Opinion
603611/2008
08-12-2019
Gentry BEACH, Robert Vollero, Deeprock Venture Partners, LP, Plaintiffs, v. TOURADJI CAPITAL MANAGEMENT, LP, Paul Touradji, Vollero Beach Capital Partners, Vollero Beach Capital Fund, Vollero Beach Associates LLC, Vollero Beach Capital Offshore, Ltd., Gary Beach, Defendants.
Plaintiffs/Counterclaim Defendants: Michael Stolper, The Stolper Group, 469 Seventh Avenue, Suite 502, New York, NY 10018 Defendant/Counterclaim Plaintiffs: Sean R. O'Brien, O'Brien LLP, 900 Third Avenue, 18th Floor, New York, NY 10022
Plaintiffs/Counterclaim Defendants: Michael Stolper, The Stolper Group, 469 Seventh Avenue, Suite 502, New York, NY 10018
Defendant/Counterclaim Plaintiffs: Sean R. O'Brien, O'Brien LLP, 900 Third Avenue, 18th Floor, New York, NY 10022
Andrew Borrok, J.
The following e-filed documents, listed by NYSCEF document number (Motion 046) 888, 889, 890, 891, 892, 893, 894, 895, 896, 897, 898, 899, 900, 901, 902, 904, 905, 906, 907, 908, 909, 910, 911, 912, 913, 914, 915, 916, 917, 918, 919, 939, 940, 941, 942, 943, 944, 945, 946, 947, 948, 949, 950, 951, 952, 953, 954, 955, 956 were read on this motion to/for SET ASIDE VERDICT.
Following a two-and-a-half-week trial (May 8 to May 23, 2019), and a unanimous jury verdict in favor of the Plaintiffs (hereinafter defined) and against Touradji Capital Management (TCM ) and Paul Touradji (TCM and Mr. Touradji, hereinafter, the Defendant/Counterclaim Plaintiffs ), the Defendant/Counterclaim Plaintiffs now move to set aside the verdict and for a new trial pursuant to CPLR 4404(a). For the reasons set forth below, the motion is denied.
As an initial matter, this is the second motion that the Defendant/Counterclaim Plaintiffs have brought to set aside the jury verdict in this action. The first motion (arguing that the verdict should be set aside as against the weight of the evidence) was made orally after the jury returned to the courtroom and issued their unanimous decision in favor of the Plaintiffs (May 23, 2019 Tr. , pp. 1989-1990). The jury had listened carefully and patiently during the course of this trial and found that both Robert Vollero and Gentry Beach (collectively, the Plaintiffs ) had oral contracts with TCM which included a bonus based on a fixed percentage of the profits without netting risk and that they did not have a contract based on a base salary and a discretionary bonus. With respect to Robert Vollero, the jury unanimously determined that TCM owes Robert Vollero $24.33 million, and with respect to Gentry Beach, the jury unanimously determined that TCM owes Gentry Beach $21.4 million. The jury appropriately did not reach the claim for quantum meruit/unjust enrichment bonus prior to addressing quasi-contract or unjust enrichment. As to Mr. Vollero, this was added as Question 4(a) to the verdict sheet. (Question 4[b] presented the unjust enrichment theory and Question 5 presented the quasi-contract theory). As to Mr. Beach, this was added as Question 12(a) to the verdict sheet (Question 12[b] presented the unjust enrichment theory and Question 13 presented the quasi-contract theory). With these additions, counsel for the Defendant/Counterclaim Plaintiffs formally accepted the jury instruction and indicated their acceptance by signing the verdict sheet, without further objection. By doing so, the Defendant/Counterclaim Plaintiffs waived the right to now use this as a basis for a new trial ( CPLR 4110-b ). Pursuant to 4110-b, "[n]o 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" (see also Bowne of NY v. International 800 Telecom Corp. , 178 AD2d 138 [1st Dept 1991] ). It is also well-settled that a challenge to a verdict sheet is unpreserved where a party has consented to the sheet as given to the jury ( Jing Xue Jiang v. Dollar Rent a Car, Inc. , 91 AD3d 603 [2d Dept 2012] ). For the avoidance of doubt, both (i) the pre-conditions requested by the Defendant/Counterclaim Plaintiffs (i.e. , that the jury must first find that there was not a contract for a base salary and a discretionary before addressing whether the Plaintiffs could recover based on unjust enrichment or quasi contract) and (ii) the faithless fiduciary charge were added to the final charges given to the jury.
