ansin v. river oaks furniture, 1st cir. (1997)
TRANSCRIPT
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USCA1 Opinion
United States Court of Appeals
For the First Circuit
____________________
Nos. 96-1734 and 96-1735
HAROLD S. ANSIN, ET AL.,
Plaintiffs, Appellees,
v.
RIVER OAKS FURNITURE, INC., ET AL.,
Defendants, Appellants.
____________________
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge] ___________________
____________________
Before
Cyr, Boudin, and Lynch,
Circuit Judges. ______________
____________________
Edward P. Leibensberger, with whom John C. Fitzpatrick, Gl_______________________ ___________________ _
Deegan, and Nutter, McClennen & Fish, LLP were on brie______ _________________________________
appellees.
Ames Davis, with whom Nancy S. Jones and Waller Lansden__________ _______________ _______________
Davis were on brief, for appellants. _____
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____________________
February 3, 1997
____________________
LYNCH, Circuit Judge. This case arises fromLYNCH, Circuit Judge.
_____________
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series of transactions among former fellow shareholders of
Mississippi close corporation, River Oaks Furniture, In
The Ansins,1 Massachusetts investors, allege that Tho
Keenum and Stephen Simons, officers and directors of Ri
Oaks, fraudulently induced them to sell their shares in Ri
Oaks ten months before a successful initial public offeri
("IPO"). The Ansins also allege that Keenum and Simo
violated the contractual terms of a stock subscripti
agreement and other corporate documents by causing
unauthorized transfer of a number of the Ansins' shares
other corporate insiders. The Ansins sued Keenum, Simons a
River Oaks Furniture in federal court in Massachusett
alleging securities law violations under Section 10(b) of t
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Securities Exchange Act of 1934, conversion, breach
contract, breach of fiduciary duty, common law fraud, le
malpractice and a violation of Mass. Gen. Laws ch. 93A.
The jury found for the plaintiffs on all coun
then remaining in the case and awarded both compensatory a
punitive damages. Defendants appeal from the judgme
against them, arguing that they were entitled to judgment
a matter of law on all counts, that the action was barr
____________________
1. The plaintiffs in this action are Harold S. Ansi
Lawrence J. Ansin (by the executor of his estate), and t
Ansin Foundation (a private charitable trust), collective
"the Ansins."
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because of laches and related doctrines, and that both t
compensatory and punitive damages awards are legal
unsustainable. The Ansins cross-appeal the pre-tri
dismissal of their Mass. Gen. Laws ch. 93A claim, and al
argue that the district judge improperly denied their reque
for prejudgment interest. They also ask this court
correct a clerical error in the judgment.
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I.
When the losing party challenges the sufficiency
the evidence, as defendants do here, this court views t
record in the light most favorable to the jury's verdic
See Correa v. Hospital San Francisco, 69 F.3d 1184, 1188 (1 ___ ______ ______________________
Cir.), cert. denied, 116 S. Ct. 1423 (1995). The facts a ____________
described as the jury might have found them, drawi
reasonable inferences in favor of the plaintiffs.
A. The Ansin Investment in River Oaks _____________________________________
Lawrence (Larry) Ansin, a Massachusetts fabr
manufacturer, met Stephen Simons, then a furniture buyer wi
a Texas retailer, in the mid-1970s. What began as a busine
relationship grew, over the next decade, into a friendship.
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The two men vacationed together and visited each other
homes. In 1987, Simons started his own upholster
furniture company in Mississippi. The company had s
original investors in addition to Simons; five of these me
including Thomas Keenum, had been involved with the start-
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and eventual IPO of another Mississippi upholste
manufacturer. The sixth investor was Larry Ansin, who wa
at that time, the chief executive officer and so
shareholder of Joan Fabrics, a Massachusetts-based company.
