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Campbell v. Liberty Transfer Co.

December 19, 2006

ALAN F. CAMPBELL, PLAINTIFF,
v.
LIBERTY TRANSFER CO., DEFENDANT.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM AND ORDER

Presently before the Court is the motion of Liberty Transfer Co. ("Liberty" or "defendant") for reconsideration of my Order of August 19, 2005, in which I denied, as untimely, its post-trial Fed. R. Civ. P. 50(b) application for judgment as a matter of law.

For the reasons indicated infra, that motion is granted and, upon reconsideration, judgment is awarded to defendant as to the UCC-based and conversion causes of action, but denied as to the negligence claim. As to that claim, a new trial is required.

JURY'S VERDICT AND ENTRY OF JUDGMENT

On June 18, 2004, the jury returned a verdict in favor of plaintiff Allen F. Campbell ("plaintiff" or Campbell") against defendant on each of plaintiff's three causes of action, those being a claim under Uniform Commercial Code § 8-401, a claim for conversion, and one based on negligence. Although the concomitant judgment was prepared on the same date the verdict was returned, viz. June 18, 2004, it was not entered until July 2, 2004. By letter dated July 8, 2004, defendant requested that the judgment be vacated based on "several issues left unresolved." Those issues were identified thusly:

The first issue was our motion for judgment at the conclusion of Plaintiff's case, on which the Court reserved decision. The next issues were the multitude of legal and factual issues with respect to Rule 144, to which all parties agreed, stipulated and consented would not go to the jury, but would remain with the Court to decide in the event of a Plaintiff's verdict. These issues generally deal with whether or not the Plaintiff could have legally sold shares under Rule 144, and complied with such legal requirements, at the time he alleges damages accrued, and whether or not the Defendant could have issued free trading shares under Rule 144 without undue exposure to violations of the Securities Laws.

There are also the post trial issues regarding the verdict itself and whether or not it was contrary to the weight of the evidence. As well, there was the issue of whether or not Plaintiff set forth a prima facie case on damages, considering there was no expert testimony and no evidence of sufficient volume to sell the shares at the price claimed during the time Plaintiff claims he would have sold the shares, as well as the effect on price of dumping shares in a thinly traded securities market.

(Letter from Edward J. Kramer, Esq. to Court dated July 8, 2004 at 1-2.)

Defendant's July 8th letter application was granted, resulting in the July 2, 2004 entry of judgment being vacated. Thereafter, for reasons to be explained momentarily, the vacated judgment was reentered on August 19, 2005.

PARTIES' INITIAL POST-TRIAL MOTIONS

Among defendant's initial post-trial motions was one "for summary judgment [as of] the conclusion of Plaintiff's case" and another labeled as a "post-trial motion to set aside the jury's findings." (Def.'s Mem. in Supp. at 1.) Those motions were deemed to be made pursuant to Fed. R. Civ. P. 50(b), and considered as one post-verdict motion seeking judgment as a matter of law on a number of different grounds. In opposing that application, plaintiff took the position that the Court lacked jurisdiction to entertain defendant's request on several grounds, including that it was made more than ten days after entry of judgment, and thus ran afoul of the ten day jurisdictional period established in Rule 50(b).

Rather than addressing the threshold jurisdictional arguments broached by plaintiff, defendant inexplicably confined its argument solely to what it perceived to be the substantive merits of its positions and the flaws in those advanced by plaintiff. In any event, by decision dated August 19, 2005, I (1) denied defendant's Rule 50(b) motion as untimely, and (2) declined, as unnecessary, to address its application on the merits. Judgment was entered in favor of plaintiff, consistent with the jury's verdict and the August 19th decision, on August 22, 2005.

DEFENDANT'S MOTION FOR RECONSIDERATION

By notice of motion filed on September 1, 2005, Liberty moved for reconsideration. In doing so, it argued, correctly as it develops, that the judgment in this case was not entered on the same date as the jury returned its verdict, to wit June 18, 2004, as the Court had found (see Aug. 19, 2005 Order at 5), but rather on July 2, 2004. As a result, defendant's July 8, 2004 letter was, contrary to the conclusion reached by the Court, timely.

As noted, defendant did not initially respond to plaintiff's timeliness argument. While reconsideration motions are not intended as vehicles for litigants to advance new arguments following receipt of an adverse decision, here such relief is justified given: (1) the case's convoluted post-verdict procedural history (see Aug. 19, 2005 Order, nn.3-4), and (2) defendant's letter was clearly filed within ten days of the correct entry date. Under the circumstances, the August 19, 2005 Order erroneously dismissing defendant's Rule 50(b) motion as untimely is vacated.

