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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: November 18, 2013

Gross Negligence Claim Dismissed Based on Business Judgment Rule and Lack of Damages

On November 12, 2013, Justice Bransten of the New York County Commercial Division issued a decision in Phillips v. Hoffman, 2013 NY Slip Op. 51836(U), granting summary judgment and dismissing a gross negligence claim filed by a pro se plaintiff against a hedge fund manager who she claimed had mismanaged her money.

Justice Bransten dismissed the claim on two independent grounds.  First, Justice Bransten found that the investment decisions made by the defendant were protected by Delaware’s business judgment rule, which plaintiff could not overcome because she did not allege any negligent process but instead simply took issue with the specific investment choices made by the defendant.  Second, Justice Bransten found that, as a matter of law, the plaintiff had suffered no damages because her initial investment was $450,003 and she received back $936,584 after redeeming her investments, and thus she actually made a profit as the result of the defendant’s alleged gross negligence.

This case illustrates the principle that disappointed investors who don’t make as much money as they would like with their investments do not always have a remedy for their “lost” profits.

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