River Oaks Furniture, Inc. was incorporated
August 1987. Larry Ansin's total investment in the ventu
was $100,000, for which he was issued a certificate, dat
September 1, 1987, for 7,500 shares of common stock. T
was 10% of the then-issued shares. Simons owned 30,0
shares and was president of the company; Keenum owned 7,5
shares and was secretary and treasurer. Keenum and Simo
were two of the three members of the Board of Directors.
In March 1988, the River Oaks investors set
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another Mississippi corporation, R-O Realty, Inc., to o
real estate which would then be leased to River Oaks. Ea
of the original investors contributed another $500 in capit
and Larry Ansin was issued a share certificate for 437
shares in R-O Realty.
In 1988, Larry Ansin decided to sell Joan Fabrics
Larry Ansin expected that, as part of such a transaction,
would have to sign a non-competition agreement, which wou
preclude him from owning stock in another furniture compan
Accordingly, Larry Ansin arranged to sell his River Oa
shares to his father, Harold Ansin, for the $100,000 he
originally invested. The Ansins executed a Stock Purcha
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Agreement dated May 31, 1988. Harold Ansin did not know
many shares he was purchasing, but understood that he
buying his son's entire 10% interest in River Oaks.
In April 1992, Larry Ansin learned that he had
inoperable brain tumor. He died on June 24, 1993, before t
commencement of this litigation.
B. The Reduction of the Ansin Interest to 4,000 Shares
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______________________________________________________
Harold Ansin did not sell any of the River Oa
shares until 1992. Nonetheless, at some point in 1989, t
Ansin ownership interest was reduced from 7,500 to 4,0
shares, or from 10% to 4% of the company.2 The compa
issued 25,000 new shares in 1989, but that legitima
dilution would only have reduced the Ansin stake to 7.5%.
Following Harold Ansin's purchase of his son
shares, River Oaks did not issue a new stock certificate
Harold Ansin's name. Harold Ansin was upset about this a
kept asking Larry to do something about it. Larry Ans
wrote to Simons twice in 1989 requesting a new sha
certificate for Harold. Eventually, a certificate was issu
on September 22, 1989 which indicated that, as of January
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1988, Harold Ansin owned 4,000 shares of River Oaks.
____________________
2. The River Oaks 1988 tax return lists Harold Ansin
owning 7,500 shares. Harold Ansin's River Oaks 1988 K-1,
tax form issued to shareholders by the corporation, stat
that Ansin owned 10% of the company. Ansin's 1989 K-
however, indicated that Ansin now owned only 4% of t
company.
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The Stock Transfer Ledger of River Oaks Furnitur
which was not actually typed up (from Keenum's notes) unt
1993, shows Lawrence Ansin as originally owning 7,500 share
However, according to the Ledger, Ansin transferred on
4,000 shares to his father on January 1, 1988, and t
transferred 1,000 shares to Simons and 2,500 shares to Dona
Franks, another of the original River Oaks investors,
January 1, 1989.
Simons testified that these transfers of stock
Larry Ansin were part of a general reallocation of shar
undertaken in early 1989. According to Simons, durin
telephone conversation in February or March 1989, he to
Larry Ansin that, in order to recruit talented new employee
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the company wished to issue 25,000 new shares of stoc
Simons further testified that Larry Ansin then orally agre
to reduce his ownership interest to 4%. However, Simo
acknowledged that there is no record of this conversation n
any contemporaneous records or correspondence memorializi
the transfers to Simons and Franks. Simons also testifi
that he and Ansin only discussed percentages of ownership,
opposed to numbers of shares, and that Ansin did not recei
any money for the transfers. Simons did not speak to Haro
Ansin about the transfers.