In addition to the foregoing, the record at trial unequivocally demonstrates that the Defendant/Counterclaim Plaintiffs waived their right to call for a new trial ( People v. Noel , 156 AD2d 592, 593 [2d Dept 1989] ). Critically, the Defendant/Counterclaim Plaintiffs never sought a new trial during the entirety of the two and a half weeks that the court presided over this matter, despite all the objections they now raise and all the "bias" they now attempt to manufacture (see IGS Realty Co., L.P. v. Brady , 149 AD3d 524 [1st Dept 2017] [defendant not entitled to new trial because he failed to preserve the issues at trial] ). As discussed elsewhere in this opinion, the court repeatedly offered to declare a mistrial only to have the Defendant/Counterclaim Plaintiffs (and the Plaintiffs) reaffirm time and time again that they wished to continue on with the trial. It bears repeating here that when the court raised this issue at trial, counsel for the Defendant/Counterclaim Plaintiffs unequivocally stated:
MR. O'BRIEN: We certainly don't want a mistrial.
* * *
No mistrial.
(May 10, 2019 Tr. , p. 256:10-11, 256:17).
Likewise, when the court asked counsel for the Defendant/Counterclaim Plaintiffs about what remedy he thought the court should impose in addressing the Regulation M issue discussed below, counsel for the Defendant/Counterclaim Plaintiffs reiterated that he was not seeking a mistrial:
THE COURT: inasmuch as you're not asking for any relief, I just want to make clear you're not asking for any relief, I just want to make clear you're not asking me for a mistrial in this case?
MR. O'BRIEN: I am not, Your Honor.
THE COURT: Okay. You understand that I might make a ruling that precludes certain evidence in this case. You're not asking for a mistrial, sir?
MR. O'BRIEN: Not asking for a mistrial. I will object to the preclusion, obviously.
THE COURT: You can note your exception, should I do that. You can take it up with the First Department.
MR. O'BRIEN: Sure.
THE COURT: So as an initial matter, the court wants to note that neither side has requested a mistrial in this case. I asked them both if they wanted a mistrial on the record. Both sides have said no.
(May 10, 2019 Tr. , p. 248:18-249:8).
Inasmuch as the Defendant/Counterclaim Plaintiffs argue that the court "excessively intervened" in the proceedings so as to deny them a fair trial (as further discussed below), it is well-settled that a "trial court has broad authority to control the courtroom, rule on the admission of evidence, elicit and clarify testimony, expedite the proceedings and to admonish counsel and witnesses when necessary" ( Campbell v. Rogers & Wells, 218 AD2d 576, 569 [1st Dept 1995] ; see also Delcor Labs. v. Cosmair, Inc. , 263 AD2d 402, 402 [1st Dept 1999] [no new trial warranted where court sought to clarify testimony and took "active role in the trial"] ).
The Defendant/Counterclaim Plaintiffs' objections in this regard can be generally grouped into one of the following categories: (1) mischaracterizations of the record, (2) inadmissible evidence, and (3) issues waived by counsel at trial (including expressly waiving their right to a mistrial as discussed above).
The Defendant/Counterclaim Plaintiffs' Mischaracterizations
The trial started with the Defendant/Counterclaim Plaintiffs' counsel attempting to mislead the jury by falsely claiming that the SEC found that the Plaintiffs "violated the securities laws." The trial concluded exactly the same way, with counsel for the Defendant/Counterclaim Plaintiffs misleading the jury by stating that Messrs. Beach and Vollero were "fired" from their prior employment at another hedge fund, Solstice (May 23, 2019 Tr. , p. 1863:25-1864:1). Neither statement was supported by the record. In fact, both representations were, at best, misleading and, at worst, knowingly false when made in violation of Rule 3.3 of the New York Rules of Professional Conduct, which provides:
a lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer.
(Rules of Professional Conduct [ 22 NYCRR 1200.0 ] Rule 3.3 [a] [1] ).
With respect to the "securities laws" violation, counsel for the Defendant/Counterclaim Plaintiffs stated in his opening statement that Messrs. Beach and Vollero were "faithless fiduciaries," who " violated the securities laws when they were engaging in the very trading they were going to ask you to pay them for. The SEC came in and made that finding, not Mr. Touradji ." (May 8, 2019 Tr. , p. 45:1-4 [emphasis added] ). What counsel was referring to was a certain Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities and Exchange Act of 1934 and Section 203(3) of the Investment Advisors Act of 1940, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order (the SEC Consent Decree ) dated December 9, 2011, issued by the Securities and Exchange Commission (the SEC ) accepting TCM's Offer of Settlement for the purpose of the public administrative and cease-and-desist proceedings initiated by the SEC against TCM (not Messrs Beach or Vollero).
