Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19890628_0040500.C02.htm/qx
Timestamp: 2016-12-11 13:58:33
Document Index: 643213435

Matched Legal Cases: ['§ 15', '§ 77', '§ 10', '§ 78', '§ 240', '§ 240', '§ 1961', '§ 10', '§ 10', '§ 10', '§ 15', '§ 2', '§ 885', '§ 885']

| Singer v. Olympia Brewing Co.
Singer v. Olympia Brewing Co.
LOUIS P. SINGER, AS SUCCESSOR IN INTEREST TO TROSTER, SINGER & CO., PLAINTIFF-APPELLEE CROSS-APPELLANT,v.OLYMPIA BREWING COMPANY, DEFENDANT-APPELLANT CROSS-APPELLEE
Appeal from order of the United States District Court for the Eastern District of New York, Joseph M. McLaughlin, Judge, denying alternative motions for judgment notwithstanding the verdict, new trial, or partial new trial; cross appeal from amended judgment granting defendant's motion for setoff of settlement amount paid to plaintiff by third party. Affirmed.
Meskill, Pratt, and Altimari, Circuit judge.
Defendant Olympia Brewing Company (Olympia) appeals from an order of the United States District Court for the Eastern District of New York, Joseph M. McLaughlin, Judge, denying Olympia's alternative motions under Fed.R.Civ.P. 50(b) and 59 for judgment n.o.v., a new trial, and a partial new trial, made on the ground that there was insufficient evidence to support the jury's verdicts in this securities fraud action. Plaintiff Singer cross-appeals from an amended judgment entered on August 2, 1988, that reduced Singer's judgment against Olympia from $2,958,350.50 to $1,708,350.50 to reflect a setoff of $1,250,000 based on the post-verdict settlement Singer had obtained in another action from a third party, Loeb Rhoades & Co. (Loeb Rhoades).
Singer, as successor-in-interest to Troster, Singer & Co. (Troster Singer), brought this securities fraud action against Olympia, alleging primary and aiding-and-abetting violations of §§ 15 and 17 of the Securities Act of 1933, 15 U.S.C. §§ 77o and 77q; §§ 10, 15, and 20 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j, 78o, and 78t; and SEC rules 10b-5 and 15cl-2, 17 C.F.R. § 240.10b-5 and § 240.15cl-2. Singer also alleged violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., but that claim was dismissed before trial.
The jury found against Olympia in special verdicts establishing, with respect to the primary § 10(b) and rule 10b-5 violation, that Olympia made either material misstatements or omissions; that it acted with intent to defraud or with reckless disregard for the truth; that Troster Singer reasonably relied on Olympia's misrepresentations or omissions; and that Olympia thereby caused Troster Singer damages in the amount of $1,354,592.50. With respect to the aiding-and-abetting violation, it was uncontested that either Bernhardt or Loeb Rhoades had violated § 10(b) and rule 10b-5, and the jury found, in its special verdicts, that Olympia had known of Bernhardt's or Loeb Rhoades's activities; that it had given either Bernhardt or Loeb Rhoades substantial assistance in effecting the violation; and that the substantial assistance had caused Troster Singer's losses of $1,354,592.50. To the jury's verdict of $1,354,592.50, the trial judge added $1,603,758.00 in prejudgment interest for a total judgment of $2,958,350.50.
Having carefully reviewed the record, we cannot conclude that the jury's special verdicts were "the result of sheer surmise and conjecture" or that "reasonable and fair minded [people] could not [have] [arrived] at a verdict against" Olympia. To the contrary, the evidence amply supports the jury's determinations that Olympia made material misstatements or omissions, did so with scienter, and caused Singer's losses of $1,354,592.50. We therefore affirm the district court order denying the motion for judgment n.o.v.
