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93A Opinion in Baker v. Goldman Sachs

93A Opinion in Baker v. Goldman Sachs

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Published by gesmer
Decision by Massachusetts District Court Judge Patti Saris following jury verdict for Goldman Sachs
Decision by Massachusetts District Court Judge Patti Saris following jury verdict for Goldman Sachs

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Categories:Types, Business/Law
Published by: gesmer on Jun 12, 2013
Copyright:Attribution Non-commercial


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1UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTS___________________________________)JANET BAKER AND JAMES BAKER,)Plaintiffs))v.)Civil Action No. 09-10053-PBS)GOLDMAN SACHS & CO., et al.,)Defendants.)___________________________________))ROBERT ROTH and PAUL G. BAMBERG,)Plaintiffs))v.))Civil Action No. 10-10932-PBSGOLDMAN SACHS & CO.,)Defendant and)Third-Party Plaintiff,))v.))JANET BAKER AND JAMES BAKER,)Third-Party Defendants.)___________________________________)
June 11, 2013SARIS, C.J.
On June 7, 2000, Dragon Systems, Inc. (“Dragon”), a companythat revolutionized speech recognition technology, merged intoLernout & Hauspie Speech Products N.V. (“L&H”). Within months,the public disclosure of a fraud at L&H rendered its stock
James Baker, Roth, and Bamberg’s breach of contract claimswere dismissed before trial. Roth and Bamberg’s breach offiduciary duty claims were also dismissed before trial. JanetBaker’s third-party beneficiary breach of contract claim wasvoluntarily dismissed during trial.2worthless. Plaintiffs Janet and James Baker, Robert Roth, andPaul Bamberg, the founders and principal shareholders of Dragon,lost about $300 million as well as their lives’ work, and spentthe next decade in litigation against L&H and others trying toclaim back the losses.Janet and James Baker, wife and husband founders andcontrolling shareholders of Dragon, filed a complaint assertingbreach of contract, negligent and intentional misrepresentation,negligence, gross negligence, breach of fiduciary duty, andviolations of ch. 93A against their investment banker, DefendantGoldman Sachs & Co. (“Goldman”). This lawsuit was consolidatedwith a similar action later filed by Roth and Bamberg, the otherprincipal shareholders.
On January 23, 2013, after a 20-daytrial, the jury found in favor of Goldman on all the plaintiffs’remaining common law claims: negligent performance of services,gross negligence, intentional misrepresentation, negligentmisrepresentation, and the Bakers’ breach of fiduciary dutyclaims. Although the instructions told them to reach the third-party claims only if liability against Goldman was found, thejury also found that Janet Baker made negligentmisrepresentations to Bamberg and Roth and breached her fiduciary
After the start of trial, the litigation strategies ofcounsel for the Bakers and counsel for Roth and Bamberg began todiverge. At first, the conflict was primarily about the amountof trial time spent for various witnesses. In response, theCourt gave Roth and Bamberg additional time. After the juryverdict, a more substantive conflict emerged when Roth andBamberg began asserting claims against the Bakers.3duty to them, and that James Baker breached his fiduciary duty toPaul Bamberg.The plaintiffs allege Goldman violated the MassachusettsUnfair Trade Practices statute, Mass. Gen. Laws ch. 93A, becauseit was egregiously negligent and made fraudulent statements whenit advised Dragon to merge with L&H without engaging in adequatefinancial due diligence. After consideration of the evidencepresented at trial, the jury’s verdict, and the argumentsadvanced by counsel
the Court finds in favor of Goldman.
The Court makes the following findings of fact based on theevidence introduced at trial.
A.The Golden Eggs
Plaintiffs revolutionized speech recognition technologybased upon a mathematical model for computer speech recognitiondeveloped by James Baker in his Ph.D. thesis. Founding Dragon in1982, they created software that not only recognized spokencommands, but also enabled the dictation and transcription ofnatural conversational speech. Dragon began as a four-personcompany operating out of the Bakers’ living room, growing into a

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