The opinion of the court was delivered by: SWEET
These consolidated actions were tried before a jury between November 5-16, 1984, and on November 16 the jury rendered its verdict for plaintiffs Quintel Corporation, N.V. and H. R. Gajria ("Gajria") (collectively, "Quintel"). Defendant and third-party plaintiff Citibank, N.A. ("Citibank") has now moved this court pursuant to Fed.R.Civ.P. 50(b) to overturn the jury verdict or, in the alternative, for a new trial pursuant to Fed.R.Civ.P. 59. Defendants Arnold S. Alperstein and Goldstick, Weinberger, Feldman, Alperstein & Taishoff, P.C. (collectively, "Alperstein") have cross-moved for judgment notwithstanding the verdict. Quintel has moved for the inclusion of prejudgment interest in the judgment against Citibank and Alperstein. Citibank also seeks prejudgment interest on its cross-claim. For the following reasons, Citibank and Alperstein's motions for judgment n.o.v. and for a new trial are denied and Quintel and Citibank's motion for prejudgment interest are granted in part and denied in part.
The Facts as Established at Trial
These actions arose out of real estate transaction in which plaintiff and third-party defendant H. R. Gajria acquired the limited partnership interest in Flag Associates, L.P. ("Flag"), a partnership to be formed for the purpose of acquiring, operating and converting to condominium ownership six apartment complexes located in the State of Florida (the "Developed Land"). Gajria is a non-resident of the United States who is engaged in the business of manufacturing and distributing watches and electronic equipment principally in Japan and the Middle East. Quintel is a corporation existing and organized pursuant to the laws of the Netherlands Antilles which was organized as an acquisition vehicle for the transaction. Citibank is a nationally chartered bank which acted as investment advisor and fiduciary agent to Quintel and Gajria in connection with the investment effectuated by Gajria's acquisition of all stock in Quintel and Quintel's acquisition of the limited partnership interest in Flag. Alperstein is an attorney engaged in the practice of law in the State of New York who was engaged by Gajria to represent him in the negotiation and the completion of the Flag investment.
In 1979, Monumental Properties Trust ("MPT") retained Brooks, Harvey & Co. ("Brooks Harvey") to manage the sale of its real estate holdings throughout the United States. One package of real estate consisted of MPT's real estate holdings in Florida (the "Florida Package"). In connection with the sale of the Florida Package, Brooks Harvey prepared and circulated a brochure (the "Blue Book") to prospective purchasers that described the package as including both the Developed Land, consisting of six garden apartment complexes, and approximately 80 acres of undeveloped land (the "Undeveloped Land"). The offering price for the Florida Package was $13.5 above existing mortgages, of which $1.486 million was attributed to the value of the Undeveloped Land.
In May 1979, MPT entered into a purchase agreement (the "Purchase Agreement") with Garrin Properties, Inc. ("Garrin"), an entity wholly owned by Nelson Rising ("Rising"), Robert Ginsberg ("Ginsberg") and John Rudey ("Rudey") (collectively, the "General Partners"), in which Garrin agreed to buy the Florida Package for a purchase price of $11.5 million in excess of existing mortgages. Garrin then approached Citibank's Gary Bulkley ("Bulkley"), a vice-president in the Bank's Real Estate Investment and Management Department, to obtain second mortgage financing. After obtaining second mortgage financing elsewhere Garrin returned to Citibank to obtain help in finding an investor who could supply equity financing to cover the balance needed. Although Garrin and Citibank initially discussed giving an investor a 25-30% interest in the entire Florida Package in exchange for $4,800,000, they ultimately negotiated a proposal eliminating the Undeveloped Land from the Florida Package and providing that the equity investor would receive a 49% interest in the Developed Property in exchange for $4.1 million. Garrin agreed to contribute $700,000 of its own funds towards the purchase of the Florida Package. On June 27, 1979, Garrin and Citibank set up Flag as a limited partnership in accordance with their negotiations. Citibank subsequently prepared a brochure (the "Red Brochure") which described the investment available in Flag for an equity investor. The Red Brochure did not mention the Undeveloped Land.
Gajria, who had been a Citibank client since July 1978, first became involved in the Flag transaction in August, 1979 when he was given a copy of the Red Brochure by Rusi Sanjani ("Sanjani") who had previously pursued other interests on Gajria's behalf. At that time, Gajria, through Sanjani, also contacted Alperstein for advice in connection with the proposed acquisition by Gajria of the limited partnership interest in Flag. Alperstein was also given a copy of the Red Brochure.
