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03/21/13 3:43 PM

#10065 RE: leifsmith #10062

This John Faessal? Yep I'd trust him...

Supreme Court, Appellate Division, First Department, New York.
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LAUB v. FAESSEL
Kenneth D. LAUB, Plaintiff-Appellant, v. John L. FAESSEL, et al., Defendants-Respondents.

-- August 01, 2002

PETER TOM, J.P., ANGELA M. MAZZARELLI, ERNST H. ROSENBERGER, RICHARD W. WALLACH and GEORGE D. MARLOW, JJ.
David Boies, of counsel (Sherab Posel and David Bergman, on the brief, Boies, Schiller & Flexner LLP and Frydman & Bergman, attorneys) for plaintiff-appellant.Glen Banks, of counsel (Felice B. Galant, on the brief, Fulbright & Jaworski L.L.P., attorneys) for defendants-respondents.

Plaintiff's 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 finance those transactions through Bear Stearns. In addition, both before and during the period in which plaintiff allegedly was relying to his detriment on Faessel's misrepresentations and investment recommendations, plaintiff controlled and determined what trades were actually made for his account, as well as what and how many shares of stock he would buy and when. From July 1995 through December 1995, plaintiff actively traded stock only through Bear Stearns; ?during the first quarter of 1996, plaintiff traded stock through a number of leading brokerage firms, including Bear Stearns, Morgan Stanley, Goldman Sachs, Salomon Brothers, and WorldCo, among others. In the first quarter of 1996, the stock market declined, particularly in technology equities. Plaintiff, having invested heavily on margin, sold a great deal of his technology stock, allegedly at a loss of over $41 million. Plaintiff seeks to recoup those losses through the current action.


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 plaintiff's investment losses (Laub v. Faessel, 981 F.Supp. 870, 872-873 [S.D.N.Y.]?). Having dismissed the Federal claims, the court declined to exercise jurisdiction over the remaining State common-law claims (id., 981 F.Supp. at 873). Rather than appeal, plaintiff commenced the instant action.

The present appeal stems from Supreme Court's grant of defendants' motion for summary judgment dismissing the complaint and its denial of plaintiff's 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 plaintiff's proposed Third Amended Complaint stem from the same allegations regarding Faessel's alleged misrepresentations as to his and WorldCo's expertise and competence.

http://caselaw.findlaw.com/ny-supreme-court-appellate-division/1191860.html