Opinion
5062/92.
Decided March 31, 2006.
Before the Court are two motions seeking to cast aside the jury's special verdict rendered in June 2005 after the liability phase of trial in this fraud and breach of contract action. Having elected to try their case before a jury, and finding themselves dissatisfied with the result, Defendants, like alchemists, are mixing together whatever laws and facts they can find at hand in an effort to change a lump of coal into gold.
The first motion is Defendants' Motion for Post-Trial Relief, in which Defendants attempt to reconstruct the events of trial in an attempt to convince me that facts that were clearly understood by all parties to have happened never took place. All parties agreed that the June 2005 trial would be limited to issues of liability, and Defendants insisted that Plaintiff save its expert testimony and most witness testimony about business damages for the damages phase. Defendants did not object either to the verdict sheet or to my jury charge as to fraud. Nevertheless, Defendants now contend: (1) that Plaintiff sought a rescission remedy, rather than damages; (2) that the evidence of damages cannot support the jury's liability finding; (3) that my jury instructions as to fraud damages were inadequate; and (4) that the trial evidence supports a directed verdict striking out Plaintiff's punitive damages claim although Plaintiff has not yet had an opportunity to present evidence in its support.
Over seven months after being found liable for fraud by the jury, Defendants also filed a second motion, a Motion to Strike Plaintiff's Jury Demand, for Leave to File a Motion for Summary Judgment and for Summary Judgment. Based on a strained interpretation of C.P.L.R. § 3212, this motion seeks an award of summary judgment based on witness testimony at trial and seeks to strike Plaintiff's jury demand, which Defendants never previously challenged, either before or during trial.
For the reasons that follow, I deny both motions in their entirety.
Plaintiff Imaging International, Inc. ("Imaging") brought this lawsuit against Defendants Hell Graphic Systems, Inc. ("Hell Graphic") and its successor in interest, Linotype-Hell Company, seeking damages and rescission based on fraudulent inducement, breach of duty to deal in good faith, mutual mistake and breach of express warranties. Plaintiff argued that Hell Graphic made fraudulent misrepresentations to induce Imaging to purchase certain printing equipment pursuant to a 1989 agreement, and that the equipment malfunctioned, resulting in injury, including the bankruptcy of Imaging's business.
Counts I, II, and V seek money damages (respectively, for breach of good faith dealing, fraud, and breach of express warranties); Counts III and IV seek rescission (respectively, based on fraud and mutual mistake).
Defendants counter-claimed in breach of contract for the balance due on the contract, alleging that Imaging had failed to make its payments under the 1989 agreement and was solely responsible for its own demise. Defendants brought a second counter-claim for reimbursement from plaintiff for the use of its equipment, "in the event that the Agreement is rescinded." (2d Am. Answer ¶ 33.) Plaintiff served on Defendants its Note of Issue, containing a jury demand, without objection, on January 10, 2005. A jury trial took place between June 8 and June 23, 2005.
From the outset, Plaintiff's trial counsel made it clear that Imaging was seeking money damages. In his opening statement, Plaintiff's trial counsel told the jury: "[W]e are here to determine why Imaging died and who was responsible." (Tr. Trans. 25.) He continued: "The testimony will be that the company was bleeding . . . 40 to $50,000 a month." ( Id. at 33.)
Defendants also understood that Plaintiff sought money damages from the beginning of trial. Defendants' trial counsel told the jury in his opening statement: "Mr. Randazzo [Imaging's President] . . . claims that he's entitled to have Hell pay him for the loss of his business. . . . Now he wants to hand us the bill for millions of dollars as the value of his company. . . ." ( Id. at 41.) "We're not responsible for his bankruptcy. . . ." ( Id. at 49.)
On the third day of trial, Plaintiff called James Gilbert as an expert witness on damages. On direct examination, Mr. Gilbert described himself as a CPA who did "a lot of litigation support in areas of business damage and business valuation." ( Id. at 235-36.) He testified that he had conducted more than 1000 business damage valuations since 1986 and had testified at "at least three or 400" trials." ( Id. at 237.) He had been appointed by the state of Florida to do its business damage calculations. ( Id. at 237-38.) Plaintiff then offered Mr. Gilbert as an "expert witness in the fields of accounting and valuation of business and business damages." ( Id. at 238.)
During Defendants' voir dire, Mr. Gilbert testified that he had updated his curriculum vitae since 2000, when a one-page version of his curriculum vitae (c.v.) had been attached to his expert report and disclosed to Defendants. ( Id. at 235-38.) Plaintiff's counsel then gave Defendants' counsel, for the first time, a 14-page c.v., listing dozens of cases in which Mr. Gilbert had testified as to business damages none of which was contained in the c.v. that was disclosed to Defendants' counsel in 2000. ( Id. at 250, 255.) Defendants' counsel argued that, because of Plaintiff's failure to disclose Mr. Gilbert's 14-page c.v., they had been "severely prejudiced on a hotly contested issue in this litigation." ( Id. at 250, 255-56.)
