FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

AUGUST 23, 2010

JOHN LEY

 CLERK

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 09-13608

Non-Argument Calendar

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D. C. Docket No. 06-80525-CV-DTKH

NEIL COLE,

Plaintiff-Appellee,

versus

AMERICAN CAPITAL PARTNERS

LIMITED, INC., et al.,

Defendants,

C. FRANK SPEIGHT,

JOSEPH I. EMAS,

Defendants-Appellants.

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Appeal from the United States District Court

for the Southern District of Florida

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(August 23, 2010)
Before CARNES, MARCUS and ANDERSON, Circuit Judges.

PER CURIAM:

This appeal concerns the appropriate calculation of damages. DefendantAppellant Frank Speight challenges the district court’s calculation and imposition

of $6,595,412.15 in damages after entry of summary judgment in favor of PlaintiffAppellee Neil Cole in a suit alleging fraud, conversion, breach of contract, breach

of fiduciary duty, and conspiracy.

I.

The facts, in short, are as follows: In various capacities, the defendants

facilitated a “Stock Loan” to Cole. In a Stock Loan, the borrower pledges stock as

collateral for loan monies. Cole engaged in two separate loans with Defendant

American Capital Partners Limited, Inc. In the first loan, which occurred in April

2005, American Capital loaned Cole $665,000.00. In return, Cole delivered

200,000 shares of Candy’s Inc. as collateral. In the second, which occurred in

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June 2005, American Capital loaned Cole $768,000.00. Cole delivered another

200,000 shares of Candy’s as collateral. At the time of each loan agreement, the

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parties also entered into escrow agreements under which the Candy’s shares were

Candy’s later changed its name to Iconix Brand Group, Inc. Cole is the President 1

and Chief Executive Officer of Iconix.

Speight executed these loan agreements in his capacity as President of American

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Capital.

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to be held in escrow.

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In April 2006, Cole sought to prepay the balance of the first loan. He also

decided he would prepay the balance of the second loan after the conclusion of the

first year of that loan. Upon prepayment, his shares in Candy’s were to be returned

to him. On May 16, 2006, after a phone conversation between Cole’s counsel and

Defendant Emas, in which Emas falsely stated that he believed Cole had defaulted

under the loan agreement and that he had released some of the shares held in

escrow, Cole’s counsel sent Emas a letter to ascertain the status of the shares held

in escrow. Emas did not respond.

In actuality, Emas had long since disposed of all of the shares. The

purported escrow account was actually Emas’s personal brokerage account at

Fordham Financial. Between May 4 and June 13, 2005, Emas sold all 400,000 of

the Candy’s shares, receiving approximately $2,143,337.00. A portion of the

monies were used to fund the “loans” to Cole. The balance of the proceeds was

divided amongst the defendants.

Cole brought this lawsuit in May 2006. During discovery, all of the

In late September 2005, American Capital informed Cole that it had assigned the 3

loans to Defendant Consolidated Financial Group, a company formed by Speight and Defendant

Ellis. Cole was directed to make payments to Consolidated Financial at an address in New York

City. Cole timely made payments throughout 2005 and early 2006. Cole was not aware that

Consolidated Financial was controlled by Speight and Ellis.

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defendants invoked their Fifth Amendment privilege in response to Cole’s

interrogatories and during his attempts to depose them. In light of documentary

evidence presented by Cole and the defendants’ invocations of the Fifth

Amendment, the district court granted summary judgment to Cole. The district

court awarded Cole $6,595,412.15 in damages. The district court calculated the

damages by taking the value of the stock at the time Cole learned it had been

improperly sold, subtracting the amount Cole received in “loans,” adding the

amount of “loan” payments made by Cole, and then applying pre- and

post-judgment interest.

Speight appeals the district court’s damage calculation.

II.

“We review the district court’s determination of the proper legal standard to

compute damages de novo. The court’s factual findings, however, will only be

reversed if clearly erroneous.” A.A. Profiles, Inc. v. City of Fort Lauderdale, 253

F.3d 576, 581 (11th Cir.2001) (citation omitted).

The parties agree that the central component of damages is the value of the

Candy’s stock that was pledged by Cole as collateral and improperly sold by the

defendants. The district court calculated damages by taking the value of the stock

at the time Cole learned the defendants had improperly sold it – i.e., the value of

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the stock in mid-May 2006. At that time, the 400,000 shares were worth

$6,352,000.00. The defendants argue that the value of the stock should be

calculated by aggregating the amount of money received each time the a portion of

stock was improperly sold between in May and June of 2005. The defendants

calculate that amount to be $2,132,375.00.

Both sides also agree on the appropriate cases to consult in determining

damages. Before the district court and again on appeal, both point to a Second

Circuit case, Schultz v. Commodities Future Trading Commission, 716 F.2d 136

(2d Cir. 1983). There, the Second Circuit held that “the measure of damages for

wrongful conversion of stock is either (1) its value at the time of conversion or (2)

its highest intermediate value between notice of the conversion and a reasonable

time thereafter during which the stock could have been replaced had that been

desired, whichever of (1) or (2) is higher.” Id. at 141. The district court adopted

this approach, finding that it was in agreement with Florida law. In this regard, it

cited Madison Fund, Inc. v. Charter Co., 427 F. Supp. 597 (S.D.N.Y. 1977), and

Berman v. Airlift International, Inc., 302 F. Supp. 1203 (N.D. Ga. 1969), as two

federal cases applying the Schultz approach under Florida law.

We conclude that the district court did not err in calculating the damages.

Cole argues that under Florida’s choice of law analysis, New York law would

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apply to this case, and thus, Schultz would control directly. In the alternative, he

argues that even if Florida tort law applies the approach of Schultz is consonant

with Florida law. We need not decide that argument because we conclude that the

result is the same under both Schultz and Florida tort law. Under Florida law,

“[t]he goal of damages in tort actions is to restore the injured party to the position

it would have been in had the wrong not been committed.” Totale, Inc. v. Smith,

877 So. 2d 813, 815 (Fla. 4th DCA 2004) (internal quotation marks omitted). In

this regard, Florida applies a “flexibility theory” of damages. Under that approach,

damages are calculated using either the “benefit of the bargain” rule or the “out of

pocket” rule. Id. Courts are to use the rule that would more likely fully

compensate the injured party. Id.

Here, if Cole had received the “benefit of the bargain” he entered into, then

in or around May 2006, he would have previously received two loans, paid them

back in full, and received his 400,000 shares of Candy’s stock in return at that

time. Neither party disputes that at that point the shares were valued at $15.88 per

share, for a total amount of $6,352,000.00. Looking to Schultz, Cole was notified

of the conversion of his stock in mid-May 2006. Again, the value of the stock at

that time was $6,352,000.00. Through whatever lens you view the question, the

result is the same.

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Speight does not challenge the district court’s application of pre- and postjudgment interest.

After thorough review, we affirm the district court’s order entering final

judgment in the amount of $6,595,412.15.

AFFIRMED.

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Appellant’s motion to file reply brief out of time is GRANTED. 4

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