The opinion of the court was delivered by: Bauer, District Judge.
MEMORANDUM OPINION AND ORDER
On March 28, 1974 this Court adjudged the defendant A.G.
Becker & Co., Inc. liable to plaintiff on Counts I, II, VI, X,
XI, XIII, and XIV of the instant complaint. Since that time
the parties, in support of their respective positions, have
submitted briefs concerning the amount of damages and interest
they deem appropriate.
On June 26, 1974 this Court reviewed the commutations as to
damages made by the parties. This Court in its Memorandum
Opinion and Order stated that some form of prejudgment
interest was appropriate in this case and requested the
parties to submit to the Court their calculations as to how
much interest would be proper.
Defendant, A.G. Becker & Co., Inc. has never waived its
argument that plaintiff is not entitled to any prejudgment
interest. However, in light of a recent decision by the Court
of Appeals for the Seventh Circuit and other decision by
federal courts in securities cases, it is now clear that
prejudgment interest may be awarded in situations wherein
through the fault of another the plaintiff was deprived of
beneficial use of his funds. See Madigan, Inc., et al. v.
Goodman, 498 F.2d 233 (7th Cir. 1974); Janigan v. Taylor,
344 F.2d 781 (7th Cir. 1965); Reube v. Pharmacodynamics, Inc.,
348 F. Supp. 900 (E.D.Penn. 1972).
As Judge Cummings stated in Madigan (supra):
". . . Smith v. Boles, supra, apparently the
first case to announce the federal rule, allowed
interest on the purchase price. Had plaintiffs
not purchased the Fidelity stock, or purchased at
a lower price, they would have put the unused
money somewhere, even if only in a savings
account. Unlike the non-existent profits
envisioned as a result of defendants'
misrepresentations, the chance
to use their money elsewhere was actually lost to
plaintiffs . . ." 498 F.2d at 240.
Defendant alternatively argues that if prejudgment interest
is allowed, "interest should be assessed only from the date on
which the damages are liquidated; that is, the date of sale
for those shares of Ranchers stock which were sold on April
30, 1970, and March 9, 1971, for the Red Rope stock and for
the remainder of the Ranchers stock." According to defendant's
computations, this would result in an assessment of
prejudgment interest (through July 30, 1974) of $4,352.28.
On the other hand plaintiff contends that prejudgment
interest must be assessed on the entire purchase price on each
transaction from the date of purchase to the earlier of date
of sale or the date of discovery of fraud and thereafter on
the aggregate loss incurred to date of judgment. According to
plaintiff's calculations this would amount to $5,685.25 in
interest on the Ranchers transaction and $5,806.44 in interest
on the Red Rope transaction. Plaintiff also seeks costs of
$1,123.21. This amounts to $11,491.69 in interest in a case
wherein the total damages to be awarded are $21,867.50.
Nevertheless the Court does not believe that the plaintiff's
method of computation of damages and interest is inequitable.
The defendant was found to be the "wrongdoer" in the series of
stock transactions which were the subject of the litigation.
A.G. Becker & Co., Inc. had the use of the plaintiff's funds
for an extended period of time. A unique and special
relationship existed between the parties and the defendant
breached its affirmative duty as plaintiff's broker. A failure
to assess interest on the purchase price would have the affect
of allowing parties to speculate with the funds of innocent
persons, without fully compensating such victims for the
unlawful use of their assets.
The Securities Exchange Act of 1934 provides for a
recissional remedy to a defrauded purchaser (see § 29(b),
15 U.S.C. § 78cc(b)). In lieu of rescission the Court still feels
that plaintiff is entitled to an award of monetary damages
sufficient to place him in the position he would have been had
it not been for defendant's wrongful activity. Allowing
damages, interest, and costs restores plaintiff to that
position. Plaintiff can only be made whole if placed in a
posture which assumes that he had the opportunity to utilize
his funds in a reasonable manner. The law does not permit
defendants to obtain the beneficial use of plaintiff's funds at
no cost to the wrongdoer.
This Court, having rendered a verdict against the defendant,
A.G. Becker & Co., Inc., and in favor of plaintiff, John F.
Cant, on Counts I, II, III, IV, V, VI, X, XI, XIII and XIV of
the complaint on March 28, 1974 hereby enters the following
Accordingly, it is hereby ordered that the plaintiff, John
F. Cant, recover of the defendant, A.G. Becker & Co., Inc.,
damage in the amount of $21,492.50, interest in the amount of
$11,491.96, and costs in the amount of $1,123.21, the sum of
which is $34,107.67.
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