642 F.3d 293
2d Cir.2011Background
- Wolfson pumped up prices of thinly-traded securities in which he held a substantial interest and sold them to investors at inflated values.
- Brokers in the scheme allegedly took large, sometimes undisclosed commissions, and sometimes made misrepresentations about commission sizes.
- Wolfson argued brokers had no duty to disclose commissions and that the district court gave an improper fiduciary-duty instruction.
- The district court denied relief under Fed. R. Crim. P. 33, citing this court’s Szur ruling, and Wolfson appealed directly.
- The Second Circuit held the brokers owed a fiduciary duty to disclose exorbitant commissions, and that the jury instruction was correct, following Szur and related precedents.
- The court affirmed Wolfson’s first conviction and, in light of that affirmation, also affirmed the related guilty plea and second conviction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether brokers owed a duty to disclose commissions. | Wolfson: brokers had no fiduciary duty to disclose commissions. | Wolfson: district court failed to properly instruct on fiduciary duty. | Duty to disclose commissions found; no reversible error in instruction. |
| Whether the fiduciary-duty jury instruction was proper under Szur/Skelly. | Szur limited reach of fiduciary duty in such relationships. | Instruction aligned with Szur; Skelly does not restrict Szur’s holdings. | Instruction correct; no error in charge. |
| Whether the Rule 33 challenge warrants reversal on direct appeal. | Arguments should be considered under Rule 33 standards. | Traditional Szur rule governs; no plain error found. | No plain error; arguments unavailing. |
| Impact of the first conviction on the second plea/conviction. | Reversal of first judgment would affect second. | Second judgment is independent once the first stands. | Second judgment affirmed by virtue of first affirmation. |
Key Cases Cited
- Szur, 289 F.3d 200 (2d Cir. 2002) (fiduciary duty elements include reliance and de facto control; promotes disclosure relevance)
- United States v. Skelly, 442 F.3d 94 (2d Cir. 2006) (proper fiduciary jury instruction requires reliance and dominance elements)
- SEC v. First Jersey Securities, Inc., 101 F.3d 1450 (2d Cir. 1996) (implied representation that prices charged are reasonably related to market prices)