Thomas Keenum, who, as company secretary,
responsible for maintaining the Stock Transfer Ledge
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testified that no document, other than his personal note
records these stock transactions, and that only Simons, a
not the Ansins, ever communicated with him about the decrea
in the Ansin ownership interest. Although other capit
transactions are recorded in the minutes of the Board
Directors, the Ansin transfers were not, nor to Keenu
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legal representatives," recited that "[e]ach Stockhol
agrees that all shares of Stock of the Company . . . shall
subject to the terms and conditions of Paragraph Number 12
the Articles of Incorporation." The By-Laws, which char
the secretary with maintaining the stock transfer books
the corporation,
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stated that:
Transfer of shares of the corporation
shall be made only on the stock transfer
books of the corporation by the holder of
record thereof or by his legal
representative . . . .
At trial, the plaintiffs argued that these documen
constituted an enforceable contract, and that defendant
unauthorized transfer of 3,500 River Oaks shares to Simo
and Franks amounted to a breach of that contract.
C. The Repurchase of the Ansin Interest and the IPO
___________________________________________________
The original investors in River Oaks had hope
from the beginning, eventually to take the company publi
During the first quarter of 1992, the company took the fir
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-8- 8
Keenum stated that a value of $25 million was "about right
Analyses prepared by J.C. Bradford for internal use project
a range of values from $16.3 million to $31 millio
depending on the assumptions used, and similar valuatio
were discussed with River Oaks personnel.
Shortly thereafter, J.C. Bradford determined tha
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given all the circumstances, including market condition
River Oaks was not a candidate for an IPO in 1992. J.
Bradford advised River Oaks to wait until the end of 1992
early 1993 to see if the company met its projections befo
proceeding further.
At approximately the same time, April 1992, Lar
Ansin learned that he had a brain tumor. After
diagnosis, Ansin asked Patrick Maraghy, his tax planner,
act as an intermediary in his financial dealings. Ans
continued to make his own decisions.
In July 1992, Walter Billingsley, the River Oa
controller, and Simons contacted Maraghy about refinanci
River Oaks' debt. Ansin, like the other origin
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shareholders, had previously signed personal guarantees f
bank loans to River Oaks; now, the Bank of Mississippi want
another personal guarantee from Ansin for $550,000 of n
financing. Maraghy communicated the request to Ansin,
declined to provide new guarantees because he was very i
and because he was no longer a shareholder of River Oaks.
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Through August and into September of 1992, Simo
continued to call Maraghy frequently, pressuring him to
Larry Ansin to reconsider his decision. At no time
Simons tell Maraghy that the bank had agreed, on August
1992, to proceed with the refinancing without a new guarant
from Larry Ansin. Instead, Simons represented that t
company would have problems without the new Ansin guarante
and that people would be thrown out of work. In ear
September, Simons asked if Harold Ansin would sign a person
guarantee, but Harold Ansin declined.
In mid- to late-September, Simons called Mara
and asked if the Ansins would be willing to sell their sto
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back to River Oaks so that someone else could purchase it a
provide the guarantee. The Ansins agreed, believing that t
sale would help Simons obtain the needed financing.
On October 19, 1992, Keenum called Maraghy
discuss an offer of $300,000 for the Ansin River Oa
Furniture and R-O Realty shares. Keenum told Maraghy t
River Oaks had recently bought out Keith Franklin, the on
other non-management shareholder, for $60,000 per
interest, indicating that $300,000 was a fair price for t
Ansin's 4% interest in River Oaks. Keenum also told Mara
that the R-O Realty shares were valueless, as R-O Realty
properties were heavily encumbered with debt.
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The Ansins agreed to the sale, believing that t
price was fair and that they were accommodating Simons' ne
for bank financing. Simons wrote to Maraghy, thanking
"for helping me resolve this problem."4 The sale of t
Ansin shares for $300,000 was closed in November 1992.
In board meetings on November 19, 1992, a
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were no ongoing negotiations in November 1992, Billingsl
testified that River Oaks' management knew by October
November 1992 that the company would meet its sal
projections for 1992 and so would meet the condition set
____________________
4. Before finalizing the sale, Harold Ansin transferred t
shares to the Ansin Foundation, a family charitable trus
for tax reasons.
