Cottam v. Global Emerging Capital Group, LLC et al
OPINION AND ORDER: For the reasons stated above, Plaintiff's request for $19,621,000 in damages is denied. The Clerk of the Court is respectfully directed to enter judgment for Plaintiff in the amount of $1 in nominal damages and to close the case. (As further set forth in this Order.) (Signed by Judge Lorna G. Schofield on 3/31/2021) (cf) Transmission to Orders and Judgments Clerk for processing.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
GLOBAL EMERGING CAPITAL GROUP,
LLC, et al.
16 Civ. 4584 (LGS)
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge:
These are the Court’s findings of fact and conclusions of law pursuant to Federal Rule of
Civil Procedure 52, following a one-day bench trial conducted by videoconference on March 8,
2021. Defendants 6D Global Technologies, Inc. (“6D Global Technologies”) and 6D
Acquisitions, Inc. (“6D Acquisitions”) (collectively “Defendants”) breached a subscription
agreement through which Plaintiff John Cottam sought to purchase shares in 6D Acquisitions,
which would be converted on a 1:1 basis to shares in 6D Global Technologies (the “Subscription
Agreement”). The bench trial was limited to the issues of (1) damages on Plaintiff’s breach of
contract claim and (2) Defendants’ affirmative defense of waiver. For the reasons stated below,
Plaintiff has not met his burden of establishing a stable foundation for a reasonable estimate of
damages. As a result, Plaintiff is awarded nominal damages of $1.
Plaintiff commenced this action on June 16, 2016, alleging that 6D Global Technologies,
6D Acquisitions and Tejune Kang breached the Subscription Agreement and violated Section
10(b) of the Exchange Act, 16 U.S.C. § 78j(b), and Rule 10b-5. On September 21, 2016,
Defendants filed a motion to dismiss. The prior judge who presided over this case denied the
motion, held that the Subscription Agreement is unambiguous and stated that Plaintiff was likely
to succeed on his breach of contract claim.
On August 24, 2017, Defendants filed their answer and counterclaims, as well as a third
party complaint. The third party complaint named as third party defendants the thirty-three other
investors who, along with Plaintiff, signed the Subscription Agreement (collectively, the “Third
Party Defendants”). Defendants and the Third Party Defendants eventually reached a settlement
and stipulated to the dismissal of all claims and counterclaims against each other.
In August and September 2017, Plaintiff and Defendants filed cross-motions for
summary judgment. Summary judgment was granted in favor of defendant Tejune Kang with
respect to all claims and granted in favor of all Defendants with respect to Plaintiff’s securities
fraud claim. Cottam v. Glob. Emerging Cap. Grp., LLC et al., No. 16 Civ. 4584, 2020 WL
1528526, at *1 (S.D.N.Y. Mar. 30, 2020). After summary judgment, the only remaining claim
was Plaintiff’s breach of contract claim -- specifically, that Defendants breached the Subscription
Agreement by failing to provide all of the 2,900,000 shares of 6D Global Technologies stock that
Plaintiff purchased. With respect to this claim, Plaintiff’s motion for summary judgment was
granted as to liability 1 but denied as to damages. Id. at 5-6, 13-14. Summary judgment was
granted as to liability because, even though Plaintiff received the same proportion of shares that
the whereas clauses of the Subscription Agreement contemplate, the operative provisions of the
Subscription Agreement are unambiguous and provide that Plaintiff is entitled to 2,900,000
“Defendants are in no position to argue that the breach caused no damages, having chosen to
breach the Subscription Agreement (by paying to Plaintiff a number of shares less than the
number owed to him under the Subscription Agreement) . . .” Cottam, 2020 WL 1528526 at
shares. The summary judgment decision also held that, based on the nuances of contract law, the
defenses of mutual mistake, unilateral mistake and impossibility do not apply.
As to damages, Plaintiff’s motion for summary judgment was denied because, although
Plaintiff established the fact of damages -- i.e., that he received fewer shares than he was entitled
to -- there remained a question of fact about the value of the omitted shares due to the impact of
restrictions on, and the lack of liquidity of, the stock. Id. at 14. In addition, Defendants’ motion
for summary judgment on the affirmative defense of waiver was denied. Defendants argued that
Plaintiff waived his right to additional shares by accepting 420,290 shares of 6D Global
Technologies stock, requesting that 6D Global Technologies lift the restrictions on the shares and
then selling his shares at a profit. However, a genuine issue of material fact as to whether
Plaintiff voluntarily and intentionally abandoned a known right to additional damages precluded
summary judgment on this issue.