ADDITIONAL ARGUMENTS ADVANCED BY PLAINTIFF REGARDING COURT'S JURISDICTION TO ENTERTAIN DEFENDANT'S RULE 50(B) MOTION

Typically, the Court, having vacated its earlier Order, would proceed directly to address defendant's motion for judgment as a matter of law on the merits. However, plaintiff, in opposing defendant's current motion, mentions two other grounds in support of his position that the Court lacks jurisdiction to disturb the jury's verdict, viz. (1) "[d]efendant[] waived its right [to seek judgment as a matter of law] by failing to move for judgment . . . at the conclusion of the evidence," and (2) "[d]efendant violated Rule 50(b)'s ten day limitation by filing its post verdict motion for judgment as a matter of law during mid-November 2004 which was far later than ten days after even the later July 2, 2004 entry date." (Decl. in Opp'n to Def.'s Mot. for Recons. at 2.) These two arguments will be addressed seriatim.

1. Defendant's Purported Failure to Make

Rule 50(a) Motion at End of all the Evidence

This argument by plaintiff was broached, and expressly rejected earlier by the Court in its August 19, 2005 decision. (Aug. 19, 2005 Order at 4-5.) By way of supplementing what was said then, it warrants mention that "[t]he purpose of requiring the moving party to articulate the ground on which JMOL is sought is to give the other party an opportunity to cure the defects in proof that might otherwise preclude him from taking the case to the jury. The articulation is necessary . . . so that the responding party may seek to correct any overlooked deficiencies in the proof." Goldieri-Ambrosini v. Nat'l Realty & Dev. Corp., 136 F.3d 276, 286 (2d Cir. 1998) (internal quotation marks and citations deleted).

That purpose was more than adequately served in this case although Liberty did not expressly move for judgment as a matter of law at the conclusion of all the evidence. To begin with, defendant explained its position in detail following the presentation of plaintiff's case-in-chief. (Trial Transcript ("Tr.") at 118-129; 139-140.) At that time, the Court "reserve[d] decision on the motion," and indicated that it would do the same "after the defendant has put in its case, assuming it does put in a case." (Id. at 140-141.) Thereafter, the defense called one witness, Lisa Conger ("Conger"). Following her brief testimony, both sides rested. The pre-summation charge conference was then conducted, during which the defendant mentioned again the arguments embodied within its Rule 50(a) motion made at the conclusion of plaintiff's case-in-chief. (Id. at 171 to 205; see also id. at 161-163.)

For the reasons provided in the August 19, 2005 Order, as supplemented above, I find that Liberty has not waived its right to assert its current Rule 50(b) motion. Clearly, defendant provided specific notice of what it perceived to be the deficiencies in plaintiff's proof "before the case [was] submitted to the jury." Fed. R. Civ. P. 50(a)(2). And, as explained infra, the deficiencies cited were not truly factual in nature, but rather concerned the legal conclusions to be drawn based on a given set of undisputed material facts.

2. Purported Untimeliness of Rule 50(b) Motion

Based on Judgment Being Entered on July 2, 2004 Instead of June 18, 2004

Plaintiff's argument in toto on this point, including the caption, reads as follows:

B. Defendant violated Rule 50(b)'s ten day time limitation by filing its post verdict motion for judgment as a matter of law during mid-November 2004 which was far later than ten days after even the later July 2, 2004 entry date.

7. As this Court correctly stated, the ten day time limitation is jurisdictional and cannot be enlarged by the Court. See Ex. A [i.e. Court's Aug. 19, 2005 Order]; Decision at p. 6-7. (Decl. in Opp'n to Def.'s Mot. for Recons. at 2-3.)

Defendant's response is even shorter than plaintiff's presentation on this point in that it is nonexistent.

Perhaps, plaintiff means to suggest that the July 8, 2004 letter may not be construed as a Rule 50(b) motion in that it simply conveys an intention to make a future Rule 50(b) motion, as distinct from actually making such a motion with briefs to follow. See Weissman v. Dawn Joy Fashions, Inc., 214 F.3d 224, 230-32 (2d Cir. 2000); Rodick v. City of Schenectady, 1 F.3d 1341, 1346-47 (2d Cir. 1993). Otherwise, plaintiff's abbreviated argument is difficult to fathom. As noted, the initial judgment was entered on July 2, 2004. Defendant's July 8th letter - although beyond Rule 50(b)'s ten day period if erroneously measured from the June 16, 2004 date as I did in crafting the August 19, 2005 Order - obviously was filed within ten days of the correct entry date. As a result, if the July 8th letter constituted a Rule 50(b) motion, that motion was timely notwithstanding that the accompanying briefs were not filed until mid-November 2004.

