Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Sandra C. Barkley v. United Homes

June 20, 2012

SANDRA C. BARKLEY, PLAINTIFF,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, OLYMPIA MORTGAGE CORP., AND BENJAMIN TURNER, DEFENDANTS.
MARY LODGE,
PLAINTIFF,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, OLYMPIA MORTGAGE CORP., BAYVIEW LOAN SERVICING, LLC, BAYVIEW ASSET MANAGEMENT, LLC, U.S. BANK, N.A., AS TRUSTEE FOR BAYVIEW ASSET-BACKED SECURITIES TRUST SERIES 2007-30, AND BAYVIEW FINANCIAL MANAGEMENT CORP., DEFENDANTS. DEWITT MATHIS, PLAINTIFF,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, AND ALLIANCE MORTGAGE BANKING CORP., DEFENDANTS.
SYLVIA GIBBONS AND SYLVIA GIBBONS, AS ADMINISTRATOR OF THE ESTATE OF RODNEY GIBBONS, PLAINTIFFS,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, AND OLYMPIA MORTGAGE CORP., DEFENDANTS.
MILES MCDALE AND LISA MCDALE,
PLAINTIFFS,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, ALLIANCE MORTGAGE BANKING, CORP., AND BENJAMIN TURNER, DEFENDANTS. CHARLENE WASHINGTON, PLAINTIFF,
v.
UNITED HOMES, LLC, UNITED PROPERTY GROUP, LLC, YARON HERSHCO, GALIT NETWORK, LLC, AND ALLIANCE MORTGAGE BANKING CORP., DEFENDANTS.



The opinion of the court was delivered by: Matsumoto, United States District Judge:

MEMORANDUM AND ORDER

Plaintiffs Sandra Barkley, Mary Lodge, Dewitt Mathis, Lisa McDale, Miles McDale, Charlene Washington, and Sylvia Gibbons in her individual capacity and as the Administrator of the Estate of Rodney Gibbons (collectively "plaintiffs") each commenced six separate actions against United Homes, LLC; United Property Group, LLC; Galit Network, LLC (collectively, the "UH Defendants"); Yaron Hershco, the owner and principal of the UH Defendants; Olympia Mortgage Corp. ("Olympia")*fn1 (collectively "defendants"); and others, alleging that defendants engaged in a fraudulent property-flipping scheme wherein the UH Defendants acquired distressed, damaged, and defective properties in predominantly minority neighborhoods, made substandard and superficial repairs, and used racially targeted marketing strategies to sell the properties as "newly renovated" at substantially inflated prices, primarily to members of racial and ethnic minorities with little or no experience with homeownership and minimal financial acumen. Plaintiffs further alleged that the UH Defendants conspired with appraisers, attorneys, and mortgage lenders in order to perpetrate the fraudulent scheme.

On May 9, 2011, jury selection and trial commenced in these actions. (ECF*fn2 Minute Entry dated 5/9/2011.) Prior to submitting the cases to the jury, the court denied defendants' motions for judgment as a matter of law, made pursuant to Federal Rule of Civil Procedure 50(a) ("Rule 50(a)") with regard to plaintiffs' claims and the extent to which the corporate veil could be pierced to impose individual liability on Mr. Hershco. (Trial Transcript ("Tr.") XIII at 268-91.) Following a three-week trial, on June 1, 2011, the jury found the UH Defendants, Mr. Hershco, and Olympia liable for engaging in deceptive business practices in violation of Section 349 of New York General Business Law ("GBL § 349"), fraud, and conspiracy to commit fraud, and awarded compensatory and punitive damages. (ECF Minute Entry dated 6/1/2011; ECF No. 566, Jury Verdict ("Verdict").) The jury found the UH Defendants, Mr. Hershco, and Olympia not liable on plaintiffs' discrimination claims. (Verdict.)

Presently before the court are (1) renewed motions for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b) ("Rule 50(b)"), and (2) in the alternative, motions for a new trial pursuant to Federal Rule of Civil Procedure 59 ("Rule 59") by the UH Defendants and Mr. Hershco (the "moving defendants").*fn3 (ECF No. 618, Memorandum of Law in Support of Hershco's Motion for Judgment as a Matter of Law, or in the Alternative, a New Trial ("Hershco Mem."); ECF No. 620, Memorandum of Law in Support of the UH Defendants' and Yaron Hershco's Motion for Judgment as a Matter of Law, or in the Alternative, a New Trial ("Defs.' Mem."); ECF No. 649, Defendants' Memorandum of Law in Reply ("Defs.' Reply)".) Plaintiffs oppose the moving defendants' motions. (ECF No. 643, Plaintiffs' Memorandum of Law in Opposition (Pls.' Opp'n").)

For the reasons set forth below, the court denies the moving defendants' Rule 50(b) and 59 motions.

BACKGROUND

I.The Verdict

A.The Jury's Findings

After a three-week jury trial, the jury found by a preponderance of the evidence that defendants engaged in unfair and deceptive practices in violation of GBL § 349 by inducing plaintiffs to enter into their respective home purchase and financing transactions by misrepresenting the appraised value of the properties, the condition of the properties, and/or the terms and affordability of their respective mortgages.

