Court Opinion

ID: 9479135
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:09:12.993127+00
Date Added: 2024-06-11T17:46:50.734252
License: Public Domain

COX, Circuit Judge,
specially concurring:
I agree that summary judgment was not appropriate in this case. I write separately to express my disagreement with the majority’s conclusion “that rescission is an appropriate remedy under the circumstances of the present case.”
The traditional measure of damages in a suit under Rule 10b-5 alleging fraud on the part of the seller of securities is out-of-pocket loss, see Pelletier v. Stuart-James Co., Inc., 863 F.2d 1550, 1558 (11th Cir.1989) (citation omitted); Blackie v. Barrack, 524 F.2d 891, 909 (9th Cir.1975), and our most recent decisions have left unresolved the question of whether and under what circumstances rescission is an available remedy. See Pelletier, 863 F.2d at 1558 n. 19; Rousseff v. E.F. Hutton Co., Inc., 843 F.2d 1326, 1329 n. 1 (11th Cir.1988). Accord Randall v. Loftsgaarden, 478 U.S. 647, 106 S.Ct. 3143, 3152, 92 L.Ed. 2d 525 (1986) (“The issue of whether and *1533under what circumstances rescission or a rescissionary measure of damages is available under section 10(b) is an unsettled one.”)- In any event, the jurisprudence on the issue unanimously supports the proposition that “[i]t is for the district judge, after becoming aware of the nature of the case, to determine the appropriate measure of damages in the first instance.” Arrington v. Merrill, Lynch, Pierce, Fenner & Smith, 651 F.2d 615, 620-21 (9th Cir.1981) (citation omitted). In determining whether rescission is appropriate, the district court must consider the nature of the relationship between the plaintiff-buyer and the defendant-seller, see Huddleston v. Herman & MacLean, 640 F.2d 534, 554 (5th Cir. Unit A 1981) (“The use of the re-scissional measure is usually limited to cases involving either privity between plaintiff and defendant or some specific fiduciary duty owed by brokers to their customers.”); the specific causal nexus between the plaintiffs loss and the defendant’s wrongful conduct, see In re Fortune Systems Securities Litigation, 680 F.Supp. 1360, 1369 (N.D.Cal.1987); whether the plaintiff would have purchased the securities in the absence of any misrepresentations or omissions, see Kronfeld v. Advest, Inc., 675 F.Supp. 1449, 1455-56 (S.D.N.Y.1987), and the cases cited in that opinion; whether the plaintiff promptly demanded rescission, see Jordan v. Duff & Phelps, Inc., 815 F.2d 429, 440 (7th Cir.1987); and whether the plaintiff is able to return the securities. Id. See generally Jacobs, “The Measure of Damages in Rule 10b-5 Cases,” 65 Geo. L.J. 1093, 1109-1120 (1977); Note, “The Measure of Damages in Rule 10b-5 Cases Involving Actively Traded Securities,” 26 Stan.L.Rev. 371, 374-77 (1974). A consideration of all of these factors is a necessary prerequisite to a determination of whether rescission or a rescissory measure of damages is appropriate in this case.
Bruschi did not pray for rescission in her amended complaint, nor did she assert it as a potential remedy in her memorandum in opposition to the motions for summary judgment. Although this failure does not preclude the court from considering rescission as a possible remedy, see Wolf v. Frank, 477 F.2d 467, 478 (5th Cir.1973), it is significant because it indicates that the district court has never had an opportunity to consider whether the remedy is appropriate under the circumstances of this case. Indeed, the insufficiency of the evidentiary record would have effectively precluded such a determination. For example, the record does not evidence whether Bruschi is still in possession of the securities, whether she promptly demanded rescission after learning of the alleged misrepresentations and omissions, or whether the decline in the value of the Elmco investment was related to supervening market forces, and not to any act or omission of Brown. Such a record cannot support this court’s conclusion that rescission or a rescissory measure of damages would be an appropriate remedy in this case.
I conclude that it is unnecessary to reach the issue of whether rescission or a rescis-sory measure of damages is appropriate in this case. The only question properly before us is whether a genuine issue of material fact exists which precludes summary judgment. Bruschi never presented a claim for rescission in the district court, and the district court’s ruling did not address the issue. Additionally, the eviden-tiary record is too skeletal to permit an informed conclusion as to whether rescission is an appropriate remedy in this particular case.