Opinion
3:20-cv-01908-RBM-MSB
07-30-2024
MANUEL RODITI and VENICE BEJARANO, Plaintiffs v. NEW RIVER INVESTMENTS INC., et al., Defendants
ORDER DENYING DEFENDANTS' MOTION FOR (1) JUDGEMENT AS A MATTER OF LAW AND (2) NEW TRIAL
[DOC. 210]
HON. RUTH BERMUDEZ MONTENEGRO, UNITED STATES DISTRICT JUDGE
Pending before the Court is Defendant New River Investments, Inc., Alberto Roditi, and Guillermo Roditi Dominguez's (collectively, “Defendants”) Post-Trial Motion for (1) Judgment as a Matter of Law and (2) New Trial (“Motion”). (Doc. 210.) Plaintiffs Manuel Roditi and Venice Bejarano (collectively, “Plaintiffs”) filed an Opposition to Defendants' Motion (“Opposition”). (Doc. 212.) Defendants filed a Reply in support of their Motion (“Reply”). (Doc. 215.)
The Court finds this matter suitable for determination without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth below, Defendants' Motion is DENIED .
I. BACKGROUND
On January 30, 2024, shortly before trial, Plaintiffs filed a Third Amended Complaint (“TAC”), asserting claims for (1) violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act (“Exchange Act”), (2) violations of Section 20(a) of the Exchange Act, (3) breaches of fiduciary duty, and (4) breach of contract. (Doc. 156.) Plaintiffs' allegations primarily related to Defendants' mismanagement of Plaintiffs' Interactive Brokers (“IB”) account and the losses sustained therein. (Id. ¶¶ 13-20.)
Plaintiffs also asserted a negligent misrepresentation claim, which did not proceed to trial.
During a week-long jury trial, Plaintiffs' expert Lisa Roth opined that an appropriate investment mix for the IB account given Plaintiffs' risk tolerance was a portfolio that combined two indices: the NASDAQ index and the Russell 1000 index. (Doc. 192 at 766:23-767:8.) Roth then provided this opinion to Plaintiffs' damages expert, Brian Bergmark, who used this mix for his damages analysis:
Q. And what kind of information did you obtain from Ms. Roth?
A. Well, as I said, I'm not an investment advisor. And so one of the claims that the plaintiffs have in the case is that the account, beginning in 2018, was -- was handled in a different way than it had been, and not consistent with what they expected to have -- have -- how the trading would have performed. So what I'm trying to do is compare, if that trading would have been performed consistent with their expectations, what would the account -account balance have been. And so I asked Ms. Roth, who was investment advisor, how their money would have been -- how it would have been invested and what types of investment it would have been in. And then I used that information to quantify what the -- the -- the returns on the account would have been, had they been in those investments that Ms. Roth's identified, compared to what actually occurred.(Doc. 186 at 938:17-939:8.) Bergmark then testified that he began his damage analysis on January 1, 2018 because Roth had opined that there was a change in the management of the IB account at this time. (Id. at 943:6-16.) Bergmark also testified that Roth recommended a mix of 70% invested in the NASDAQ Composite index and 30% in the Russell 1000 index. (Id. at 947:2-7.) Mr. Bergmark concluded that if the $1,288,959 that existed in this IB account on January 1, 2018 were invested 70% in the NASDAQ Composite index and 30% in the Russell 1000 index, the balance on December 15, 2023 would have been $2,926,741. (Id. at 957:5-959:12.)
At trial, there was a dispute regarding whether Roth recommended the NASDAQ 100 or the NASDAQ Composite index. Roth clarified that the NASDAQ Composite index was the appropriate index for Plaintiffs. (Doc. 193 at 1018:20-1019:12.) Roth explained that the NASDAQ 100 index is merely a subset of the NASDAQ Composite index. (Id. at 1020:17-25.)
On February 9, 2024, the jury returned a verdict for Plaintiffs on all counts. (Doc. 197.) The jury awarded Plaintiffs $1,050,000 for breach of fiduciary duty, $525,000 for breach of contract, and $525,000 for violations of Section 10(b) and Rule 10b-5 of the Exchange Act. (Id. at 2-4.) The jury also found Defendant Guillermo Roditi Dominguez liable pursuant to Section 20(a) of the Exchange Act. (Id. at 5.)
