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Beecher v. Able

United States District Court for the Southern District of New York
435 F. Supp. 397 (1975)


Douglas Aircraft Company, Inc. (Douglas) (defendant) sold $75 million in debentures. The plaintiff brought suit based on § 11 of the Securities Act of 1933. The district court agreed with the plaintiff that Douglas had sold the debentures under a prospectus that contained a materially false break-even prediction. For purposes of calculating damages, neither party wanted to value the debentures at market value. The plaintiff argued that the value should be below the debentures’ market price due to a financial crisis Douglas was experiencing. Douglas argued that the value should be above the debentures’ market price due to Douglas’s good prospects of financial recovery. Further, Douglas argued that the court should account for the company’s release of poor third quarter earnings right before the plaintiff filed the lawsuit. Douglas claimed that this report resulted in panic selling, thus depressing the market value of the debentures.

Rule of Law


Holding and Reasoning (Motley, J.)

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