Stearns & Co. v. Daisy System Corp. (In re Daisy System Corp.)

Appellant Jack Kenney, Chapter 11 Trustee for Daisy Systems Corporation and Daisy/Cadnetix, Inc. (“Daisy”), appeals the district court’s grant of summary judgment for Appellee Bear Steams & Co., Inc. (“Bear Stearns” or “the investment bank”), in Ken-ney’s action for professional negligence and negligent misrepresentation. Kenney also appeals the district court’s denial of his request for leave to amend his complaint to state a claim for breach of fiduciary duty. We affirm in part, reverse in part and remand.

FACTUAL AND PROCEDURAL BACKGROUND

In 1988, Daisy, a public corporation specializing in the development of computer-aided engineering systems, sought to acquire Cadnetix, a public company that developed computer-aided and manufacturing design systems. Daisy’s president and Chief Executive Officer, Dr. Norman Friedmann, approached Michael Tennenbaum, a senior managing director at Bear Stearns, for his assistance in the acquisition. Friedmann, who had never before been involved in the acquisition of a public company, reportedly asked Tennenbaum if Bear Steams could analyze the Daisy/Cadnetix merger and the *1173 benefits the deal would confer upon Daisy shareholders. Tennenbaum…

concurring and dissenting:

It is impossible not to recognize that this is a case of biting off more than one can chew. Daisy was not satisfied with being a major player in the computer field; it decided to gobble up another major player — Cadnetix. It thought that it would then be an even bigger and more powerful company. Instead, it choked on the bite. Its trustee in bankruptcy is now looking for a deep pocket. Perhaps he has found it in the trousers of Bear Stearns.

The issue is close, but on the evidence presented it is just barely possible that a trier of fact will determine that Bear Stearns performed negligently and that the negligence led to the collapse of Daisy. That is so even though Daisy had designs on Cadnetix before it even contacted Bear Stearns; that Daisy did not even seek Bear Stearns’ advice for the deal it actually finally consummated; that Daisy did not seek financing help from Bear Stearns until its attempts at self help created an almost impossible timing situation; and, finally, that it was Daisy which failed to conduct its business in a way that allowed it to meet even in its own financial projections. Still, I suppose a reasonable trier of fact could…