Following the jury's verdict, Plaintiffs' counsel immediately raised an issue regarding the jury's damages award. Plaintiffs' counsel stated, “I'm a little worried that there's-the verdict is a little vague in terms of damages. So, in other words, I don't know if they're intending the total damages be [two] million or 1,050,000. And as opposed to potentially having post trial motions on that issue, I think we just ask them now what's your total damages award?” (Doc. 199 at 125:25-126:5.) Defendants' counsel responded, “That's fine, Your Honor.” (Id. at 126:6.) The Court stated, “[w]ell, one of the things that I can do is ... I can write here, ‘[w]hat is the total amount of damages?'” (Id. at 126:24127:1.) Plaintiffs' counsel responded, “I think that's a good idea[,]” and Defendants' counsel responded, “[t]hat's fine, Your Honor.” (Id. at 127:2-6.)
The Court then informed the jury, “[i]n reviewing the verdict form, there needs to be some clarification. So I will be giving this [verdict] form back to you, and you need to insert what is the total amount of damages. All right? So there will be a signature line for you to insert the number and then a place for the presiding juror to sign again.” (Id. at 127:19-23.) The jury returned a verdict for a total of $2,100,000 in damages. (Id. at 128:12-13.)
Accordingly, on February 20, 2024, this Court entered judgment in favor of Plaintiff and against Defendants for $2.1 million broken down as follows:
For Breach of Fiduciary Duty: $1,050,000.00 against Defendants New River Investments Inc., Alberto Roditi, and Guillermo Roditi Dominguez.
For Breach of Contract: $525,000.00 against Defendant New River Investments Inc.
For Violations of Section 10(b) of the Exchange Act and Rule 10(b)(5): $525,000.00 against Defendants New River Investments Inc., Alberto Roditi, and Guillermo Roditi Dominguez.(Doc. 205.)
A. Defendants' Motion
In their Motion, Defendants request that the Court enter judgment as a matter of law for Defendants and against Plaintiffs as to their claims for violations of the Exchange Act. (Doc. 210-1 at 5.) Defendants argue that Plaintiffs failed to establish all of the elements of a 10b-5 claim: (1) a material misrepresentation, (2) in connection with the purchase or sale of a security, (3) with scienter, (4) by means of interstate commerce. (Id. at 7.) Specifically, Defendants argue that they never represented that they would take the investor policy statement “seriously” and that Plaintiffs could not have reasonably relied on misrepresentations in the investment advisory contract (“IAC”) because it was not found until January 9, 2024. (Id. at 8-9.) Defendants also argue that they did not act with the requisite scienter because Defendants' allegedly reckless conduct was not an extreme departure from the relevant standard of care. (Id. at 9-10.) Lastly, Defendants argue that Plaintiffs did not establish the use of an instrumentality of interstate commerce because Plaintiffs resided in Mexico. (Id. at 10.)
Defendants also request that that the Court vacate the judgment as to all counts and set a new trial because (1) the jury's verdict constitutes impermissible double recovery and (2) Plaintiffs' counsel's misconduct at trial substantially prejudiced Defendants. (Id. at 5.) First, Defendants argue that the jury impermissibly awarded duplicative damages by aggregating three separate awards based on the same facts and resulting in the same harm. (Id. at 9-15.) In support of this position, Defendants cite both federal and California state case law interchangeably. (Id.) Defendants conclude that the Court should order a new trial or reduce the judgment to $525,000. (Id. at 15.) Second, Defendants argue Plaintiffs' counsel's misconduct warrants a new trial. (Id. at 15-22.) Specifically, Defendants argue that Plaintiffs' counsel impermissibly shifted the burden of proof in his opening and closing statements by noting that Defendants did not have an expert witness. (Id. at 16-18.) Defendants also argue that Plaintiffs misstated the burden of proof when making an analogy to the scale of justice and improperly inserted his own beliefs and opinions throughout his closing argument. (Id. at 18-21.)
Even if the Court were to accept all Defendants arguments as meritorious (which it does not), the proper award of damages would be $1,050,000, not $525,000. Defendants attempt to reduce the Plaintiffs' award further without explanation is not well taken.
