Globus v. Law Research Service, Inc.
United States Court of Appeals for the Second Circuit
418 F.2d 1276 (1969)
Buyers (buyers) (plaintiffs) of the stock of Law Research Service, Inc. (Law Research) (defendant) brought suit against Law Research; its president, Ellias C. Hoppenfeld (defendant); and underwriter Blair & Co., Granberry Marache Inc. (Blair) (defendant) under the Securities Act of 1933. The buyers alleged that the offering circular (i.e., a type of prospectus) for Law Research’s public offering was materially misleading. Arguing that Law Research was more culpable, Blair in turn filed a cross-claim against Law Research pursuant to the indemnification clause in their underwriting agreement. The jury found Law Research, Hoppenfeld, and Blair to be liable to the buyers and awarded compensatory and punitive damages against all three. The jury also found for Blair on its indemnification cross-claim. However, the district court set aside Blair’s cross-claim victory. The district court reasoned that the jury’s compensatory and punitive damages awards against Blair necessarily meant that it found Blair to have had actual knowledge of the material misstatements. Under these circumstances, the district court ruled, it would be against public policy to allow Blair to obtain indemnification. Blair appealed.
Rule of Law
Holding and Reasoning (Kaufman, J.)
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