Gajria first met with representatives of Citibank on August 6, 1979 after Sanjani on Ganjria's behalf had engaged in preliminary discussions with Citibank about the investment. Gajria also met with Alperstein on August 6 to discuss the investment. On August 7, Gajria flew to Florida to inspect the properties with Sanjani, his son, Kaizad Sanjani ("Kaizad"), Gary Bulkley, and Claude Kemper of Citibank ("Kemper"). At trial, Gajria and the Sanjanis testified that during the flight down to Florida and on three other occasions Gajria and the Sanjanis questioned the Citibank representatives as to why Quintel would receive only a 49% interest in Flag for a $4.1 million investment whereas the General Partners were receiving a 51% interest for their $700,000 commitment.
Gajria and the other were met in Florida by Rising, who accompanied them on their site inspections. During the visit, Rising discussed the history of the negotiations between MPT and Garrin which culminated in the Purchase Agreement, but the Purchase Agreement was never shown to Gajria or the Sanjanis, nor were they informed of the existence of the Undeveloped Land. At one point during the visit, Kaizad pointed to the Undeveloped Land and asked Rising if it was "ours." Rising responded by saying "No." Neither Bulkley or Kemper responded. Gajria also testified at trial that Rising was asked to identify all other Florida properties in which the General Partners had an interest, and that neither Rising nor the others mentioned the Undeveloped Land in response to this query. During the course of the inspection trip, Gajria and the Sajanis saw Rising refer to the Blue Brochure for information about the properties. None of them were ever shown the Blue Brochure. There was no testimony presented that they requested to see the Blue Brochure.
On August 8, in New York, Gajria agreed orally to take the entire investment. He arranged to borrow $4.8 million from Citibank to cover both the $4.1 million investment and Citibank's $600,000 advisory fee. He subsequently signed an Acquisition Agreement, and Acquisition Authentication and a Service Agreement. These agreements provide, among other things, for Gajria to pay Citibank the sum of $600,000 in consideration for its services in connection with the Flag investment, for Citibank to render monitoring services in connection with the operation of some of the properties, for Gajria to make his investment through Quintel, and for Gajria and Quintel to indemnify Citibank except for gross negligence or willful misconduct. Gajria also on August 8 formally retained Alperstein as his attorney for the transaction. As Gajria's attorney, Alperstein reviewed these documents as well as the Red Brochure.
From August 7 through August 10, Gajria, the Sanjanis, Alperstein, Citibank and the General Partners negotiated the terms of the Flag Limited Partnership Agreement ("Partnership Agreement") and the related business plan. During the course of the August 9, 1979 meetings, Gajria was shown a copy of a draft partnership agreement prepared by Alperstein and Paul Kalos ("Kalos"), Citibank's in-house counsel. After reading paragraph 6.03 of the Partnership Agreement, which stated that the General Partners had entered into a Purchase Agreement with MPT to purchase all the properties listed in the Purchase Agreement and that the General Partners would cause all of the assets, excluding "the property described in Exhibit A annexed hereto" to be acquired by the Limited Partnership, Gajria inquired about Exhibit A which was not attached. Kalos responded by telling Gajria that Exhibit A was not ready yet because it was still being typed.
The documents for closing were finalized on August 11 and 12 by attorneys for the General Partners. Early on August 13, Citibank and Alperstein received execution copies of the documents, including Exhibit A to the Partnership Agreement, which is a metes and bounds description of the Undeveloped Property, and Exhibit A-1, the Purchase Agreement between Garrin and MPT. Also on August 13, a conversation took place between Frederick Russo ("Russo") another Citibank attorney, who was called in to replace Kalos, and Alperstein to which Bulkley, Kemper, Gajria and the Sanjanis were witnesses. According to Russo, he had just discovered that the Undeveloped Land was not included in Gajria's investment and specifically mentioned that fact to Alperstein when he phoned him about the documents. According to Gajria, Alperstein placed the call in order to express concern on another matter and the Undeveloped land was not discussed.
The closing took place in Baltimore on August 14, 1979, and was attended by Russo, Bulkley, the General Partners and their lawyers. Prior to the closing, Russo and Bulkley on the train trip to Baltimore obtained an agreement from Ginsberg not to develop the Undeveloped Property in a manner that would compete with the Developed property. Alperstein, Gajria and the Sanjanis chose not to attend the closing. At the closing, Garrin acquired the total of the Florida Package from MPT. It then assigned the Developed Land portion to Flag and assigned the remaining Undeveloped Land, valued at approximately $1.4 million, to the General Partners affiliated limited partnership, Queens Park Land Developers ("Queens Park").
The day after the closing, Gajria requested and was given a copy of the Blue Brochure. Gajria testified that he asked for the Brochure only because he wanted to show his family pictures of the apartment complex he had just purchased which were included in the Brochure. He further testified that it was only upon reading the Blue Brochure on the way to the airport that he first discovered the existence of the Undeveloped Land. He also testified that he subsequently discovered that the purchase price to Garrin of the entire Florida Package was the same as the purchase price to Flag of just the Developed Land, and that the Undeveloped Land had been assigned to Queens Park.