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J.C. Bradford for following up on the IPO. During
conference call on December 7, 1992, less than two wee
after the Ansin repurchase, Ron Ashby, River Oaks' outsi
auditor, discussed the impact of an IPO on River Oa
accounting for employee loans with Keenum and other Ri
Oaks personnel. Ashby's notes, made in the month or t
prior to that call, indicate that River Oaks was looking
an IPO in July or August 1993.
Simons testified that, in one phone conversation
early 1992, he told Larry Ansin that River Oaks had ma
initial contact with an unspecified investment banker, a
that Larry Ansin thought going public was a great ide
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However, Harold Ansin, Maraghy, and Susan Ansin, Larry
wife, all testified that Larry Ansin never mentioned t
possibility of an IPO, even though they all stated that Lar
discussed business with them regularly.
The River Oaks board approved an IPO on March
1993. Maraghy first learned that an IPO was being plann
from a June 1993 newspaper article. By this time, Larry Ans
had died.
River Oaks went public on August 26, 1993 for $
per share. As part of the transaction, River Oaks effecte
28.8 for 1 stock split on June 23, 1993. This meant that t
Ansins' 7,500 shares would have become 216,000 share
Additionally, R-O Realty was merged into River Oa
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furniture, and the R-O Realty shareholders received $1
million of River Oaks stock. From the proceeds of t
offering, River Oaks distributed $2,465,000 of previo
earnings to its pre-IPO shareholders.
Finally, the plaintiffs learned from the prospect
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of the existence of River Wood Products, Inc. River Wood
been established in 1991 to produce furniture frames f
River Oaks. Although there were no significant financi
benefits to setting up River Wood as a separate corporatio
a 1991 memo from Ashby indicated that "a political reason f
setting up . . . separate corporations would be to exclu
certain current River Oaks shareholders." Harold Ansin
one of the shareholders excluded. At the time of the IP
River Wood shareholders received shares of River Oa
Furniture stock.
At trial, plaintiffs' expert testified that if t
Ansins had held 7,500 shares prior to the IPO and then so
them at the end of the restricted period, they would ha
received a total of $4,179,140. This figure inclu
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proportional allocations of River Oaks Furniture shares f
the Ansin R-O Realty shares and for a hypothetical 7.
interest in River Wood Products. It also included a share
the S-corporation distribution.
II.
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The Ansins filed suit on October 4, 1993, allegi
securities law violations, fraud, breach of fiduciary dut
malpractice and Mass. Gen. L. ch. 93A claims arising fr
defendants' failure to disclose the planned IPO. Aft
discovery, on June 17, 1994, plaintiffs filed a Seco
Amended Complaint, adding a conversion claim for t
reduction of the Ansin interest to 4,000 shares. T
district court granted a defense motion to dismiss the c
93A and malpractice claims on October 12, 1994. On July
1995, a Third Amended Complaint was filed, which include
breach of contract claim arising from the same facts as t
conversion claim.
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On November 15, 1995, the district court grant
defendant's motion for summary judgment on the conversi
claim, finding that the Massachusetts three-year statute
limitations for torts barred any conversion claim that t
Ansins should have discovered prior to October 4, 1990. T
district court found that various 1989 tax documents, sign
by Harold Ansin and indicating that he owned a 4,000 share
4% interest in River Oaks, should have alerted Ansin to t
alleged conversion.
The remaining claims were tried to a jury. T
jury returned a special verdict form finding that:
defendants violated the Securities Exchange Act and enga
in common law fraud by failing to disclose the publ
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offering discussions with J.C. Bradford; 2) River Oa
committed a breach of contract when the Ansin interest
reduced to 4,000 shares; 3) Simons and/or Keenum breached t
fiduciary duty owed by a dominant shareholder to a minori
shareholder by failing to disclose the discussions with J.
