Opinion
04 Civ. 6078 (WHP).
July 24, 2006
Robert J.A. Zito, Esq. Amy M. Rubenstein, Esq. Schiff Hardin LLP New York, NY, Counsel for Plaintiff.
David L. Harris, Esq. Lowenstein Sandler PC Roseland, NJ, Counsel for Defendant.
ORDER
Defendant Susan M. Barrett d/b/a Strategic Pharma Services, Inc. ("Barrett") moves pursuant to Fed.R.Civ.P. 59 for a new trial or, in the alternative, to amend the Final Judgment in this civil action. Plaintiff MJAC Consulting, Inc. ("MJAC") also moves under Rule 59 for an order amending the Final Judgment to increase the damage award from $110,000 to $220,000, exclusive of interest and costs. For the reasons set forth below, both motions are denied.
BACKGROUND
This action involves a breach of fiduciary duty by Barrett. The case was tried before a jury in August 2005. The jury concluded that Barrett caused Harris Pharmaceuticals, Inc. ("Harris") to terminate a consulting agreement with MJAC so that she could realize all of the profits of that agreement herself rather than share them 50-50 with her joint venture partner, MJAC. Prior to trial, MJAC moved for leave to file an Amended Complaint that would (1) withdraw its claim for an accounting; (2) clarify certain allegations in the original complaint; (3) modify the caption to name "Steven Friedman d/b/a/ MJAC Consulting, Inc." as the plaintiff; and (4) allege for the first time that Barrett owed MJAC's principal Steven Friedman ("Friedman") a fiduciary duty arising out of their "friendship and trust." By an Order dated July 8, 2005, this Court granted MJAC's motion to withdraw the accounting claim and clarify certain allegations, but denied MJAC permission to modify the caption or to assert new bases for its breach of fiduciary duty claim.
I. Evidentiary Rulings on Damages
At trial, MJAC offered extensive testimony from Friedman that Barrett's interference with the Harris-MJAC contract had prevented MJAC from bringing to market a generic drug and realizing lucrative sales commissions. (See, e.g., Trial Transcript ("Tr.") at 31-32, 104-105, 114-117, 120-127, 133-136.) Barrett objected to this testimony on the ground that it constituted a new damages theory. (See, e.g., Tr. at 119, 122-123, 125, 134-135.) The Court overruled most of Barrett's objections, but excluded some testimony. (See, e.g., Tr. at 113, 129, 131.) To rebut that evidence, Barrett sought to introduce MJAC's original $245,000 invoice to Harris (the "Harris invoice") as a means of showing that MJAC's damages theory had changed prior to trial. Barrett's counsel proffered that such evidence would demonstrate that MJAC's damages theory had changed. This Court sustained MJAC's objection because that invoice only related to MJAC's claim for an accounting, which had already been withdrawn with prejudice. This Court also found the invoice would likely confuse the jury.
II. Rulings on the Proper Measure of Disgorgement
At trial, this Court ruled that MJAC was entitled to elect between the remedies of compensatory damages and disgorgement. (Tr. at 386.) However, noting that all of the disgorgement cases cited by MJAC "involve[d] defendants who would not have shared directly in any profits had they not breached their fiduciary duty . . . [because] all of [those] profits would have [otherwise] gone to the employer or the corporation or client," this Court found that the proper measure of disgorgement was the $110,000 to which MJAC would have been entitled had Barrett shared the $220,000 she received from Harris. (Tr. at 386-387.) This Court also denied a separate in limine motion by MJAC on the same issue. (Tr. at 504.)
DISCUSSION
I. Barrett's Motion for a New Trial
Fed.R.Civ.P. 59(a) provides: "A new trial may be granted to all or any of the parties and on all or part of the issues . . . for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States. . . ." A court may grant a new trial if, for example, "substantial errors were made in admitting evidence, or in charging the jury." Sharkey v. Lasmo, 55 F.Supp.2d 279, 289 (S.D.N.Y. 1999). Under Rule 59, a court's decision whether to grant a new trial is "committed to the sound discretion of the trial judge." Metromedia Co. v. Fugazy, 983 F.2d 350, 363 (2d Cir. 1992). However, "[a] motion for a new trial ordinarily should not be granted unless the trial court is convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice." Atkins v. New York City, 143 F.3d 100, 102 (2d Cir. 1998) (quoting Lightfoot v. Union Carbide Corp., 110 F.3d 898, 911 (2d Cir. 1997) (internal citations omitted)).