(Verdict.) In addition, the jury found by clear and convincing evidence that defendants defrauded plaintiffs in connection with plaintiffs' home purchase and financing transactions. (Id.) The jury also found that defendants conspired with one or more other defendants to engage in the fraudulent activity. (Id.)

Moreover, the jury found sufficient facts to pierce the corporate veil and hold Mr. Hershco individually liable for the fraud, conspiracy, and GBL § 349 claims, having found that Mr. Hershco "exercised complete control over [the UH Defendants]" in connection with each plaintiff's home purchase transaction, and that Mr. Hershco committed fraud or some other wrong against each plaintiff through his domination over the UH Defendants. (Id.) In addition, the jury found that Mr. Hershco, as a corporate officer of the UH Defendants, participated in or knowingly approved of wrongful conduct. (Id.)

B.Awards of Compensatory and Punitive Damages

The jury awarded compensatory and punitive damages to plaintiffs as summarized below:

Damages Awarded to Sandra Barkley*fn4

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Olympia $1,000 from Ben Turner Compensatory Damages for Fraud $45,000 Punitive Damages for Fraud $25,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Olympia $10,000 from Ben Turner Compensatory Damages for Conspiracy to Defraud $45,000

Damages Awarded to Rodney and Sylvia Gibbons*fn5

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Olympia Compensatory Damages for Fraud $57,500 Punitive Damages for Fraud $35,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Olympia Compensatory Damages for Conspiracy to Defraud $57,500

Damages Awarded to Mary Lodge*fn6

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Olympia Compensatory Damages for Fraud $50,000 Punitive Damages for Fraud $35,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Olympia Compensatory Damages for Conspiracy to Defraud $50,000

Damages Awarded to Dewitt Mathis*fn7

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Alliance Compensatory Damages for Fraud $65,000 Punitive Damages for Fraud $35,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Alliance Compensatory Damages for Conspiracy to Defraud $65,000

Damages Awarded to Miles and Lisa McDale*fn8

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Alliance $1,000 from Ben Turner Compensatory Damages for Fraud $75,000 Punitive Damages for Fraud $25,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Alliance $10,000 from Ben Turner Compensatory Damages for Conspiracy to Defraud $75,000

Damages Awarded to Charlene Washington*fn9

Compensatory Damages for Unfair and Deceptive Practices $1,000 Punitive Damages for Unfair and Deceptive Practices $1,000 from Yaron Hershco $1,000 from each UH Defendant $1,000 from Alliance Compensatory Damages for Fraud $25,000 Punitive Damages for Fraud $35,000 from Yaron Hershco $5,000 from each UH Defendant $10,000 from Alliance Compensatory Damages for Conspiracy to Defraud $25,000

DISCUSSION

II.Defendants' Rule 50(b) Motions to Set Aside the Verdict

A.Legal Standard

Rule 50(a) of the Federal Rules of Civil Procedure permits a party to move for judgment as a matter of law before a case is submitted to the jury. Fed. R. Civ. P. 50(a). A motion made pursuant to Rule 50(a) "must specify the judgment sought and the law and facts that entitle the movant to the judgment." Id. If the court denies a party's Rule 50(a) motion, the movant may file a renewed motion for judgment as a matter of law no later than 28 days after entry of judgment.*fn10 Fed. R. Civ. P. 50(b). "In ruling on the renewed motion, the court may: (1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law." Id.

"In considering a motion for judgment as a matter of law, the district court 'must draw all reasonable inferences in favor of the nonmoving party.'" Zellner v. Summerlin, 494 F.3d 344, 370 (2d Cir. 2007) (quoting Reeves v. Sanderson Plumbing, 530 U.S. 133, 150 (2000)). The court must not, however, make credibility determinations or weigh the evidence because "'[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'" Id. (quoting Reeves, 530 U.S. at 150). Consequently, "'although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe.'" Id.; see also Katara v. D.E. Jones Commodities, Inc., 835 F.2d 966, 970 (2d Cir. 1987) (a court "cannot assess the weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury") (internal quotation marks omitted).

The movant thus bears a heavy burden, because "a court may grant a motion for judgment as a matter of law 'only if it can conclude that, with credibility assessments made against the moving party and all inferences drawn against the moving party, a reasonable juror would have been compelled to accept the view of the moving party.'" Zellner, 494 F.3d at 370-71 (quoting Piesco v. Koch, 12 F.3d 332, 343 (2d Cir. 1993)). In other words, the court may grant a Rule 50(b) motion for judgment as a matter of law only if the record contains "'such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture, or . . . such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded men could not arrive at a verdict against [it].'" Concerned Area Residents for Env't v. Southview Farm, 34 F.3d 114, 117 (2d Cir. 1994) (quoting Song v. Ives Lab., Inc., 957 F.2d 1041, 1046 (2d Cir. 1992)). The court reviews the moving defendants' Rule 50(b) motions in light of these considerations.

