certainty and evidence of proximate causation, plaintiffs could recover pursuant to either of these measures of damage. However, since the parties have not fully briefed the issues surrounding these theories of recovery and since plaintiffs are normally entitled to choose which damages avenue to pursue, we see no reason to comment upon the merit of either of these measures at this time. Similarly, we decline to address defendants' contentions that previous Rent Pool disbursements and the unpaid balance of the Panoses' mortgage should offset an out-of-pocket damage award. We merely hold here that pursuant to their § 10(b) claims, plaintiffs may not recover on a benefit-of-the-bargain damage theory for either the wrongful imposition of the amendments to the A&Gs or for the fraudulent concealment of the title cloud.
B. The Common Law
Plaintiffs also assert both of their benefit-of-the-bargain damage theories under their common law fraud and breach of contract causes of action. At the outset, since plaintiffs are residents of New York and California respectively and defendant Island Gem is a Netherlands Antilles company, we must determine which jurisdiction's law to apply to plaintiffs' claims. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938).
Under Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 494, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941), a federal court sitting in diversity applies the choice of law jurisprudence of the forum state. This same principle controls when the court's jurisdiction over state law/common law claims is pendent, as herein. Norlin Corp. v. Rooney, Pace, Inc., 744 F.2d 255, 263 (2d Cir. 1984). Accordingly, this Court must look to New York choice of law principles in determining which jurisdiction's law will govern.
New York has adopted an "interest analysis" as a guide to making this choice, focusing on the relationship between the respective jurisdictions and the issues in dispute. Schultz v. Boy Scouts of America, Inc., 65 N.Y.2d 189, 197, 491 N.Y.S.2d 90, 95, 480 N.E.2d 679 (1985). Before assessing the relative interests, however, the court must determine whether there is an "actual conflict" between the laws of the jurisdictions involved. Matter of Allstate Insurance Co., 81 N.Y.2d 219, 223, 613 N.E.2d 936, 937, 597 N.Y.S.2d 904 (1993) (Kaye, C.J.). Such a conflict exists when "'one State's interest [in applying its law] cannot be accommodated without sacrificing the other's.'" Miller v. Bombardier, Inc., 872 F. Supp. 114, 117 (S.D.N.Y. 1995) (quoting Cooney v. Osgood Machinery, Inc., 81 N.Y.2d 66, 76, 612 N.E.2d 277, 283, 595 N.Y.S.2d 919 (1993) (Kaye, C.J.)). In this case, the parties fail to brief fully Netherlands Antilles fraud and breach of contract law and New York and California breach of contract law. We are therefore unable to determine whether the jurisdictions' laws are in conflict regarding benefit-of-the-bargain recoveries;
and hence which law to apply to plaintiffs' common law claims. Therefore, based on the submissions before us, we must deny defendants' motion to restrict plaintiffs' common law damages.
Although the parties have fully briefed the issues surrounding benefit-of-the-bargain damages under § 10(b), they have each devoted only a few pages to addressing damages under the common law. In their trial memorandum, plaintiffs argue that New York law applies to the Panoses' breach of contract and fraud claims and California law to the Wohls', and that both of these states' laws support plaintiffs' benefit-of-the-bargain theories. Plaintiffs' Trial Mem., at 191. Defendants, referring to their trial memorandum, contend that Netherlands Antilles law controls, allegedly preventing a benefit-of-the-bargain recovery. Defendants' Mem. in Support, at 23 n.17. As a fall back position, defendants claim that even under New York and California law plaintiffs may not recover their asserted damages for common law fraud.
While plaintiffs cite specific California and New York case law and applicable statutes to support their damage claims, defendants rely solely on the affidavit of Lucius Halley as proof of Netherlands Antilles law. Citing Article 1382 of the Civil Code of the Netherlands Antilles,
Halley contends that plaintiffs may only recover on their fraud claims for "the actual damage suffered as a direct result of defendants' acts," not "speculative" recoveries such as benefit-of-the-bargain damages. Halley Aff., at 1. Similarly, defendants argue that benefit-of-the-bargain damages on plaintiffs' breach of contract claim are unrecoverable under Netherlands Antilles Code Articles 1260-69. Halley Aff., at Exhibit 7. Neither party provides Netherlands Antilles case law specifically addressing benefit-of-the-bargain damages under either fraud or breach of contract causes of action, however. Absent guidance on interpreting Netherlands Antilles law, we are unable to determine from either the parties' briefs or the broad language of the Netherlands Antilles Code whether a conflict in fact exists between the jurisdictions' laws.
Moreover, even if no conflict exists, defendants fail to address plaintiffs' breach of contract theories under New York and California law, and neither party discusses the import of Cal. Civ. Code § 3343(a)(4) which, it appears to the Court, might govern the Wohls' recovery on their fraud claim if California law were to apply. See Stout v. Turney, 22 Cal. 3d 718, 586 P.2d 1228, 150 Cal. Rptr. 637 (1978).
Given the uncertainty surrounding Netherlands Antilles law, and the partial briefing of New York and California common law, we are forced at this time to deny defendants' motion in limine with respect to plaintiffs' common law damage claims. We invite defendants to renew their motion with respect to these claims, however, if they can demonstrate either 1) that New York and California law do not support either of plaintiffs' benefit-of-the-bargain damage theories under either of plaintiffs' common law claims,
or 2) that Netherlands Antilles law denies benefit-of-the-bargain recoveries on plaintiffs' common law claims, and that it controls under the facts of this case.
For the reasons stated above, defendants' motion to bar plaintiffs' benefit-of-the-bargain damage recovery under § 10(b) is granted, and defendants' motion to restrict plaintiffs' damage recovery under their fraud and breach of contract causes of action is denied. We invite the parties to readdress plaintiffs' common law damage theories at a later time in accordance with the directions above.
Dated: March 16, 1995
New York, New York
William C. Conner, U.S.D.J.