Defendants asked me to preclude Mr. Gilbert from testifying. I considered whether a limiting instruction to the jury to disregard Mr. Gilbert's testimony as to any qualifications he acquired since the date of the original report would effectively limit the prejudice caused by his testimony, and whether delaying his testimony to give Defendants' counsel time to prepare his cross-examination would be practical. ( Id. at 262.)
Then, in order to avoid a mistrial, I proposed to the parties a third alterative: to bifurcate the damage and liability phases of the case, so that the trial in progress would be limited to liability alone, and damages would be tried at a later date. Thus, Mr. Gilbert's testimony as to his qualifications would not prejudice the jury, because the jury would not decide the issue of damages at all. Both parties consented to the bifurcation. The ongoing trial proceeded solely on liability. ( Id. at 267-68.)
THE COURT: You know there is actually a third alternative in this matter. And the third alternative is that Mr. Gilbert's testimony relates to damages. It has nothing to do with the question of liability. And that is to take the damage phase out of this trial and trial liability only, bifurcate this and save this for the second trial of damages and then there is no issue here whatsoever of prejudice of the jury. The jury has not heard one word about damages, and I will try this as a liability case only. I think that will be a solution. [Defendants' Counsel] MR. MAZER: Your Honor, I think that is an acceptable solution. THE COURT: Mr. Kramer, do you have an opinion on that? [Plaintiff's Counsel] MR. KRAMER: I think that's acceptable. THE COURT: I will tell this jury that I am taking the damages out of this phase, that this will be tried on liability only. And it will actually be a faster trial for them, and that's what we will do.
Based on this understanding, Defendants' trial counsel urged me not to permit Plaintiff to elicit testimony as to the specific amount of Imaging's damages. For instance, he asked me to instruct Plaintiff's principal witness, Jeffrey Randazzo, not to testify to the specific amount of Imaging's damages. ( Id. at 270-71.) Defendants' counsel also questioned the relevance to liability of the anticipated testimony by Plaintiff's witness Arnold Held, from Drake Publishing, a magazine publisher. Imaging proposed that Mr. Held would testify that, as a result of Hell Graphic equipment not working, Imaging "couldn't meet his price and therefore he took the account away" from Imaging. ( Id. at 876-79.) Defendants objected that Mr. Held's testimony was "arguably only going to be towards damages." ( Id. at 877.)
THE COURT: I propose to tell the jury simply we will return to the testimony of Mr. Randazzo, that I am striking the testimony of Mr. Gilbert, that the case will deal only with the subject of liability and I'm taking damages out of this trial. Any objection to that statement? MR. MAZER: No, I have no objection. I did have one very brief application. THE COURT: Yes. MR. MAZER: You know its my suspicion that or concern that given what's transpired this morning the Plaintiff himself or Plaintiff's President himself or some other witness may try to slip in the damage number that they have been claiming in that report which I think would prejudice us THE COURT: Damages is not in this case. MR. MAZER: I ask the witness be instructed before he gets here that he is not to mention that number or discuss the numbers with respect to claimed damages. THE COURT: Of course. I assume you have done that. This deals with the issue of liability on two causes of action. MR. KRAMER: There are exhibits of the costs of the individual machine. THE COURT: Costs [are] part of the case but that's not the damages. MR. KRAMER: I just want to be clear. THE COURT: He can discuss the cost of equipment. Anything else? MR. MAZER: No, Your Honor. (Tr. Trans. 270-71.)
To satisfy Defendants' concern that specific testimony as to money damages would prejudice their case before the jury, I instructed Plaintiff's counsel that he could "elicit [some] testimony" to "establish the central elements of the claim of damages" but directed him not to "go into it in terms of the numerical amounts. . . ." ( Id. at 878-79.)
Consequently, at Defendants' insistence, Plaintiff was permitted to introduce only general testimony as to its damages. For instance, on behalf of Plaintiff, Mr. Randazzo, Imaging's president, testified that he had leased new premises and conducted renovations in order to install and maintain the new equipment purchased from Hell Graphic; that as a result of the failure of Hell Graphic's equipment to function properly, he incurred additional labor and equipment costs and lost productivity and customers; and that these additional costs eventually led to Imaging's ceasing operations and filing for bankruptcy. ( E.g., Tr. Trans. at 129, 393, 427, 468-71, 503-06, 604, 629.) William Lovisek, an employee of Hell Graphic, testified that problems with Hell Graphic's equipment were partially responsible for Imaging's having to run double shifts plus overtime. ( Id. at 1078, 1105-07.) Mr. Held, from one of Imaging's customers, testified that he took business away from Imaging because Imaging's bids were too high. ( Id. at 914.)