Here, the issue of whether defendant's July 8, 2004 letter constituted a Rule 50(b) motion need not be resolved because (1) the July 2, 2004 entry of judgment was vacated by Order dated August 12, 2004, and (2) judgment was thereafter entered on August 22, 2005 (pursuant to this Court's Order of August 19, 2005), i.e. well after defendant had submitted its Rule 50(b) motion papers in mid-November 2004. And a motion submitted prior to the entry of judgment, though premature, is deemed to be timely. See Fed. R. Civ. P. 50 advisory committee's note on 1995 Amendments (by providing that a renewed motion may be filed "'no later than'" 10 days after entry of judgment, rather than "'within'" 10 days, Rule 50(b) authorizes "post-judgment motions that sometimes are filed before actual entry of the judgment by the clerk.").

In sum, defendant's mid-November 2004 full fledged motion was timely as predating the entry of judgment in August 2005.

3. Conclusion Regarding Plaintiff's Two Other Jurisdictional Arguments

For the reasons indicated, the Court concludes that it has jurisdiction to entertain defendant's Rule 50(b) motion on the merits and, thus, will do so after providing the underlying facts to place the dispute in context.

FACTS

By agreement dated April 11, 1995, plaintiff, d/b/a Garantia Private Investments, invested $100,000 with NFE Entertainment, Inc. ("NFE"), for the purpose of financing the career of a country western singer. That money, rather than being used for the intended purpose, was improperly funneled to a related corporation, Panther Mountain Water Park, Inc. ("PMWP").

Upon learning of the diversion of the $100,000, plaintiff understandably complained. The ensuing dispute was "seemingly resolved by Panther/NFE Entertainment/Amoruso*fn1 offering to return the $100,000 investment proceeds" which offer was accepted by plaintiff. (Trial Exhibit ("Tr. Ex.") T at 2, ¶ 7.) But the promised repayment was not made, causing plaintiff to commence an action in March of 1996 against PMWP, NFE and Amoruso. That suit ultimately led to the parties executing a settlement agreement on March 15, 1999. (Ex. A to Tr. Ex. G.)

The March 15, 1999 agreement required: (1) PMWP and NFE to pay plaintiff $10,000 on or before April 30, 1999, (2) PMWP to execute a promissory note in favor of plaintiff in the amount of $20,000 to be paid on or before April 30, 2000, (3) PMWP to deliver to plaintiff on or before March 30, 1999 "575,000 unrestricted and freely tradeable shares" of PMWP (id. ¶ 2(c)), (4) PMWP to deliver to plaintiff on or before April 30, 1999 "a letter opinion of its counsel that the above referenced stock is unrestricted and freely tradeable; provided however the failure to deliver such opinion shall not be an event of default [and, should plaintiff go] forward with the closing of the settlement without such opinion, [PMWP's] contractual covenants that said stock is unrestricted and freely tradeable shall remain in full force and effect," (id.), and (5) that PMWP's aforementioned obligations "shall be secured by an Agreed Judgment in favor of [plaintiff] from [PMWP] in the principle [sic] amount of One Hundred Thousand Dollars ($100,000.00)" (id. ¶ 2(d)).

On March 25, 1999, PMWP passed a resolution authorizing its transfer agent, Liberty, to issue 575,000 shares of PMWP common stock to plaintiff. (Tr. Ex. S.) Absent from the corporate resolution was any suggestion that the transferability of the 575,000 shares was to be restricted in any fashion. Upon receipt of the resolution, Liberty issued an unlegended share certificate for the 575,000 PMWP shares. The share certificate was sent by Liberty to PMWP for delivery to plaintiff. However, the next day, Conger, the manager of Liberty, discovered that her subordinate had not placed a legend on the stock certificate indicating that the "shares . . . are not able to be sold on the open market." (Tr. at 144.)

Conger immediately called "Steve Thompson ["Thompson"] of Panther Mountain." (Id. at 149.) He "let [her] know that he was aware that the stock was restricted and [told her to] mark [Liberty's] records accordingly." (Id.) Liberty did so. Nonetheless, PMWP sent the unrestricted certificate to plaintiff's then counsel under covering letter dated April 1, 1999. That letter included the following comment:

As we discussed last Friday, I was led to believe that this was 144 stock, however I am no longer sure this is the case. I have been advised that counsel in New York is drafting an opinion that this stock [is] unrestricted and freely tradeable rather than 144 stock. However, if this is not the case I am making arrangements to have the necessary stock available as quickly as possible and I will present you with a new certificate for those shares in exchange for this certificate. (Ex. C to Tr. Ex. G.)

