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DARDAGANIS v. GRACE CAPITAL

January 8, 1991

THEOFANIS DARDAGANIS, HARRY EAGELBERG, MARTIN GELLER, ARTHUR KOTOROS, PAUL RAPHAEL, AND PHILIP SIMADIRIS, AS TRUSTEES OF THE RETIREMENT FUND OF THE FUR MANUFACTURING INDUSTRY, PLAINTIFFS,
v.
GRACE CAPITAL, INCORPORATED AND H. DAVID GRACE, PERSONALLY, DEFENDANTS.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiffs Trustees of the Retirement Fund of the Fur Manufacturing Industry (the "Fund") have moved for summary judgment on remand from the Court of Appeals. Defendants Grace Capital, Inc. ("Grace Capital") and H. David Grace ("Grace") oppose the motion, asserting that there are material facts in dispute concerning the proper measure of the Trustees' damages. For the following reasons, the motion is granted.

Prior Proceedings

  The parties, facts, and prior proceedings are all described
in detail in the earlier opinions of this court, Dardaganis v.
Grace Capital, Inc., 664 F. Supp. 105 (S.D.N.Y. 1987)
(Dardaganis I); Dardaganis v. Grace Capital, Inc., 684 F. Supp. 1196
 (S.D.N.Y. 1988) (Dardaganis II), and the Court of Appeals,
Dardaganis v. Grace Capital, Inc., 889 F.2d 1237 (2d Cir. 1989)
(Dardaganis III), familiarity with which is assumed. The facts
will be repeated here only as they are pertinent to the present
motion.

The Fund is a multiemployer pension plan which provides pension benefits to several thousand current or former employees in the fur garment industry. Grace Capital was employed to manage Fund's investments from August 1981 until October 1984. Grace was the chief executive officer of Grace Capital.

On August 7, 1985 the Fund sued Grace Capital and Grace personally for misinvestment of the Fund's assets. In June 1987, the Fund was awarded partial summary judgment on the issue of liability, with the amount of its damages left open. Dardaganis I.

On December 29, 1987, the Fund moved for summary judgment on the damages issue. Each party submitted experts' affidavits on the proper calculation of damages. Nancy R. Wagner ("Wagner"), the Fund's expert, used a method that relied on periodic reports produced by Grace which summarized the activity in the Fund's accounts ("the Reports"). Wagner conceded that the use of the Reports rather than more detailed day-by-day or transaction-by-transaction data required certain assumptions which were likely to lead to some inaccuracy in her calculations, but stated that she had used the Reports because they "are the only data available to the [Fund] from which damages can be calculated." September 25, 1987 Affidavit of Nancy R. Wagner ¶ 7. The Fund also asserted, as part of its statement of undisputed material facts, that "these reports are the only source available to the [Fund] for calculating damages."

Wagner initially calculated that the damages were $1,015,944 as of October 31, 1984, and that interest accrued through August 31, 1987 and other adjustments resulted in a figure of $1,427,331.*fn1 She later adjusted this figure slightly and calculated that as of February 29, 1988 the total amounted to $1,503,182.

Philip C. Loomis ("Loomis"), Grace's expert, while disagreeing with a number of Wagner's assumptions, expressly stated that "[m]y methodology does not differ in material respects from that employed by Ms. Wagner." January 22, 1988 Affidavit of Philip C. Loomis ¶ 14. He initially calculated the Fund's damages as of at $85,657, and subsequently modified that amount to $54,059 — less than six percent of the base amount ($1,015,944) calculated by Wagner. Loomis also disagreed with Wagner's interest calculations. Grace never disputed the Fund's statement that the Reports were the only data available from which damages could be calculated.

The Fund's motion was granted on April 14, 1988 with damages awarded in the amount of $1,015,944 plus interest, calculated using Wagner's method, from October 31, 1984 to the date of judgment. Dardaganis II.

Grace appealed this judgment, contesting both the summary judgment on the liability and the summary judgment on the amount of damages, and objecting to the assessment of damages against Grace personally. Dardaganis III. The Court of Appeals explicitly rejected Grace's complaints with Wagner's calculations, stating that

  There may be cases in which a defendant comes
  forward with particularly reliable evidence that,
  had the funds not been improperly invested, they
  would have been put into a particular alternative
  investment. In such cases, it may be inappropriate
  to decide by summary judgment that the funds in
  question would have yielded a return equal to the
  average rate of the rest of the portfolio. In this
  case, ...

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