Opinion ID: 549852
Heading Depth: 2
Heading Rank: 1

Heading: Measure of Damages Under Florida Securities Law

Text: 16 Section 517.211 provides a remedy for violation of the antifraud provision, Sec. 517.301: 17 (2) Any person purchasing or selling a security in violation of s. 517.301, and every director, officer, partner, or agent of or for the purchaser or seller, if the director, officer, partner, or agent has personally participated or aided in making the sale or purchase, is jointly and severally liable to the person selling the security to or purchasing the security from such person in an action for rescission, if the plaintiff still owns the security, or for damages, if the plaintiff has sold the security. 18 (3) In an action for rescission: 19 (a) A purchaser may recover the consideration paid for the security or investment, plus interest thereon at the legal rate, less the amount of any income received by the purchaser on the security or investment upon tender of the security or investment. 20 (b) A seller may recover the security upon tender of the consideration paid for the security, plus interest at the legal rate, less the amount of any income received by the defendant on the security. 21 (4) In an action for damages brought by a purchaser of a security or investment, the plaintiff shall recover an amount equal to the difference between: 22 (a) The consideration paid for the security or investment, plus interest thereon at the legal rate from the date of purchase; and 23 (b) The value of the security or investment at the time it was disposed of by the plaintiff, plus the amount of any income received on the security or investment by the plaintiff. 24 Fla.Stat. Sec. 517.211(2)-(4). 25 The remedial effect of Sec. 517.211 is similar to that of Sec. 12(2) of the Securities Act of 1933. E.F. Hutton v. Rousseff, 537 So.2d 978, 981 (Fla.1989), answering question certified in 843 F.2d 1324 (11th Cir.1988). The remedy specified is rescission, or rescissionary damages if the defrauded purchaser has already disposed of the securities. Id. See also Fla.Stat. Sec. 517.241 (stating that the same civil remedies provided by laws of the United States for the purchasers or sellers of securities ... extend to purchasers or sellers of securities under this chapter). 26 Kane is correct when he states that there is no support to be found under federal or Florida law for the netting theory Shearson argues for here. What is found, under both federal and Florida law, is the intent to have securities antifraud provisions enforced stringently to deter fraud. Randall v. Loftsgaarden, 478 U.S. 647, 663, 106 S.Ct. 3143, 3153, 92 L.Ed.2d 525 (1986). As the district judge noted, If the ... methodology espoused by [Shearson] were adopted, it could serve as a license for broker-dealers to defraud their customers with impunity up to the point where losses equaled prior gains. 27 Further, there is nothing in the language of Sec. 517.211 to indicate that the Florida legislature intended to force victims of fraud to aggregate their profits and losses from separate transactions that happened to involve the same defendant and thus reduce their recoveries. Instead, the plain language of the statute reveals the intent to allow a purchaser fraudulently induced into purchasing a security to rescind his purchase, or, if he has already sold at a loss, to be put by an award of damages in as good a position as if he had rescinded the transaction. There is no indication that other transactions are relevant to this calculation at all. 28 In Merchant v. Oppenheimer & Co., 568 F.Supp. 639 (E.D.Va.1983), rev'd in part on other grounds, Dixon v. Oppenheimer & Co., 739 F.2d 165 (4th Cir.1984), the court came to a similar conclusion when construing a Virginia remedial statute similar to the Florida law at issue here. 1 29 The plaintiff sought rescission of a certain series of transactions while the defendant broker-dealer argued that the plaintiff should be required to aggregate all transactions to arrive at the proper measure of damages. The court held that the plaintiff buyer was entitled to rescission or full rescissionary damages for any sale in violation regardless of whether the buyer happened to profit from other sales. Id. at 643-44. We think this is the only possible interpretation. 30 B. Measure of Damages for Florida Common-Law Claims of Negligence and Breach of Fiduciary Duty 31 Kane asserts that the recovery to which he is entitled for the negligence and breach of fiduciary duty claims is even greater than the $137,796 (plus interest) to which he is entitled under the state securities law. Here, Kane is mistaken. 32 Kane's claim to $186,197 is essentially a claim for lost profits. He contends that he should have been notified at least by the last week of May of the negative information on file at the Vancouver Stock Exchange. The last week of May is important only because it was the last week during which Kane could have sold his stock at a profit. After the first of June, the share price began a precipitous decline from which it never recovered. If Kane had sold his shares during the last week of May, his profit would have been $186,197. 33 Florida law is reluctant to award damages on the basis of such a speculative assertion as this. Kane wishes to recover anticipated profits based only on his claim that he would have sold the securities at the optimal time absent Raven's misrepresentations. Such speculative lost profits damages are not recoverable. Himes v. Brown & Co. Securities, 518 So.2d 937, 939 (Fla.Dist.Ct.App.1987).