Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Welcome
Go
Free Newsletter Sign Up

Venable Ditches Investment Adviser Suit Over Facebook Stock Scam

Jan. 25, 2022, 8:26 PM

Venable LLP convinced a federal judge in Pennsylvania to dismiss a lawsuit brought by a former investment adviser who alleged the law firm helped a swindler abscond with $11.25 million without delivering promised Facebook Inc. shares.

Timothy Burns says he coordinated with “fraud expert” Troy Stratos for Burns’ clients to buy 40 million pre-IPO shares of Facebook, but he ended up transferring $11.25 million and receiving nothing in return. Burns was accused of misleading investors to believe he was buying stock directly from Facebook shareholders, and convicted of wire fraud, mail fraud, and making a false statement to a financial institution.

Burns sued Stratos, Venable, and Venable attorney David Meyer, accusing the firm and attorney of negligent representation because they advised Stratos in the ill-fated deal. The district court dismissed the case against the firm, but the U.S. Court of Appeals for the Third Circuit revived the claims because of concerns about Burns’ attorney abruptly ceasing his representation.

On remand, the U.S. District Court for the District Court for the Eastern District of Pennsylvania granted Venable’s motion to dismiss, holding that Burns failed to plead “any recoverable damages” for any of the claims against the firm or Meyer. The court held that benefit-of-the-bargain damages, also known as “expectation” damages, “remain unavailable for fraud, negligent misrepresentation, unfair competition, aiding and abetting, conspiracy, and breach of fiduciary duty” in the state.

The amended complaint included a direct claim seeking to recover $90,000 Burns said he personally invested, but Judge Eduardo C. Robreno said that money was allegedly invested in 2012, after Venable ceased its involvement in the transactions at issue.

Robreno dismissed the claims against Venable and its attorney and said Burns wouldn’t get the opportunity to amend them because he has “already been afforded an opportunity to correct the errors in the initial complaint.”

The court dismissed fraud, conspiracy, and unfair competition claims against Stratos, saying the claims failed for the same reason as the claims against the law firm. A breach of contract claim against Stratos survived because his motion “does not articulate any valid reason why” that claim should be dismissed, the court said.

Plaintiffs are represented by Oved & Oved LLP and Alan L. Frank Law Associates PC. Venable is represented by Dechert LLP and Gibson Dunn & Crutcher LLP.

The case is Burns v. Stratos, E.D. Pa., No. 2:14-cv-02134, 1/24/22.

To contact the reporter on this story: David McAfee in Los Angeles at dmcAfee@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription.