ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, June 9, 2005

Good news, bad news for Goldman Sachs

Creditors of bankrupt eToys have lost their breach of contract claim against investment house Goldman Sachs, who they claimed breached a duty to the Internet bubble company to maximize the share price at its IPO.

But the New York Court of Appeals has, oddly enough, ruled that even absent a contractual obligation, Goldman can be nailed for breach of a fiduciary duty—no, not to the poor schmucks who bought the stock at too high a price on its IPO, but to eToys and its sophisticated venture capitalists, who didn't get as much money as they possibly could from selling the worthless turkey to the public.

While lone dissenter Susan Philips Reid thought that injecting common-law fiduciary duty into a complex transaction among sophisticated parties all represented by experienced counsel was unwise, the majority stressed the narrowness of its decision.

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