When Morgan Stanley was ordered to pay $1.45 billion to investor Ronald O. Perleman for fraudulently inducing his purchase of Sunbeam (through his Coleman camping company), it was the largest jury award to an individual plaintiff in 2005 according to Lawyers’ Weekly.  The verdict caused a major brouhaha in legal and financial circles—and not just for the numbers, which included $850 million in punitive damages, but also because the jury was permitted to make adverse inferences regarding Morgan Stanley’s hiding over 60 million pages of evidence, including systemic destruction of emails (which the bank attributed to a “computer glitch.”)

But at the end of just last month, the Florida Court of Appeals reversed the verdict.  Without mentioning the destroyed emails, the 2-1 panel said that Coleman failed to prove the "fraud-free" value of Sunbeam's stock on the transaction date.  Instead, Coleman had said the Sunbeam stock was essentially worthless, given the level of fraud, and produced an expert valuation of Sunbeam asserting an expected value based on its average share price from the time the deal went public until it closed. (Sunbeam’s stock plummeted after the transaction, and within three years the company went bankrupt.)

A strong dissent would have “allow[ed] the deceived victim of fraud to hold a defendant to his lies.”  Otherwise, the majority’s holding “will countenance…a perpetuation of fraudulent financial statements.”   With so much at stake in the case, a rehearing and appeal to the Florida Supreme Court are all but certain.  For a copy of the case, click here.