Throughout trial, the parties gave every indication that they understood that Plaintiff was seeking money damages. During his closing argument, Plaintiff's counsel summed up his case to the jury as a claim seeking money damages: "[You must] decid[e] who killed who murdered Imaging International. Was it Hell? Or was it Mr. Randazzo?" (Tr. Trans. 1629.) Defendants' counsel also described Plaintiff's claim as a damages claim: "Now, Mr. Randazzo would like to hand Hell Graphic the bill for the loss of his entire business." ( Id. at 1624.)
Defendants submitted a proposed jury charge stating that "Imaging seeks to recover damages that it claims were caused by a fraud committed by the defendant Hell Graphic." (Defs' Req'ts Charge No. 11.) Defendants' proposed charge also contained an instruction asking the jury to calculate the "actual monetary loss" sustained by the plaintiff. Because Plaintiff, at Defendants' insistence, had not been permitted to introduce specific damages testimony, I did not include this proposed charge in my jury instructions.
Defendants' second counter-claim for reimbursement for plaintiff's use of its equipment, which was dependent on "the event that the [a]greement is rescinded," (2d Am. Answer ¶ 33), was not submitted to the jury. The only counter-claim submitted to the jury was Defendants' first counter-claim for the balance due on the contract.
Whether during the charge conference or at any other time at trial, Defendants did not object to either the verdict sheet, (Tr. Trans. 1567-1572, 1673-75), or to my jury charge as to fraud damages, ( id. at 1564-67, 1699-1700).
I instructed the jury that "[P]laintiff . . . seeks to recover damages that i[t] claims were caused by a fraud committed by the defendant Hell Graphic Systems with regard to the secured equipment sales contract." ( Id. at 1686.) I further charged the jury that Imaging had the burden of proving by clear and convincing evidence that it did "justifiably rely upon a representation and as a result sustained damages." ( Id. at 1688.) "If you find that Hell Graphic Systems did not make [knowingly a false] statement to induce Imaging International to purchase the equipment, then you proceed no further on the claim of fraud." ( Id. at 1689.) I continued: "If you find that Imaging did sustain damages, then you will find for Imaging International on the claim of fraud." ( Id. at 1690-91.)
As part of the special verdict sheet, the jury was asked whether it found "that the [fraudulent] representation was made for the purpose of inducing Imaging International to rely upon it to enter into the 1989 Agreement." (Verdict Sheet at 3.) It then asked the jury whether it found that Imaging "justifiably relied on the representation made by Hell Graphic for the purpose of inducing Imaging International to enter into the 1989 Agreement, and as a result sustained damages." ( Id.) The jury answered yes to both questions. The jury was also instructed: "If you find in favor of the plaintiff with regard to the fraud claim . . ., then do not consider the other claims in this case. . . ." ( Id. at 4.) If the jury did not find fraud, it was then instructed to turn to Plaintiff's breach of contract claim, which was the first cause of action in the Amended Complaint, seeking money damages. Plaintiff's fourth cause of action for mutual mistake seeking rescission was never submitted to the jury. (Defs' Br. Mot. Post-Trial Relief at 18. n. 8 (conceding that Plaintiff's "claim for mutual mistake[,] has been abandoned").)]
The jury rendered a special verdict against Hell Graphic and in favor of Imaging, finding Hell Graphic liable for fraud. In accordance with the instructions, the jury did not reach either Imaging's breach of contract claim or Defendant's breach of contract counter-claim. During the course of these events, no one said a word about rescission. At no time, prior to their February 2006 motion, did Defendants object to Plaintiffs' jury demand or to the presence of the jury at trial.
In their motion for post-trial relief, filed September 23, 2005, Defendants moved for a directed verdict rejecting Plaintiff's fraud claim pursuant to C.P.L.R. § 4401 and for a new trial in the interests of justice under C.P.L.R. § 4404(a). They also asked that I make certain findings of fact omitted from special verdict sheet, pursuant to C.P.L.R. § 4111(b).
When Defendants moved for a directed verdict to dismiss the fraud claim during the charge conference at trial, I reserved decision on their motion until after the jury's verdict. ( Id. at 1518, 1520.)
On February 8, 2006, Defendants filed a second post-trial motion, styled as a request to strike Plaintiff's jury demand, for leave to file a motion for summary judgment, and for summary judgment, in which Defendants asked me to consider the jury's verdict only advisory, to permit them to file a summary judgment out of time, and to dismiss all Plaintiff's claims based on the trial testimony.
I. Defendants' Motion for Post-Trial Relief
A. Plaintiff's purported election of a rescission remedy in its complaint
Hell Graphic first contends that Imaging is barred by laches from seeking a damages remedy for its fraud causes of action, because it elected a rescission remedy at trial, and it did not promptly rescind the 1989 agreement.
Defendants' contention is wrong on multiple levels. First, Plaintiff at no time "elected" rescission as its sole remedy. Plaintiff's Complaint included counts seeking both damages for fraud (Count II) and rescission of the contract (Count III).
