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Keywords

defendantdamagesfiduciarypartnershipfiduciary dutybreach of fiduciary dutypiracy
defendantdamagesfiduciarywillcorporationfiduciary dutybreach of fiduciary duty

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Newburger, Loeb & Co., Inc. v. Gross, 563 F.2d 1057, 24 Fed.R.Serv.2d 42, Fed. Sec. L. Rep. P 96,148, 1977-2 Trade Cases P 61,604

Facts

The case centers around the financial troubles of the New York brokerage firm Newburger, Loeb & Co. and its successor, which led to the departure of managing partner Charles Gross. After Gross became a general partner in the firm, he invested significant capital but later faced management issues and capital problems. Following his withdrawal from the firm, a reorganization was proposed that Gross and other partners opposed, leading to allegations of coercion and manipulation by the remaining partners to gain control of the firm's assets.

The case centers around the financial troubles of the New York brokerage firm Newburger, Loeb & Co. and its successor, which led to the departure of managing partner Charles Gross.

Issue

The main legal issues include whether the churning claim was valid under the Securities Exchange Act and whether the defendants' counterclaims for civil conspiracy and breach of fiduciary duty were justified.

The Corporation argues that Judge Owen's finding that the Buckley account was not churned is clearly erroneous.

Rule

The court applied principles of fiduciary duty under New York Partnership Law and evaluated the validity of the churning claim based on the definition of churning as a deceptive practice under the Securities Exchange Act.

Churning has been held to be a deceptive device within s 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, for which a private cause of action for damages will lie.

Analysis

The court found that the evidence did not support the churning claim, as the account in question was non-discretionary and the customer had authorized all transactions. However, the court determined that the actions of the remaining partners constituted a breach of fiduciary duty, as they engaged in coercive tactics to force Gross into consenting to the asset transfer, which violated partnership law.

The court found that the evidence did not support the churning claim, as the account in question was non-discretionary and the customer had authorized all transactions.

Conclusion

The court affirmed the dismissal of the churning claim but reversed the judgment on the conversion counterclaim, holding that the defendants were entitled to damages for the breach of fiduciary duty.

The court affirmed the dismissal of the churning claim but reversed the judgment on the conversion counterclaim.

Who won?

The defendants prevailed on the breach of fiduciary duty counterclaims, as the court found that the actions of the remaining partners were coercive and violated their fiduciary obligations.

The defendants prevailed on the breach of fiduciary duty counterclaims, as the court found that the actions of the remaining partners were coercive and violated their fiduciary obligations.

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