Opinion ID: 570490
Heading Depth: 2
Heading Rank: 1

Heading: The Ruling on the Merits

Text: 5 Healey's claims were tried in a four-day bench trial at which Chelsea, by then reportedly defunct, did not appear. Following the trial, the remaining parties submitted posttrial memoranda, and in conjunction with their memorandum the Dominick Companies moved under § 11(e) of the 1933 Act and Fed.R.Civ.P. 11 for an award of sanctions against both Healey and his trial attorney Press. Healey's attorneys urged the court to defer its decision on the sanctions motion until after its decision on the merits; the Dominick Companies suggested that there might be a conflict of interest between Healey and Press on the matter of sanctions. The district court refused to postpone consideration of sanctions. 6 In an Opinion dated August 31, 1990 (August Opinion), reported at 132 F.R.D. 346, the district court dismissed the complaint on the ground that Healey had failed to prove misrepresentations, scienter, or reliance. It found Healey's claims frivolous and, as discussed in greater detail in Parts I.B. and III below, granted the Dominick Companies' motion for sanctions against both Healey and Press. As to the merits of Healey's claims against Dominick U.S. in particular, the court found that Healey had presented not one scintilla of evidence to establish liability on the part of that defendant. August Opinion, 132 F.R.D. at 351. As to Healey's claims against all of the defendants, the court stated, in part, as follows: 7 This case never should have been brought. There was more than a failure of proof at trial to establish any of the claims made. The proof clearly showed that Healey had no basis for making his claims and that he must have known that he instituted bogus litigation. Healey involved himself in this transaction eagerly, with full knowledge of the risks. Although receiving a word of caution from his own expert, he did not pause or hesitate in his quest for the gold just over the horizon, confident that his own superior resources, knowledge and expertise would gain him the prize he sought. 8 There were no misrepresentations made to Healey by either Dominick & Dominick or Chelsea, and even if it is assumed for the sake of argument that such misrepresentations were established, there clearly was no reliance. Healey spoke to Field on September 11, 1987, concerning Chelsea and the Spotted Horse mine.... In this initial conversation Field avoided hard sell tactics. He told Healey that he had not made any independent verification of the technical and financial data in regard to Chelsea. Healey brushed this disclaimer aside assuring Field that he had the appropriate experience and skill to appraise such data on his own. 9 .... 10 .... Although [William] Trebilcock, Healey's own expert, was not convinced that the project would succeed, Healey was not deterred. 11 .... 12 At the September 18, 1987 meeting ... Healey was given full and complete information on Chelsea's financial condition, the status of all litigation in which it was involved and the financial burden which the project faced in bringing the physical structures to the level so that the mine could be worked profitably. On October 6, 1987, Healey succeeded in preventing Chelsea from agreeing to take a huge and much needed infusion of financing from City Resources. McAlister was strongly in favor of accepting the City Resources proposal and, in seeking at that critical October 6th meeting in Toronto to convince Healey to agree with him, he emphasized the huge costs Chelsea faced in bringing the mine physically up to legal and operational standards.... Even if the fact finder had not been certain that Healey had received full and complete information about the probable costs in insuring the viability of the project before October 6, 1987, the only conclusion that can be reached from learning of the October 6, 1987 meeting and its contents was that Healey at least at that point was given all the facts. 13 There was no misrepresentation or failure to state a material fact by either Dominick or Chelsea to Healey.... In addition, to succeed on the § 10(b) and Rule 10b-5 claim, there must be a showing of scienter on the part of defendants, ... or such recklessness as to amount to scienter.... There was no proof as to any defendant to meet this standard. 14 August Opinion, 132 F.R.D. at 350-51.