The SEC Consent Decree included the following four findings under the heading titled "Summary":
These proceedings arise out of a violation of Rule 105 of Regulation M of the Exchange Act by Touradji Capital [emphasis added], an unregistered investment adviser and hedge fund manager located in New York, New York. Rule 105 prohibits buying an equity security made available through a public offering, conducted on a firm commitment basis, from an underwriter or broker or dealer participating in the offering after having sold short the same security during the restricted period as defined therein.
On three occasions, from October 2007 through July 2008, Touradji Capital bought offered shares from an underwriter or broker or dealer participating in a follow-on public offering after having sold short the same security during the restricted period. These violations collectively resulted in profits of approximately $834,000.
The trading decisions that gave rise to the foregoing violations of Regulation M were made by two former employees of Touradji Capital whose employment ended in late 2008.
During the relevant period, although Touradji Capital had some training to its employees concerning Rule 105, it did not have policies, procedures and controls in place sufficient to prevent or detect Rule 105 violations [emphasis added].
(SEC Consent Decree, p. 2).
Inasmuch as Rule 105 "prohibits buying an equity security made available through a public offering, conducted on a firm commitment basis, from an underwriter or broker or dealer participating in the offering after having sold short the same security during the restricted period as defined therein" (SEC Consent Decree, p. 2), the Defendant/Counterclaim Plaintiffs' alleged in this litigation that the Plaintiffs breached their fiduciary duties by violating Rule 105. The evidentiary basis that the Defendant/Counterclaim Plaintiffs had presented to this court and previously to the First Department, was the third bullet point in the above Summary (Bullet Point 3 ) of the SEC Consent Decree (see Beach v. Touradji Capital Mgt., LP , 142 AD3d 442, 444 [1st Dept 2016] ; 144 AD3d 557, 559 [1st Dept 2016] ) which does not identify Messrs. Beach or Volero by name in the Summary or elsewhere in the SEC Consent Decree.
After the close of Mr. O'Brien's (counsel for the Defendant/Counterclaim Plaintiffs) opening statement the Plaintiffs objected to Mr. O'Brien's incorrect characterization of the SEC Consent Decree, and the court excused the jury so that an appropriate conversation could take place outside of the presence of the jury.
MR. GREENBERGER: Including saying that these gentlemen out there violated SEC Rules. First of all, it's a settlement agreement, not a finding. Second of all, it's against Touradji Capital Management, who paid the fine also ordered forfeiture; period. You can try to pin it on them, but that's not what it is.
MR. O'BRIEN: The order says that the trades at issue were done by two traders.
(May 8, 2019 Tr., p. 58:5-12).
The court reviewed the SEC Consent Decree. Notably, at this time, counsel for the Defendant/Counterclaim Plaintiffs did not in any way explain the circumstances of Bullet Point 3 to the court — i.e., that Bullet Point 3 had been inserted at Mr. O'Brien's request in order to have his client agree to the SEC Consent Decree as discussed more fully below. But putting that aside, outside of the presence of the jury, responding to objections by the Plaintiffs' counsel, the court stated the following:
The Court is very, very concerned about what was said during the opening statements, which indicated that the SEC had made findings that the plaintiffs in this case had violated the Securities and Exchange Laws. Among other things, the two plaintiffs in this case are not specifically identified. And, in addition to that, part of the basis for the findings of the violations as identified in paragraph 4 of the summary is that Touradji Capital did not have policies, procedures, and controls in place sufficient to prevent or detect Rule 105 violations [emphasis added].
I am not sure if this can be cured, to be quite frank, because this is a proceeding involving Touradji Capital. And the way that this was presented, it certainly sounded like it was a proceeding as against Mr. Gentry Beach and Mr. Robert Vollero and their conduct. While counsel may be able to demonstrate that the two employees identified in this order are, in fact, Robert Vollero and Gentry Beach, I am not sure if he can do that. But, in any event, I am concerned about identifying them as having been the result of findings by the SEC. Unless there's another document which has not been presented to me, the SEC made no such specific finding on the record. In any event, Mr. Beach and Mr. Vollero were not even a party to this proceeding.
