Opinion
19 Civ. 1817 (VB)(JCM)
03-17-2022
ROBERT JAMIESON, JUDITH JAMIESON, ROBERT JAMIESON AS TRUSTEE FOR THE RAYMOND DAVID JAMIESON IRREVOCABLE GRANDCHILDREN'S TRUST, and JUDITH JAMIESON AS TRUSTEE FOR THE JAMIESON FAMILY FOUNDATION, Plaintiffs, v. SECURITIES AMERICA, INC., SECURITIES AMERICA ADVISORS, INC., HECTOR A. MAY, VANIA MAY BELL, and EXECUTIVE COMPENSATION PLANNER, INC., Defendants.
To the Honorable Vincent L. Briccetti, United States District Judge:
SUPPLEMENTAL REPORT AND RECOMMENDATION
JUDITH C. MCCARTHY, UNITED STATES MAGISTRATE JUDGE.
On February 22, 2022, I issued a Report and Recommendation (“February R&R”), in which I respectfully recommended awarding Plaintiffs (1) compensatory damages for the relevant period of fraudulent activity, (2) punitive damages in an amount equal to the amount of compensatory damages, and (3) post-judgment interest. (Docket No. 98). No objections to the February R&R were filed. On March 14, 2022, at my request, Plaintiffs provided the Court with a revised damages calculation that included the amount of compensatory damages for the period from 2001 through February 2018 in conformance with the February R&R. (Docket Nos. 100104). For the reasons set forth herein, I respectfully recommend granting Plaintiffs' motion for a default judgment against Defendants Hector A. May (“Hector May”) and Executive Compensation Planners, Inc. (“ECP”) (collectively, “Defendants”) in the total amount of $31,632,020. I also respectfully recommend awarding post-judgment interest at the statutory rate provided for in 28 U.S.C. § 1961, running from the date of the entry of the final judgment.
I. BACKGROUND
Familiarity with the underlying facts of this case and the February R&R is assumed. Briefly, on August 30, 2021, the Honorable Vincent L. Briccetti granted a default judgment as to liability on all of Plaintiffs' claims against Defendants Hector May and ECP. (Docket No. 83). Thereafter, Judge Briccetti referred the matter to the undersigned to conduct a damages inquest. (Docket No. 84). I issued the February R&R and conducted a Telephone Conference on February 28, 2022 to discuss how to proceed. Thereafter, Plaintiffs filed the following submissions: (1) a letter requesting the court issue a default judgment in the amount of $31,632,020, (Docket No. 100); (2) a declaration of expert Craig McCann, dated March 14, 2022, and exhibits attached thereto, in further support of Plaintiff's motion for a damages, (Docket No. 101); (3) a Statement of Damages, (Docket No. 102); and (4) a Proposed Default Judgment, (Docket No. 103).
II. DISCUSSION
As outlined more fully in the February R&R, when assessing damages, this Court must determine whether Plaintiff “has presented sufficient evidence to enable the Court to ascertain with reasonable certainty the amount of damages recoverable ....” Avalon Risk Management Insurance Agency, LLC v. Rossano, 12cv3934 (LGS) (DF), 2016 WL 2851435, at *3 (S.D.N.Y. Mar. 31, 2016) (citation omitted). The same analysis applies here.
If Defendants do not have access to cases cited herein that are available only by electronic database, then they may request copies from Plaintiff's counsel. See Local Civ. R. 7.2 (“Upon request, counsel shall provide the pro se litigant with copies of such unpublished cases and other authorities as are cited in a decision of the Court and were not previously cited by any party.”).
A. Compensatory Damages
The Second Circuit has held that in cases of investment advisor fraud, the proper measure of damages is calculated by taking “the initial value of the portfolio, adjust[ing] it by the percentage change in an appropriate index during the [relevant] period, and subtract[ing] the value of the portfolio at the end of the period.” Rolf v. Blyth, Eastman Dillon & Co., 637 F.2d 77, 84 (2d Cir. 1980). As explained in the February R&R, Plaintiffs' expert, Craig McCann, correctly applied the formula to calculate Plaintiffs' compensatory damages, except that he calculated damages through October 2021, the date of his declaration, rather than February 2018, the date the fraudulent activity ended. In his March 14, 2022 declaration, McCann recalculates Plaintiffs' compensatory damages using the correct end date.
McCann analyzed what Plaintiffs' $14,061,269 investments would be worth on February 28, 2018 if Defendants invested their funds according to Plaintiffs' 2004 written instructions. (Docket No. 101 ¶¶ 16-17). The 2004 written instructions directed Defendants to invest approximately $3.5 million in short-term bonds and approximately $8.6 million in laddered bonds with longer maturity dates, which proceeds upon maturation would be invested in equity securities. (Id. ¶ 18). Plaintiffs also made monthly withdrawals of approximately $29,000 to cover living expenses, which decreased to $20,000 once their children graduated from college, and then increased again due to inflation. (Id. ¶¶ 18-19). To determine how the market fluctuated during this time period, McCann constructed diversified portfolios using the S&P 500 Index Fund and the Intermediate-Term Bond Index Fund. (Id. ¶ 21). McCann concluded that had the $14.1 million been invested in accordance with the 2004 instructions, and after deductions for the monthly withdrawals were made, Plaintiffs' investments would have grown to $20,617,323 as of February 28, 2018. (Id. ¶ 22). From this amount, McCann subtracted the $51,313 that remained in Plaintiffs' brokerage accounts when they discovered the fraud in February 2018, leaving a total compensatory damages calculation of $20,566,010. (Id. ¶ 23).
