14-4609-cv
Iroquois Master Fund, Ltd. v. Quantum Fuel Systems Technologies Worldwide, Inc.


                           UNITED STATES COURT OF APPEALS
                               FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

        At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
1st day of February, two thousand sixteen.

Present:
            PETER W. HALL,
            SUSAN L. CARNEY,
                        Circuit Judges,
            BRIAN M. COGAN,
                        District Judge.*
____________________________________________________

IROQUOIS MASTER FUND, LTD.,

                              Plaintiff-Appellant,

               v.                                                           No. 14-4609-cv

QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.,

                        Defendant-Appellee.
_____________________________________________________

For Plaintiff-Appellant:                     THOMAS J. FLEMING, Olshan Frome Wolosky LLP,
                                             New York, NY.

For Defendant-Appellee:                      FRED K. HERRMANN (Matthew L. Powell, on the
                                             brief), Kerr, Russell and Weber, PLC, Detroit, MI.
*
 Hon. Brian M. Cogan, of the United States District Court for the Eastern District of New York,
sitting by designation.
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                                    Matthew J. Aaronson, Troutman Sanders LLP, New
                                    York, NY.
____________________________________________________

       Appeal from a judgment of the United States District Court for the Southern District of

New York (McMahon, J.).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the order of the district court is AFFIRMED.

       Appellant Iroquois Master Fund, Ltd. (“Iroquois”) appeals from a December 1, 2014 final

judgment entered after a bench trial finding Appellee Quantum Fuel Systems Technologies

Worldwide, Inc. (“Quantum”) liable for breach of contract. On appeal, Iroquois argues that the

district court erred when it found that Quantum breached the Series A Warrants (the “Warrants”)

on May 23, 2013, and calculated Iroquois’s damages on that basis, and when it admitted

Quantum’s expert’s testimony into evidence. Quantum argues that because Iroquois was not

aggrieved by the district court’s decision, Iroquois lacks appellate standing to bring this appeal.

We assume the parties’ familiarity with the underlying facts, the procedural history of the case,

and the issues on appeal. We affirm.

        We first address Quantum’s contention that Iroquois lacks appellate standing. A party

does not have “standing to appeal an order unless [it] can show some basis for arguing that the

challenged action causes [it] cognizable injury, i.e., that [it] is ‘aggrieved’ by the order.” Spencer

v. Casavilla, 

, 78 (2d Cir. 1994). Here, because the district court’s final judgment

caused Iroquois injury when it awarded Iroquois damages in an amount less than the amount

Iroquois argued it was entitled to, Iroquois has not “receive[d] all that [it] has sought.” Deposit

Guar. Nat’l Bank, Jackson, Miss. v. Roper, 

, 333 (1980). Iroquois was aggrieved by

the district court’s judgment and thus has standing to bring this appeal.

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       Turning to Iroquois’s argument that the district court erred in calculating damages, we

review de novo conclusions of law and mixed questions of law and fact, and we review the

district court’s factual findings for clear error. Roberts v. Royal Atl. Corp., 

, 367 (2d

Cir. 2008). “Although the amount of recoverable damages is a question of fact, the measure of

damages upon which the factual computation is based is a question of law.” Oscar Gruss & Son,

Inc. v. Hollander, 

, 196 (2d Cir. 2003) (internal quotation omitted). Iroquois argues

that the district court’s damages calculation is incorrect because it is based on the district court’s

erroneous finding that Quantum breached the Series A Warrants on May 23, 2013. We disagree.

       We begin by noting that under the Warrants’ choice of law provision, New York law

governs the terms of the contract. The Warrants provided Iroquois with the right to purchase

Quantum stock at a defined exercise price. The Warrants contained anti-dilution provisions that

reset Iroquois’s exercise price to any lower price at which shares were sold to later investors (the

“effective price”). On May 23, 2013, following the Crede Transaction, Iroquois delivered a

notice of intent to partially exercise the Warrants at a lower adjusted exercise price. Quantum

refused to honor the Warrant because it did not agree that Iroquois’s proposed adjusted exercise

price was equal to the effective price.

       Iroquois argues that because it attempted to exercise the Warrants with an incorrect

exercise price—a price other than the effective price—it failed to comply strictly with the

Warrants. The flawed attempt could not trigger Quantum’s obligation to deliver warrant shares,

and thus Quantum did not breach the Warrants. This argument is unpersuasive. Although under

New York law option contracts must be strictly construed, see Deep Woods Holdings, LLC v.

