Fed. Sec. L. Rep. P 98,445 Kenneth N. Nelson v. O. E. Serwold and Helen Serwold, His Wife

The district court found and another panel of this court affirmed that in 1965 O. E. Serwold had purchased from the Estate of Neis Nelson, the appellant’s father, 36 shares of stock in violation of Section 10(b) of the Securities Exchange Act of 1934. The district court computed damages as the difference between the price paid and the fair market value of the stock within a reasonable time period thereafter. On appeal this court reversed the district court’s limitation of damages to fair market value and instructed that where the purchaser’s gain exceeds the seller’s losses, disgorgement of the purchaser’s profits is the proper measure of damages.

Pursuant to the appellate mandate the district court recomputed the damages. Due to a pooling agreement between Serwold and others, Serwold was the beneficial owner of only 30% of the stock he purchased from Nelson. The district court ordered a complete disgorgement of all profits received by Serwold only for the 10.8 shares for which he was the beneficial own er. As to the 25.2 shares of which Serwold was not the beneficial owner of record the court applied the fair market value measure of damages, i.e., the difference between the…