Further, to the extent that the sum and substance of the actual findings include a finding as against Touradji Capital, not solely based on the trades but based on their failure to have proper policies in place, I am not sure that this can be cured. I am going to give you guys time to think about it over lunch. I also am going to think about it over lunch.
There is one other thing that needs to be discussed regarding this. If it can be cured, then there is some discovery as it relates to how the SEC identified these two particular people in communications with respect to this finding by the SEC, which [has] not yet been turned over in this case. [emphasis added]
(May 8, 2019 Tr. , pp. 66:11-67:23).
Subsequently, following a bench conference, the parties and the court agreed on a "curative solution" (id. , p. 68:12-23), whereupon counsel for the Defendant/Counterclaim Plaintiffs told the jury the following:
In an abundance of caution and to try to minimize the effect of this necessary curative instruction, rather than giving this curative instruction, the court asked counsel to the Defendant/Counterclaim Plaintiffs to address this issue on the record so as to avoid appearing to admonish him in front of the jury.
Ladies and gentlemen of the jury, the judge has given me an opportunity to clarify something. In my opening statement, I indicated that the SEC has made a finding against Gentry Beach and Robert Vollero, specifically. I want to clarify that the finding of the rule violation was against Touradji Capital, my client. In its order, the SEC identified as one of the bases for the rule violation trade by two former employees. The two former employees are not identified in the SEC order and those employees were not a party to the proceeding of the SEC. I intend to adduce evidence to show you that the two employees identified are Gentry Beach and Robert Vollero. There were other grounds identified in the SEC findings for the Rule 105 violation. The judge is going to read you the SEC order, on stipulation by the attorneys, and it will be entered into evidence and you can look at it yourself.
(id. , p. 70:8-22).
The court then read the relevant portions of the SEC Consent Decree into the record.
However, it was revealed the next day when Mr. O'Brien turned over some of his communications with the SEC that as part of the negotiated agreement — i.e., the SEC Consent Decree, that it was actually Mr. O'Brien who had requested that the SEC include Bullet Point 3 in the SEC Consent Decree in order for his client, the Defendant/Counterclaim Plaintiffs, to agree to the SEC Consent Decree (May 9, 2019 Tr. , pp. 208:16-25—210:1-13). In fact, the SEC appears to have had no interest whatsoever in identifying "the two former employees" by name or that the SEC made any inquiry at all into who the former employees were . Pursuant to a letter (the June 4th Letter ), dated June 4, 2011, from Mr. O'Brien to Lauren B. Poper, Esq., Senior Counsel, United States Securities and exchange Commission, Division of Enforcement, Mr. O'Brien wrote:
For the avoidance of doubt, at the pre-trial conference, the court had ordered Mr. O'Brien to turn over the discovery which had been requested by the Plaintiffs as it related to the alleged Regulation M violations as the Plaintiffs were not the target of that investigation or otherwise involved in those proceedings. Notwithstanding the court's pre-trial order, Mr. O'Brien did not turn over such discovery prior to the commencement of trial.
In short, it would be fundamentally unfair, and inconsistent with the Commission's mandate, to pursue the present inquiry against Touradji Capital Management LLP (the "Firm"). Instead, the proper subject of any inquiry into potential Regulation M violations are the individuals responsible for directing those trades: Mr. Gentry Beach and Mr. Robert Vollero the proper course in this instance is for the Commission to direct its efforts as against Mr. Beach and Mr. Vollero proceeding against the Firm would mean those actors who are at the risk of committing securities law viola. On the counterclaims, the jury unanimously found that neither Robert Vollero, nor Gentry Beach breached their fiduciary duties to TCM. The jury also unanimously found that there was an enforceable contract between TCM and Benjamin Bram but that Gentry Beach did not know about this contract including its confidentiality and non-disparagement provisions. The jury also unanimously found that the Fortress Report (defined below) was not defamatory. Finally, the jury unanimously found that neither TCM nor Mr. Touradji was due any damages as a result of Gary Beach's publication and/or broadcast of the Fortress Report.
The court denied the first motion to set aside the verdict made orally at the conclusion of the trial (id. , p. 1990). The Defendant/Counterclaim Plaintiffs now argue again that the jury's verdict should be set aside as against the weight of the evidence or, otherwise, in the interest of justice. For the reasons set forth below, their argument is without merit.
