Andrew Finch, a stockbroker at Morgan Stanley Dean Witter & Co., assumed that his role in making Morgan Stanley the lead underwriter on the initial public offering (IPO) of Webmethods stock would allow him to allocate 75,000 shares of the stock to his clients. He prematurely acted on this belief by telling clients they could purchase the IPO shares through him. Several investors set up a vehicle at Morgan Stanley (Twin Fires) to purchase these funds through Finch.
Before the IPO of Webmethods was issued, Finch learned that his allotment was only 225 shares. Too embarrassed to tell his clients, Finch pretended that trading of the stock had been delayed. As the price of the stock shot up from $35 to $212 on the first day, the clients were celebrating--until they realized that they had never purchased as much stock as Finch led them to believe they had. The clients argued that an equitable remedy would be for Morgan Stanley to compensate them for the gains they would have made (nearly $12 million) had they purchased the stock as they had intended. Do you think the court ultimately agreed with the plaintiff s? Why or why not? If not, what remedy do you believe the plaintiffs would have been entitled to?