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A. The Federal Securities and Common Law Fraud Claims _____________________________________________________
The federal securities claim alleged violations
10(b) of the Securities Exchange Act and Rule 10b-
Defendants argue that the district court erred in denyi
their motion for a judgment as a matter of law on the feder
securities law and Mississippi common law fraud clai
Specifically, defendants assert that there was no evidence
omission or misrepresentation, of fraudulent intent,
materiality or of reliance.
Review of the district court's denial of a moti
for judgment as a matter of law is plenary. See Correa,___ ______
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jury need not do, the jury could reasonably find t
information about the IPO negotiations was omitted.
As to evidence of intent, defendants contend t
there was no possible motive for fraud, because River Oa
resold the Ansin shares to other insiders at the same pri
the corporation had paid for them, thereby depriving t
corporation of the fruits of its fraud. However, the ju
could reasonably infer, from the evidence, that t
individual defendants, officers and directors of River Oa
were working to exclude the Ansins, the only remaining no
management shareholders, from the River Oaks IPO, and we
seeking ultimately to benefit themselves and the ot
Mississippi management shareholders at the Ansins' expense.
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Defendants also argue that there was no eviden
that the undisclosed information was material. T
materiality standard under the federal securities laws is
familiar one: Information is material if "there is
reasonable likelihood that a reasonable investor wou
consider it important." Glassman v. Computervision Corp.,________ ____________________
F.3d 617, 632 (1st Cir. 1996); see also Shaw v. Digit _________ ____ ____
Equip. Corp., 82 F.3d 1194, 1219 (1st Cir. 1996)(citi _____________
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evidence showed that less than two weeks after the Ans
repurchase, River Oaks' management was "looking at a July
August 1993" IPO, and adjusting its accounting strategi
accordingly. This is not a case where the defendan
themselves "placed no special significance" on the omitt
information. Cf. Jackvony v. RIHT Fin. Corp., 873 F.2d 41 ___ ________ _______________
415 (1st Cir. 1989); Taylor v. First Union Corp., 857 F. ______ __________________
240, 244 (4th Cir. 1988)("vague agreement" as to futu
merger not material where neither "the factual nor the lega
predicates for transaction were in place). The jury
conclusion that the earlier negotiations were material
patently reasonable.
Finally, defendants contend that there was
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evidence of reliance on the omissions. Because of t
logical impossibility of proving that plaintiffs relied
information that they did not have, "[p]ositive proof
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18
reliance on omissions is not necessary where materiality
been established." Holmes v. Bateson, 583 F.2d 542, 558 (1 ______ _______
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Cir. 1978). In any case, Harold Ansin testified that he
rely on information obtained from Simons.
Thus, defendants' insufficiency arguments wi
regard to the securities law and fraud claims are unavailin
A reasonable jury could, and did, conclude that defendan
intentionally defrauded plaintiffs by failing to disclo
material information about the contemplated IPO.
B. The Breach of Contract Claim _______________________________
The defendants also argue that what plaintif
styled a breach of contract claim is essentially a conversi
claim, and therefore barred by the statute of limitation
They also claim that the evidence was insufficient to suppo
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the Massachusetts three-year tort statute of limitatio
(Mass. Gen. Laws ch. 260, 2A), rather than the Massachuset
six-year contract statute (Mass. Gen. Laws ch. 260, 2).7
Defendants cite Massachusetts caselaw for t
principle that "the determination of whether the contract
tort statute of limitations applies is controlled by t
essential nature of [the] claim." Oliveira v. Pereira, 6 ________ _______
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were transferred without their knowledge or consent,
derogation of contractual terms -- can be fair
____________________
judgment on that claim and that his ruling did not reach t
count.
7. The parties agree that Massachusetts law supplies t
applicable statute of limitations.