On March 8, 2021, a virtual bench trial was held to determine the issues of (1) damages
and (2) waiver. The two witnesses were Plaintiff, who testified on behalf of himself, and Paul
Hinton, a principal of The Brattle Group and member of its Securities and Finance Practice, who
testified as an expert witness on behalf of Defendants. Plaintiff was given the opportunity, but
not required, to retain his own expert witness and he elected not to do so. Plaintiff proceeded pro
se for trial but was represented throughout the earlier stages of the case. 2 The parties, prior to
trial, submitted written direct testimony, and during trial, conducted cross-examination, redirect
(except Plaintiff who did not question himself) and closing arguments. The Court admitted 50
Because Plaintiff was pro se at the time he filed his pre-trial submissions, as well as during
trial, his submissions and testimony are construed liberally “to raise the strongest arguments they
suggest.” McCleod v. Jewish Guild for the Blind, 864 F.3d 154, 156 (2d Cir. 2017); accord Bell
v. SL Green Realty Corp., 19 Civ. 8153, 2021 WL 516575, at *2 (S.D.N.Y. Feb. 11, 2021).
exhibits, documenting the transactions in which the parties engaged and related issues such as
Plaintiff’s efforts to sell the 6D Global Technologies shares he received.
FINDINGS OF FACT
On September 18, 2014, Plaintiff signed and entered into the Subscription Agreement, to
participate in a private placement equity offering of 6D Acquisitions shares (the “Offering”).
Pursuant to the Subscription Agreement, 6D Acquisitions was “a special purpose vehicle formed
for the purpose of investing [in a] reorganized entity” -- 6D Global Technologies. The
Subscription Agreement provides that this investment in 6D Global Technologies was to occur
through a share exchange of 266,787,609 shares of CleanTech Innovations, Inc.’s (“CleanTech”)
common stock, “equal to approximately fifty percent (50%) of its outstanding shares of common
stock,” for all of the outstanding shares of 6D Acquisitions’ common stock (the “Share
Exchange”). Through the Share Exchange, 6D Acquisitions would become a wholly owned
subsidiary of CleanTech, which would change its name to “6D Global Technologies, Inc.”
Whereas clauses of the Subscription Agreement provide that the Offering was a condition of the
Share Exchange, and include the following capital table (“Cap Table”) showing how CleanTech
would be capitalized upon raising the maximum offering:
Exchange Shares issued to 6D Acquisitions
Exchange Shares issued to NYGG Asia post-conversion
Public Shares post-cancellation of 17,729,403 shares
Investors in Offering (assuming $5,100,000 maximum)
Placement Agent’s 15% equity fee (5-year Warrants, assuming
$5,100,000 maximum offering is completed)
Total Issued and Outstanding (including Warrants)
Operative clauses of the Subscription Agreement provide that through the Share
Exchange, shares of common stock in 6D Acquisitions acquired through the Offering would be
“converted on a 1:1 basis into shares of [6D Global Technologies’] Nasdaq listed common stock
. . .”
Plaintiff was one of thirty-four investors who participated in the Offering. He invested
$870,000. Because the operative clauses of the Subscription Agreement provide that an investor
could purchase one unit of stock, equal to fifty thousand shares of 6D Acquisitions stock, for
$15,000, Plaintiff’s investment of $870,000 purchased fifty-eight units, or 2,900,000 shares of
6D Global Technologies common stock (following the conversion of the shares at a 1:1 ratio).