C.P.L.R. § 3002(e) expressly permits plaintiffs to bring claims based upon rescission in the same action as a claim for damages sustained as a result of fraud or misrepresentation in the inducement of a contract. It states:
A claim for damages sustained as a result of fraud or misrepresentation in the inducement of a contract or other transaction, shall not be deemed inconsistent with a claim for rescission or based upon rescission. In an action for rescission or based upon rescission the aggrieved party shall be allowed to obtain complete relief in one action, including rescission, restitution of the benefits, if any, conferred by him as a result of the transaction, and damages to which he is entitled because of such fraud or misrepresentation; but such complete relief shall not include duplication of items of recovery.
C.P.L.R. § 3002(e) (emphasis added). Accord Gulf Ins. Co. v. Transatlantic Reins. Co., 13 AD3d 278, 279 [1st Dept. 2004] [action seeking enforcement of settlement agreement requiring money payment was properly consolidated with action seeking rescission of reinsurance contract and alleging unreasonableness and bad faith, because under C.P.L.R. § 3002(e) "defendants may seek rescission and damages in the same action"]. Section 3002(e) has overruled older New York cases to the extent that they are in disagreement. Cf., e.g., Schiffer v. Dietz, 83 NY 300, 308 [finding money damages and rescission remedies were inconsistent].
Defendants play fast and loose with the actual events of this litigation in arguing in this motion that Plaintiff elected to pursue a rescission remedy. No one said a word about rescission during trial. Throughout this litigation and trial, the parties understood that Plaintiff was pursuing money damages for fraud and breach of contract, rather than rescission of the 1989 agreement. When I bifurcated the trial between a liability phase and a damages phase, after Defendants had moved to preclude the testimony of Plaintiff's damages expert, every person in the courtroom knew that Plaintiff was pursuing money damages. Indeed, counsel for Defendants admitted at oral argument on his first post-trial motion that he "understood all along that [Plaintiff] wanted money damages." (Trans. Oral Arg. [Trans. Oral Arg. I], 21-22 [Feb. 15, 2006].)
During their opening statements, both trial counsel told the jury that Plaintiff was seeking compensatory damages for fraud. ( See, e.g., Tr. Trans. 25 [Plaintiff's counsel: "we are here to determine why Imaging died and who was responsible"]; id. at 33 [Plaintiff's counsel: "The testimony will be that the company was bleeding . . . 40 to $50,000 a month"]; id. at 34 [Plaintiff's counsel: "not only was fraud perpetrated on Imaging, but a fraud was perpetrated on the pre-press public at large"]; id. at 41 [Defendants' counsel: "Mr. Randazzo . . . claims that he's entitled to have Hell pay him for the loss of his business. . . . Now he wants to hand us the bill for millions of dollars as the value of his company. . . ."]; id. at 49 [Defendants' counsel: "We're not responsible for his bankruptcy . . ."].)
During their closing arguments to the jury, both parties reiterated that Imaging was seeking compensatory damages. ( See, e.g., Tr. Trans. 1624 [Defendants' counsel: "Now, Mr. Randazzo would like to hand Hell Graphic the bill for the loss of his entire business."]; id. at 1629 [Plaintiff's counsel: "[You must] decid[e] who killed who murdered Imaging International. Was it Hell? Or was it Mr. Randazzo?"].)
Defendants contend, however, that the structure of the verdict sheet and my instructions to the jury indicate that Plaintiff had elected to pursue rescission. The verdict sheet instructed the jury that it did not need to reach the contract claims if it found that Hell Graphic had defrauded Imaging. (Verdict Sheet at 4.) Defendants contend that "only if the plaintiff is seeking rescission would those be alternative" causes of action. (Trans. Oral Arg. I at 7.)
On the contrary, the structure of the verdict sheet reflects the nature of Plaintiff's fraud claim, which alleged that Hell Graphic had fraudulently induced Imaging to enter into the contract. If the jury found that Hell Graphic had fraudulently induced Imaging to purchase the equipment, then there would be no valid contract to breach. See Matter of Liquidation of Union Indem. Ins. Co., 89 NY2d 94, 108-09 ["the defense of fraud in the inducement and the equitable rescission of a contract due to fraud are declarations that the contract was void ab initio"]; Prote Contracting Co., Inc. v. N.Y.C. Sch. Constr. Auth., 248 AD2d 693, 695 [2nd Dept. 1998] [affirming grant of summary judgment dismissing complaint on the ground that plaintiff had fraudulently induced the contract and was not entitled to recovery on a contract which was void as against public policy]. Thus, Plaintiff's fraud in the inducement claim and the contract claims were stated in the alternative. The verdict sheet does not require imaginative historical reconstruction to explain its structure.
In addition, my jury instructions as to fraud, to which Defendants did not object, indicated to the jury that damages were at stake. I charged the jury: "[P]laintiff . . . seeks to recover damages that i[t] claims were caused by a fraud committed by the defendant Hell Graphic Systems with regard to the secured equipment sales contract." (Tr. Trans. 1686.) I continued: "If you find that Imaging did sustain damages, then you will find for Imaging International on the claim of fraud." ( Id. at 1690-91.) It was inappropriate to give more detailed instructions as to damages, because the parties had agreed that damages were not part of this phase of the trial, and Defendants had expressly requested that I limit Plaintiff's evidence as to damages.