Sav. Deposit Ins. Fund of Republic of Turkey, 

, 623 (2d Cir. 2014), the Warrants do

not expressly require Iroquois to calculate the adjusted exercise price accurately before



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exercising the Warrants. On the contrary, the Warrants require Quantum to notify Iroquois about

any adjustments to the exercise price. Once Iroquois delivered its notice of intent to partially

exercise the Warrants, Quantum was obligated to provide the shares at the correct adjusted

exercise price. It is Quantum’s failure to do so that is a breach of contract.

       Under New York law, “damages for breach of contract should put the plaintiff in the

same economic position he would have occupied had the breaching party performed the

contract.” Oscar 

. “[T]he proper valuation for the [W]arrants was the date

of the breach—the date [Quantum] failed to deliver the warrants.” 

The proper measure

of damages for a breach of an option contract is the difference between the market value of the

stock and the option price. Hermanowski v. Acton Corp., 

, 922 (2d Cir. 1984). The

district court calculated damages by attempting to put Iroquois in the position it would have been

in if the May 23, 2013 attempted exercise and the Fall 2013 executed exercises had been honored

at the correct adjusted exercise price. The district court calculated the difference between the

value of the Fall 2013 transactions completed at the incorrect exercise prices and the value of the

Fall 2013 transactions had they been completed at the correct exercise prices. It also credited to

Iroquois the value of the May 23, 2013 attempted exercise, which Iroquois would have gained

had Quantum honored the attempt at the correct exercise price. The district court then subtracted

the number of warrant shares that Iroquois would have used for the May 23, 2013 exercise from

the number of outstanding warrant shares Iroquois retained after the Fall 2013 transfers. Because

Iroquois would have been able to exercise only a portion of the warrant shares that it actually

executed on November 4, 2013, the district court deducted from the November 4, 2013

transaction the value of the number of outstanding shares that Iroquois would not have had if the

May 23, 2013 exercise had been completed. The result of the district court’s calculations was



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that it put Iroquois in the “same economic position [it] would have been in had the defendant

fulfilled the contract.” Lucente v. IBM, 

, 262 (2d Cir. 2002). We discern no error in

the district court’s calculation of damages.

       Finally, we review for abuse of discretion the district court’s decision to admit expert

testimony. Amorgianos v. Nat’l R.R. Passenger Corp., 

, 264 (2d Cir. 2002). A

witness may testify as an expert if a) the testimony is helpful to understand a factual issue; b) the

testimony is based upon sufficient facts or data; c) the testimony is the product of reliable

principles and methods; and d) the expert has reliably applied the principles and methods to the

facts of the case. Fed. R. Evid. 702. The district court is tasked with “ensuring that an expert’s

testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert v.

Merrell Dow Pharm., Inc., 

, 597 (1993). “The decision to admit expert testimony is

left to the broad discretion of the trial judge and will be overturned only when manifestly

erroneous.” McCullock v. H.B. Fuller Co., 

, 1042 (2d Cir. 1995).

       Quantum’s expert witness—Roberts Brokaw III—is a banking expert whose knowledge

and expertise was directed at answering the precise question the district court was focused on:

whether the Exchange Right in the Crede Warrant qualifies as a discount that should have been

taken into account in calculating the Effective Price of the approximately 4.9 million Common

Stock shares issued to Crede. Brokaw provided testimony as to the common practices and

standards within the banking industry, which was directly relevant to the factual issue of whether

the Exchange Right qualified as a discount. See United States v. Bilzerian, 

, 1295

(2d Cir. 1991) (explaining that “testimony concerning the ordinary practices in the securities

industry may be received”). In forming his opinions, Brokaw drew upon his professional and

teaching experience, his review of the materials the parties exchanged during discovery, and the



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documents filed with the SEC. Although framed as a challenge to Brokaw’s methodology,

Iroquois’s argument—that Brokaw inappropriately applied a “blockage discount” to the Crede

Warrant—amounts to little more than a disagreement with Brokaw’s calculations and

conclusions. While this is an appropriate attack on the persuasiveness of an expert’s testimony, it

is not relevant to the admissibility of that testimony. 

(“The focus [of

the admissibility inquiry], of course, must be solely on principles and methodology, not on the

conclusions that they generate.”). We find no error with the district court’s decision to admit

Brokaw’s testimony.

       We have considered all of Iroquois’s remaining arguments and find them to be without

merit. The judgment of the district court is AFFIRMED.



                                             FOR THE COURT:
                                             CATHERINE O’HAGAN WOLFE, CLERK




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