Bass, Berry & Sims attorney Chris Lazarini provided comment on the case of Emerman vs. Financial Commodity Investments, LLC in which the Court granted summary judgment to Defendants, finding that Plaintiff failed to present evidence from which a reasonable trier of fact could ascertain damages. Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.
Emerman vs. Financial Commodity Investments, LLC, No. 1:13cv2546 (N.D. Ohio, 1/19/16)
The essence of a fraud action is that the injured party must have suffered some provable amount of damage.
Plaintiffs filed this fraud and breach of fiduciary duty action to recover alleged losses in Defendants' commodity trading program. Defendants moved for summary judgment after the Court issued an order prohibiting Plaintiffs from offering expert or other testimony supporting or explaining their damages spreadsheet, because Plaintiffs failed to timely identify any expert witness under Rule 26 and otherwise violated the Court's discovery orders regarding their alleged damages (SLA 2015-43).
Plaintiffs' damages spreadsheet was approximately 200 pages in length. Defendants highlighted numerous issues potentially affecting Plaintiffs' calculations, including the proper treatment of notional funding, management fees, and withdrawals prior to discovery of the alleged fraud. Defendants argued that these issues could not be resolved, and Plaintiffs could not prove damages, without expert testimony. Plaintiffs countered that the proper measure of damages was the highest account value attained. They suggested that a simple comparison of the change in account values – which they contended was evident on the face of the spreadsheet – was sufficient to show a genuine issue of material fact. Determining the precise amount of damages, they contended, should be left for trial. The Court disagrees, finding Defendants' issues valid and criticizing Plaintiffs' failure to address them. Describing Plaintiffs' spreadsheet as a bewildering and confusing array of unexplained abbreviations, terms and numbers, the Court concludes that Plaintiffs failed to establish a genuine issue of material fact and failed to present evidence from which a reasonable trier of fact could ascertain damages.
We have summarized several prior decisions in this proceeding. See SLA 2015-06 (reporting on the Court's decision to allow Plaintiffs to amend their complaint after the deadline for filing amendments had passed), SLA 2015-26 (reporting on the dismissal of Defendants' counterclaims), and SLA 2015-43 (referenced above). These decisions highlight the importance of following the rules and court orders, and demonstrate at least one court's exercise of restraint so that the matter might be decided on its merits, instead of a procedural miscue. In the end, however, Plaintiffs' failure to timely name a damages expert, despite multiple opportunities to do so, proved to be their undoing.