EBC I Inc V Goldman Sachs
EBC I, INC., Formerly Known as eTOYS, INC., by the Official Committee of Unsecured Creditors of EBC I, Inc., Respondent,
v.
GOLDMAN, SACHS & CO., Appellant.
Court of Appeals of the State of New York.
5 N.Y.3d 11 (2005)
Before Chief Judge KAYE and Judges G.B. SMITH, ROSENBLATT, GRAFFEO and R.S. SMITH concur with Judge CIPARICK.
Judge READ dissents in part in a separate opinion.
OPINION OF THE COURT
CIPARICK, J.
Plaintiff, the Official Committee of Unsecured Creditors of EBC I, Inc., formerly known as eToys, Inc., brought this action against defendant Goldman, Sachs & Co., the lead managing underwriter of its initial public stock offering, alleging five causes of action related to the underwriting agreement: breach of fiduciary duty, breach of contract, fraud, professional malpractice and unjust enrichment. We hold that plaintiff's complaint fails to state claims for breach of contract, professional malpractice and unjust enrichment. We therefore modify the Appellate Division order to dismiss these claims and, as modified, affirm to allow the fiduciary duty cause of action to proceed. Leave to replead the fraud cause of action was correctly granted; plaintiff has filed an amended complaint, but the sufficiency of that pleading is not before us on this appeal.
I.
This case involves the underwriting process by which investment banks help take securities to the market in an initial public offering (IPO). Companies may decide to make such an offering for several reasons, including a desire to raise new capital and to create a public market for their shares (see 1 Thomas Lee Hazen, Securities Regulation § 3.1 [2] [5th ed]; see also Larry D. Soderquist, Understanding the Securities Law § 2:2 et seq. [Practising Law Institute 4th ed]). A "firm commitment underwriting," at issue here, typically involves an agreement whereby the "issuer" — or company seeking to issue the security (see Securities Act of 1933 [48 US Stat 74, as amended] § 2 [codified at 15 USC § 77b (a) (4)])
v.
GOLDMAN, SACHS & CO., Appellant.
Court of Appeals of the State of New York.
5 N.Y.3d 11 (2005)
Before Chief Judge KAYE and Judges G.B. SMITH, ROSENBLATT, GRAFFEO and R.S. SMITH concur with Judge CIPARICK.
Judge READ dissents in part in a separate opinion.
OPINION OF THE COURT
CIPARICK, J.
Plaintiff, the Official Committee of Unsecured Creditors of EBC I, Inc., formerly known as eToys, Inc., brought this action against defendant Goldman, Sachs & Co., the lead managing underwriter of its initial public stock offering, alleging five causes of action related to the underwriting agreement: breach of fiduciary duty, breach of contract, fraud, professional malpractice and unjust enrichment. We hold that plaintiff's complaint fails to state claims for breach of contract, professional malpractice and unjust enrichment. We therefore modify the Appellate Division order to dismiss these claims and, as modified, affirm to allow the fiduciary duty cause of action to proceed. Leave to replead the fraud cause of action was correctly granted; plaintiff has filed an amended complaint, but the sufficiency of that pleading is not before us on this appeal.
I.
This case involves the underwriting process by which investment banks help take securities to the market in an initial public offering (IPO). Companies may decide to make such an offering for several reasons, including a desire to raise new capital and to create a public market for their shares (see 1 Thomas Lee Hazen, Securities Regulation § 3.1 [2] [5th ed]; see also Larry D. Soderquist, Understanding the Securities Law § 2:2 et seq. [Practising Law Institute 4th ed]). A "firm commitment underwriting," at issue here, typically involves an agreement whereby the "issuer" — or company seeking to issue the security (see Securities Act of 1933 [48 US Stat 74, as amended] § 2 [codified at 15 USC § 77b (a) (4)])