Berkowitz v. Baron

428 F. Supp. 1190 (1977)

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Berkowitz v. Baron

United States District Court for the Southern District of New York
428 F. Supp. 1190 (1977)

SC

Facts

On August 26, 1970, Gail and Joel Baron (defendants) sold their two clothing companies to Nathaniel Berkowitz, Edward Yaste, and Howard Hoffman (the buyers) (plaintiffs). In purchasing the companies, the buyers relied in part on the companies’ financial statement for the fiscal year ending April 30, 1970. In that financial statement, the Barons included shipping expenses as part of the companies’ manufacturing overhead. The buyers were not able to revive or maintain the companies’ business and ultimately closed the manufacturing plant on October 23, 1970. The buyers sued the Barons for securities fraud, alleging that the financial statement was materially misleading. The buyers presented expert testimony that the Barons’ inclusion of shipping expenses as manufacturing overhead did not comply with generally accepted accounting principles (GAAP).

Rule of Law

Issue

Holding and Reasoning (Cannella, J.)

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Casebooks

Accounting

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