B. Plaintiffs' Opposition
In their Opposition, Plaintiffs first assert that they established each element of their 10b-5 claim. (Doc. 212 at 6-12.) Specifically, Plaintiffs argue that they established various omissions of material fact, namely that Defendants never informed Plaintiffs of the incredible risks taken in their IB account or that the entire account could be lost. (Id. at 78.) Plaintiffs then argue that they established recklessness through fact witness testimony that Defendants misplaced Plaintiffs' IAC for more than a decade and expert testimony that Defendants' conduct was “extremely reckless and contrary to the standard of care.” (Id. at 9-10.) Plaintiffs argue that they established use of instrumentalities of interstate commerce through extensive testimony regarding the parties' use of postal mail, telephone, WhatsApp, and the internet. (Id. at 10-12.) Second, Plaintiffs assert that the awarded damages are not excessive or duplicative because they are supported by ample evidence. (Id. at 12-15 (citing Schutzky Distribs., Inc. v. Kelly, 643 F.Supp. 57, 59 (N.D. Cal. 1986)).)
Finally, Plaintiffs argue that Plaintiffs' counsel did not impermissibly shift the burden of proof because civil attorneys are permitted to comment on a party's failure to call an expert witness. (Id. at 15-16.) Plaintiffs also argue that counsel is permitted to state his or her own views as to what the evidence shows during closing arguments. (Id. at 16.) Plaintiffs conclude that any alleged prejudice was cured by the Court's jury instructions. (Id. at 16-17.)
C. Defendants' Reply
In their Reply, Defendants argue that Plaintiffs did not establish scienter in connection with the alleged omissions related to the security transaction in question. (Doc. 215 at 2.) Defendants assert that “Plaintiffs cannot connect the dots between the alleged [omission] or misrepresentation and the recklessness thereof.” (Id.) Defendants also reassert that Defendants are entitled to a new trial because Plaintiffs' counsel exhibited a pattern of misconduct. (Id. at 3-4.) Defendants did not address the damages issue in their Reply.
II. LEGAL STANDARD
A. Motion for Judgment as a Matter of Law
Federal Rule of Civil Procedure 50(a)(1) provides, “[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.”
“[T]o grant the motion, ‘under the governing law, there can be but one reasonable conclusion as to the verdict.'” Diaz v. Tesla, Inc., 598 F.Supp.3d 809, 824 (N.D. Cal. 2022) (quoting Shafer v. Cty. of Santa Barbara, 868 F.3d 1110, 1115 (9th Cir. 2017)). “The court must ‘construe the facts in the light most favorable to the jury's verdict.'” Id. (quoting Shafer, 868 F.3d at 1115). “‘A jury's verdict must be upheld if it is supported by substantial evidence, which is evidence adequate to support the jury's conclusion, even if it is also possible to draw a contrary conclusion.'” Id. (quoting Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002)).
B. Motion for New Trial
Federal Rule of Civil Procedure 59(a)(1)(A) provides, “[t]he court may, on motion, grant a new trial on all or some of the issues-and to any party-as follows: ... after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court ..” “‘Rule 59 does not specify the grounds on which a motion for a new trial may be granted.'” Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007) (quoting Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003)). The Ninth Circuit has held that “the district court can weigh the evidence, make credibility determinations, and grant a new trial for any reason necessary to prevent a miscarriage of justice.” Experience Hendrix L.L.C. v. Hendrixlicensing.com Ltd, 762 F.3d 829, 841 (9th Cir. 2014). “Historically recognized grounds [for a new trial] include, but are not limited to, claims ‘that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving.'” Molski, 481 F.3d at 729 (quoting Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940)). “If damages are excessive, the court may either grant a new trial or ‘deny the motion conditional upon the prevailing party accepting a remittitur'-that is, a reduction in the amount of damages.” Diaz, 598 F.Supp. at 825. “‘However, a district court may not grant a new trial simply because it would have arrived at a different verdict.'” Bandary v. Delta Air Lines, Inc., 623 F.Supp.3d 1071, 1075 (C.D. Cal. 2022) (quoting Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 819 (9th Cir. 2001)).
III. DISCUSSION
A. Plaintiffs' 10b-5 Claim
Section 10(b) of the Exchange Act provides, “[i]t shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce ... To use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b). Rule 10b-5 explains that it is unlawful “(a) [t]o employ any device, scheme, or artifice to defraud, (b) [t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) [t]o engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5. Therefore, “[t]o plead a primary violation of SEC Rule 10b-5, a complaint must allege ‘1) a material misrepresentation or omission by the defendant [falsity]; 2) scienter; 3) a connection between the misrepresentation or omission and the purchase or sale of a security; 4) reliance upon the misrepresentation or omission; 5) economic loss; and 6) loss causation.'” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1008 (9th Cir. 2018) (quoting In re Rigel Pharms., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012)).