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characterized as either an action for conversion or an acti
for breach of contract. It does not involve the type
"accident[] resulting in injuries to person or property"
which the draftsmen of Massachusetts' three-year tort statu
focussed. Royal-Globe Ins. Co. v. Craven, 585 N.E.2d 31 ____________________ ______
320 (Mass. 1992). Rather, it does involve a claim "
recover from another money which in equity and go
conscience he is not entitled to keep." The latter type
claim, according to the Supreme Judicial Court, is usual
advanced in a contract action. Kagan v. Levenson, 134 N.E. _____ ________
415, 417 (Mass. 1956). In these circumstances, it was n
error for the district court to apply the six-year contra
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statute of limitations to plaintiffs' contract claim.
2. Insufficiency of the Breach of Contract Evidence a __________________________________________________________
Enforceability of Rights ________________________
The defendants assert that there is no eviden
that Larry Ansin did not agree to the reduction in share
They also deny that the foundation corporate documents
River Oaks created enforceable rights in the plaintiff
This is simply not so.
As with the fraud claims, defendants rely
Simons' uncorroborated report of his phone conversation wi
Larry Ansin. With regard to the contract claim, Simo
testified that, in early 1989, Ansin orally agreed to
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recipients of the shares). Simons and Keenum bo
acknowledged that there was no documentation of the
transfers.
Simons described a complex reallocation of share
undertaken to allow shares to be issued to new key personne
However, Keenum acknowledged that 25,000 new shares we
issued in 1989, and that the new employees were issu
exactly 25,000 shares. This negated the reallocation as
reason for the reduction in Ansin's shares. Additionally,
the reallocation described by Keenum, only Harold Ansin
to give up shares; Simons' percentage of ownership
diluted by the new issuance, but he actually gained 1,0
shares (from the alleged transfer from Ansin).
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Even if the jury credited Simons' description
Larry Ansin's oral consent, the jury could have reasonab
inferred that Ansin only consented to dilution, and not to
transfer of shares. Additionally, when evaluating a seri
of events that, judging from the trial exhibits, left a hea
paper trail, the jury was entitled to draw inferences fr
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the complete absence of contemporaneous documentation of t ________________
purported Ansin transfers.
Defendants also contend that the foundation
documents of River Oaks did not create any rights in t
Ansins with regard to transfers. Defendants do not challen
the basic premise that, under Mississippi law, such documen
may form a contract. Rather, they contend that the specif
transfer provisions were only for the benefit of t
corporation, and thus created no rights in the shareholder
However, the plain language of the Subscription Agreeme
states that "this Agreement shall be binding upon and sha
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inure to the benefit of each individual Stockholder . . . a ___________________________________________________
to the Company . . . ." While the transfer provisions of t
Articles of Incorporation and the By-Laws may have be
primarily intended to prevent the unauthorized sale of shar
to outsiders, as defendants contend, this does not mean t
they served no other purpose.
To the contrary, the traditional common law
unauthorized transfers places heavy duties on t
corporation:
Courts held that a corporation whose
stock was transferable only on the books
of the company was, to a certain extent
at least, a trustee for its shareholders
in respect to their stock. . . . [I]t had
to respond in damages for any injury
sustained by them in consequence of its
negligence or misconduct. . . . This
liability rested . . . upon the ground of
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breach of contract upon the part of the
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23
company, of this undertaking to hold the
stock for the benefit of the true owner
of the certificate.
12 Fletcher Cyclopedia of the Law of Corporations 5538,______________________________________________
406 (perm. ed. 1996)(footnotes omitted). Moreover, t
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Cyclopedia explains that:
The shareholders also have a right
to expect that the corporation will
observe its own bylaws in relation to the
transfer, and it is liable for any
damages resulting to them by reason of
its failure to do so.
Id. (footnotes omitted). ___
This authority is sufficient to rebut defendant
contention that the plain language of River Oaks' transf
provisions can only be read to create rights in t
corporation. The defendants point to nothing in either t
documents or in Mississippi law that would require a jury
conclude that River Oaks shareholders had no rights un
these documents as to transfers. Accordingly, the jury
verdict on the breach of contract claim stands.
