the mails, and to prevent frauds in the sale thereof." Securities Act of 1933, 15 U.S.C. §§ 77a-77mm (1982) (preamble). In furtherance of this goal, and in recognition that market professionals have long found soft information relevant and important to informed investment decisions, SEC has encouraged, without requiring registered companies to supply forward-looking information. Guides for Disclosure of Projections for Future Economic Performance, Securities Act Release No. 5992, [1978 Transfer Binder]Fed. Sec. L. Rep. (CCH) P 81,756 (Nov. 7, 1978). Thus, it is patent that the SEC policy in not generally requiring the disclosure of soft information is motivated by concerns for the public investor and does not amount to a tacit recognition that corporations and management may hold--and realize--any legitimate value in confidential corporate soft information to the detriment of public shareholders and investors. Corporate information, like all corporate assets, ultimately belongs to shareholders as equity owners of the corporation. The SEC policy does not change the principle that the only legitimate value a corporation or its management may hold in keeping any information confidential is in a fiduciary capacity for the benefit of its public investors and shareholders. See Bruce A. Hiler, SEC, Courts, and Soft Information, 46 Md. L. Lev. 1114, 1114-16, 1123, 1171 (1987) (in "the usual types of cases in which soft information is at issue, one can say generally that when issuers or insiders are involved in a transaction with shareholders, such as a leveraged buyout or a merger that they recommend to stockholders, they will have a duty to disclose material facts to which they have access"). FMC's fiduciary interest in not being required to disclose soft information thus does not affect the conclusion that FMC may not seek damages where the information is leaked but the leak did not lead to injury to shareholders but rather benefitted them.
This is not a case where valuable corporate secrets were destroyed by misappropriation or unauthorized disclosure, which otherwise could and would have been kept confidential indefinitely, and of which any potential unrealized value was thus destroyed. As indicated above, the revised recapitalization was consummated on May 28, 1986. By all objective criteria, the transaction was successful and met all of FMC's legitimate objectives. FMC has adduced no admissible evidence to the contrary. FMC has not suggested any legitimate value, and has adduced no admissible evidence of such value, which was not fully realized in the successful consummation of the recapitalization. FMC's legitimate use of the information to plan, structure, and consummate a recapitalization that is fair to all parties was not compromised by premature disclosure that a plan might be in the offing or of its financial backdrop, and no compensable interest of FMC failed to be realized but was destroyed or diminished by premature disclosure.
II. Claim for Rescission of Goldman Sachs' Fee
FMC's first theory for the recovery of the $ 17.5 million fee it paid to Goldman Sachs is fraudulent inducement or breach of contract. There is no material issue of fact here that the goal and purpose FMC's engagement of Goldman Sachs, formalized in the Letter Agreement, was the successful consummation of a so called recapitalization transaction which met certain of FMC's criteria. Important as the preservation of confidentiality might have been to FMC's management, there is no doubt that it was ancillary to this principal objective. As discussed above, by all objective measures, all of FMC's legitimate goals in consummating a transaction that was both fair to its shareholders and that met its strategic business requirements were successfully achieved. Where the alleged breach is of an ancillary obligation, rescission is not an available remedy. As the Second Circuit has put it, "before rescission will be permitted the breach must be 'material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract,'" Septembertide Publishing, B.V. v. Stein and Day, Inc. 884 F.2d 675, 678 (2d Cir. 1989) (quoting Callanan v. Powers, 199 N.Y. 268, 92 N.E. 747 (1910). "As an extraordinary remedy, rescission is appropriate only when a breach may be said to go to the root of the agreement between the parties." Id. Accord Canfield v. Reynolds, 631 F.2d 169, 178 (2d Cir. 1980); Affiliated Hospital Products, Inc. v. Merdel Game Manufacturing Co., 513 F.2d 1183, 1186 (2d Cir. 1975); Croce v. Kurnit, 565 F. Supp. 884, 894 (S.D.N.Y. 1982), aff'd, 737 F.2d 229 (2d Cir. 1984); Nolan v. Williams Music Co., 300 F. Supp. 1311, 1317 (S.D.N.Y. 1969), aff'd sub nom. Nolan v. Sam Fox Publishing Co., Inc., 499 F.2d 1394 (2d Cir. 1974)). In addition, in Croce this court held that rescission was inappropriate because the defendant's breach of fiduciary duty did not defeat the purpose of the contract. Croce 565 F. Supp. 884.