After the form Subscription Agreement was printed and before Plaintiff received his shares, 6D
Global Technologies’ predecessor company, CleanTech, underwent two reverse stock splits to
keep its shares from dropping below a stock price of $1 and remain listed on the NASDAQ
National Market System (“NASDAQ”). These reverse stock splits decreased the number of
available CleanTech shares by 6.9 times. As a result, when the Offering closed on September
29, 2014, Plaintiff received 420,290 shares of 6D Global Technologies stock -- 6.9 times fewer
shares than he purchased. 3 All other 6D Global Technologies shareholders also received 6.9
times fewer shares than the amounts stated in the Cap Table. 4
On September 29, 2014, the date the Offering closed and Defendants breached the
Subscription Agreement, the trading price of 6D Global Technologies stock was $8.30. The
value on the date of the breach of the 2,479,710 shares that Plaintiff would have received but for
420,290 is equal to 2,900,000 divided by 6.9, i.e., Defendants reduced the number of shares
provided to Plaintiff proportionately to the reduction in total shares caused by the reverse stock
Defendants’ Exhibit 8, a 6D Global Technologies Form-8K dated September 29, 2014, in
combination with the Cap Table show that 6.9 times fewer shares were issued to 6D Acquisitions
shareholders (266,787,609 ÷ 38,664,871 = 6.9); 6.9 times fewer shares were issued to NYGG
Asia post-conversion (242,534,190 ÷ 35,149,883 = 6.9); and 6.9 times fewer public shares were
cancelled (17,729,403 ÷ 2,569,483 = 6.9).
Defendants’ breach is affected by several factors. During trial, Mr. Hinton credibly testified that
these factors include dilution caused by the issuance of additional shares; liquidity of the
company’s stock in the market; restrictions on the sale of Plaintiff’s shares; and the financial
condition of the issuer, including whether the company is mature.
Through both his written direct testimony and testimony during trial, Plaintiff provided a
theory as to the impact of dilution on the market price of the shares to which he was entitled. He
explained that (1) but for Defendants’ breach of the Subscription Agreement, the thirty-four
investors in the Offering would have collectively received an additional 12,985,988 shares, and
(2) these additional shares would have diluted the stock price by 17% (to $7.094), as they would
represent a 17% increase in the number of shares. Plaintiff asserted that, as a result, he is entitled
to $19,621,000 -- which is $20,561,000 (the number of shares times the adjusted market price on
the date of the breach) minus $940,000 (the proceeds of the sale of the 420,290 shares Plaintiff
had received). 5 While Plaintiff sold his shares at a $70,000 profit, other Offering and public 6D
Acquisitions investors lost their investments when 6D Global Technologies was delisted.
Plaintiff did not attempt to quantify the impact of illiquidity, stock restrictions or the
financial condition of 6D Global Technologies on the market price of the shares that he did not
receive. The shares he purchased through the Subscription Agreement were restricted and
subject to a six-month waiting period. 6 In addition, on the date of Defendants’ breach, 6D
Global Technologies stock was thinly traded, with only 309 shares traded. With respect to the
impact of these factors on market price, Plaintiff asserted that “[s]tock prices or trading patterns
2,900,000 x 7.094 = $20,561,000; $20,561,000 - $940,000 = $19,621,000.
The shares were in fact restricted for a period longer than six months. However, on September
29, 2014, the date the Offering closed and the Subscription Agreement was breached, the
expectation was that the shares would be restricted for six months.
cannot be ‘predicted’ reliably by any mathematical analysis.” As to the impact of the restriction
on share price, Plaintiff testified that, “[t]he effect of ‘restriction’ is one that can be seen only in
hind sight,” and that, “[t]here is no way to a priori calculate the effect of ‘restriction,’ which is
an agreement based on a gamble; the stock price could decrease during the standard 6 month
lock up, or increase (there is no way to tell).” As to the impact of liquidity on share price,
Plaintiff testified that increased trading volumes do not necessarily lead to price declines, and
further that, “the effect of ‘liquidity’ is impossible to calculate, [is] therefore speculative in the
extreme, and therefore should be denied.”
MOTION TO EXCLUDE PLAINTIFF’S TESTIMONY
Defendants’ motion to strike Plaintiff’s testimony is denied. During trial, Plaintiff, a
dermatologist with a master’s degree in health systems and undergraduate degrees in
engineering, testified that he does not have degrees in economics or finance and has not
performed any stock valuations. Defendants subsequently moved to strike Plaintiff’s testimony,
on the ground that Plaintiff was offering unqualified expert testimony in the guise of lay opinion
testimony. The Court took Defendant’s motion under advisement and reserved ruling on the
As a threshold matter, this is a bench trial in which juror confusion is not a concern. In
the context of a bench trial, a court has broad discretion to admit testimony giving it whatever
weight seems fit. See, e.g, Alford v. United States, No. 17 Civ. 5217, 2020 WL 376749, at *15
(S.D.N.Y. Jan. 23, 2020); Coon v. Bell, No. 16 Civ. 291, 2019 WL 3975547, at *3 (N.D.N.Y.