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3. Standing ___________
The defendants assert that Harold Ansin and t
Ansin Foundation lack standing to bring a contract cla
because they were not in privity of contract with River Oa
However, defendants acknowledge that Larry Ansin's esta
would have standing to bring such a suit, were it not for t
fact that, in their view, Larry Ansin acquiesced in t
breach and suffered no damages. The jury plainly reject
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these assertions. Assuming arguendo that defendants a ________
correct that, as a matter of Mississippi law, Harold Ans
could not bring this suit, we find that, as Larry Ansin
estate indisputably had standing, this claim has no possib
bearing on the outcome of the case.
C. The Breach of Fiduciary Duty Claim _____________________________________
Defendants take the position that, un
Mississippi law, shareholders may not sue, as individual
for breach of fiduciary duty by the officers and directors
a close corporation. However, Mississippi case l
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recognizes the ability of shareholders in close corporatio
to sue for breach of fiduciary duty. See Fought v. Morri ___ ______ ____
543 So. 2d 167, 172-73 (Miss. 1989). The Mississippi Supre
Court has specifically stated, in the context of a suit f
diversion of corporate opportunity, that a trial court ma
"in the case of a closely held corporation, . . . treat
action raising derivative claims as a direct action . . . a
order an individual recovery." Derouen v. Murray, 604 So._______ ______
1086, 1091 n.2 (Miss. 1992). Defendants' argument as to t
fiduciary duty claim is without merit.
D. Affirmative Defenses _______________________
Defendants assert that equitable defenses barr
both the contract claim and the fraud claims. Defendants
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claim was barred by laches, based on the district court
finding, in the context of the conversion claim, that t
Ansins should have discovered the reduction in their intere
when signing the 1989 tax documents. The defense
prejudiced by plaintiffs' delay in filing suit until 199
defendants argue, because Larry Ansin died in the interim.
We review the district court's determination as
laches for abuse of discretion. See Murphy v. Timberla ___ ______ _______
Reg'l Sch. Dist., 973 F.2d 13, 16 (1st Cir. 1992). T _________________
parties have not adequately addressed which law governs t
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1. Securities Law _________________
The Supreme Court has held that damages under Ru
10b-5 should be "the difference between the fair value of a
that the . . . seller received and the fair value of what
would have received had there been no fraudulent conduct
Affiliated Ute Citizens v. United States, 406 U.S. 128, 1 _______________________ _____________
(1972); see also Holmes, 583 F.2d at 562. On the Ansin ________ ______
securities law claim, the court instructed the jurors to fi
"the difference between what the Ansins actually received f
their stock and what you believe they would have received
they refused to sell or, instead, insisted on differe
terms." The jury was told that "the issue is not hindsight
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and that they "must evaluate the Ansins' decision in light
the facts and circumstances that existed at the time that t
decision to sell was made."
Defendants argue that the district court's ju
instructions as to the damages for the fraud claims we
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than the simple application of a price index to the shares
Holmes, 583 F.2d at 564.
______
Here, the very nature of the fraud was to indu
the plaintiffs to sell their stock at a time before the sto
would appreciate in value due to the contemplated IPO a
stock split. To adopt defendants' argument that dama
cannot exceed the price of the shares at the time of the sa
would be to reward and encourage such chicanery. Defendant
attempt to limit plaintiffs' recovery to a hypothetic
"market" price as of November 1992 is unavailing. The tri
of fact was entitled to infer that a reasonable investo
fully informed of the IPO discussions, including t
conditions set by J.C. Bradford, would not have sold
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as to planning and projections indicated that a 1993 IPO
anticipated. J.C. Bradford analysts had suggested a range
values for the company in light of the anticipated IP
information which was withheld from the plaintiffs. T
these analyses and projections were, to some exten
contingent does not mean that they are irrelevant
determining fair value. As another court of appeals
said:
The relevance of the fact [that the
defendant close corporation was involved
in merger negotiations] does not depend
on how things turn out. Just as a lie
that overstates a firm's prospects is a
violation even if, against all odds,
every fantasy comes true, so a failure to
disclose an important beneficent event is
a violation even if things later go sour.
The news . . . allows investors to assess
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tort." Aetna Cas. and Sur. v. Steele, 373 So. 2d 797, 8 ___________________ ______
(Miss. 1979). Breach of fiduciary duty has been recogniz
by the Mississippi courts as an "extreme or a speci
additional circumstance where punitive damages may
awarded." Fought, 543 So. 2d at 173 (internal quotation mar ______
omitted). The jury found such a breach of duty here.
Defendants contend that plaintiffs were required
adduce evidence as to defendants' net worth. Plaintif
correctly respond that, under Mississippi law, the net wor
inquiry is only one factor to be considered where the cou
seeks to determine if the punitive damages awarded by t
jury are so excessively disproportionate as to shock t
conscience of the court. See Bankers Life & Cas. Co.___ ________________________
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-35- 35
Mass. Gen. Laws ch. 93A gives a private right
action to any person injured by "an unfair or deceptive a
or practice" in trade or commerce "directly or indirect
affecting the people of this Commonwealth." Mass. Gen. La
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ch. 93A, 2, 9. Before January 1988, the statute
construed as not applying to securities laws claims Se
_
e.g., Cabot Corp. v. Baddour, 477 N.E.2d 399, 402 (Mas ____ ___________ _______
1985). In 1987, the Massachusetts legislature amended t
definitions section of the statute so that "trade" a
"commerce" now include "the advertising, the offering f
sale, rent or lease, the sale, rent, lease or distribution
. . . any security." Mass Gen. Laws ch. 93A, 1(b
"Security" is defined broadly under Massachusetts law
include any stock. Mass. Gen. Laws ch. 110A, 401(k).
The Supreme Judicial Court has construed ch. 93A
covering marketplace transactions, but not transactio
"principally 'private in nature.'" See Manning v. Zuckerma
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suggests that the unfair or deceptive
acts or practices prohibited are those
that may arise between discrete,
independent business entities, and not
those that may occur within a single
company.
Id. at 1269 (internal citations omitted).___
Szalla, in offering examples of the types
______
disputes not covered, cited Zimmerman v. Bogoff, 524 N.E. _________ ______
849 (Mass. 1988), for the principle that "c. 93A [i
inapplicable to transactions and disputes between parties
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After explaining that the transactions at iss
were principally private in nature, the Puritan Medic _____________
Center opinion continued: ______
Further, the aggrieved party has ______________________________
available an alternative avenue of relief _________________________________________
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prejudgment interest as awarded by anybody," the judge or t
jury. Accordingly, after the jury returned its verdict f
plaintiffs, the judge gave the jury a special interrogato
on prejudgment interest, instructing the jury that "[w]het
you choose to award interest is entirely a matter in yo
discretion." Plaintiffs' counsel did not object to this fo
of instruction. The jury did not award prejudgment interes
Post-trial, plaintiffs moved for entry of judgment includi
prejudgment interest. The district court denied this moti
as moot.
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Plaintiffs argue, on appeal, that there is
presumption in favor of prejudgment interest under t
federal securities laws, and that the district court ju
failed to so instruct the jury. Plaintiffs failed to make
contemporaneous objection to the form of the ju
instruction, and, absent plain error, this argument
waived.
However, plaintiffs also point out that, under
Mississippi statute enacted in 1989, judgments "shall be
interest at a per annum rate set by the judge hearing t
complaint from a date determined by such judge to be fair b
in no event prior to the filing of the complaint." Mis
Code Ann. 75-17-7. This statutory language, they asser
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