Marini v. Adamo
995 F. Supp. 2d 155
E.D.N.Y2014Background
- Plaintiffs Marini, Mrs. Marini, and T & R allege securities fraud under §10(b) and New York common law (fraud, breach of fiduciary duty, unjust enrichment, money had and received) arising from purchases of 86 rare coins from Adamo between 2002 and 2007; in 2008 they discovered the coins were worth far less than paid.
- Court conducted a bench trial (October 2012 to April 2013) and issued Findings of Fact and Conclusions of Law, concluding liability on several claims and detailing damages and remedies.
- Defendants Adamo, H. Edward, and Bolton were found liable for Exchange Act violations and common law fraud; Mrs. Adamo’s unjust enrichment/money had and received liability required supplemental briefing; punitive damages were declined.
- Court found Adamo overcharged and inflated coin valuations, used coded coin statements, and made oral misrepresentations about liquidity, which induced further purchases.
- On April 11, 2012, the parties stipulated that the coin transactions constitute securities under the Exchange Act; post-trial briefing was ordered on damages for the Exchange Act claim and on Mrs. Adamo’s unjust enrichment liability.
- T&R was dismissed from the action with no impact on plaintiffs’ recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the coin transactions securities under the Exchange Act? | Coins qualify as securities under Howey; transactions within the suit were securities. | The coins were not securities; arguments about market constructs and transaction nature. | Yes; transactions were securities; jurisdiction established and Howey elements supported. |
| Did Adamo’s misrepresentations and markups violate §10(b) and common law fraud? | Adamo engaged in material misrepresentations and excessive markups to induce purchases. | Disputes as to methodology and credibility; some statements considered puffery. | Yes; liability under §10(b) and under New York common law fraud established. |
| What are the statute of repose/limitations effects on recovery? | Disgorgement of all post-discovery transactions possible; limitations arguments should not bar full recovery. | Repose bars pre-9/30/2003; limitations bars pre-9/30/2006. | Statute of repose bars pre-9/30/2003 transactions; limitations bars pre-9/30/2006 apply to Exchange Act claims; post-9/30/2003 transactions addressed with supplemental damages briefing. |
| Are Adamo, H. Edward, Bolton and Mrs. Adamo liable for fiduciary duty, unjust enrichment, and money had and received? | Adamo owed fiduciary duty; corporations liable under respondeat superior; unjust enrichment possible. | Challenging existence of fiduciary duty; joint accounts and benefits questioned. | Adamo and corporate defendants liable for fiduciary duty and unjust enrichment/money had and received; Mrs. Adamo's unjust enrichment liability requires supplemental briefing; T&R dismissed from the claim. |
| What damages and remedies are awarded? | Compensatory damages equal to out-of-pocket loss plus interest; punitive damages sought. | Disputes over exact figures and the proper base for damages; punitive damages optional. | Compensatory damages awarded $11,304,079 on state-law claims; prejudgment/post-judgment interest awarded; punitive damages denied; Exchange Act damages require supplemental briefing. |
Key Cases Cited
- First Jersey Sec., Inc. v. Gruner & Jahr Publishing Co., 101 F.3d 1450 (2d Cir.1996) (excessive markups and duties of disclosure in securities transactions)
- Grandon v. Merrill Lynch & Co., Inc., 147 F.3d 184 (2d Cir.1998) (extending First Jersey to include excessive markups in non-equity securities)
- Press v. Chem. Inv. Servs. Corp., 166 F.3d 529 (2d Cir.1999) (factors for determining whether a markup is excessive; duties of disclosure)