Leboce, S.A., a Luxembourg Corporation v. Merrill Lynch, Pierce, Fenner & Smith, Inc., a Corporation, and Does I--Xx, Inclusive

Leboce, a Luxembourg investment holding company, placed an order with the San Jose, California, office of Merrill Lynch to sell Leboce’s holdings of 44,000 shares of American Microsystems, Inc., a stock traded over-the-counter. The account executive handling Leboce’s account, after communicating the order through channels to Merrill Lynch’s New York office, accepted Merrill Lynch’s own trading department’s offer for the shares without knowing the source of the offer. Within a half an hour, Merrill Lynch began reselling the shares to other purchasers and turned a small profit.

The day following the sale, the account executive in the San Jose office learned that Merrill Lynch was a “market maker’’ in American Microsystems and had purchased the stock itself. He informed Le-boce. At the same time, Merrill Lynch sent a written confirmation of the transaction to Leboce, indicating that Merrill Lynch had purchased the shares. Leboce then completed the transaction by delivering the share certificates to Merrill Lynch along with a letter stating that the delivery was without prejudice to any legal rights Le-boce might have. Leboce subsequently sued Merrill Lynch claiming that California…