June 09, 2017
On Tuesday, June 6, 2017, the Second Circuit affirmed a judgment and defense verdict in favor of Morgan Stanley that found the company was not liable for insider trading in a case brought by a Russian billionaire and his holding company, Veleron. Weil also represented Morgan Stanley in securing the complete defense jury verdict in New York federal court in November 2015.
Veleron had alleged that Morgan Stanley began illegally short-selling shares of a Canadian auto parts company that Veleron had invested in just prior to the financial crisis, after learning that Veleron was going to be unable to meet a $93 million margin call and would be forced to liquidate its stock. During the trial, Weil argued that Morgan Stanley had no duty to Veleron to avoid trading on the information relating to the margin call, and that its short-selling transactions were a normal hedge against market volatility – which was permitted by its contracts with its counterparty. After two days of deliberations, the jury found that Morgan Stanley did not act with fraudulent intent, and found the company not liable for the losses Veleron sustained as a result of its investment.
In its ruling affirming the lower court’s judgment pursuant to the defense verdict, the Second Circuit held that Veleron is not a party to the contract under which it brought the case, and also found no merit in the plaintiff’s claims that the judge had given the jury in the original trial erroneous instructions. The affirmation represents a complete and total victory for Morgan Stanley in the case.
Jonathan Polkes, the Co-head of Weil’s global Litigation Department, led the Weil trial and appellate team, which included partners Christopher Garcia and Paul Dutka, and associates David Byeff, Adam Banks, Ondrej Diaz, Amanda Shulak, Amy Suehnholz, Irisa Chen, and Lauren Engelmyer.