Aug. 22, 2019). Pursuant to Federal Rule of Evidence 701, “[i]f a witness is not testifying as an
expert,” his testimony is limited to opinion that is “rationally based on the witness’s perception”;
“helpful to clearly understanding the witness’s testimony or to determining a fact in issue”; and
“not based on scientific, technical, or other specialized knowledge.” Here, Plaintiff provided
helpful testimony regarding examples of 6D Global Technologies share prices and trading
volumes on certain days, as well as the possible impact of dilution on the share price. With
respect to the impact of dilution, Plaintiff’s testimony was limited to a simple mathematical
explanation that did not require any scientific, technical or other specialized knowledge. See
New York v. United Parcel Serv., Inc., 942 F.3d 554, 596 (2d Cir. 2019), cert. denied, 141 S. Ct.
242 (2020) (finding that expert testimony was not needed for “simple arithmetic calculations”).
As a result, Plaintiff’s testimony is admitted and given due weight.
CONCLUSIONS OF LAW AS TO DAMAGES
Plaintiff seeks to recover damages for the 2,479,710 shares to which he was entitled
under the Subscription Agreement but did not receive. For the reasons outlined below, Plaintiff
has failed to meet his burden of showing a stable foundation for a reasonable estimate of the
damages incurred. As a result, Plaintiff’s request for $19,621,000 in damages is denied and
nominal damages in the amount of $1 are awarded.
“Proof of damages is an essential element of a claim for breach of contract under New
York law.” 7 Process Am., Inc. v. Cynergy Holdings, LLC, 839 F.3d 125, 141 (2d Cir. 2016).
Under New York law, “an award of damages should place a plaintiff in the same position as that
party would have been if the contract had not been breached.” Rich-Haven Motor Sales, Inc. v.
Nat’l Bank of New York City, 558 N.Y.S.2d 91, 91 (2d Dep’t 1990); accord Oscar Gruss & Son,
Inc. v. Hollander, 337 F.3d 186, 196 (2d Cir. 2003); Arach Specialty Ins. Co. v. APCO Indus.,
Inc., 2020 WL 6581000, at *6 (E.D.N.Y. Oct. 5, 2020). Where “the breach involved ‘the
New York law applies because the Subscription Agreement provides that it is governed by New
York law and because the parties assume that New York law applies.
deprivation of an item with a determinable market value, the market value at the time of the
breach is the measure of damages.’” Cole v. Macklowe, 882 N.Y.S.2d 417, 419 (1st Dep’t 2009);
accord LG Cap. Funding, LLC v. CardioGenics Holdings, Inc, 787 F. App’x 2, 3 (2d Cir. 2019)
(summary order). Contrary to Plaintiff’s contentions, these expectation damages -- not lost
profits -- are the proper measure of damages. See Tractebel Energy Mktg., Inc. v. AEP Power
Mktg., Inc., 487 F.3d 89, 111 (2d Cir. 2007) (estimating general damages for a breach of contract
and stating that, “[i]t has long been established in New York that a breaching party is liable for
all direct and proximate damages which result from the breach”); accord LG Capital Funding,
LLC, 787 F. App’x at 3 (applying New York law and finding that the district court erred by
awarding what amounted to lost profits, rather than damages that would put the plaintiff in the
“economic position [it] would have occupied”) (internal quotation marks omitted).
