OPINION OF THE COURT
Plaintiffs second amended complaint alleges that, in 1993, defendant John L. Faessel introduced himself to plaintiff as a “duly registered investment advisor, specializing in advising high net worth individuals” with respect to the stock market and that, subsequently, Faessel represented to plaintiff that he had “extensive training and expertise as a technical analyst and chartist” as well as a “broad client base” to whom he regularly and successfully provided investment advice. All of Faessel’s representations as to his training, expertise, and experience were allegedly false. The complaint further alleges that, in July 1995, Faessel knowingly made additional false representations to plaintiff regarding Faessel’s relationship with defendant WorldCo, a securities broker-dealer firm, and the expertise and services that WorldCo would and could provide to plaintiff. According to the complaint, between July 1, 1995 and March 31, 1996, plaintiff, acting in reliance on Faessel’s misrepresentations as to his and WorldCo’s qualifications, invested in various securities that Faessel recommended, which resulted in losses to plaintiff of “not less than $41,502,518.” The complaint also alleges that, during the specified time period, Faessel was an employee of WorldCo and subject to WorldCo’s supervision and control.
The complaint includes claims against Faessel based upon fraud, negligent misrepresentation, and breach of fiduciary obligation, and against WorldCo based on WorldCo’s alleged status as Faessel’s employer under the doctrine of respondeat superior. Each count of the complaint demands damages in excess of $41 million.
Evidence developed through discovery established that, from the spring of 1994 through June 30, 1995, plaintiff retained Faessel as a consultant, essentially to provide second opinions with respect to the investment advice plaintiff was receiving from his broker, Bear Stearns & Co., and that he paid Faessel approximately $18,000 during that period for his consulting services. During the first half of 1995, prior to the period when plaintiff allegedly relied on Faessel’s misrepresentations, plaintiff purchased 7,000,000 shares of technology stock, valued at over $400 million, using millions of dollars in margin debt to
In 1997, plaintiff sued Faessel and WorldCo in federal court. The complaint in the federal action set forth essentially the same allegations as are set forth in the present complaint, but included a claim that Faessel’s alleged misrepresentations constituted a violation of federal securities laws, along with claims for common-law fraud, misrepresentation and breach of fiduciary obligation. The federal court dismissed the securities law claims because there was no allegation in the complaint that any of the alleged misrepresentations caused plaintiffs investment losses (Laub v Faessel,
The present appeal stems from Supreme Court’s grant of defendants’ motion for summary judgment dismissing the complaint and its denial of plaintiffs motion to amend his second amended complaint further to add additional parties connected with WorldCo and to assert additional claims against those parties and WorldCo. All of the claims in plaintiffs proposed third amended complaint stem from the same allegations regarding Faessel’s alleged misrepresentations as to his and WorldCo’s expertise and competence.
For each of the direct causes of action included in the complaint — fraud, negligent misrepresentation and breach of fiduciary duty — plaintiff must establish that the alleged misrepresentations or other misconduct were the direct and proximate cause of the losses claimed (see, Wall St. Transcript
To establish causation, plaintiff must show both that defendant’s misrepresentation induced plaintiff to engage in the transaction in question (transaction cáusation) and that the misrepresentations directly caused the loss about which plaintiff complains (loss causation) (see, e.g., Small v Lorillard Tobacco Co.,
Plaintiff has not alleged that Faessel’s misrepresentations concerned the financial condition of any of the companies whose stock he recommended to plaintiff (see, e.g., Hotaling v A.B. Leach & Co.,
Plaintiff’s reliance on Marbury Mgt., Inc. v Kohn (629 F2d 705 [2d Cir], cert denied sub nom. Wood Walker & Co. v Marbury Mgt., Inc.,
Because there is no nexus between the alleged misrepresentations and plaintiffs losses, Supreme Court’s grant of summary judgment dismissing the complaint was entirely appropriate. Because the proposed amendments to the complaint would not change the fundamental deficiency in plaintiffs claims, Supreme Court’s denial of plaintiffs motion to amend the complaint was also appropriate. Supreme Court properly granted defendants’ motion for summary judgment dismissing the complaint for the same reasons that the federal statutory claims were dismissed, i.e., because plaintiff failed to allege or provide any evidence that Faessel’s asserted misrepresentations — rather than market forces — caused plaintiffs alleged losses.
Accordingly, the judgment of the Supreme Court, New York County (Jane Solomon, J.), entered September 24, 2001, dismissing the second amended complaint and bringing up for review an order, same court and Justice, entered August 29, 2001, which denied plaintiffs motion to amend the complaint and granted defendants’ cross motion for summary judgment, should be affirmed, without costs. The appeal from the aforesaid order should be dismissed, without costs.
Tom, J.P., Mazzarelli, Wallach and Marlow, JJ., concur.
Judgment, Supreme Court, New York County, entered September 24, 2001, affirmed, without costs. Appeal from order, same court, entered August 29, 2001, dismissed, without costs.