The standard for granting a new trial is governed by CPLR 4404(a), which provides that:
the court may set aside a verdict or any judgment entered thereon and direct that judgment be entered in favor of a party entitled to judgment as a matter of law or it may order a new trial of a cause of action or separate issue where the verdict is contrary to the weight of the evidence, in the interest of justice or where the jury cannot agree.
THE UNANIMOUS JURY VERDICT WAS NOT AGAINST THE WEIGHT OF THE EVIDENCE
The rule is well settled that a court should not set aside a jury verdict as against the weight of the evidence unless the jury could not have reached its verdict on any fair interpretation of the evidence ( McDermott v. Coffee Beanery, Ltd. , 9 AD3d 195, 206 [1st Dept 2004] ). "In making this determination, the court must proceed with considerable caution for in the absence of indications that substantial justice has not been done, a successful litigant is entitled to the benefits of a favorable jury verdict" (id. [internal citation and quotation omitted] ). A court may not exercise its discretionary power in such a way as to " ‘unnecessarily interfere with the fact-finding function of the jury to a degree that amounts to an usurpation of the jury's duty’ " ( Pena v. New York City Tr. Auth. , 185 AD2d 794, 795 [1st Dept 1992] [quoting Ellis v. Hoelzel, 57 AD2d 968, 969 [3d Dept 1977] ). To set aside a verdict on the grounds that a verdict is against the weight of the evidence requires a determination that the jury could not have reached its verdict upon any fair interpretation of the evidence ( Pena , 185 AD2d at 795 ). The question is a necessarily "discretion laden" one ( KBL, LLP v. Community Counseling & Mediation Servs. , 123 AD3d 488, 489 [1st Dept 2014] ).
The Defendant/Counterclaim Plaintiffs argue that the jury's verdict on the breach of contract claim could not have been based upon any fair interpretation of the evidence (Def. Supp. Memo. , pp. 19-20). However, the jury had plenty of evidence from which to find for the Plaintiffs. The Plaintiffs presented TCM's own letters, emails and accounting records that reflected that the Plaintiffs' had an oral agreement which included fixed percentage compensation. They also presented documents and testimony from their financial planners showing contemporaneous reflections of their deal terms with TCM. Other non-party witnesses like Mr. Bram and Miko Sibila corroborated the terms of the oral contract. And significantly, even TCM's own witness at trial, Kate Fleet, acknowledged that she understood, and TCM investors were told, of Mr. Vollero's fixed compensation arrangement:
[MR. STOLPER:] Do you remember going to or attending meetings with prospective and actual investors with Rob Vollero?
[MS. FLEET:] Yes.
[MR. STOLPER:] Do you remember testifying — well, do you remember the subject of compensation for folks at Touradji Capital being raised?
[MS. FLEET:] I'm sure it came up, yes.
[MR. STOLPER:] And do you remember Mr. Vollero being the one to answer the questions about compensation?
[MS. FLEET:] Yeah, probably he answered it and not me in that case.
[MR. STOLPER:] Do you remember the answer he gave when asked those kinds of things?
[MS. FLEET:] No. I mean I don't remember the exact words he used. I can tell you kind of what he — what I recall as being the kind of natural answer that — answer that was given during those meetings.
[MR. STOLPER:] Sure.
[MS. FLEET:] That the compensation would be based on the performance of their fund. You know something to that effect, yes.
(May 20, 2019 Tr. , pp. 1436:17-1437:8 [emphasis added] ).
In addition, the verdict had firm support in a document produced at trial titled, "Touradji Capital Management LP, Compensation Summary — RV/GB Calculation." Mr. Touradji testified that it was created by TCM's CFO, Tom Dwan (May 10, 2019 Tr., p: 355:5-8). The document addressed year-end bonuses and included percentage bonus calculations for Robert Vollero and Gentry Beach. Initially, Mr. Touradji indicated that he had not seen it before the litigation commenced. Ultimately, he recanted in front of the jury, testifying as follows:
[MR. STOLPER:] This particular page deals with year-end in 12/31/07; correct?
[MR. TOURADJI:] Yes.
[MR. STOLPER:] Can you recall — he has pages like this for '05 and '06 as well?
[MR. TOURADJI:] I've seen them in the course of this litigation, yes.
[MR. STOLPER:] There are a lot of numbers, so I just picked those seven to take you through '07.
[MR. TOURADJI:] Sure.
[MR. STOLPER:] Now, you testified before that you hadn't seen this document until just before the Litigation with Mr. Beach; is that right?