The calculations made by McCann are proper and in accordance with Second Circuit case law. Accordingly, I respectfully recommend granting Plaintiffs' request for compensatory damages in the amount of $20,566,010.
B. Punitive Damages
In addition to compensatory damages, Plaintiffs seek punitive damages in an amount equal to compensatory damages. (Docket No. 90 at 13; see also Docket No. 100). As discussed in the February R&R, the high threshold for moral culpability is met here, warranting punitive damages in an amount equal to compensatory damages. See, e.g., Cont'l Indus. Grp., Inc. v. Altunkilic, 14-CV-790 (AT) (JLC), 2020 WL 3884312, at *8 (S.D.N.Y. July 1, 2020) (awarding an equal amount of punitive damages where actual damages totaled approximately ten million dollars in a case of misappropriation of a company's confidential and proprietary information, because “where the amount of actual damages is already significant . . . an equal amount in punitive damages should be sufficient to accomplish the dual purposes of punishment and deterrence.”) (citation and quotation omitted). As I explained in the February R&R, given the egregiousness of the crime, the extraordinary lengths that Hector May went to conceal his actions and ingratiate himself with his victims, (see Docket No. 1 ¶¶ 32-39), the more than twenty years that he perpetrated this fraud and stole millions of dollars, (see id. ¶¶ 47-63), and the degree of reprehensibility of his conduct, (see id. ¶¶ 89-101), a punitive damages award equal to the compensatory damages is warranted in this case. Accordingly, I respectfully recommend awarding Plaintiffs punitive damages in the amount of $20,566,010.
C. Offset Amounts
A plaintiff may not, as a matter of law, recover twice for the same injuries. See Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d Cir. 1989) (“[W]hen a plaintiff receives a settlement from one defendant, a nonsettling defendant is entitled to a credit of the settlement amount against any judgment obtained by the plaintiff against the nonsettling defendant as long as both the settlement and judgment represent common damages.”). Plaintiffs acknowledge that the total damages should be reduced by any payments received in connection with this case. (Docket No. 100). Plaintiffs received $9.5 million from Defendants Securities America, Inc. and Securities America Advisors, Inc. in settlement of their claims. (Docket No. 90 at 16-17; see also Docket No. 103). As of March 14, 2022, Plaintiffs have not received any other compensation in relation to this case or any related criminal or civil enforcement actions. (Docket No. 100). Accordingly, I respectfully recommend reducing Plaintiffs' total damages by $9.5 million to $31,632,020.
D. Post-Judgment and Pre-Judgment Interest
Plaintiffs seek post-judgment interest, which is mandated on any money judgment in a civil case recovered in a district court. 28 U.S.C. § 1961(a).
Plaintiffs do not seek pre-judgment interest. Although New York state law entitles Plaintiffs to pre-judgment interest on compensatory damages, N.Y. C.P.L.R. § 5001 (1992), the Second Circuit has held that pre-judgment interests should not be awarded where such an award would “amount to double recovery” or a “windfall.” Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co., 697 F.2d 481, 484-86 (2d Cir. 1983). Since I am recommending an award of punitive damages equal to compensatory damages, a further award of pre-judgment interest would amount to a “windfall, ” and, thus, is not warranted here. See id., at 485-86. Therefore, the Court agrees with Plaintiffs that pre-judgment interest would not be appropriate here.
Accordingly, I respectfully recommend awarding post-judgment interest at the statutory rate provided for in 28 U.S.C. § 1961, calculated from the date of the entry of the final judgment.
III. CONCLUSION
For the foregoing reasons, the Court respectfully recommends awarding Plaintiffs a total of $31,632,020 in compensatory and punitive damages, plus post-judgment interest at the statutory rate provided for in 28 U.S.C. § 1961, as of the date of entry of final judgment. This amount is comprised of $20,566,010 in compensatory damages, $20,566,010 in punitive damages, and an off-set of $9.5 million that Plaintiffs received from Defendants Securities America, Inc. and Securities America Advisors, Inc. in settlement of their claims.
The Clerk of Court is respectfully requested to mail a copy of this Report and Recommendation to the pro se Defendants.
IV. NOTICE
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b)(2) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from receipt of this Report and Recommendation to serve and file written objections. See Fed.R.Civ.P. 6(a) and (d) (rules for computing time). If copies of the Report and Recommendation are served upon the parties by mail, the parties shall have seventeen (17) days from receipt of the same to file and serve written objections. See Fed.R.Civ.P. 6(d). A party may respond to another party's objections within fourteen (14) days after being served with a copy. See Fed.R.Civ.P. 72(b)(2). Objections and responses to objections, if any, shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable Vincent L. Briccetti at the United States District Court, Southern District of New York, 300 Quarropas Street, White Plains, New York, 10601, and to the chambers of the undersigned at said Courthouse.
Requests for extensions of time to file objections must be made to the Honorable Vincent L. Briccetti and not to the undersigned. Failure to file timely objections to this Report and Recommendation will result in a waiver of objections and will preclude later appellate review of any order of judgment that will be rendered. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(b), 6(d), 72(b); Caidor v. Onondaga Cnty., 517 F.3d 601, 604 (2d Cir. 2008).
SO ORDERED: