Opinion ID: 663081
Heading Depth: 2
Heading Rank: 2

Heading: Of Proximate Cause.

Text: 22 In contending that there is no proximate cause linking Icahn's failure to notify Conway of trades or margin calls and Conway's losses, Icahn asserts that Conway received written disclosure of such information prior to the liquidations. In this connection, Icahn points to the intervening written notifications that Conway admits he received as well as to its argument that Conway's conduct in the circumstances was unreasonable as a matter of law. 23 The relationship between a stockbroker and its customer is that of principal and agent and is fiduciary in nature, according to New York law. See 11 N.Y.Jur.2d Brokers Sec. 45 (1981); People v. Mercer Hicks Corp., 4 Misc.2d 55, 155 N.Y.S.2d 740, 744 (Sup.Ct.1956), aff'd, 3 A.D.2d 708, 160 N.Y.S.2d 806 (1957). A broker, as agent, has a duty to use reasonable efforts to give its principal information relevant to the affairs that have been entrusted to it. See Restatement (Second) of Agency Sec. 381 (1958). Accordingly, because Conway's account was a non-discretionary one, his authorization for all purchases and sales was required. Absent a waiver of notice running in its favor, Icahn had a duty to notify Conway prior to the execution of the sellout and to secure his consent as to the items to be sold. 24 Conway admits to receiving only minor margin calls by mailgram on October 22 and October 23. As to those calls, he testified that he did not understand why they were sent, considering the buying power in his account. He received no other notifications in writing or by telephone, and he did not receive the margin call for 1.7 million dollars, according to his version of the events. The jury, of course, was free to believe that version. Conway was not even afforded the opportunity to designate which shares he wished to have sold to meet the margin call, an important factor for someone in Conway's position, especially considering the volatility of the market and the capital gain tax implications of the sales. 25 While it is true that Conway was aware of his purchases and of the declining market situation in the weeks before the massive selloff in his account, it cannot be said that his actions were unreasonable as a matter of law. Without the information that it was Icahn's duty to provide, Conway was not in a position to decide whether to cover the margin call with other assets that were available to him or to designate the securities he wished to sell. There was ample evidence for the jury to find that Conway's loss was the direct result of Icahn's negligence and breach of fiduciary duty. To say that there is no causal chain linking Icahn's alleged failure to notify Conway of trades or margin calls and Conway's losses is to ignore in its entirety the evidence presented by Conway. 26