April 8, 1996, Commonwealth would probably have agreed to have the registration of the warrants "piggybacked" on that application, thus lessening any expense to Palomar. (Tr. 45-46).
Mr. Falk also testified without contradiction that, once the 250,000 shares had been received, Commonwealth would have proceeded to sell them on the market over a relatively short period of time, at all events within thirty days after receipt. (Tr. 39-40). In support of that suggestion, Mr. Falk noted that by March 1996, the volume of transactions in Palomar stock was quite substantial, thus permitting quicker sale of the 250,000 shares without disrupting the market price. (Id.).
If events had followed that course, the registration would have been effective by June 14, 1996, since that was in fact the effective date of the April registration statement. (Tr. 47). In view of plaintiff's interest in raising cash quickly before June 30, 1996, we readily infer that it would have sold the shares between June 14 and June 28, 1996, the available trading period after the registration took effect. (See Tr. 39-40).
For simplicity we will assume that equal numbers of shares would have been sold daily on those trading days. Based on the prices for those days reported by NASDAQ, that scenario would have generated $ 3,567,500.00 in revenue.
Less the $ 3.00 per share price payable to Palomar under the terms of the warrants, Commonwealth would have realized $ 2,817,500.00 in profit on this transaction.
In opposing this conclusion Palomar presses the notion that it materially breached the contract as early as April 1995 by failing to deliver the warrants to plaintiff and by failing to make the required monthly payments commencing in or around that period. Defendant then cites Schultz v. Commodity Futures Trading Comm'n, 716 F.2d 136, 140-41 (2d Cir. 1983), for the proposition that plaintiff's recoverable loss is the market value of the warrants shortly after the time of the breach -- that is, the failure to deliver the warrants in the Spring of 1995. According to defendant, the warrants at the time had at least some theoretical value, which it calculates at $ 125,000.00, and defendant therefore argues that plaintiff's recoverable damages are limited to this sum and the $ 100,000.00 in monthly payments that were concededly not made, or a total of $ 225,000.00, plus interest.
Defendant misconstrues the import of Schultz. The Court there dealt with a claim for conversion of securities and addressed the measure of damages that applies to an asset with a fluctuating market price. As the Second Circuit noted, the benchmark standard was established by the Supreme Court in Galigher v. Jones, 129 U.S. 193, 32 L. Ed. 658, 9 S. Ct. 335 (1889), a case in which a stockbroker had failed to purchase shares of stock at his customer's instructions and had sold other shares without authorization. Addressing the question of damages, the High Court held:
the measure of damages in stock transactions of this kind is the highest intermediate value reached by the stock between the time of the wrongful act complained of and a reasonable time thereafter, to be allowed to the party injured to place himself in the position he would have been in had not his rights been violated.