B.Procedural Waiver

As an initial matter, plaintiffs argue that the moving defendants' Rule 50(b) motions for judgment as a matter of law are procedurally flawed to the extent that the movants' Rule 50(a) motions failed to reference the specific grounds upon which the Rule 50(b) motions rest. (Pls.' Opp'n at 3-5.) According to plaintiffs, defendants waived two specific arguments now present before the court: (1) the "specific merger clause" in the plaintiffs' contracts of sale renders plaintiffs' fraud claims inactionable, and (2) plaintiffs failed to present sufficient evidence to support the jury's award of compensatory damages. (Id. at 4-5.)

Defendants do not deny their failure to raise either issue; instead, defendants urge the court not to "apply a procedural 'gotcha'" by declining to consider defendants' unpreserved arguments. (Defs.' Reply at 6.) In addition, defendants argue that despite their "procedural oversight," the court should nonetheless consider their arguments to avoid a manifest injustice. (Id. at 7.)

1.Legal Standard

A party moving for judgment as a matter of law pursuant to Rule 50(a) "must specify the grounds upon which the motion relies." Lambert v. Genesee Hosp., 10 F.3d 46, 53-54 (2d Cir. 1993), overruled on other grounds by Kasten v. Saint-Gobain Performance Plastics Corp., 131 S. Ct. 1325 (2011). A renewed motion for judgment as a matter of law pursuant to Rule 50(b) must follow an earlier motion on the same subject because "'[t]he very purpose of Rule 50(b)'s requiring a prior motion for a directed verdict is to give the other party an opportunity to cure the defects in proof that might otherwise preclude him [or her] from taking the case to the jury.'" Broadnax v. City of New Haven, 415 F.3d 265, 268 (2d Cir. 2005) (quoting Cruz v. Local Union No. 3 of the Int'l Bhd. of Elec. Workers, 34 F.3d 1148, 1155 (2d Cir. 1994)). Accordingly, the court may reach a forfeited issue only if ignoring the issue would "result in manifest injustice" or if the issue involved is "purely legal error." AIG Global Secs. Lending Corp. v. Banc of Am. Secs., LLC, 386 F. App'x 5, 6 (2d Cir. 2010).

2.Application

At the close of plaintiff's case-in-chief, pursuant to Rule 50(a), defendants moved to dismiss Mr. Hershco as an individual defendant on grounds that plaintiffs had presented insufficient evidence to pierce the corporate veil because they had failed to establish that Mr. Hershco, the owner and principal of the UH Defendants, abused the corporate form in furtherance of fraud. (Tr. XIII at 269-77.) In addition, defendants argued that there was "no proof of fraud," particularly because plaintiffs entered into their home purchases in "arm's length deal[s] with [their] eyes wide open, with legal counsel at [the] table." (Id. at 279-83.) Defendants also asserted that plaintiffs failed to present sufficient evidence of civil conspiracy because there was no evidence of fraud, conspiracy, or the steering of lawyers or lenders. (Id. at 281.) Moreover, defendants contended that there was no evidence to support plaintiffs' claims that the prices of plaintiffs' homes were inflated; that defendants knowingly saddled plaintiffs with unaffordable mortgages; or that plaintiffs were unsophisticated buyers with no financial acumen. (Id. at 281-83.) Defendants further argued that plaintiffs had failed to meet the burden of proof with respect to plaintiffs' racial discrimination claims. (Id. at 277-86.)

Defendants did not, however, articulate in their Rule 50(a) motions (1) that plaintiffs' fraud claims were inactionable due to the "specific merger clause" in plaintiffs' contracts of sale; or (2) that plaintiffs failed to prove sufficient evidence of compensatory damages. Consequently, because neither of the unpreserved issues involves purely legal questions and the court finds no risk of manifest injustice, the court will not reach the issues here.

C.Fraud

In support of their motion for judgment as a matter of law with respect to plaintiffs' fraud claims, defendants advance numerous arguments, all of which lack merit.

1.Doctrine of Caveat Emptor Does Not Apply

Defendants first argue that plaintiffs' fraud claim is barred by the doctrine of caveat emptor because the transactions at issue were "all at arm's length between parties of ordinary intelligence and experience." (Defs.' Mem. at 8-10.) Defendants assert that because plaintiffs were sophisticated and "experienced buyers [who] understood the options available to them in the real estate property market," plaintiffs' reliance on defendants' representations regarding the value or quality of their home purchases was unjustified, and therefore an improper basis for plaintiffs' fraud claims. (Id. at 8.)

Under the doctrine of caveat emptor, New York "imposes a duty on buyers of real estate to independently ascertain or verify the value of the property at issue." M & T Mortg. Corp. v. White, 736 F. Supp. 2d 538, 558 (E.D.N.Y. 2010) (citing London v. Courduff, 529 N.Y.S.2d 874 (N.Y. App. Div. 2d Dep't 1988)). Thus, it is "settled law in New York that the seller of real property is under no duty to speak when the parties deal at arm[']s length"*fn11 and "[t]he mere silence of the seller, without some act or conduct ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.