Barrett contends that a new trial is warranted because (1) the Court allowed MJAC to introduce evidence of a new damages theory; and (2) the Court declined to permit Barrett to offer the purportedly fraudulent $245,000 Harris invoice. Neither of these arguments is sufficient to warrant a new trial and both were thoroughly considered by this Court during the trial.
Barrett's argument about a new damages theory makes no sense. To the extent that limited evidence of that theory was allowed, it related only to MJAC's claim for tortious interference — a claim rejected by the jury. Thus, no damages were awarded on that theory. Tellingly, the amount of the verdict precisely corresponded to the correct measure of damages on a disgorgement theory for breach of fiduciary duty. See infra. Finally, Barrett does not provide any specific examples to substantiate her argument that she was prejudiced by having to devote significant time to rebutting MJAC's new damages theory. Indeed, Barrett was given a full and fair opportunity to present her own case-in-chief.
Barrett's second argument that a new trial is warranted because the Harris invoice was not received in evidence is equally unavailing. While the Harris invoice was the centerpiece of MJAC's damages theory on its claim for an accounting, that claim was dropped from the Amended Complaint and the invoice thereby became irrelevant. Barrett bald assertion that the jury would have regarded all of Friedman's testimony as incredible had she been allowed to introduce evidence of MJAC's prior damages theories is pure and unsubstantiated speculation. This is not sufficient to establish that the jury reached a "seriously erroneous result" requiring another trial under Rule 59.Atkins, 143 F.3d at 102.
II. Motions to Amend the Judgment
A motion to alter or amend a judgment pursuant to Fed.R.Civ.P. 59(e) is evaluated under the same standard as a motion for reconsideration under Local Civil Rule 6.3. Williams v. N.Y. Dep't. of Corrections, 219 F.R.D. 78, 83 (S.D.N.Y. 2003). Such motions "will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). Such a motion "cannot assert new arguments or claims which were not before this court on the original motion." Koehler v. Bank of Berm., Ltd., No. M18-302 (CSH), 2005 WL 1119371, at *1 (S.D.N.Y. May 10, 2005). The decision to grant or deny a motion for reconsideration is within the sound discretion of the district court. McCarthy v. Manson, 714 F.2d 234, 237 (2d Cir. 1983).
A motion to amend the judgment is not an invitation to parties to "treat the Court's initial decision as the opening of a dialogue in which that party may then use such a motion to advance new theories or adduce new evidence in response to the court's rulings." De Los Santos v. Fingerson, No. 97 Civ. 3972 (MBM), 1998 WL 788781, at *1 (S.D.N.Y. Nov. 12, 1998); accord In re Rezulin Prods. Liab. Litig., 224 F.R.D. 346, 349 (S.D.N.Y. 2004). "It is well-settled that Rule 59 is not a vehicle for relitigating old issues, presenting the case under new theories, securing a rehearing on the merits, or otherwise taking a second bite at the apple." Sequa Corp. v. GBJ Corp., 156 F.3d 136, 144 (2d Cir. 1998) (citations and internal quotation marks omitted). Reconsideration is generally appropriate only where there is "an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Virgin Atlantic Airways Ltd. v. National Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992).
A. Barrett's Motion to Amend the Judgment
Barrett moves to reduce the damages award from $110,000 to $65,000 on the ground that Friedman conceded that "pursuant to the terms of his employment with H.D. Smith [beginning in November of 2004], he was not permitted to retain any MJAC clients other than one that owed MJAC a `residual commission schedule.'" (Def.'s Br. at 9.) Barrett suggests that even on a disgorgement theory, the appropriate measure of damages should be limited to the amounts that MJAC could actually have collected had Barrett not breached her fiduciary duty.