Approximately six weeks thereafter, i.e. on or about May 17, 1999, plaintiff delivered his stock certificate to his broker and directed the broker to sell the shares into the market over a period of time. That process resulted in 155,000 shares being sold at an average price of 25 cents per share during the period from May 18 to June 2, 1999. But when plaintiff's stock certificate was delivered to Liberty, Liberty declined to effect the transfers on the basis that the certificate was "restricted." (Tr. Ex. B ("Uniform Rejection Notice" dated "5/25/99".)*fn2 At the same time, Liberty affixed a stamp to plaintiff's certificate indicating that he had "acquired [his shares] for investment," and that the shares could not be publically offered for sale unless certain conditions were satisfied. (Tr. Ex. A.)

Plaintiff endeavored to correct the situation initially by calling Conger. She referred him to Thompson who, in turn, directed him to contact Steven Sanders ("Sanders"), PMWP's "SEC lawyer[] in New York City." (Tr. at 42.) Plaintiff called Sanders but was advised that he was "out of town." (Id.) Plaintiff "also spoke [without success] with Frank Chandler . . . who had . . . delivered the [unrestricted] certificate to [plaintiff's] attorney" under the previously noted covering letter of April 1, 1999. Id.

Given that PMWP's transfer agent had refused to record the transfer of the 155,000 shares, and that PMWP and Liberty declined to take any steps to correct the problem, plaintiff went back to court for the purpose of enforcing the March 15, 1999 settlement agreement. That court issued a judgment on September 21, 1999 which, inter alia, directed PMWP to "issue 575,000 unrestricted and freely tradeable shares" of PMWP stock to plaintiff, and to pay plaintiff $100,000, plus interest, based on PMWP's failure to comply with its obligations under the settlement agreement. (Tr. Ex. I.)

True to form, PMWP ignored its obligations under the September 21, 1999 judgment, leading plaintiff to return once again to the Texas court. This time, the court signed an order to show cause directing various PMWP individuals to explain on October 26, 2000 why each should not be held in contempt. (Tr. Ex. J.)

Apparently while the contempt application was pending, PMWP hired John A. Spinuzzi, Esq. ("Spinuzzi") to provide an opinion as to (a) whether plaintiff's 575,000 shares "may be offered and sold into the public market or in private transactions without an effective registration statement," and (b) whether "the Stock Transfer Agent may permit the issuance of new certificates without any restrictive legend thereon and to permit any transfers of the involved shares without violation of the registration provisions of the Securities Act." (Tr. Ex. T at 1.)

By letter dated December 8, 2000, Spinuzzi opined: It is the undersigned's conclusion and opinion that Mr. Campbell is entitled to offer and to sell the involved securities into the public market through normal brokerage transactions and/or in private transactions without any restrictions upon such transfers for the reason he is entitled to utilize the transactional exemption provided by Section 4(1) of the Securities Act in that Mr. Campbell is not an "issuer," "underwriter" or "dealer" within the meaning of the Securities Act. (Id. at 5.)

Spinuzzi's letter was sent to Liberty which then issued six unrestricted stock certificates totaling 575,000 shares on December 7, 2000. Those shares were sold for between 2 cents and 5 cents a share during the period from December 19, 2000 to January 22, 2001, with the total sales proceeds being $18,179.37.

Plaintiff maintains, inter alia, that "[a]s a result of Liberty's wrongful failure to transfer the [155,000] shares in [May 1999 when the price was approximately 25 cents per share, and by affixing the restrictive legend thereby preventing any further sales in the open market at that time at that price, he] lost approximately $206,070.63, plus interest." (First Am. Compl. ¶ 2.)

DISCUSSION ON MERITS OF DEFENDANT'S RULE 50(B) MOTION SEEKING VACATUR OF JURY'S VERDICT AND JUDGMENT AS A MATTER OF LAW

1. Rule 50(b) Standard

As explained in Galdieri-Ambrosini: The standard governing motions for judgment as a matter of law ("JMOL") pursuant to Rule 50, formerly denominated motions for directed verdict or motions for judgment notwithstanding the verdict, is well established. Judgment as a matter of law may not properly be granted under Rule 50 unless the evidence, viewed in the light most favorable to the opposing party, is insufficient to permit a reasonable juror to find in [his] favor. In deciding such a motion, the court must give deference to all credibility ...


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