By Nate Raymond
NEW YORK, Feb 27 (Reuters) - A New York state appeals court
on Tuesday dismissed the last remaining claim in a lawsuit by an
investor who accused a trading platform of botching a proposed
$2.48 million purchase of pre-IPO Facebook Inc shares.
The New York Appellate Division, First Department, held that
the Facie Libre entities controlled by Felix Investments could
not bring a claim of intentional misrepresentation against
SecondMarket, an online marketplace for shares in private
"Dismissal of the negligent misrepresentation claim is
warranted because plaintiffs failed to allege any out-of-pocket
loss as a result of the subject transaction, as opposed to lost
profits," the five-judge panel wrote in a short order.
The ruling reversed an August decision by Manhattan Supreme
Court Justice Shirley Kornreich, who had dismissed most of the
Felix entities' case but allowed the misrepresentation claim to
Mark Murphy, a spokesman for SecondMarket, said in a
statement the company was "thrilled with the result."
"We stated at the outset that these allegations were
completely without merit, and now two separate courts have
supported our position and all claims have been dismissed," he
Dominick Picca, a lawyer for the Felix plaintiffs, declined
The lawsuit was filed in June 2011 as investors scrambled to
buy shares in social media companies like Facebook, Twitter and
Zynga before they went public.
The sale of non-public stock drew the attention of the U.S.
Securities and Exchange Commission, which in March filed suit
against Felix. The lawsuit claimed Felix misled investors by
earning secret commissions on the sale of Facebook stock.
Felix and its principal, Frank Mazzola, have denied the
The New York case, which is separate from the SEC lawsuit,
came after Felix bought Facebook shares before the social
media's $16 billion IPO in May 2012. The purchases were made
through two entities, Facie Libre Associates I and II, Latin for
"face" and "book."
Facie Libre Associates' lawsuit against SecondMarket
followed its attempted purchase of Facebook shares in March 2010
from Karl Voskuil, a Facebook employee listing the shares online
The complaint said Facebook, which had to bless the deal,
didn't approve it after SecondMarket failed to deliver an
important legal opinion to Facebook before the deal was
scheduled to close.
SecondMarket told the Felix entities about the failed deal,
but by then Facebook had instituted a policy barring insiders
like Voskuil from tendering their shares, the lawsuit said.
The lawsuit claimed breach of contract against a third-party
intermediary, breach of fiduciary duty, negligence, unjust
enrichment and intentional misrepresentation.
The First Department panel included Justices Angela
Mazzarelli, Helen Freedman, Rosalyn Richter and Judith Gische.
The case is Facie Libre Associates I, LLC, v. SecondMarket
Holdings, Inc, New York Appellate Division, First Department,
For Facie Libre: Dominick Picca, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo.
For SecondMarket: Robert O'Hare, O'Hare Parnagian.
Follow us on Twitter @ReutersLegal | Like us on Facebook