Eurycleia Partners, LP v. Seward & Kissel, LLP
New York Court of Appeals
12 N.Y.3d 553, 910 N.E.2d 976 (2009)
Wood River Partners, LP (Wood River) was a hedge fund. Seward & Kissel, LLP (Seward) (defendant) was the legal counsel of Wood River. Seward drafted an offering memorandum for investors in Wood River. Wood River’s offering memorandum indicated that Wood River would not invest more than 10 percent of the total assets of the hedge fund in any individual stock. Eventually, Wood River had invested about 65 percent of the hedge fund’s total assets in Endwave Corporation stock. Sixteen limited partners (plaintiffs) of Wood River sued Seward for fraud, specifically for misrepresenting that Wood River was following its 10 percent cap on individual stocks. However, there was no evidence that Seward knew that Wood River had been violating the 10 percent cap. The appellate division dismissed the limited partners’ complaint. The limited partners appealed.
Rule of Law
Holding and Reasoning (Graffeo, J.)
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