GFL Advantage Fund, Ltd. v. Colkitt

272 F.3d 189 (2001)

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GFL Advantage Fund, Ltd. v. Colkitt

United States Court of Appeals for the Third Circuit
272 F.3d 189 (2001)

Facts

Douglas Colkitt (defendant) was the founder of EquiMed, Inc. (EquiMed) and National Medical Financial Services Corporation (National Medical) and owned the majority of the shares of stock of both companies. Colkitt was loaned money by GFL Advantage Fund, Ltd. (GFL) (plaintiff) to finance other business ventures. In exchange for the loans, Colkitt gave GFL notes that granted GFL the right to receive Colkitt’s shares of EquiMed and National Medical and to use those shares as collateral to repay the debt owed by Colkitt. Months after issuing the loans to Colkitt, GFL demanded Colkitt’s EquiMed and National Medical shares. Unbeknownst to Colkitt, GFL also began to short-sell the stock. GFL sued Colkitt, alleging that Colkitt breached his contractual obligations under the notes. Colkitt asserted counterclaims against GFL, seeking to rescind the notes on the grounds that GFL violated securities laws by manipulating EquiMed’s and National Medical’s stock. The district court dismissed Colkitt’s counterclaims. Colkitt appealed.

Rule of Law

Issue

Holding and Reasoning (Scirica, J.)

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