Moreover, rescission is not an available remedy where, as here, plaintiff has realized and paid for the full benefit of the contract. See Rudman v. Cowles Communications, Inc., 30 N.Y.2d 1, 13, 330 N.Y.S.2d 33, 43, 280 N.E.2d 867 (1972); Schank v. Schuchman, 212 N.Y. 352, 106 N.E. 127 (1914) (Cardozo, J.). There are no obvious means to undo the entire restructure transaction, nor has FMC sought such a remedy. As this court stated in Stahl Management Corp. v. Conceptions Unlimited, 554 F. Supp. 890, 894 (S.D.N.Y. 1983), "usually, rescission may be obtained only when it is reasonably feasible to return the parties to their pre-contract status quo." FMC is thus not entitled rescission and restitution of Goldman Sachs' $ 17.5 million fee. "Absent grounds for rescission . . . [plaintiff] has only the right to compensatory damages for breach of the agreement," Affiliated, 513 F.2d at 1186, of which, as discussed above, plaintiff did not suffer any in this case. See also Babylon Associates v. County of Suffolk, 101 A.D.2d 207, 475 N.Y.S.2d 869, 874 (N.Y. App. Div. 1984) (plaintiff not entitled to rescission of contract and restitution for all sums paid thereunder to defendant construction contractor where contractor's breach was caused by subcontractor's illegal conduct and "it is clear that [contractor's] breach . . . was not willful since . . . contractor neither had knowledge nor participated in the subcontractor's criminal activity.").
FMC's second theory for the recovery of the $ 17.5 million fee it paid to Goldman Sachs is for breach of fiduciary duty. Plaintiff is entitled to the forfeiture of Goldman Sachs fee only if Goldman Sachs was not merely negligent but had violated its duty of loyalty to plaintiff by placing its own interest, or that of another, before that of plaintiff. Battle Fowler v. Brignoli, 765 F. Supp. 1202 (S.D.N.Y.), aff'd mem., 952 F.2d 393 (2d Cir. 1991), cert. denied, 112 S. Ct. 1587 (1992). The Court finds on the record as a whole, in the light most favorable to FMC, that Goldman Sachs was at most guilty of negligence and that FMC has adduced no admissible evidence that Goldman Sachs had violated its duty of loyalty. As indicated above, FMC has conceded that it was not within the scope of Brown's employment by Goldman Sachs to disclose confidential client information, that there is no evidence Goldman Sachs had any knowledge that Brown had been engaging in such conduct, and that Brown knew his conduct violated Goldman Sachs' policies on client confidentiality. FMC has failed to adduce any evidence that Goldman Sachs realized any monetary or other direct benefit from either Brown's misbehavior or from Brosens' alleged disclosures. FMC's vague allegations, entirely unsupported by admissible evidence, that Goldman Sachs benefitted indirectly from participating in an amorphous network involving other members of the Wall Street community are at best no more than a showing "that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). "A party may not 'rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment.'" Litton Indus. v. Lehman Bros. Kuhn Loeb Inc., 709 F. Supp. 438 (S.D.N.Y. 1989) (quoting Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir. 1986)), rev'd on other grounds, 967 F.2d 742 (2d Cir. 1992). Goldman Sachs is thus entitled to and is hereby separately granted summary judgment against FMC on its claim for forfeiture of Goldman Sachs' fee.
In summary, for the foregoing reasons, the Court finds on the record as a whole in the light most favorable to FMC that FMC has failed, on Goldman Sachs' motion for summary judgment, to adduce sufficient admissible evidence of specific facts to sustain its complaint. The action is accordingly dismissed with costs.
July 1, 1993
Senior United States District Judge