My jury instructions as to the elements of Plaintiff's first cause of action for breach of contract, which included a showing "that Imaging International suffered damages," indicated that Plaintiff's contract claim also sought damages. ( Id. at 1693.) Plaintiff's fourth cause of action for mutual mistake seeking rescission was never submitted to the jury. (Defs' Br. Mot. Post-Trial Relief at 18. n. 8 [conceding that Plaintiff's "claim for mutual mistake[,] has been abandoned"].)] If a rescission claim, rather than damages claims, had been submitted to the jury, presumably Defendants would have pursued their second counterclaim for reimbursement for plaintiff's use of its equipment, which they made dependent on "the event that the [a]greement is rescinded." (2d Am. Answer ¶ 33.) In fact, however, this claim was not submitted to the jury, because everyone understood that Plaintiff was not pursuing rescission as a remedy.
After insisting that I limit Plaintiff's evidence as to damages in an attempt to benefit from the absence of potentially damaging testimony, it is disingenuous for Defendants now to turn around and complain that Plaintiff did not pursue a damages remedy.
Defendants also argue that I should cast aside the jury's verdict based on a provision in the 1989 agreement limiting damages, which they never mentioned during trial. It is not apparent that the contractual damage limitation is still valid, because the jury found that Hell Graphic fraudulently induced Imaging to enter into the 1989 agreement by making a misrepresentation and that Hell Graphic either "knew the representation of fact was false or made the representation recklessly without regard to whether it was true or false." (Verdict Sheet at 2.) Although any damage calculation is beyond the scope of this opinion, which is limited to the issues of the June 2005 liability trial, caselaw suggests that a contractual damage limitation is not enforceable when it was obtained by fraud. Cf. Kalisch-Jarcho, Inc. v. City of New York, 58 NY2d 377, 384-85 [1983] ["[A]n exculpatory clause is unenforceable when . . . the misconduct for which it would grant immunity smacks of intentional wrongdoing [such as] when it is fraudulent."]. In any case, Defendants are estopped from invoking a provision of the 1989 agreement to eliminate their liability for fraud, because they participated in the trial of this action without ever calling my attention to that provision and waived any objection to my jury charge as to the elements of fraud. See C.P.L.R. § 4110-b; cf. Import Alley of Mid-Island, Inc. v. Mid-Island Shopping Plaza, Inc., 103 AD2d 797, 798 [2nd Dept. 1984] ["when an adversary does not apply to strike a jury demand until the eve of trial [a jury] waiver clause can no longer be asserted [and the adversary] must be deemed to have waived the clause"]. Defendants' counsel admitted as much at oral argument. (Trans. Oral Arg. I at 9 ["I can't think of any specific point it was raised during the trial"]. Defendants cannot, in a post-trial motion, overturn the jury's verdict based on a contract provision that they never raised during trial, when they never objected to the omission of this information from the jury instructions or verdict sheet. In support of their argument that a contractual damage limitation can defeat a jury verdict of fraud in the inducement, Defendants cite Mom's Bagels of New York, Inc. v. Sig Greenebaum, Inc., 164 AD2d 820 [1st Dept. 1990], in which a restaurant sued a seller of an oven for fraud and breach of contract. Mom's Bagel's, however, decided different issues, and its reasoning does not govern this case. In Mom's Bagels, the court dismissed the fraud count in the complaint on summary judgment. In doing so, the court relied not on the contractual damage limitation provision, but on the fact that the plaintiff had admitted that it had received a full refund of the price of the oven and had not alleged any other injury. ( Id. at 823.) Moreover, the court dismissed the plaintiff's punitive damages demand not because of the contractual damage provision, but because the complaint alleged only a "private wrong." ( Id. at 822-23.) Consequently, the reasoning of Mom's Bagel's does not apply here. Imaging has alleged a variety of damages in its Complaint and throughout this litigation, and Defendants themselves insisted that Plaintiff defer the bulk of its damages evidence until the damages phase of trial. Defendants also contend that a decision in this action over ten years ago partially granting Defendants' motion to dismiss supports their argument for overturning the jury verdict based on the contractual damage limitation in the 1989 agreement. In that decision, Judge Crane upheld the contractual waiver of implied warranties in a different portion of the agreement, holding that "[a]n unambiguous contractual waiver of implied warranties is fully enforceable against the buyer even where the buyer is also alleging fraud in the inducement." (Slip. op., Imaging Int'l Inc. v. Hell Graphic Sys., Inc., Index No. 5062-1992, at 11 [Sup. Ct. NY County May 4, 1995] [Crane, J.] [dismissing cause of action alleging breach of implied warranties].) Judge Crane's decision did not even address the damages limitations provision and therefore does not apply here.
Because I reject Defendants' contention that Plaintiff elected a rescission remedy for its fraud claim, I do not reach their argument based on laches or quantum meruit.