[MR. TOURADJI:] Probably.
[MR. STOLPER:] Well, I don't want to make it a guessing game. When was the first time you saw this document? [emphasis added]
[MR. TOURADJI:] The '07, this exact one? I don't know. Sometime in '08. Maybe right around then.
[MR. STOLPER:] What about the ones that refer to '05 and '06?
[MR. TOURADJI:] They weren't created until sometime later in '07. I know that Mr. Dwan, at some point, had emailed me these. I don't know [when] exactly, but sometime in '07.
[MR. STOLPER:] Now, in '07, Gentry Beach and Rob Vollero still worked at Touradji Capital; right?
[MR. TOURADJI:] That's correct.
[MR. STOLPER:] And there was no litigation by Gentry Beach or Rob Vollero in 2007?
[MR. TOURADJI:] That's correct.
[MR. STOLPER:] The anticipation of litigation didn't happen until at least [when] Mr. Beach left in 2008; right?
[MR. TOURADJI:] That's fair.
[MR. STOLPER:] We went over the dates earlier. He left on September 25 of 2008?
[MR. TOURADJI:] Correct.
[MR. STOLPER:] Isn't it true that you testified initially that the first time you saw that document, the document created by Mr. Dwan, reflecting —with this title, Touradji Capital Management Compensation Summery — RV/GB Calculation," was right before the litigation of Mr. Beach? [emphasis added]
[MR. TOURADJI:] I guess so, yes.
[MR. STOLPER:] That would have been in late 2008?
[MR. TOURADJI:] Correct.
[MR. STOLPER:] But then, as it turned out, you actually did get this document emailed to you at the end of 2007 shortly after Mr. Dwan created it? [emphasis added]
[MR. TOURADJI:] Okay.
[MR. STOLPER:] Let's not take my word for it.
(Whereupon Plaintiff's Exhibit 119 [an email from Tom Dwan to Paul Touradji] is marked in evidence.)
* * *
[MR. STOLPER:] Now it's December 20, 2007, almost a year before Mr. Vollero leaves, it's Tom Dwan writing to you. "Paul, have the RV/GB compensation schedule ready when you want to take a look. Tom" [emphasis added]
[MR. TOURADJI:] Okay.
[MR. STOLPER:] So just confirming, December 20, 2007?
[MR. TOURADJI:] That's correct.
(id. , pp. 355:9-357:21).
Based on this testimony and evidence alone, there was a reasonable basis for the jury to find that there was a contract for fixed percentage bonus compensation between TCM and the Plaintiffs, "RV/GB." The fact that the jury awarded the Plaintiffs less than the total they asked for (i.e., $45.7 million, and not the full $60.44 million), or that one of the many percentages from which Messrs. Beach and Vollero's compensation was calculated on the exhibit prepared by Mr. Dwan, is insufficient to set aside the verdict as against the weight of the evidence.
The Defendant/Counterclaim Plaintiffs position despite this internally-prepared document was not that the percentage should have been as set forth on Mr. Dwan's document, but rather than no such percentage-based bonus compensation arrangement existed and that Mr. Vollero and Mr. Beach were salary employees only entitled to a discretionary bonus. In addition, as discussed below, the evidence was that Mr. Touradji changed this document on a number of occasions by increasing the expenses allocated to the Plaintiffs and thus decreasing their compensation. If the deal was as the Defendant/Counterclaim Plaintiffs suggest — i.e., a base salary and discretionary bonus — it is hard to conceive a legitimate explanation as to why Mr. Touradji would have made those otherwise superfluous and unnecessary changes.
This was not however the only evidence introduced that supported the jury's verdict as to the Plaintiffs' breach of contract claim. Equally significant was PX 242. By way of background, when Mr. Vollero was on the stand, the Plaintiffs sought to introduce a document which included both numbers that were in evidence and/or that were otherwise part of TCM's financial statements and numbers to which a calculation had been performed as to the percentage-based bonus compensation claimed by the Plaintiffs. The Defendant/Counterclaim Plaintiffs objected. The court excused the jury and Mr. Vollero. Mr. O'Brien explained that the calculations were inadmissible because they were not in evidence and were not a business record. The court sustained the objection. Counsel for the Plaintiffs then "whited out" all of the information that was not otherwise in evidence and presented the document to counsel for the Defendant/Counterclaim Plaintiffs to ensure all numbers that were not otherwise in evidence had been removed. Counsel for the Defendant/Counterclaim Plaintiffs confirmed that to be the case. The court then let Mr. Vollero re-enter the courtroom and retake the stand and called the jury back into the courtroom. Counsel for the Plaintiffs then had Mr. Vollero, over a significant period of time, complete each of the over 60 blanks on PX 242 (one by one) in front of the jury and compute the calculation to justify the amount the Plaintiffs were claiming in damages — which calculated amount tied to their demand.