1. Material Misrepresentation or Omission in Connection with the Purchase or Sale of a Security
“[A] misrepresentation or omission is material if there is a substantial likelihood that a reasonable investor would have acted differently if the misrepresentation had not been made or the truth had been disclosed.” Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005) (citing Basic Inc. v. Levinson, 485 U.S. 224, 231-32 (1988)). As to “in connection with,” the Ninth Circuit has noted, “a private plaintiff must prove a ‘causal connection between a defendant's misrepresentation and [the] plaintiff's injury[,]' ... a proximate relationship between the plaintiff's injury and the purchase or sale of a security[,] ... [and] a connection between the defendant's alleged misrepresentation and the security at issue. Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1485-86 (9th Cir. 1991) (citations omitted) (first alteration in original); see also Superintendent of Ins. v. Bankers Life & Cas. Co., 404 U.S. 6, 12 (1971) (holding that fraudulent conduct is “in connection with” a purchase or sale if the alleged fraudulent conduct is found to be “touching” the securities transaction).
As stated above, Defendants argue that they never represented that they would take the investor policy statement “seriously” and that Plaintiffs could not have reasonably relied on misrepresentations in the IAC because it was not found until January 9, 2024. (Doc. 210-1 at 8-9.) The Court disagrees.
First, Defendants have not cited any Ninth Circuit or California district court case law in support of their position. Second, the parties' investor policy statement indicated that the margin of risk permissible in the IB account was 30%, not the nearly 100% lost. (See Doc. 192 at 762:15-23.) Thus, the parties' investment policy statement materially misrepresented the degree of risk to be taken in Plaintiffs' IB account. While the contract may have been lost, and the specific terms forgotten, Plaintiffs testified that they always understood that the money was to be used for retirement and invested accordingly. (See Doc. 184 at 510:8-20, 514:14-18, 517:23-518:20.) Therefore, the Court does not agree with Defendants that Plaintiffs could not have reasonable relied on misrepresentations in the IAC. Further, Plaintiffs' expert testified that the IAC and the investor policy statement should have been updated annually to reflect any changes in the investment strategy, which they were not. (Id. at 762:24-763:7.) Thus, the jury could have reasonably found that Defendants' failure to update the IAC to reflect an increase in Plaintiffs' risk tolerance was a material omission. Finally, Plaintiffs' expert testified that IACs and investment policy statements provide the strategic plan for a client's assets. (Id. at 751:17-752:2.) Thus, the jury could have reasonably found that each of these material misrepresentations or omissions concerning Plaintiffs' IAC and policy statement were “in connection with” or “touching” Defendants' purchase of securities on Plaintiffs' behalf.
Plaintiffs also offered evidence that Defendants failed to disclose, i.e., omitted, material facts regarding the risk of Plaintiffs' investments in Tesla, specifically the fact that all the money in the account could be lost.
Q. Did Alberto tell you that in November and other parts of 2019, he had been shorting Tesla stock?
THE PLAINTIFF: No.
Q. In 2019, did he talk to you about buying any sort of investment based on the Tesla share price falling?
THE PLAINTIFF: No.
Q. If Alberto Roditi had told you that he was shorting Tesla stock or placing investments on the idea that the Tesla stock would fall, what would you have said?
THE PLAINTIFF: I would have told him not to do it.
Q. Now, at any point after this Exhibit 214 until all of it was lost, did Alberto tell you he was putting you in investments that might lose the rest of the -- the rest of the money?
THE PLAINTIFF: No.(Doc. 184 at 552:9-553:5, 564:6-12 (objections omitted).) Thus, the jury could have reasonably found that Defendants omitted material facts in connection with Plaintiffs' investments in Tesla and that, had the truth had been disclosed, Plaintiffs would have chosen not to invest in Tesla. See Livid Holdings Ltd., 416 F.3d at 946.
2. Scienter
“Scienter is the ‘mental state embracing intent to deceive, manipulate, or defraud.'” SEC v. Todd, 642 F.3d 1207, 1215-16 (9th Cir. 2011) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976)). “Reckless conduct may also constitute scienter. Reckless conduct is a highly unreasonable act or omission that is an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it.” Id. (citations omitted).