B. Proof of actual pecuniary loss
Defendants also argue that the weight of the evidence at trial does not provide a legally sufficient basis for the jury's finding that Imaging has proven the damages element of its fraud cause of action by clear and convincing evidence.
Under New York law, one of the elements of a cause of action for fraud is damages. A plaintiff who successfully brings a fraud cause of action may recover damages for its "actual pecuniary loss sustained as the direct result of the wrong." Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 421. Under the "out-of-pocket rule," as it is called, a plaintiff cannot recover lost profits that would have been realized in the absence of fraud. ( Id.)
A jury verdict may not be set aside as against the weight of the evidence unless a rational jury could not have reached the verdict on any fair interpretation of the evidence. Hoffson v. Orentreich, 168 AD2d 243, 244-45 [1st Dept. 1990]. I find that the evidence of actual pecuniary loss introduced by Imaging, described, supra, was sufficient to justify the jury's finding that Imaging incurred damages resulting from fraud.
C. Jury Instruction About Damages and Admission of Evidence of Lost Profits
Defendants also contend that they are entitled to a new trial, because I failed to instruct the jury correctly regarding damages and improperly admitted evidence of damages based on lost profits and lost business opportunities.
Defendants waived this argument in at least two ways. First, Defendants have waived any argument that the damage instruction was erroneous, because they did not object to my jury charge as to damages. (Tr. Trans. 1564-67, 1699-1700.) C.P.L.R. § 4110-b provides: "No party may assign as error the giving or the failure to give an instruction unless he objects thereto before the jury retires to consider its verdict stating the matter to which he objects and the grounds of his objection."
Second, Defendants expressly consented to bifurcate the liability and damages phases of the trial, and the parties understood that the bifurcation would eliminate not only the testimony of Mr. Gilbert, but most damages testimony during the liability phase. (Tr. Trans. 267.) In fact, Defendants insisted upon eliminating most of Plaintiff's damages testimony. Early at trial, Defendants' trial counsel expressed concern that "Plaintiff's President himself or some other witness may try to slip in the damage number that they have been claiming in [Mr. Gilbert's expert] report which I think would prejudice us." Accordingly, Defendants "ask[ed that] the witness be instructed . . . that he is not to mention that number or discuss the numbers with respect to claimed damages." ( Id. at 270-71.) Later, Defendants objected to the anticipated testimony of Mr. Held that he had pulled his business away from Imaging because it couldn't meet his price, arguing that Mr. Held's testimony was "only going to be towards damages." ( Id. at 876-79.) Because of Defendants' concern about prejudicial damages testimony, I did not permit Plaintiff to introduce evidence of damages other than the most general testimony during the liability phase. Defendants are disingenuous in now seeking to overturn the jury verdict because of insufficient evidence of fraud damages.
In any case, the jury was properly charged as to the damages element of the fraud cause of action. Moreover, Plaintiff introduced sufficient evidence of actual pecuniary loss to support the jury's finding that Plaintiff incurred damages as a result of Hell Graphic's conduct. Cf. Mills Studio, Inc. v. Chenango Val. Realty Corp., 15 AD2d 138 [3rd Dept. 1961] [tenant could recover damages for fraud based on lost business and increased operating expenses prior to trial as a result of landlord's misrepresentation].
Furthermore, Defendants have suffered no prejudice from their failure to object to any error in the jury charge, because Imaging still has to prove the extent of damages to which it is entitled during the damages phase of this trial.
D. Punitive damages
Finally, Defendants ask for a directed verdict in their favor on Imaging's punitive damages claim as a matter of law. At trial, which was limited to liability issues, by the parties' consent, Imaging was not permitted to introduce evidence related to punitive damages. This issue was expressly reserved for the damages trial. Therefore, Imaging has not had a chance to present the evidence in support of its claim for punitive damages. Consequently, Defendants' request for a directed verdict as to punitive damages is denied.
II. Defendants' Motion to Strike Plaintiff's Jury Demand, for Leave to File a Motion for Summary Judgment and for Summary Judgment
On February 8, 2006, over seven months after the jury's verdict, Defendants filed a second motion styled as a Motion to Strike Plaintiff's Jury Demand, for Leave to File a Motion for Summary Judgment and for Summary Judgment.
Defendants evidently styled their second post-trial motion in this way because they had already filed a post-trial motion. C.P.L.R. § 4406 plainly bars Defendants from filing a second post-trial motion as to the same issues decided by a jury verdict. It states: "[T]here shall only be one motion under this article with respect to any decision by a court, or to a verdict on issues triable of right by jury; and each party shall raise by the motion . . . every ground for post-trial relief then available to him."
Moreover, this motion was filed many months after the 15-day period after a jury's verdict in which C.P.L.R. § 4405 permits post-trial motions to be filed. Although this time can be extended if a litigant can establish "good cause," see C.P.L.R. § 2004, Defendants have offered no explanation whatsoever for waiting to file this motion until over seven months after the conclusion of the liability trial. This failure to show good cause is alone sufficient reason to deny their motion. See Casey v. Slattery, 213 AD2d 890, 891 [3rd Dept. 1995] [finding that trial court abused discretion in overlooking plaintiff's four-month delay in filing motion to set aside jury verdict "since he failed to offer any explanation for his substantial delay"].
Defendants cannot avoid §§ 4405 and 4406 by contorting their arguments to fit into the framework of a pre-trial motion. See Casey, 213 AD2d at 891 [plaintiff's characterization of his dilatory post-trial motion as a motion for reargument of his previously denied motion for a directed verdict at the end of trial was "an obvious artifice designed to evade the time limitation of CPLR 4405."].
As Plaintiff remarked in its Memorandum of Law in Opposition to Defendants' Second Motion for Post-Trial Relief, "Defendants are operating within an alien system of jurisprudence." (Pl. Memo. Opp'n at 6.)
Furthermore, in addition to being untimely and a second post-trial motion, Defendants' motion is meritless, as I will briefly describe below.
A. Request to strike the jury demand over seven months after the verdict
First, Defendants introduce a variation on the hypothesis they advanced in their first post-trial motion: that Plaintiff elected a rescission remedy. In their second motion, Defendants contend that Plaintiff waived its right to a jury trial by joining claims seeking both damages and rescission in its Complaint, and that consequently I must regard the jury's verdict as merely advisory.
Defendants have fundamentally misunderstood the nature of the right to trial by jury. "[T]he right to trial by jury is zealously protected in our jurisprudence and yields only to the most compelling circumstances." John W. Cowper Co. v. Buffalo Hotel Dev. Venture, 99 AD2d 19, 21 [4th Dept. 1984].
Defendants' counsel at oral argument maintained that "the right to jury trial in this case was . . . waived and extinguished when plaintiff filed the complaint asserting equitable and legal causes of action. The right to a jury trial evaporated at that point." (Trans. Oral Arg. [Trans. Oral Arg. II], 6-7 [Mar. 23, 2006].)
This assertion is incorrect. "[T]he fact that a plaintiff may have waived its own right to a jury trial by joining a legal claim with an equitable claim will not affect a defendant's entitlement to a jury trial on plaintiff's legal causes of action." Hudson View II Assocs. v. Gooden, 222 AD2d 163, 167 n. 1, 168 [1st Dept. 1996] [defendants did not waive their "right to a jury trial on plaintiffs' legal claims" despite plaintiff's joinder of legal and equitable claims arising from the same transaction]; Cilwick v. Camelo, 55 AD2d 782, 782 [3rd Dept. 1976] ["the joinder of an equitable action with a legal one cannot deprive the defendant of the right of a trial by jury"]. Although "joinder in a complaint of both legal and equitable causes of action arising from the same transaction constitutes a waiver by plaintiff of his right to a trial by jury[,] [s]uch waiver . . . applies only to the plaintiff as defendant retains his right to a jury trial on the legal issues." Cowper, 99 AD2d at 21. In fact, once Plaintiff demanded a jury, it had no right to withdraw its jury demand without Defendants' consent. C.P.L.R. § 4102(a) ["A party may not withdraw a demand for trial by jury without the consent of the other parties."].
Defendants' counsel maintains, however, that Defendants also waived their right to a jury trial by joining legal and equitable claims in their pleadings. (Trans. Oral Arg. II at 18-19 ["Defendants also joined legal and equitable claims, and nobody had a right to a jury trial here as a matter of law"].) This asserted is contradicted by the pleadings and caselaw.
In Hudson, the plaintiffs moved to strike the defendants' jury demand prior to trial, contending that the defendants had waived their right to a jury trial on the plaintiffs' legal claims by asserting equitable defenses and counterclaims. The First Department rejected this argument for at least two reasons. First, it found that the defendants had not waived their right to a jury trial on the plaintiffs' legal claims by the assertion of equitable defenses. Second, it found that Defendants' counterclaims, which sought "damages only for the value of services and actual expenditures made by them," were "wholly legal causes of action predicated on principles of contract and/or quasi-contract," and therefore the defendants also had not waived their right to a jury trial on their counterclaims. Hudson, 222 AD2d at 168.
The plaintiffs' complaint had joined legal and equitable claims.
Here, Defendants brought two counterclaims: one seeking damages for breach of contract, and the second seeking reimbursement for plaintiff's use of its equipment, in case "the [a]greement is rescinded." (2d Am. Answer ¶ 33.) Both counterclaims are contractual or quasi-contractual in nature, and therefore give rise to the right to trial by jury. Hudson, 222 AD2d at 168. Therefore, Defendants had a right to a jury trial on both Plaintiff's legal claims and their own counterclaims, which they never waived prior to trial.