“New York’s damages rule is precisely the same when the breach of contract is
nondelivery of shares of stock.” Lucente v. Int’l Bus. Machines Corp., 310 F.3d 243, 262 (2d
Cir. 2002) (alteration omitted); accord Kaminsky v. Herrick, Feinstein LLP, 870 N.Y.S. 2d 1, 9
(1st Dep’t 2008). The value of restricted stock should be discounted to reflect the restrictions on
its sale. See Simon v. Electrospace Corp., 269 N.E.2d 21, 27 (N.Y. 1971) (“If restricted, then the
market value would have to be discounted in some way.”); accord Jamil v. Solar Power, Inc.,
230 F. Supp. 3d 271, 275 (S.D.N.Y.), aff’d sub nom. Jamil v. SPI Energy Co., 713 F. App’x 42
(2d Cir. 2017), as amended (Nov. 29, 2017). In addition, the value of stock should take into
account its liquidity in the market; where stock is thinly traded, its value should be discounted.
See Davidowitz v. Partridge, No. 8 Civ. 6962, 2010 WL 5186803, at *12 (S.D.N.Y. Dec. 7,
2010) (explaining that the trading value of the stock at issue was thin and, as a result, it was
unlikely that “any significant number of shares” could be sold “without depressing the stock’s
price”); Kovens v. Paul, No. 04 Civ. 2238, 2009 WL 562280, at *2, 5-7 (S.D.N.Y. Mar. 4, 2009)
(analyzing the value of thinly traded stock in a breach of contract action). Additional factors,
like the financial condition of the company, can impact the calculation of damages and help
ensure the damages calculation is “grounded in reality.” See BrandAid Mktg. Corp. v. Biss, No.
3 Civ. 5088, 2008 WL 190494, at *5-6 (S.D.N.Y. Jan. 22, 2008), aff'd, No. 08-0941-CV, 2009
WL 742077 (2d Cir. Mar. 23, 2009) (awarding $1 in nominal damages where the company had
“liabilities far exceeding its assets” and eventually met an “abrupt demise”); see also Pac. Life
Ins. Co. v. The Bank of New York Mellon, No. 17 Civ. 1388, 2021 WL 673479, at *8-9 (S.D.N.Y.
Feb. 22, 2021) (striving to assess damages in the context of a hypothetical “but-for” the breach
scenario, that is “grounded in reality” and avoids unfair windfalls).
A non-breaching party that has established the fact of damages by a preponderance of the
evidence is entitled to market value damages to “the extent that they can be proven with
reasonable certainty.” Process Am., Inc., 839 F.3d at 141 (internal citation and quotation marks
omitted). While the “burden of uncertainty as to the amount of damages is upon the wrongdoer,”
the non-breaching party must first “show a ‘stable foundation for a reasonable estimate’ of the
damages incurred as a result of the breach.” Id. (applying New York law and citing Freund v.
Washington Square Press, 314 N.E.2d 419, 421 (N.Y. 1974)); accord Hollander Loader
Company LLC v. FLSmidth A/S, 769 F. App’x 40, 42 (2d Cir. 2019) (summary order) (“To prove
general damages under New York law, the plaintiff must show (1) the fact or existence of
damages to a ‘reasonable certainty’ and, if the fact or existence of damages is proven, (2) ‘a
stable foundation for a reasonable estimate’ [of damages] incurred as a result of the breach.”).
Establishing a “stable foundation for a reasonable estimate” requires putting forth a plausible
theory that amounts to something more than a speculative measure of damages. Freund, 314
N.E.2d at 421 (finding that Plaintiff failed to provide a “stable foundation for a reasonable
estimate” of damages where Plaintiff’s estimate of royalties was “speculative”); Hollander
Loader Company LLC v. FLSmidth A/S, 313 F. Supp. 3d 447, 481 (S.D.N.Y. 2018), aff’d, 769 F.
App’x 40 (2d Cir. 2019) (applying New York law and rejecting Plaintiff’s evidence of damages
as “nothing more than speculative” where damages were based on “basic math” and “internal
forecasts” rather than public financial statements). 8
Here the fact -- but not the amount -- of damages has been established. The proper
measure of the amount of damages is the market value of the 2,479,710 shares that Plaintiff did
not receive, on the date of breach -- September 29, 2014. To meet his burden of providing a
stable foundation for a reasonable estimate of damages, Plaintiff -- without the aid of an expert
and acting pro se -- offers a simple explanation; he reasons that (1) but for Defendants’ breach of
the Subscription Agreement, the investors in the Offering would have collectively received an
additional 12,985,988 shares, and (2) these additional shares would dilute the stock price by 17%
(to $7.094), as they would represent a 17% increase in the number of shares.