As stated above, Defendants argue that they did not act with the requisite scienter because Defendants' allegedly reckless conduct was not an extreme departure from the relevant standards of care. (Doc. 210-1 at 9-10.) However, Plaintiffs have proffered expert testimony that Defendants' management of Plaintiffs' IB account, particularly the Tesla investment, was “extremely reckless and contrary to the standard of care[.]” (Doc. 192 at 755:16-756:9.) For example, Plaintiffs' expert testified that she saw little evidence of diversification or any kind of allocation strategy in the IB account. (Id. at 747:22-748:12, 748:17-749:3.) Plaintiffs' expert also testified that there was an undue amount of risk in the account. (Id. at 748:13-16.) With regards to the Tesla investment, specifically, Plaintiffs' expert testified that she reviewed the parties' communications and disclosure documents and “didn't see anything that, to [her], was adequate disclosure of the risk . . ..” (Id. at 762:2-13.) Thus, the jury could have reasonably found that Defendants acted with the requisite scienter.
3. Instrumentality of Interstate Commerce
As stated above, Defendants argue that Plaintiffs did not establish the use of an instrumentality of interstate commerce because Plaintiffs reside in Mexico, not another state within the United States. (Doc. 210-1 at 10.) However, “[t]he term ‘interstate commerce' means trade, commerce, transportation, or communication among the several States, or between any foreign country and any State, or between any State and any place or ship outside thereof.” 15 U.S.C. § 78c(a)(17) (emphasis added). Further, both parties elicited evidence at trial that the parties-Plaintiffs in Mexico and Defendants in the United States-communicated via email, WhatsApp, and telephone. (See e.g., Doc. 175 at 624:2-4, 634:8-11, 637:1-5, 681:15-18.) Thus, Defendants' argument is without merit.
B. Damages
1. Applicable Law
When reviewing a jury's award of damages on state law claims, federal courts apply state law. See Gasperini v. Ctr. for Humans., Inc., 518 U.S. 415, 426-31 (1996) (finding that state law regarding the excessiveness of damages is substantive law that supplies the test for federal-court review of a verdict on state law claims); Passantino v. Johnson & Johnson Consumer Prod., Inc., 212 F.3d 493, 510 (9th Cir. 2000) (“As the damage awards involving backpay, front pay, and emotional damages were allocated to the state law claim, we analyze those awards under [the state] law, and affirm.”); Diaz, 598 F.Supp. at 825 (“When assessing remittiturs of state-law claims, federal courts apply state law.”). Thus, the Court will address Plaintiffs' federal and state law claims separately.
2. Plaintiffs' 10b-5 Claim
“Neither section 10(b) nor Rule 10b-5 sets forth any specific measure of damages. The usual measure of damages for securities fraud claims under Rule 10b-5 is out-ofpocket loss; that is, the difference between the value of what the plaintiff gave up and the value of what the plaintiff received. Consequential damages may also be awarded if proved with sufficient certainty.” Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d 1017, 1030 (9th Cir. 1999) (“Ambassador”) (citing DCD Programs v. Leighton, 90 F.3d 1442, 1449 (9th Cir. 1996)). However, “[n]o person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in [one] or more actions, a total amount in excess of the actual damages to that person on account of the act complained of.” 15 U.S.C. § 78bb(a)(1).
Applying this standard, the Ninth Circuit has barred double recovery in actions involving federal securities fraud and state common law claims. For example, in Burgess v. Premier Corp., the Ninth Circuit noted that the plaintiffs were only entitled to one recovery for their investment losses-determined by a jury to be $496,128-even though the jury found for the plaintiffs on claims under federal securities laws, Washington state securities laws, the Washington Consumer Protection Act, and state common law claims. 727 F.2d 826, 837 (9th Cir. 1984); see also Foster v. Fin. Tech. Inc., 517 F.2d 1068, 1072 (9th Cir. 1975) (finding impermissible double recovery in a 10b-5 case).
However, the Ninth Circuit also gives substantial deference to a jury's finding of the appropriate amount of damages. See Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422, 1435 (9th Cir. 1996) (citing Los Angeles Memorial Coliseum Comm'n v. NFL, 791 F.2d 1356, 1360 (9th Cir. 1986)). Federal district courts in this Circuit “must uphold the jury's finding unless the amount is grossly excessive or monstrous, clearly not supported by the evidence, or based only on speculation or guesswork.” Id. “The Court must [also] strive to construe the awards such that they are logical and probable.” Schutzky Distributors, Inc. v. Kelly, 643 F.Supp. 57, 62 (N.D. Cal. 1986) (quotation omitted) (finding that the jury's 10b-5 award was only logical and probable if aggregated and that it was “patently obvious” that the jury meant to award the defendant the total and believed it was being asked to assign portions thereof to each cause of action).
