Opinion ID: 425977
Heading Depth: 4
Heading Rank: 1

Heading: United States v. Newman

Text: 18 Moss first argues that because Courtois owed a fiduciary duty to his employer, Morgan Stanley, and to Morgan Stanley's client, Warner, then Newman (standing in Courtois' shoes) owed a separate duty of disclosure to Deseret shareholders. Plaintiff claims that our decision in United States v. Newman, 664 F.2d 12 (2d Cir.1981), aff'd after remand, 722 F.2d 729 (2d Cir.1983) (unpublished order), cert. denied, --- U.S. ----, 104 S.Ct. 193, 78 L.Ed.2d 170 (1983), supports this circuitous linking of liability. We disagree. 19 In Newman we held that Courtois' and Antoniu's securities transactions constituted a breach of their fiduciary duty of confidentiality and loyalty to their employers (Morgan Stanley and Kuhn Loeb & Co., respectively) and thereby provided the basis for criminal prosecution under section 10(b) and rule 10b-5. Indeed, the district court at Newman's trial specifically charged the jury that the law is clear that Mr. Newman had no obligation or duty to the people from whom he bought the stock to disclose what he had learned, and, thus, he could not have defrauded these people as a matter of law. J.App. at 29-30. Nothing in our opinion in Newman suggests that an employee's duty to abstain or disclose with respect to his employer should be stretched to encompass an employee's duty of disclosure to the general public. In fact, we explicitly limited our holding in Newman by stating: 20 In two instances the targets themselves were clients of the investment banking firms. The Government belatedly suggests that the indictment should be construed to allege securities laws violations in these two instances, on the theory that the defendants, by purchasing stock in the target companies, defrauded the shareholders of those companies. Whatever validity that approach might have, it is not fairly within the allegations of the indictment, which allege essentially that the defendants defrauded the investment banking firms and the firms' takeover clients. 21 United States v. Newman, 664 F.2d at 15 n. 1 (emphasis added). Thus, the district court was correct in concluding that plaintiff cannot hope to piggyback upon the duty owed by defendants to Morgan Stanley and Warner. There is no 'duty in the air' to which any plaintiff can attach his claim. 553 F.Supp. at 1353.