- 23 -
Petitioners primarily contend that they were not negligent
because they reasonably relied on the memorandum and their
advisers. Petitioners had no education or experience in plastics
materials or plastics recycling, nor had they seen a Sentinel EPS
recycler, when they invested in SAB Foam. Moreover, they did not
consult with anyone who had such expertise in plastics or
plastics recycling.
As an associate for Miller & Summit, petitioner may have
learned about business practices of PI long ago, but that in no
way establishes him as an authority about PI or the plastics
industry. When petitioner was employed by Miller & Summit and
was assigned work for PI, that company was located in New Jersey
under different ownership and had not yet manufactured any
recyclers. By the time of the transactions in issue, PI had
moved to Hyannis, Massachusetts. Nothing in the record
establishes that petitioner had any special knowledge about PI or
its business in 1981-82. Petitioner’s knowledge of SAB Foam,
rather, is derived primarily from the memorandum and Miller.
The memorandum was essentially a sales-oriented document,
and it contained numerous warnings that prospective investors
should not rely on it. Petitioners’ advisers either lacked
knowledge about the subject of the proposed investment or were
part of the sales group and therefore inherently and obviously
unreliable. Under the circumstances of this case petitioners’
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011