The Court also looks to out-of-circuit cases for guidance. In U.S. Industries, Inc. v. Touche Ross & Co., an officer of a health spa company and his accountant established a finance company to purchase contracts and paper from the health spa company. 854 F.2d 1223, 1228 (10th Cir. 1988). The list of shareholders for the newly established finance company included directors, officers, and employees of the health spa company. Id. The owner of the health spa company became concerned that the relationship between the health spa company and the finance company was not in the health spa company's best interests. Id. at 1229. Therefore, the health spa company agreed to purchase of all the assets of the finance company for $1.2 million. Id. In doing so, the finance company falsely represented that none of its officers, directors, or shareholders had been an officer, director, or managing agent at the health spa company; that no portion of the purchase price would be paid, either directly or indirectly, to any past or present officer, director, or managing agent of the health spa company; and that no officer, director, or managing agent of the health spa company had been a shareholder of the finance company. Id.
After a jury trial against various entity and individual defendants, the jury found that the defendants were liable for, among other things, 10b-5 violations and breaches of fiduciary duty. See id. at 1231. However, when the special verdict forms were examined, it became apparent that damages awards were improper because different amounts of damages were assessed to defendants who were jointly and severally liable. Id. at 1231. Consequently, the Court submitted a supplemental jury form to the jury, requiring them to determine the total loss arising out of the statutory and common law violations. Id. After recalculating the damages, the jury found that certain defendants were jointly and severally liable for $550,000 for 10b-5 violations and for $614,000 for breaches of fiduciary duty. Id. The district court found that that the $614,000 award for breaches of fiduciary duty was duplicative because the jury had impermissibly aggregated the $550,000 award for 10b-5 violations and the $64,000 award for breaches of fiduciary duty noted on the previous verdict form. Id. at 1232. The Tenth Circuit agreed, reasoning that “the initial special verdict award could [only] be harmonized with the supplemental special verdict award only if the jury had reached the figure set out in the supplemental special verdict by adding the 10b-5 award of $550,000 to its original fiduciary duty award of $64,000.” Id. at 1258-1260. The court concluded that, “while the damages that could be awarded were not necessarily identical for the two claims, the trial judge's finding on duplication is not clearly erroneous.” Id.
Following the example of the Tenth Circuit, and analyzing the jury's verdict form in light of the evidence presented at trial, the Court finds that the jury's total award of $2,100,000 is not a duplicative, double recovery. Here, unlike in U.S. Industries, Inc., the record supports the jury's finding. At trial, Plaintiffs' damages expert testified that the total amount of damages was approximately $2.9 million. (Doc. 186 at 957:5-959:12.) Therefore, having found the defendants liable on all claims, the jury could have reasonably awarded Plaintiffs up to approximately $2.9 million. The Court cannot find that the jury's aggregation of the three damages awards for each cause of action, totaling $2.1 million, is duplicative. Rather, it appears that the jury intended to award damages in an amount between the $1,288,959 in the IB account on January 1, 2018 and the $2,926,741 that would have been in the account on December 15, 2023 had Plaintiffs money been invested according to Roth's proposed alternative portfolio. (Id.) Here, as in Schutzky, it is “patently obvious” to the Court that the jury meant to award Plaintiffs a total of $2.1 million and initially believed it was being asked to assign portions thereof to each cause of action. 643 F.Supp. at 62.
The Court also gave the jury the opportunity to clarify their verdict, to which Defendants' counsel consented. After being asked the total amount of damages, the jury unambiguously indicated that the jury awards for each cause of action were meant to be aggregated for a total award of $2.1 million. Unlike in U.S. Industries, Inc., this subsequent verdict form was entirely consistent with the initial verdict form. See 854 F.2d at 1232, 1258-60. Thus, the Court cannot find that the jury's 10b-5 award is impermissibly duplicative.
3. Plaintiffs' State Law Claims
In California, “[r]egardless of the nature or number of legal theories advanced by [a] plaintiff, [the plaintiff] is not entitled to more than a single recovery for each distinct item of compensable damage supported by the evidence.” Tavaglione v. Billings, 4 Cal.4th 1150, 1158 (1993) (citation omitted). “Double or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited.” Id. at 1159. “Thus, for example, in a case in which the plaintiff's only item of damage was loss of commissions, two awards of damages identical in amount-one for breach of contract and the other for bad faith denial of the same contract-could not be added together in computing the judgment.” Id. “In contrast, where separate items of compensable damage are shown by distinct and independent evidence, the plaintiff is entitled to recover the entire amount of his damages, whether that amount is expressed by the jury in a single verdict or multiple verdicts referring to different claims or legal theories.” Id.
