the very nature of the fraud was to indu

the plaintiffs to sell their stock at a time before the sto

would appreciate in value due to the contemplated IPO a

stock split. To adopt defendants' argument that dama

cannot exceed the price of the shares at the time of the sa

would be to reward and encourage such chicanery. Defendant

attempt to limit plaintiffs' recovery to a hypothetic

"market" price as of November 1992 is unavailing. The tri

of fact was entitled to infer that a reasonable investo

fully informed of the IPO discussions, including t

conditions set by J.C. Bradford, would not have sold


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as to planning and projections indicated that a 1993 IPO

anticipated. J.C. Bradford analysts had suggested a range

values for the company in light of the anticipated IP

information which was withheld from the plaintiffs. T

these analyses and projections were, to some exten

contingent does not mean that they are irrelevant

determining fair value. As another court of appeals

said:

The relevance of the fact [that the

defendant close corporation was involved

in merger negotiations] does not depend

on how things turn out. Just as a lie

that overstates a firm's prospects is a

violation even if, against all odds,

every fantasy comes true, so a failure to

disclose an important beneficent event is

a violation even if things later go sour.

The news . . . allows investors to assess


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tort." Aetna Cas. and Sur. v. Steele, 373 So. 2d 797, 8 ___________________ ______

(Miss. 1979). Breach of fiduciary duty has been recogniz

by the Mississippi courts as an "extreme or a speci

additional circumstance where punitive damages may

awarded." Fought, 543 So. 2d at 173 (internal quotation mar ______

omitted). The jury found such a breach of duty here.

Defendants contend that plaintiffs were required

adduce evidence as to defendants' net worth. Plaintif

correctly respond that, under Mississippi law, the net wor

inquiry is only one factor to be considered where the cou

seeks to determine if the punitive damages awarded by t

jury are so excessively disproportionate as to shock t

conscience of the court. See Bankers Life & Cas. Co.___ ________________________


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-35- 35

Mass. Gen. Laws ch. 93A gives a private right

action to any person injured by "an unfair or deceptive a

or practice" in trade or commerce "directly or indirect

affecting the people of this Commonwealth." Mass. Gen. La


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ch. 93A, 2, 9. Before January 1988, the statute

construed as not applying to securities laws claims Se

_

e.g., Cabot Corp. v. Baddour, 477 N.E.2d 399, 402 (Mas ____ ___________ _______

1985). In 1987, the Massachusetts legislature amended t

definitions section of the statute so that "trade" a

"commerce" now include "the advertising, the offering f

sale, rent or lease, the sale, rent, lease or distribution

. . . any security." Mass Gen. Laws ch. 93A, 1(b

"Security" is defined broadly under Massachusetts law

include any stock. Mass. Gen. Laws ch. 110A, 401(k).

The Supreme Judicial Court has construed ch. 93A

covering marketplace transactions, but not transactio

"principally 'private in nature.'" See Manning v. Zuckerma


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suggests that the unfair or deceptive

acts or practices prohibited are those

that may arise between discrete,

independent business entities, and not

those that may occur within a single

company.

Id. at 1269 (internal citations omitted).___

Szalla, in offering examples of the types

______

disputes not covered, cited Zimmerman v. Bogoff, 524 N.E. _________ ______

849 (Mass. 1988), for the principle that "c. 93A [i

inapplicable to transactions and disputes between parties


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-38- 38

After explaining that the transactions at iss

were principally private in nature, the Puritan Medic _____________

Center opinion continued: ______

Further, the aggrieved party has ______________________________

available an alternative avenue of relief _________________________________________


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prejudgment interest as awarded by anybody," the judge or t

jury. Accordingly, after the jury returned its verdict f

plaintiffs, the judge gave the jury a special interrogato

on prejudgment interest, instructing the jury that "[w]het

you choose to award interest is entirely a matter in yo

discretion." Plaintiffs' counsel did not object to this fo

of instruction. The jury did not award prejudgment interes

Post-trial, plaintiffs moved for entry of judgment includi

prejudgment interest. The district court denied this moti

as moot.


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Plaintiffs argue, on appeal, that there is

presumption in favor of prejudgment interest under t

federal securities laws, and that the district court ju

failed to so instruct the jury. Plaintiffs failed to make

contemporaneous objection to the form of the ju

instruction, and, absent plain error, this argument

waived.

However, plaintiffs also point out that, under

Mississippi statute enacted in 1989, judgments "shall be

interest at a per annum rate set by the judge hearing t

complaint from a date determined by such judge to be fair b

in no event prior to the filing of the complaint." Mis

Code Ann. 75-17-7. This statutory language, they asser


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Ansin v. River Oaks Furniture, 1st Cir. (1997)

Documents

Transcript of Ansin v. River Oaks Furniture, 1st Cir. (1997)