Stephenson v. Paine Webber Jackson & Curtis, Inc.

Monroe Stephenson (plaintiff), an experienced investor, had his brokerage account at Paine Webber Jackson & Curtis, Inc. (defendant) handled by employee James Welch. In October 1982, Stephenson learned of an unauthorized trade and told Welch, who promised to fix it, but Stephenson never checked whether it actually was corrected -- including ignoring a December 1982 account statement that would have revealed it wasn't. Several more unauthorized trades followed over the next months; Stephenson kept telling Welch but never informed Paine Webber itself until September 1983. Stephenson sued Paine Webber and Welch over the trades. The district court ruled for Paine Webber, and Stephenson appealed.