Put another way, “[t]he primary right theory ... provides that a ‘cause of action' is comprised of a ‘primary right' of the plaintiff, a corresponding ‘primary duty' of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [T]he primary right is simply the plaintiff's right to be free from the particular injury suffered. It must therefore be distinguished from the legal theory on which liability for that injury is premised: ‘Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.'” Plotnik v. Meihaus, 208 Cal.App.4th 1590, 1612 (2012) (citations omitted). “Regardless of the nature or number of legal theories advanced by the plaintiff, he is not entitled to more than a single recovery for each distinct item of compensable damage supported by the evidence. Double or duplicative recovery for the same items of damage amounts to overcompensation and is therefore prohibited.” Id. (quotation and citations omitted).
While it is true that Plaintiffs' breach of contract and breach of fiduciary duty claims arise from the same injury-Plaintiffs' investment losses-the Court finds that the jury's total damages award of $2.1 million does not constitute double or duplicative recovery in this case. As explained in more detail above (see Section III.B.2), the evidence presented at trial supports an award of up to approximately $2.9 million. Thus, it is apparent to the Court that the jury intended to award Plaintiffs a total of $2.1 million and initially assigned portions thereof to each cause of action. The Court also gave the jury the opportunity to clarify its verdict, to which Defendants' counsel consented. The Court therefore cannot find that the jury's damages awards for its state law claims are impermissibly duplicative.
Although unpublished and of limited persuasiveness, the Court notes that California appellate courts have upheld separate awards for breach of contract and breach of fiduciary duty. See e.g., Melvin v. Harkey, No. G049674, 2018 WL 3617855, at *10-11 (Cal.Ct.App. July 30, 2018) (finding that a jury's separate awards for breach of contract and breach of fiduciary were not duplicative given the jury's note explaining the damage awards); Arin v. Applequist, No. A126245, 2011 WL 3684810, at *12-15 (Cal.Ct.App. Aug. 23, 2011) (explaining that counsel forfeited any objection to the jury's damages awards by failing to object or request clarification at trial).
C. Misconduct of Counsel
“[M]isconduct by trial counsel results in a new trial if the ‘flavor of misconduct sufficiently permeate[s] an entire proceeding to provide conviction that the jury was influenced by passion and prejudice in reaching its verdict.'” Hemmings v. Tidyman's Inc., 285 F.3d 1174, 1192-95 (9th Cir. 2002) (quoting Kehr v. Smith Barney, 736 F.2d 1283, 1286 (9th Cir. 1994)) (finding that counsel inappropriately referred to other cases that she herself had litigated); see also Anheuser-Busch, Inc. v. Nat. Beverage Distribs., 69 F.3d 337, 346 (9th Cir. 1995) (same). “Courts consider ‘the totality of circumstances' in evaluating the likelihood of prejudice from improper comments made by counsel.” Pavemetrics Sys., Inc. v. Tetra Tech, Inc., 652 F.Supp.3d 1098, 1101 (C.D. Cal. 2023) (quoting Hemmings, 285 F.3d at 1193). “Considerations include ‘the nature of the comments, their frequency, their possible relevancy to the real issues before the jury, the manner in which the parties and the court treated the comments, the strength of the case, and the verdict itself.'” Id. at 1101 (quoting same). “Where misconduct permeates the proceeding, the jury is necessarily prejudiced. Constant objections are certainly not required, as they could antagonize the jury ....” Anheuser-Busch, Inc., 69 F.3d at 346 (quotations omitted).
“[W]here ‘offending remarks occurred principally during opening statement and closing argument, rather than throughout the course of the trial,' [the Ninth Circuit is] less inclined to find the statements pervaded the trial and thus prejudiced the jury.” Settlegoode v. Portland Pub. Sch., 371 F.3d 503, 518 (9th Cir. 2004) (quoting Kehr v. Smith Barney, Harris Upham & Co., 736 F.2d 1283, 1286 (9th Cir. 1984)). “[T]he right to argue a case to the jury is very broad. Counsel may state his or her views as to what the evidence shows and the conclusions to be drawn therefrom.” Hammonds v. Yeager, No. EDCV 15-1036 SS, 2017 WL 10560471, at *1 (C.D. Cal. Aug. 9, 2017) (quotation omitted). “During closing argument in a civil case, counsel is permitted to make inferences and advance ‘plausible argument[s] in light of the record.'” Draper v. Rosario, 836 F.3d 1072, 108384 (9th Cir. 2016) (quoting Settlegoode, 371 F.3d at 518).