Barrett's argument is unpersuasive. It is predicated on a mischaracterization of Friedman's testimony. In fact, when asked "At your new job for H.D. Smith, are you allowed to keep any clients with MJAC?" Friedman responded "Yes." (Tr. at 136.) When asked "How does that work?" Friedman responded "I had one residual commission schedule — commission that was still owed to MJAC and that was incorporated into the agreement." (Tr. at 136-137.) These passages from the trial transcript — the only evidence supplied by Barrett — do not support an argument that MJAC was "contractually prohibited" from collecting any sums from Harris after November 2004. Moreover, Barrett failed to raise this argument at trial and accordingly waived her right to assert it. See Ogden Corp. v. Travelers Indem. Co., 740 F. Supp. 963, 967 (S.D.N.Y. 1990) (barring legal theories on Rule 59 motion where counsel failed to raise them previously);Morse/Diesel, Inc. v. Fidelity Deposit Co. of Maryland, 768 F. Supp. 115, 116 (S.D.N.Y. 1991) (stating that a party may not "advance new facts, issues or arguments not previously presented to the Court" in a Rule 59(e) motion). Therefore, Barrett's motion to amend the Final Judgment to reduce the damages award to $65,000 is denied.
B. MJAC's Motion to Amend the Judgment
MJAC cites no authority in its motion papers "that might reasonably be expected to alter the conclusion[s] reached by the court" with respect to the correct measure of damages on a disgorgement theory. Shrader, 70 F.3d at 257. To the contrary, like the cases MJAC previously presented to this Court, all of the authorities it cites "involve defendants who would not have shared directly in any profits had they not breached their fiduciary duty . . . [because] all of [those] profits would have [otherwise] gone to the employer or the corporation or client."See, e.g., Schweizer v. Mulvehill, 93 F. Supp. 2d 376, 401 (S.D.N.Y. 2000) (noting in dicta that disgorgement of the full amount realized by an attorney as part of a scheme involving breach of fiduciary duty was appropriate in circumstances where attorney would have realized no profits but for his breach); Diamond v. Oreamuno, 24 N.Y.2d 494 (1969) (compelling disgorgement of all proceeds "derived solely from exploiting information gained by virtue of [defendants'] inside position as corporate officials.") (emphasis added);Corporate Interiors, Inc. v. Pappas, No. 8570/00, 2004 WL 750507, at *6 (N.Y.Sup. Apr. 7, 2004) (permitting plaintiff to submit evidence of gains realized by former employee who had breached his duty of loyalty as a basis for a damages award where the employee would not have realized any profits but for opportunities arising from his employment with plaintiff); Gomez v. Bicknell, 756 N.Y.S.2d 209, 214-15, 302 A.D.2d 107 (2d Dept. 2002) (same).
The various securities cases cited by MJAC (see, e.g., S.E.C. v. Patel, 61 F.3d 137, 139-40 (2d Cir. 1995); S.E.C. v. Tome, 833 F.2d 1086, 1096 (2d Cir. 1987); S.E.C. v. Thomas James Assocs., Inc., 738 F. Supp. 88, 94 (W.D.N.Y. 1990)) are, as this Court has previously noted, conceptually similar to employer-employee cases where the breaching party has no entitlement to any profit and is therefore forced to disgorge all of the fruits of his breach. (Tr. at 385.) In contrast, this case presents a situation where Barrett would have been entitled to keep half of the Harris consulting fees had she proceeded in a lawful manner.
MJAC relies heavily on Bon Temps Agency Ltd. v. Greenfield, 584 N.Y.S.2d 824, 825-26, 184 A.D.2d 280, 281 (1st Dept. 1992), in which the disloyal employee of a temporary employment agency was forced to disgorge all profits realized from her wrongful, secret placement of two employees, including the value of the commissions she would have received had she placed the employees through proper channels. However, in Bon Temps, the court relied on the New York rule that "a disloyal employee is not entitled to receive compensation, whether commissions or salary."Bon Temps, 584 N.Y.S.2d at 826 (emphasis added); see also Interpol Ltd. v. Patterson, 874 F. Supp. 616, 622 (S.D.N.Y. 1995) (same). This action does not involve a plaintiff who seeks to avoid paying compensation to a disloyal employee; indeed, it does not involve an employer-employee relationship at all. To the contrary, this case presents a situation in which the parties were joint venturers who negotiated an agreement requiring that all profits be shared 50-50. Because MJAC presents no authority in which any court grants a plaintiff a windfall of the type claimed here, there is no need for this Court to amend its August 17, 2005 bench rulings. See Shrader, 70 F.3d at 257 (motions for reconsideration generally denied unless the movant "can point to controlling decisions or data that the court overlooked — matters in other words, that might reasonably be expected to alter the conclusion reached by the court.").
CONCLUSION
For the foregoing reasons, both Barrett's and MJAC's Rule 59 motions are denied.SO ORDERED.