Commercial Litigation and Arbitration

Morgan Stanley’s Florida Miracle (For Now) — Reversal on Expert Economic Testimony

Download associated file: Morgan Stanley v Coleman.pdf 

The $1.58 billion verdict and judgment entered against Morgan Stanley in Florida state court was reversed on March 21, with instructions to enter judgment for the defendant (no new trial). The 2 to 1 decision of the Florida Court of Appeal in Morgan Stanley & Co., Inc. v. Coleman (Parent) Holdings, Inc., No. 4D05-2606 (Fla. App. March 21, 2007), is attached. The electronic discovery violations were irrelevant to the decision, which turned on damages exclusively. Citing federal precedent which it perceived to be congruent with Florida law, the Florida Court of Appeal reversed the judgment because of the failure of the plaintiff's economic expert to conduct an event study or otherwise "to prove the actual, 'fraud-free' value of the stock at the time of purchase" and the plaintiffs' failure "to present any competent proof at trial establishing the absence of non-fraud related factors."

The majority also reversed the punitive damages award, distinguishing an assault and battery decision and holding that "[p]unitive damages for fraud cannot be based on nominal damages alone."

The lengthy and erudite dissent, the size of the judgment and the importance of the issues likely guarantee review by the Florida Supreme Court.

The intriguing question is why there was no remand for a new trial on damages. If you view Morgan Stanley's conduct below as reprehensible, this seems very harsh. If you consider that Morgan Stanley was not treated appropriately by the lower court, it seems understandable. Sometimes the most important themes driving opinions go unstated.

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