Opinion ID: 1865218
Heading Depth: 1
Heading Rank: 23

Heading: Commitment of Oberammergau Tickets.

Text: The trial court concluded Hagen had misled Monson into believing the Oberammergau tickets had been confirmed, and that, therefore, there existed a violation of Minn.Stat. § 80A.01(b). It is undisputed that during the negotiations, Hagen told Monson tickets were ordered for the Passion Play. Indeed they had been and no one contends to the contrary. His statement that the tickets were ordered could not constitute an untrue statement of material fact under the state security law. It clearly appears in the record that Monson understood the tickets were ordered rather than confirmed. [16] Moreover, on July 3, 1979, Monson and Wardwell went to Dittmann's offices to inspect business records primarily to determine whether the Oberammergau tour aircraft were under contract and whether the Passion Play tickets were ordered as represented. They then ascertained that both steps had been taken. In light of those undisputed facts, the trial court's legal conclusion, that Hagen had a duty to disclose to Monson the difference between ordered and confirmed, is perplexing. This transaction involves sophisticated businessmen on both sides. It is doubtful that Minn.Stat. § 80A.01(b) imposed upon Hagen a duty to educate Monson, an experienced businessman, on the difference between an order and a confirmation of tickets. But even if the trial court did not err on this ground, it did err in finding a causal connection between the nondisclosure and the $159,693 awarded in damages. Proximate cause is an essential element of a fraud action, Davis v. Re-Trac Manufacturing Corp., 276 Minn. 116, 117, 149 N.W.2d 37, 39 (1967), including an action brought under anti-fraud provisions of state securities law. See also Royal Realty Co. v. Levin, 244 Minn. 288, 291, 69 N.W.2d 667, 670 (1955) (false representation must be proximate cause of damages). To recover damages for misrepresentation of the status of the Oberammergau tickets, Specialized Tours must prove those misrepresentations proximately caused $159,693 in damages. On proximate cause, Prosser has written: In general    courts have restricted recovery to those losses which might be expected to follow from the fraud and from events that are reasonably foreseeable.    [I]f false statements are made in connection with the sale of corporate stock, losses due to a subsequent decline in the market    or other factors in no way relate[d] to the representations will not afford any basis for recovery. W. Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and Keeton on the Law of Torts § 110, at 767 (5th ed. 1984) (footnotes omitted). Cases arising under section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5 are instructive on causation since our security law is to be interpreted in conformance to those statutes. In a recent case, Bennett v. United States Trust Co., 770 F.2d 308 (2d Cir.1985), the Second Circuit Court of Appeals discussed the causal connection that must exist between a misrepresentation and injury before recovery is allowed under the securities statute. In holding that a plaintiff had failed to establish a loss causation  that the misrepresentation or omission caused the economic harm  as distinguished from the transaction causation  that the violation caused the plaintiff to engage in the transaction in question  the court in Bennett found no proximate relationship between the loss and the misrepresentation. Id. at 313-14. The court made the identical ruling on claims made based on violation of New York's Blue Sky Laws. Id. at 316. See also In re Investors Funding Corp. of New York Securities Litigation v. Dansker, 523 F.Supp. 533 (S.D.N.Y.1980) (under federal securities laws, statement must be proximate cause of injury), and Eriksson v. Galvin, 484 F.Supp. 1108 (S.D.N.Y.1980) (section 10(b) has requirement of causation in fact between the act and the injury). At the July 3 closing, Monson asked that the down payment be held in escrow to give him an opportunity to examine the business records relative to the Oberammergau tours. By his own examination of the Terramar correspondence, he fully understood the tickets had been ordered but not confirmed. Notwithstanding, he entered the transaction with full knowledge the tickets had not been fully secured. He now contends that Hagen's failure to disclose the payment schedule necessary to confirm the tickets caused Specialized Tours' failure to make the down payment for the Inzell tickets by September 1, thereby ultimately resulting in Terramar's failure to obtain the Passion Play tickets. Our review of the evidence leads us to conclude that the trial court's finding of a causal connection between the alleged nondisclosure and the loss was clearly erroneous. The missed payment was not the reason the Passion Play tickets were not obtained. The reason they were not obtained was that Terramar negligently failed to transmit payments remitted by Dittmann to the Oberammergau committee as promised. This resulted, in turn, in the failure of Terramar to make necessary arrangements for one-half of the Inzell tours. Terramar also tried to obtain tickets without accommodations in Oberammergau but such tickets were not obtainable. When informed of this, Dittmann, now operated by Monson, resorted to purchasing tickets through Matterhorn, which ultimately was able to obtain the tickets for Dittmann on the black market at a cost substantially above the official Oberammergau prices. In addition, Matterhorn insisted on having all of the travel business. This resulted in Dittmann cancelling many of the arrangements which Terramar had already made at the official Oberammergau prices, and, in turn, paying inflated costs for those same arrangements from Matterhorn. None of this extra cost was causally connected with any alleged misrepresentation by Hagen. Hagen cannot be legally held to be causally responsible for the $159,693 loss allegedly sustained by Specialized Tours. [17]