• Successor to eToys sued lead underwriter of its 1999 IPO
• IPO was at $20 per share
• On first day of trading, opened at $79 and closed at $76.56
• eToys went bankrupt in 2001
• Plaintiff claims it relied on Goldman's expertise to price IPO and that Goldman didn't disclose conflicts of interest
• Which were profit kick-back arrangements it had with those it favored with allocations in this hot IPO
• Complaint thus alleged there was an advisory relationship that was independent of the formal underwriting agreement

• Opinion 6.07.05

Generally agrees with initial NY trial court ruling

Reverses Appellate Division

• "A cause of action for breach of fiduciary duty may survive, for pleading purposes, where the complaining party sets forth allegations that, apart from the terms of the contract, the underwriter and issuer created a relationship of higher trust than would arise from the underwriting agreement
  alone"
• Six to one decision
• Dissent objected to adding a fiduciary relationship to a contractual one

• Applying NY law, following cases hold that whether an underwriter has fiduciary obligations is a fact specific determination to be made by fact finder
• Breakaway Solutions Inc v Morgan Stanley & Company Inc 2004 WL 1949300, 2004 Del. Ch. LEXIS 125 2004
• Xpedior Creditor Trust v Credit Suisse First Boston (USA)
  Inc 341 F Supp 2d 258 [US Dist Ct, SD NY 2004]
• MDCM Holdings Inc v Credit Suisse First Boston
  216 F Supp 2d 251 [US Dist Ct, SD NY 2002]