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Singer v. Olympia Brewing Co.

decided: June 28, 1989.

LOUIS P. SINGER, AS SUCCESSOR IN INTEREST TO TROSTER, SINGER & CO., PLAINTIFF-APPELLEE CROSS-APPELLANT,
v.
OLYMPIA BREWING COMPANY, DEFENDANT-APPELLANT CROSS-APPELLEE



Appeal from order of the United States District Court for the Eastern District of New York, Joseph M. McLaughlin, Judge, denying alternative motions for judgment notwithstanding the verdict, new trial, or partial new trial; cross appeal from amended judgment granting defendant's motion for setoff of settlement amount paid to plaintiff by third party. Affirmed.

Meskill, Pratt, and Altimari, Circuit judge.

Author: Pratt

PRATT, Circuit Judge

Defendant Olympia Brewing Company (Olympia) appeals from an order of the United States District Court for the Eastern District of New York, Joseph M. McLaughlin, Judge, denying Olympia's alternative motions under Fed.R.Civ.P. 50(b) and 59 for judgment n.o.v., a new trial, and a partial new trial, made on the ground that there was insufficient evidence to support the jury's verdicts in this securities fraud action. Plaintiff Singer cross-appeals from an amended judgment entered on August 2, 1988, that reduced Singer's judgment against Olympia from $2,958,350.50 to $1,708,350.50 to reflect a setoff of $1,250,000 based on the post-verdict settlement Singer had obtained in another action from a third party, Loeb Rhoades & Co. (Loeb Rhoades).

Because there was sufficient evidence to support the jury's verdicts, we affirm the district court's denial of Olympia's motions for post-verdict relief. On the cross-appeal, we conclude that the setoff was proper and thus affirm the amended judgment.

I. BACKGROUND

Singer, as successor-in-interest to Troster, Singer & Co. (Troster Singer), brought this securities fraud action against Olympia, alleging primary and aiding-and-abetting violations of §§ 15 and 17 of the Securities Act of 1933, 15 U.S.C. §§ 77o and 77q; §§ 10, 15, and 20 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j, 78o, and 78t; and SEC rules 10b-5 and 15cl-2, 17 C.F.R. § 240.10b-5 and § 240.15cl-2. Singer also alleged violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., but that claim was dismissed before trial.

In 1975-1977 Olympia was an independent beer manufacturer and distributor operating primarily in the northwestern part of the United States. Its stock was traded over the counter. Singer's claims arose out of a series of transactions in Olympia stock by Troster Singer, a professional market maker, in a market that had been artificially inflated by the actions of Loeb Rhoades, a registered broker-dealer.

In 1975 R. Jack Bernhardt, a registered representative and securities salesman for Loeb Rhoades, began inducing his customers to purchase Olympia stock. Through various means, including the spreading of false rumors of an imminent takeover of Olympia, he manipulated the market and caused an artificial increase in the price of Olympia's stock.

In March 1977 Troster Singer acquired a large number of shares of Olympia stock at the artificially inflated prices, but later suffered substantial losses when the fraud was revealed and the price of the stock plummeted. Singer claimed that Olympia's officers knew or should have known of Bernhardt's or Loeb Rhoades's manipulation of the market before Olympia made voluntary public disclosures in an article in Barron's and in two press releases, and that, in order to take advantage of the artificially high price of its stock, Olympia made material misstatements or omissions by failing to reveal the known fraud. Singer further claimed that Troster Singer had relied on Olympia's misstatements or omissions to its substantial injury.

The jury found against Olympia in special verdicts establishing, with respect to the primary § 10(b) and rule 10b-5 violation, that Olympia made either material misstatements or omissions; that it acted with intent to defraud or with reckless disregard for the truth; that Troster Singer reasonably relied on Olympia's misrepresentations or omissions; and that Olympia thereby caused Troster Singer damages in the amount of $1,354,592.50. With respect to the aiding-and-abetting violation, it was uncontested that either Bernhardt or Loeb Rhoades had violated § 10(b) and rule 10b-5, and the jury found, in its special verdicts, that Olympia had known of Bernhardt's or Loeb Rhoades's activities; that it had given either Bernhardt or Loeb Rhoades substantial assistance in effecting the violation; and that the substantial assistance had caused Troster Singer's losses of $1,354,592.50. To the jury's verdict of $1,354,592.50, the trial judge added $1,603,758.00 in prejudgment interest for a total judgment of $2,958,350.50.

II. DISCUSSION

A. Motions for Judgment Notwithstanding the Verdict and New Trial

The post-verdict motions need not detain us long. Asserting that there was insufficient evidence to support the jury's findings that Olympia made material misstatements or omissions, acted with scienter, and caused Singer's losses, Olympia claims that ...


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