After Gajria complained to Citibank, Citibank offered to replace him with another investor and to refund his money. Gajria refused, saying that he did not want to be replaced in the investment but instead wanted an interest in the Undeveloped Land. In May 1980, Gajria repaid Citibank the entire principal of the loan plus interest that Citibank originally made to him in August, 1979.
Gajria and Quintel subsequently commenced an action charging Citibank and the Flag General Partners with securities violations, common law fraud and breach of fiduciary obligation. On June 28, 1985 Gajria and Quintel settled with the General Partners and rescinded the transaction entered into with the Flag General Partners. Quintel was paid $6.2 million. A separate action charging Alperstein with legal malpractice and breach of contract was also commenced and both actions were consolidated. Citibank and Alperstein also asserted claims for contribution against each other, and Citibank asserted a claim against Quintel to recover the amount of an overdraft in one of Gajria's bank accounts at Citibank which was never repaid.
In opinions prior to trial, it was held that Gajria could not sue Citibank for less than gross negligence or willful misconduct and that the measure of damages was limited to $617,000, the total of the fees paid by Quintel to Citibank and Alperstein.
The Standard for Judgment n.o.v. and for a New Trial
Entry of a judgment notwithstanding the verdict is only appropriate where "the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable men could have reached." Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970); see also Ebker v. Tan Jay Int'l, Ltd., 739 F.2d 812, 825 (2d Cir. 1984). The evidence must be viewed in the light most favorable to the non-movants. Sirota v. Solitron Devices, Inc., 673 F.2d 566, 573 (2d Cir.), cert. denied, 459 U.S. 838, 74 L. Ed. 2d 80, 103 S. Ct. 86 (1982). In making such a determination, "[c]ourts are not free to reweigh the evidence and set aside the jury verdict merely because the jury could have drawn different inferences or conclusions or because judges feel that other results are more reasonable." Tennant v. Peoria & Pekin Union Railway, 321 U.S. 29, 35, 88 L. Ed. 520, 64 S. Ct. 409 (1944). For judgment n.o.v. to be entered for either Citibank of Alperstein, they must establish that the evidence presented could only have supported a conclusion contrary to the verdict reached by the jury. The jury's verdict must be affirmed if there is sufficient evidence to support the jury's reasonable findings of fact, even if a different conclusion is also possible. See Fund of Funds, ltd. v. Arthur Andersen & Co., 545 F. Supp. 1314, 1326 (E.D.N.Y. 1982).
A new trial may be granted in the interest of justice and to prevent a miscarriage of justice where judgment n.o.v. would not be appropriate. Isley v. Motown Record Corp., 69 F.R.D. 12, 16 (S.D.N.Y. 1975); Bevevino v. Saydjari, 574 F.2d 676, 684 (2d Cir. 1978). In deciding on a motion for a new trial, the court may weigh the evidence and need not view it in the light most favorable to the verdict winner. Fund of Funds, Ltd. v. Arthur Andersen & Co., supra, 545 F. Supp. at 1326. The court has considerable discretion in ordering a new trial if the verdict is so inconsistent with the weight of the evidence or if the errors at trial were so prejudicial that to do otherwise would be a miscarriage of justice. Haber v. County of Nassau, 557 F.2d 322 (2d Cir. 1977).
Citibank's Motion for Judgment n.o.v. and for a New Trial
In order for Citibank to be granted judgment n.o.v., there must have been insufficient evidence presented at trial to support the jury's conclusions that the General Partners' acquisition of the Undeveloped Land was a material undisclosed fact, that Gajria was not put on notice of this acquisition, and that Citibank intended to deceive, manipulate or defraud Gajria or that it acted recklessly. Citibank contends taht there was no evidence presented at trial that could establish all of these elements.
With regard to Quintel's burden of proof on the element of materiality, the court instructed the jury as follows:
In general, information is material if a reasonable person would attach importance to it in determining how to act. The information must be such that if it were disclosed, it would be reasonably certain to have a substantial effect on an investment decision, whether the information refers to a past or future event.
In response to the special interrogatories, the jury concluded that the existence of the Undeveloped Land and the manner and cost of its acquisition by the General Partners was a material fact. The principal evidence offered by Quintel upon which the jury could have relied in reaching this conclusion was the opinion of its expert witness, Robert Stanger ("Stanger") and the testimony of Gajria himself and the testimony concerning the development of the transaction, including the events which took place on the trip to Baltimore. Citibank now argues that Stanger's opinion should be disregarded and that in any event neither his opinion nor Gajria's testimony supports the jury's conclusion.
Citibank first contends that Stanger, who testified at the trial that the Undeveloped Land was additional compensation to the General Partners in a material amount that should be disclosed, was improperly qualified as an expert. However, Stanger's knowledge of the industry standard, based upon his personal procedures and his observations of the industry, was ...