The opinion of the court was delivered by: Robert L. Carter, District Judge.
The facts of this case up to December 22, 1988, are set out
in the court's earlier opinion, Metromedia Co. v. Fugazy, No.
87 Civ. 2597 (RLC) (S.D.N.Y. Dec. 22, 1988) (1988 WL 140773,
1988 U.S.Dist.LEXIS 14645) (Carter, J.). However, in light of
subsequent developments, and for the convenience of the reader,
they are repeated here.
On March 21, 1985, plaintiff Metromedia Company
("Metromedia") entered a stock purchase agreement with
defendants William D. Fugazy, Travelco, Inc. ("Travelco"), and
Fugazy International Corporation ("International"), whereby
800 newly issued shares of common stock in Fugazy Express, Inc.
("Express"), representing an 80% interest in Express.*fn1 In
July, 1986, Express filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy
Code, 11 U.S.C. § 1101 et seq., and in March, 1987, it
converted its Chapter 11 reorganization proceeding to a
liquidation under Chapter 7 of the Bankruptcy Code. Id. §§ 701
Alleging that the defendants wrongfully misrepresented and/or
failed to state material facts regarding the financial
condition of Express, Metromedia filed the two actions
consolidated here. Metromedia claimed damages for violations of
§ 12(2) of the Securities Act of 1933, 15 U.S.C. § 77l(2); §
10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j;
Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5; and the Racketeer
Influenced and Corrupt Organizations statute ("RICO"),
18 U.S.C. § 1962(b)-(d), as well as for common-law fraud,
negligent misrepresentation, and breach of warranty. The
predicate offenses alleged in support of the RICO claim were
bankruptcy fraud under 18 U.S.C. § 152, mail fraud under
18 U.S.C. § 1341, wire fraud under 18 U.S.C. § 1343, and
securities fraud under § 10(b), Rule 10b-5, and § 12(2).
Defendants asserted various defenses, and William Fugazy
alleged a counterclaim for breach of an employment agreement
between himself and Express on the theory that Express was an
alter ego of Metromedia.*fn2 Defendants also impleaded
third-party defendant John W. Kluge, claiming that he had
signed a "hold harmless" agreement promising to indemnify
defendants, and that he was a controlling person of Express
liable under § 15 of the Securities Act and § 20 of the
Securities Exchange Act. 15 U.S.C. § 70o, 78t.
The case came on for jury trial beginning on May 16, 1990.
The court granted a directed verdict for Metromedia against
William Fugazy, Travelco and International on the claim of
breach of warranty, Tr. 2089, 2091, dismissed William Fugazy's
counterclaim, Tr. 2087, and dismissed the defendants'
controlling-person claim against Kluge. Tr. 2090. The other
claims were submitted to the jury.
With respect to the predicate offense of bankruptcy fraud
under the RICO claim, the bankruptcy court for this district
had ruled on May 15, 1990, that William Fugazy and Roy Fugazy
had engaged in acts constituting that offense. In re Fugazy
Express, Inc. (Shimer v. Fugazy), 114 B.R. 865 (Bankr.S.D.N Y
1990).*fn3 This court ruled that the bankruptcy court's
findings collaterally estopped William and Roy Fugazy from
denying the bankruptcy fraud, Tr. 2091, and instructed the jury
to find that the defendants had committed bankruptcy fraud.
On June 6, 1990, by special verdict, the jury found William
Fugazy liable under § 12(2) and RICO. As for the requisite
predicate acts for the RICO claim, the jury found that William
Fugazy had committed mail fraud, wire fraud, securities fraud
under § 12(2) and (as instructed by the court) bankruptcy
fraud. The jury rejected the
plaintiff's other claims and the defendants' third-party claim.
The jury awarded $15,553,930.89 in damages. Tr. 2301, 2304.
The court trebled the verdict as to William Fugazy, as provided
in the RICO statute, 18 U.S.C. § 1964(c), to $46,661,792.67.
Tr. 2308. The judgment was approved by the court on June 27,
1990, and entered on the docket on July 6, 1990.
On July 16, 1990, William Fugazy filed a voluntary petition
with the bankruptcy court for relief under Chapter 11 of the
Bankruptcy Code. 11 U.S.C. § 1101 et seq. Consequently, the
present action was automatically stayed under 11 U.S.C. § 362.
Nonetheless, on July 20, the defendants (except Roy Fugazy)
filed a motion with this court for judgment notwithstanding the
verdict or, alternatively, a new trial. On September 4, the
bankruptcy court entered an order modifying the automatic stay
to the extent necessary . . . (A) to permit the
Debtor to pursue Debtor's post-trial motion for
judgment n.o.v. in the Metromedia action . . . and
(B) to permit all other parties to pursue
post-trial motion practice in the Metromedia
Action in connection with Debtor's motion for
judgment n.o.v. . . .
In re Fugazy, No. 90 B 20688 (HS), slip order at 1-2
(Bankr.S.D.N.Y. Sept. 4, 1990). With respect to Fugazy's motion
for judgment n.o.v., the modification is retroactive to July
20, 1990. Id. at 2.
In considering a motion for judgment n.o.v., the court must
view the evidence in the light most favorable to the non-moving
party. Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970);
Unijax, Inc. v. Champion Int'l, Inc., 516 F. Supp. 941, 950
(S.D.N.Y. 1981) (Carter, J.), aff'd, 683 F.2d 678 (2d Cir.
1982). The motion "will be granted only if (1) there is a
complete absence of probative evidence to support the verdict
for the non-movant[,] or (2) the evidence is so strongly or
overwhelmingly in favor of the movant that reasonable and fair
minded [jurors] in the exercise of impartial judgment could not
arrive at a verdict against [the movant]." Armstrong v.
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