Robert Solomon v. U.S. Trust, Paul Woods
Published: Apr. 8, 2003 | Result Date: Oct. 25, 2002 | Filing Date: Jan. 1, 1900 |Case number: BC248208 – $0
Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Joanna S. McCallum
(Manatt, Phelps & Phillips, LLP.)
Steven M. Goldberg
(Manatt, Phelps & Phillips, LLP)
Defendant
Joshua G. Hamilton
(Latham & Watkins LLP)
Experts
Plaintiff
Steven S. Thel
(technical)
Edward B. Horwitz
(technical)
Defendant
John D. Maine
(technical)
Allan Rockler
(technical)
Facts
According to the plaintiff: The defendant U.S. Trust Company, N.A. and its employee, Paul Woods, performed discretionary investment management services for the plaintiff. The plaintiff placed significant assets under the defendant's discretionary management and control. The defendants determined and controlled the plaintiff's investment portfolio. Although the portfolio performed well for a time, ultimately it suffered substantial losses. In mid-2000, the plaintiff transferred his assets to Woods' new company, Odyssey Advisors. Within six months, virtually all of the assets that had been managed by the defendants were gone. ACCORDING TO DEFENDANT WOODS: The plaintiff opened investment accounts at U.S. Trust in 1993. The defendant Paul Woods at U.S. Trust was assigned as the account's investment adviser. The plaintiff's main collateralized account had risen from margined out in September 1998 to approximately $14 million in value on Dec. 31, 1999. In the summer of 2000, Woods left U.S. Trust and formed his own firm, Odyssey. In the fall of 2000, the plaintiff transferred his accounts from U.S. Trust to Odyssey. The account thereafter declined in value. When liquidated at the beginning of 2001, the plaintiff, after paying off his margin debt of about $3 million received approximately $200,000 on his main account. ACCORDING TO U.S. TRUST: The plaintiff opened investment accounts at U.S. Trust in 1993 by borrowing $2.3 million from U.S. Trust to create two separate investment accounts with a combined initial value of $2.8 million. The defendant Paul Woods at U.S. Trust was assigned as the account's investment adviser. The plaintiff's accounts fluctuated in value over the years. The plaintiff's accounts rose to $5.7 million in value in 1997, dropped to $2.8 million in 1998, jumped to $15 million at the end of 1999, and fell back to $6.5 million in May 2000. In the summer of 2000, Woods left U.S. Trust and formed his own firm, Odyssey. In September and October 2000, the plaintiff transferred all of his accounts from U.S. Trust to Odyssey. At the time of the transfer to Odyssey, the accounts had rebounded to a value of $10.3 million. The plaintiff's accounts at Odyssey thereafter declined in value. In January 2001, the plaintiff's accounts at Odyssey had dropped to $3.9 million in value, at which time plaintiff froze his accounts and paid off his margin debt of about $3 million. After paying off the margin, the plaintiff's accounts had a value of approximately $900,000. The plaintiff brought suit against U.S. Trust and Woods, alleging a loss of $11 million. The plaintiff's claims against Odyssey were tried in a separate AAA arbitration proceeding where the plaintiff was unsuccessful.
Result
The court entered summary judgment in favor of the defendants. According to U.S. Trust, the court, based on the undisputed facts, found that the plaintiff had broad experience as an investor for years before he opened his accounts at U.S. Trust, including large investments in junk bonds, start-up companies, and commodities. The court further found that the plaintiff had executed numerous investor statements acknowledging his financial sophistication and participation in high risk investments, that he made his own investment decisions that he was an accredited investor, and that he had received detailed monthly statements from U.S. Trust. Based on these facts, the court determined that the plaintiff was a sophisticated investor who had by his conduct ratified the transactions made on his behalf and on that basis, it granted summary adjudication on the negligence and breach of fiduciary duty claims. The court also granted summary judgment as to all causes of action on the grounds that the plaintiff's damage claim was speculative as a matter of law because it was impermissibly based purely on hindsight to rework the portfolio to determine when a different investment approach should have been taken, what that approach should have consisted of and what different stocks or other instruments should have been bought and sold under the different approach. Finally, the court found that the defendants were not responsible for any losses that the plaintiff suffered while the accounts were at Odyssey because Odyssey's authority over the accounts was a superseding cause of any damages incurred after the transfer of the accounts to Odyssey. However, the court denied that defendants' motion on the claim of res judicata and did not render a decision on the claim that the agreement language barred the claims.
Other Information
The plaintiff has filed a notice of appeal on Dec. 18, 2002. That appeal is pending.
For reprint rights or to order a copy of your photo:
Email
jeremy@reprintpros.com
for prices.
Direct dial: 949-702-5390