Shawmut Bank, N.A. v. Kress Associates

Opinion by Judge FLETCHER; Partial Concurrence and Partial Dissent by Judge NORRIS.

These three related appeals arise from the collapse of a commercial real estate development project financed by industrial development bonds. Bondholders Eaton Vance California Municipals Trust, Municipal Securities Trust High Income Series 10, and Municipal Securities Trust High Income Series 11 sued the developer and affiliated companies, the trustee, and various law firms involved in the *1482 bond issue. One of the bondholders, Eaton Vance, also sued the underwriter. The bondholders settled with the developer and the law firms, and the district court entered summary judgment in favor of the underwriter and the trustee. The bondholders appeal these judgments.

Eaton Vance’s claims against Bear, Stearns & Co., Inc., the underwriter, are based on alleged misrepresentations in the offering documents and alleged breaches of fiduciary duty. We affirm the district court’s dismissal of all of Eaton Vance’s claims against Bear Stearns except the sixth claim, for breach of fiduciary duty — although as set forth below, we reverse only as to a narrow segment of that claim.

The bondholders’ five claims…

concurring in part and dissenting in part:

I concur in the opinion with one exception. I dissent from Part I.C.l which reverses the summary judgment for Bear Stearns on Eaton Vance’s Seventh Claim for Relief relating to the surety bond. The majority holds that Bear Stearns may be liable for damages under California tort law for breach of duty to the bondholders for failure to ensure that the surety bond was in the form the parties had agreed to.

1. Eaton Vance’s Seventh Claim for Relief is based on the theory that Bear Stearns had a fiduciary duty to the bondholders which it allegedly breached when it failed to assure that the surety bond was in the proper form. 1 The majority rejects Eaton Vance’s contention that Bear Stearns had a fiduciary duty to the bondholders (Opinion at 1490-91), but reverses the summary judgment on the Seventh Claim anyway. The majority creates a new theory of liability on the Seventh Claim, a theory that Eaton Vance has not asserted and the parties have neither briefed nor argued. In coming up with its own tort theory under California law, the majority relies solely on treatises which neither Eaton Vance nor Bear Stearns cites.

2. The majority decides…