See also Trainum v. Rockwell Collins, Inc., No. 16 Civ. 7005, 2018 WL 11220003, at *18
(S.D.N.Y. Feb. 26, 2018), aff’d, 765 F. App’x 514 (2d Cir. 2019) (applying New York law and
declining to grant damages in part where plaintiff’s spreadsheet calculations were unreliable and
therefore did not provide a “stable foundation”); Meda AB v. 3M Co., 969 F. Supp. 2d 360, 387
(S.D.N.Y. 2013) (with respect to a breach of contract claim under New York law, finding
plaintiff’s expert unpersuasive and holding that plaintiff “has not otherwise provided a stable or
reasonable basis for assessing any damages”); Davidowitz, 2010 WL 5186803 at *11, 13
(S.D.N.Y. Dec. 7, 2010) (explaining that under New York law, where there were restrictions on
sale and trading volume was thin, the market price would need to be discounted and finding that
where plaintiff’s proffered expert testimony as to damages was “obviously wrong,” plaintiff had
failed to meet his burden); Esquire Trade & Finance, Inc., et al. v. CBQ, Inc., No. 3 Civ. 9650,
2009 WL 3756470, at *4 (S.D.N.Y. Nov. 5, 2009) (finding that it was “[p]laintiffs’ burden to
provide the Court with a reasonable means of and basis for calculating damages”) (citing Mehta
v. New York City Dep’t of Consumer Affairs, 556 N.Y.S.2d 601, 602 (1st Dep’t 1990); BrandAid
Mktg. Corp., 2008 WL 190494 at *5 (applying New York law and finding that plaintiff was
entitled to nominal damages of $1 where it had “not offered any viable method for quantifying”
the value of newly issued restricted shares).
Plaintiff’s reasoning -- even liberally construed to raise the strongest argument it suggests
-- does not provide a sufficiently stable foundation for estimating damages. Plaintiff’s valuation
of the stock speaks only to dilution; it does not address other factors including the six-month
restriction on the shares or the stock’s thin trading and related illiquidity, the factors that
precluded a summary judgment finding on damages. Plaintiff asserts that estimating the impact
of these other factors is impossible and, as a result, the Court should ignore them. For example,
on the issue of restriction, Plaintiff testified that “[t]here is no way to a priori calculate the effect
of ‘restriction,’ which is an agreement based on a gamble; the stock price could decrease during
the standard 6 month lock up, or increase (there is no way to tell).” Plaintiff is correct that
purchasing restricted stock is ultimately a gamble. However, estimating the impact of this
gamble on the market price of 6D Global Technologies stock is not about precisely forecasting
what the market price of the stock will be on the date the restriction is lifted or looking at what
the “actual economic conditions and performance were in light of hindsight.” Oscar Gruss, 337
F.3d at 196 (internal quotation marks omitted); see also Kaminsky, 870 N.Y.S. 2d at 9 (finding
that “evidence of the subsequent market value of the shares was simply not germane”). Instead,
the inquiry hinges on the extent to which the market risk associated with this uncertainty
decreased the market price of 6D Global Technologies stock on September 29, 2014. See Simon,
269 N.E.2d at 27 (explaining that the value of restricted stock “would have to be discounted in
some way”). Plaintiff offers no reasonable basis for making this determination. Defendant’s
expert Mr. Hinton credibly testified that no simple rule of thumb could be applied in this case
involving a fragile company that is not well established.
Similarly, Plaintiff offers no reasonable basis for estimating the impact of liquidity.
During the trial, Plaintiff provided testimony on 6D Global Technologies share prices and
trading volumes on certain dates, to illustrate that increases in trading volume did not necessarily
correlate with decreases in share prices and vice versa. Putting aside that Plaintiff’s testimony
muddied rather than clarified any basis for calculating the impact of liquidity, his illustration was
flawed. Plaintiff’s illustration failed to account for the direction of the trading that occurred on
the dates to which he pointed and specifically, whether significant portions of 6D Global
Technologies shares were sold on those dates. 9 It is well understood that efforts to sell large
quantities of shares that the market is unable to absorb will push prices down. See, e.g.,
Davidowitz, 2010 WL 5186803 at *12. Plaintiff has provided no reasonable basis for calculating
how much prices would decrease under the circumstances of this case; instead, he characterizes
this calculation as “impossible” and “speculative in the extreme,” and asserts that the Court,
therefore, should ignore the impact of liquidity.