As stated above, Defendants argue that Plaintiffs' counsel impermissibly shifted the burden of proof to Defendants by noting Defendants did not have an expert witness, that Plaintiffs' counsel misstated the burden of proof, and that Plaintiffs' counsel improperly inserted his own beliefs and opinions throughout his closing argument. (Doc. 210 at 1621.) The Court disagrees.
First, commenting on the Defendants' failure to produce evidence or call an expert witness does not impermissibly shift the burden of proof to the Defendants. The Ninth Circuit has held that in criminal cases the prosecution may comment on the failure of the defense to call expert witnesses. See United States v. Cabrera, 201 F.3d 1243, 1250 (9th Cir.2000) (“A prosecutor's comment on a defendant's failure to call a witness does not shift the burden of proof, and is therefore permissible, so long as the prosecutor does not violate the defendant's Fifth Amendment rights by commenting on the defendant's failure to testify.”); Merced v. McGrath, 157 Fed.Appx. 7, 9 (9th Cir. 2005) (“The trial court did not err in permitting the prosecution to comment on the failure of the defense to call expert witnesses.”). The Court sees no reason why the same should not be true in civil cases. See e.g., Woods v. Amazon.com, LLC, No. 17 C 4339, 2019 WL 2323874, at *4 (N.D. Ill. May 30, 2019) (“[T]he Court cannot conclude at this time that any commentary on Defendants' failure to call a witness is improper. ... [A plaintiff] may comment on deficiencies in Defendants' case due to the absence of certain evidence.”) (citations omitted). Additionally, any resulting prejudice was cured when the Court instructed the jury that statements and arguments by counsel were not evidence (Doc. 199 at 1312:16-21), when Defendants argued that they did not have the burden of proof and were not required to call an expert (id. at 1362:23-1363:5), and when Plaintiffs' counsel in his rebuttal argument clarified that he was not saying that Defendants did not have a burden of proof (id. at 1387:20-24). See e.g, Matton v. White Mountain Cable Const. Corp., 190 F.R.D. 21, 24 n.9 (D. Mass. 1999) (“Defendant complains that the court erroneously overruled counsel's objection to plaintiff's suggestion in closing argument that the jury could infer from defendant's failure to call the expert witnesses that their testimony would not have been helpful to defendant's case. ... [T]he suggested inference was in the bounds of plausibility [and] the court instructed the jury repeatedly that arguments by counsel could not be given any evidentiary weight.”); Nunley v. Kloehn, 888 F.Supp. 1483, 1494 (E.D. Wis. 1995) (“We must presume, then, that, to the extent that [counsel's] suggestion in closing argument that [the expert's] standard of care testimony would have been harmful to the defendant was unsupported by the evidence, it was ignored by the jury.”).
Second, the Court does not agree with Defendants that Plaintiffs' analogy to the scales of justice misstated the burden of proof. See Blossom v. CSX Transp., Inc., 13 F.3d 1477, 1479-81 (11th Cir. 1994) (finding that Plaintiff's counsel's characterization of the burden of proof in civil action as analogous to placing parties' evidence on the scale of justice and “tipping the scale” just one little bit in plaintiff's favor was proper illustration of plaintiff's burden); see also Simmons v. Blodgett, 110 F.3d 39, 42 (9th Cir. 1997) (“Well-settled principles guide the fact-finding process, including the rule that when the scales are evenly balanced and the relevant evidence leaves a trier of fact in “equipoise,” the party with the burden of proof loses.”). The Court also properly instructed the jury on the burden of proof in the jury instructions. (Doc. 199 at 1311:23-1312:1.)
Finally, the Court does not agree that Plaintiffs' counsel improperly inserted his opinions and beliefs throughout his closing argument. As stated above, “[c]ounsel may state his or her views as to what the evidence shows and the conclusions to be drawn therefrom.” Hammonds, 2017 WL 10560471, at *1. Plaintiffs' counsel did just that. His colloquial use of “I think” does not render his closing statement improper. Additionally, Defendants argued in closing that Plaintiffs' counsel's “view of whether what he thinks or what was-he believes to be here is also not relevant.” (Doc. 199 at 1363:6-7.) Thus, Defendants had an opportunity to address Plaintiffs' counsel purported misconduct.
IV. CONCLUSION
Based on the foregoing, Defendants' Motion is DENIED .
IT IS SO ORDERED.