Facts

Plaintiffs were offered stock in a children's restaurant, Giggles N' Hugs Inc., that had recently gone public through a reverse merger. Plaintiffs purchased 100,000 shares of stock for $329,000 from promoter Richard K. Steele Jr. The stock proved to be undepositable and not worth the amounts paid. After failed efforts to obtain rescission, plaintiffs brought suit against the Steele, Giggles N' Hugs Inc., and the company's Chief Executive Officer, Joey Parsi, alleging fraud and various blue sky violations, including sale of security by an unlicensed broker.

Giggles N' Hugs cross-claimed against its attorney, Gisela Stoecklein, and challenged the suit on the grounds that the sale involved a private transaction between private parties rather than Giggles.

PLAINTIFFS' CONTENTIONS:
Plaintiffs claimed Steele made a series of misrepresentations to induce the purchase of the stock. Plaintiffs sought to impose liability for fraud and securities laws violations upon Steele, Giggles N' Hugs and Parsi.

DEFENDANT'S CONTENTIONS:
Defendants disclaimed any knowledge regarding Steele's activities and contended that plaintiffs assumed the risk of acquiring speculative stock.

Result

In a bench trial, plaintiffs procured a judgment against Steele in the amount of $1,618,877 representing damages, punitive damages, interest and attorney fees. Separately, plaintiffs procured a payment of $40,000 from Stoecklein, $20,000 from Giggles N' Hugs and Parsi and 200,000 additional shares of the company's stock.

Other Information

FILING DATE: July 19, 2012.