When Defendants received notice of Plaintiff's jury demand several months prior to trial, they had an opportunity to move to strike it. Defendants made the strategic decision not to move to strike the jury demand. See A.J. Fritschy Corp. v. Chase Manhattan Bank, 36 AD2d 600, 600 [1st Dept. 1971] [per curiam] ["While the motion to strike [jury demand based on joinder of legal and equitable claims" may be made at any time up to the opening of trial, it is preferable in the interest of orderly procedure that it be made within a reasonable period prior thereto."] [emphasis added].
Defendants cited A.J. Fritschy in support of another point in the reply brief to their second post-trial motion, but they failed to refer to this statement.
Defendants chose instead to try their case before the jury. Having elected to take their chances with a jury, Defendants cannot now over seven months after the verdict insist on a "do-over." By electing to try their case before a jury, Defendants are now estopped from moving to strike Plaintiff's jury demand. See Cantor v. 255 West 15th Holding Corp., 207 NYS2d 535, 535-36 {28 Misc 2d 503} [1st Dept. 1960] ["[I]f the defendant intended to challenge the plaintiff's right to jury trial, it was bound to act seasonably and with diligence. The defendant was not free to wait until the eve of trial . . . before moving to strike."]; David D. Siegel, New York Practice § 378 [West 3d ed. 1999] ["A waiver of trial by jury is itself waivable."].
Defendants concede that they have found only one decision, Ruder v. Lincoln Rochester Trust Co., 18 AD2d 763 [4th Dept. 1962], in which a court granted a motion to strike that was made for the first time after trial. Ruder, however, is inapposite. There the plaintiff brought a single cause of action, which was an equitable claim: it sued to compel specific performance of an alleged contract for the purchase of shares of stock. The equitable claim was tried before a jury. The trial court considered itself to be bound by the jury's findings, although it disagreed with them. The appellate court found that the trial court erred in treating the jury's verdict on the equitable claim as binding, rather than advisory, and granted the defendant a new trial.
Here, in contrast, the parties tried a fraud claim seeking money damages which Plaintiff had alleged as Count II in its Amended Complaint. Therefore, the jury's verdict was binding not advisory and could only be overturned if irrational. Mirand v. City of New York, 84 NY2d 44, 48-49. The decisions cited by Defendants are inapposite, because they involve plaintiffs that pursued a rescission remedy, and here Plaintiff did not do so. Cf. Mercantile Gen. Reins. Co. v. Colonial Assur. Co., 82 NY2d 248 [under C.P.L.R. § 4101, jury verdict as to plaintiff's unitary claim seeking rescission for fraud was advisory]. Defendants exercised their right to have the legal claims in this action decided by a jury and may not now claim that they wished they never had exercised it.
B. Request for leave to file a motion for summary judgment
Second, Defendants request leave to move for summary judgment to dismiss all of Imaging's claims, based on the evidence presented at trial.
While the legal standard of review is the same, a motion for summary judgment is "based on pretrial evidentiary submissions" while a motion for a directed verdict is based "on the evidence presented at trial." Stephenson v. Hotel Employees Rest. Employees Union Local 100, 14 AD3d 325, 331 n. 4 [1st Dept. 2005], aff'd, 6 NY3d 265. Therefore, the arguments raised by Defendants in this motion are properly the subject of a post-trial motion. Defendants have evidently styled their second motion in this way because they have already filed a post-trial motion, and C.P.L.R. § 4406 bars Defendants from filing a second post-trial motion as to the same issues decided by a jury verdict. Defendants cannot avoid § 4406 by seeking to make their post-trial arguments fit into the framework of a pre-trial motion.
Defendants contend, however, that they have "good cause" to make such a motion more than 120 days after the Note of Issue was filed, cf. C.P.L.R. § 3212(a), because their motion is based on witness admissions during trial. This statement alone demonstrates that the their motion is, in essence, a prohibited second post-trial motion. Moreover, Defendants have not offered any explanation whatsoever much less "good cause" for having waited over seven months after trial to raise the argument.
Defendants have cited only one decision involving a bifurcated trial in which a court granted a motion for summary judgment between the liability and damages phases, but that case counsels against granting their motion. In Peak v. Northway Travel Trailers Inc., 260 AD2d 840 [3rd Dept. 1999], the plaintiff moved for summary judgment as to damages, based on the jury's liability verdict in its favor. The court affirmed the trial court's denial of summary judgment "in view of the understanding at trial that the issue of damages would be separately tried and that defendant would have an opportunity to present proof as to damages" at the damages phase of the trial. ( Id. at 842.) A similar understanding existed during the bifurcated trial in this case.
Consequently, Defendants' meritless and untimely motion to strike and for leave to move for summary judgment and for summary judgment is prohibited under C.P.L.R. § 4406, is an improper utilization of C.P.L.R. § 3212, and constitutes an abuse of this Court's resources.
For the foregoing reasons, I deny Defendants' Motion for Post-Trial Relief and Motion to Strike, for Leave to File a Motion for Summary Judgment and for Summary Judgment in their entirety. Plaintiff's request for an award of attorneys fees is also denied.