Plaintiff also offers no insight as to how the financial condition of 6D Global
Technologies, which was on the brink of delisting, should impact the assessment of damages.
Other courts have assessed the impact of factors like restrictions, liquidity, and the financial
condition of the subject company, even in complicated cases. See, e.g., Davidowitz, 2010 WL
5186803 at *11; BrandAid Mktg. Corp., 2008 WL 190494 at *5. Plaintiff makes the untenable
argument that such calculations are impossible and the Court therefore should ignore them. To
do so would unquestionably result in an unwarranted windfall to Plaintiff.
This is not an instance in which the market price of 6D Global Technologies shares can
serve as a stable foundation for a reasonable estimate of damages. In Jamil v. Solar Power Inc.,
During trial, Mr. Hinton credibly testified that the analysis of the impact of high trading volume
on prices depends on the direction of trades. “[W]hen you’re trying to dispose of -- you know,
sell a large volume of shares into the market, more shares than the market has – you know, can
absorb easily, it starts to push down the prices. And that’s well understood. You have to look at
the direction of the trade.”
the court, based on the record and without the benefit of trial, calculated the market value of
475,000 shares of restricted common stock that the defendant was contractually obligated, but
failed to, transfer to the plaintiff. Jamil, 230 F. Supp.3d at 273. To estimate the impact of
restrictions on the value of the shares, the court looked at the trading price on two separate dates
of breach, calculated the extent to which the value of the shares dropped between those dates,
assumed a steady rate of decrease to calculate the extent to which value dropped per day, and
multiplied the per-day rate of decrease by the relevant holding periods. Putting aside whether it
is appropriate to use the actual performance of stock (i.e., hindsight) to calculate damages, see
Oscar Gruss & Son, Inc., 337 F.3d at 196, the calculation methods applied in Jamil do not work
for this case. Here, a confluence of factors -- not just restrictions on the shares -- impacts the
value of the stock; dilution that would occur because of the issuance of additional shares, the 6month restriction on the shares, the liquidity of the shares and the stability of 6D Global
Technologies are all factors that, based on the facts before this Court, would depress the value of
the 2,479,710 shares that Plaintiff did not receive. The market price on the date of breach, even
accepting arguendo Plaintiff’s proposed method for calculating dilution, is not a sufficiently
stable foundation for a reasonable estimate of damages.
While expert testimony is not per se required for a case of this nature, where the
combined impact of factors including dilution, restriction, liquidity and stability of the subject
company leads to a particularly complicated analysis, the practical reality may be that expert
testimony is the only way to meet the burden of providing a sufficiently stable foundation for
estimating damages. Here, Plaintiff did not retain an expert even when he was represented by
counsel and otherwise made no effort to quantify, or provide a reasonable basis for quantifying,
the impact of these factors (other than dilution), alone or together. Because Plaintiff has not
provided a sufficiently stable foundation for estimating damages, his request for $19,621,000 in
damages is denied, and he is awarded $1 in nominal damages. See Compania Embotelladora
Del Pacifico, S.A. v. Pepsi Cola Co., 976 F.3d 239, 248, n.10 (2d Cir. 2020) (citing Hirsch
Electric Co. v. Comm Servs, Inc., 536 N.Y.S.2d 141, 143 (2d Dep’t 1988) (“[A]lthough the
plaintiff has failed to demonstrate damages which would be recoverable at trial with respect to
the lost profits claim, it is a well-settled tenet of contract law that even if the breach of contract
caused no loss or if the amount of loss cannot be proven with sufficient certainty, the injured
party is entitled to recover . . . nominal damages.”).
Because the Court declines to grant Plaintiff’s request for damages, it does not address
Defendants’ affirmative defense of waiver.
For the reasons stated above, Plaintiff’s request for $19,621,000 in damages is denied.
The Clerk of the Court is respectfully directed to enter judgment for Plaintiff in the amount of $1
in nominal damages and to close the case.
Dated: March 31, 2021
New York, New York
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