Court Opinion

ID: 6931044
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:00:43.868819+00
Date Added: 2024-06-11T16:07:11.184703
License: Public Domain

JON 0. NEWMAN, Chief Judge,
concurring:
The result we reach in this case might appear to some to be unduly harsh for defrauded investors and unduly kind to those making fraudulent misrepresentations, but, though I find the result troublesome, I am satisfied that it is ultimately sound in principle and a faithful application of governing New York law. Stripped to its essence, the case involves the following circumstances. A law firm renders a series of substantially similar opinions on substantially similar investment opportunities. The opinions are alleged to contain a material misrepresentation. An investor sees the opinion that concerns investment A, does not see the opinion that concerns investment B, and nonetheless puts money in investment B, after receiving truthful assurance from a third party that the investments are substantially similar and that the law firm’s opinions are also substantially similar.
The Court rejects an investor’s claim against the law firm, holding that the legal requirement of reliance on an allegedly fraudulent misrepresentation has not been shown.
As Judge Campbell’s opinion cogently points out, there has in fact not been reliance by the investor on the law firm’s opinion concerning investment B. Yet the law firm was perfectly willing to issue substantially similar opinions concerning both investments (indeed, 30 others) and was in all likelihood completely indifferent as to whether an investor read the firm’s opinion relating to investment A or investment B. Why then should the firm not be liable for the alleged misrepresentation concerning investment A, since it was substantially similar to the opinion concerning investment B, in which the investor placed his money?
To answer that the investor read only the piece of paper relating to investment A and did not see the substantially similar piece of paper concerning investment B is a correct statement of the facts but a rather technical ground of defense, one that seems to prefer form to substance. In this context, however, observance of form has one distinct virtue: It eliminates all disputes as to just how similar the two (or more) investments and the two (or more) opinions concerning them really are. In this case, the investments are remarkably similar and so are the opinions, but cases will inevitably arise where the investor claims substantial similarity and the opinion preparer reasonably disputes the claim. Strict insistence that the investor see and rely upon the opinion concerning the precise investment in which he placed his money eliminates a needless ground of controversy.
*313Moreover, as Judge Campbell points out, the investor is on notice, from the legend on the private placement memorandum, that no offering is to be made by means of “ANY LITERATURE ... EXCEPT THE INFORMATION CONTAINED HEREIN.” The law firm’s opinion with respect to investment A was not contained in the private placement memorandum concerning investment B. Finally, there is no unfairness in holding those who undertake sophisticated investments and who later complain that they were misled by the language of a legal opinion, to make sure that they have read the opinion that concerns the precise investment in which they have placed their money, and not some other investment, no matter how similar.
For these reasons, I concur in Judge Campbell’s opinion.