We believe a uniform national rule of settlement credit is appropriate for several reasons. First, whether to credit a defendant with a setoff affects substantive rather than procedural rights of the parties under the federal securities laws. Although most circuits have, in securities actions, incorporated state statutes for procedural matters, such as statutes of limitations, see, e.g., Wood v. Combustion Engineering, Inc., 643 F.2d 339, 341-42 (5th Cir. 1981); O'Hara v. Kovens, 625 F.2d 15, 17 (4th Cir. 1980), cert. denied, 449 U.S. 1124 101 S. Ct. 939, 67 L. Ed. 2d 109 (1981); Cook v. Avien, Inc., 573 F.2d 685, 694 (1st Cir. 1978); Stull v. Bayard, 561 F.2d 429, 431-32 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 54 L. Ed. 2d 783, 98 S. Ct. 769 (1978); Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123, 125 (7th Cir. 1972); but see In re Data Access Systems Securities Litigation, 843 F.2d 1537 (3d Cir.) (in banc) (holding that statute of limitation for § 10(b) and rule 10b-5 actions is to be borrowed from analogous federal securities law rather than incorporated from state law), cert. denied, 488 U.S. 849, 109 S. Ct. 131, 102 L. Ed. 2d 103 (1988), the circuits generally have not adopted state law as the rule of decision to govern substantive aspects of implied private securities actions. See Wolf v. Frank, 477 F.2d 467, 479 (5th Cir.) (federal law determines the availability of prejudgment interest), cert. denied, 414 U.S. 975, 94 S. Ct. 287, 38 L. Ed. 2d 218 (1973); Drachman v. Harvey, 453 F.2d 722, 726-27 (2d Cir. 1971) (federal law determines the definition of a "shareholder" entitled to bring suit), rev'd on other grounds in rehearing in banc, 453 F.2d 722 (2d Cir. 1972); Baumel v. Rosen, 412 F.2d 571, 575 (4th Cir. 1969) (proper measure of damages is determined by federal law), cert. denied, 396 U.S. 1037, 24 L. Ed. 2d 681 (1970).
The next question, of course, is what should the federal rule be? We think it must be the one satisfaction rule, which provides that a plaintiff is entitled to only one satisfaction for each injury. See U.S. Industries, Inc. v. Touche Ross & Co., 854 F.2d at 1236, 1261-62; Harris v. Union Electric Co., 846 F.2d at 485; Marcus, Stowell & Beye Government Securities, Inc. v. Jefferson Investment Corp., 797 F.2d 227, 233 (5th Cir. 1986); Ratner v. Sioux Natural Gas Corp., 719 F.2d at 803. See also N.Y.Gen.Oblig.Law § 15-108 (McKinney 1989) and Ill.Rev.Stat.ch. 70 para. 302 § 2(c) (1987). The rule has also been approved in the Restatement (Second) of Torts § 885(3) (1979):
Under this rule, when a plaintiff receives a settlement from one defendant, a nonsettling defendant is entitled to a credit of the settlement amount against any judgment obtained by the plaintiff against the nonsettling defendant as long as both the settlement and judgment represent common damages. See Hess Oil Virgin Islands Corp. v. UOP, Inc., 861 F.2d 1197, 1208 (10th Cir. 1988); U.S. Industries, Inc., 854 F.2d at 1236; see also Restatement (Second) of Torts § 885(3), comments e & f.
We decline to journey with Singer down this road of speculation for two reasons. First, there has been no adjudication that anyone was liable to Singer on the RICO claim. See Hines v. IBG International, Inc., 813 F.2d 1331, 1335 (4th Cir. 1987) (plaintiff may not treble jury verdict before setting off settlement amount where settling defendants settled treble damage claim but nonsettling defendant went to trial and prevailed on that claim). Second, Singer relies on analytically dissimilar cases in which a plaintiff sues multiple defendants for treble damages, settles with one or more of them, and then prevails at trial against the remaining defendants. In such cases, we have held that it is proper to treble the damage award before crediting settlement payments. See, e.g., State of New York v. Hendrickson Brothers, Inc., 840 F.2d 1065, 1086-87 (2d Cir.) (antitrust case), cert. denied, 488 U.S. 848, 109 S. Ct. 128, 102 L. Ed. 2d 101 (1988); Hydrolevel Corp. v. American Society of Mechanical Engineers, Inc., 635 F.2d 118, 130 (2d Cir. 1980) (same), aff'd, 456 U.S. 556, 72 L. Ed. 2d 330, 102 S. Ct. 1935 (1982). Here, however, Singer's RICO claim against Olympia in the New York action was dismissed prior to trial, and its parallel RICO claim against Loeb Rhoades was included in the overall settlement of the Illinois action. In such a case, we will not speculate either that a RICO violation would have been established had Singer proceeded to trial in Illinois, or that, had there been a RICO trial and recovery there, the RICO damages before trebling would have been the same as the damages awarded in the New York case. Although, as Singer claims, the settling defendant may well have considered its possible exposure to treble damages in deciding to settle, it would be entirely speculative for us, absent a finding of liability on the RICO claim, to treble in the settled Illinois case the actual damages awarded in the tried New York case.