Securities Regulation Keyed to Coffee
Elkind v. Liggett & Myers, Inc.
A diversified company, Liggett & Myers, Inc. (Liggett), had financial analysts in their employ to participate in a public relations operation. One of the analysts communicated with Liggett’s Director of Corporate Communications via telephone on July 10, 1972, and was met with a noncommittal response to his anticipated revenue inquiry. The analyst sent a wire to his firm’s bureaus, informing them that one of the firms’ customers sold 100 Liggett shares as a result of an adversarialdeduction taken from the Director’s reply. On July 17, an analyst from a different firm question Liggett’s Chief Financial Officer if it was anticipated that revenue would drop. It is purported that the officer responded with a “grudging” confirmation, also stating that it was “confidential.” Regardless, the analyst reported to his firm and its clients sold 1,800 shares of Liggett. Elkind, on behalf of Liggett’s ignorant shareholders, filed suit against the corporation under Rule 10b-5, promoted under the Securities Exchange Act of 1934 for producing the disclosures, following a July 18 press release containing the information that Liggett put out. Liggett’s per share price was $55 5/8 on July 17 and following the press release, by July 19, dropped to $46 3/8. The district court awarded the damages by taking the difference between what the plaintiff class paid for their stock and what they would have received if there had been a public disclosure, amounting to over $1 million, including the prejudgment interest. Liggett appealed.
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