Each such number was footnoted on the page to make verification and attribution as to where such number could be found easier.
And if that were not enough, in a letter, dated February 23, 2006 (PX 76), Tom Dwan confirmed that Robert Vollero "earns a base salary of $200,000 per year and currently holds deferred compensation in excess of $3,000,000 [emphasis added]".
For completeness, both Gentry Beach and Robert Vollero claimed that they tried to discuss their unpaid compensation with Mr. Touradji on a number of occasions. According to Mr. Beach, Mr. Beach approached Mr. Touradji about his unpaid compensation by email, over the telephone, and ultimately in person. According to Mr. Beach when he approached Mr. Touradji, Mr. Touradji ordered him into his office, slammed the door so hard that it was heard by other employees (among others, Mr. Sibila corroborated that photos fell off his wall in the adjacent office and that he heard Mr. Touraji's voice) threatened his life, told him that he would not pay him and that he would never work on Wall Street again. Mr. Beach further indicated that he went to the police and filed a police report, resigned and hired both an attorney and engaged the firm of Fortress Global Investigations (Fortress ) to assess the likelihood of follow-through by Mr. Touradji on his threat. For the avoidance of doubt, Fortress created a report (the Fortress Report ) which forms part of the basis for the Defendant/Counterclaim Plaintiffs' defamation claim. At trial, Mr. Touradji denied that this is what occurred. Indeed, according to Mr. Touradji, Mr. Beach threatened him (see May 10, 2019 Tr., p. 321:8 ). Subsequent to this exchange (i.e. , later that morning), the evidence showed that Mr. Touradji sent out an email at 11:30 am (PX 190) which undermines the position taken by Mr. Touradji:
[MR. STOLPER:] "Anyone on this email who doesn't get the joke can come talk to me today, can collect unemployment with other jokers. I have a theme and I'm trying to be very loud and consistent and positive about it."
[MR. TOURADJI:] Right.
[MR. STOLPER:] " Run faster than me or get eaten " [emphasis added].
(May 10, 2019 Tr., p. 324:7-17 ).
In further support of the Plaintiffs' claim that Mr. Touradji breached his agreement with Gentry Beach, the Plaintiffs introduced an email (PX 149) from Mr. Touradji, dated May 6, 2008 (the May 6th Email ).
[MR. STOLPER:] Now, this is Younis writing to you. "Did you in your conversation with Gentry [emphasis added] let him off the hook in terms of having him ask his father to put in money?"
You had a chance to read that?
[MR. TOURADJI:] Yes.
[MR. STOLPER:] You needed Gary Beach [emphasis added] to put in money as a partner to Playa, right?
[MR. TOURADJI:] We were getting frustrated that —
[MR. STOLPER:] That's a yes or no. Did you need money in Playa and you need him to contribute money in Playa as a partner in the Playa partnership?
[MR. TOURADJI:] Need, no. Want, yes.
[MR. STOLPER:] And the problem you had is that the partnership agreement did not require Mr. Gary Beach [emphasis added] to put the money in, right?
[MR. TOURADJI:] I don't —
[MR. STOLPER:] That was the problem. You couldn't control Gary Beach, and you couldn't get him to put the money in, and you wanted the money into the Playa partnership at this time.
[MR. TOURADJI:] That was one of the problems.
[MR. STOLPER:] And you were looking to use the son and the son's need for his money that he was owed, you were dangling that in front of him to get him to get his father to do something that you wanted?
[MR. TOURADJI:] No.
[MR. STOLPER:] Alright. Let's keep going then. Mr. Younis writes: "I can handle it, but I need you to know that you and I are on the same page in the sense that if Gary does not put money in at the right valuation then there will be consequences."
[MR. TOURADJI:] Right.
[MR. STOLPER:] So now we're looking to, I'll say the word, threaten. Maybe that's too strong a word. But you're looking to strong arm Gary into putting money into the partnership at this time?
[MR. TOURADJI:] No.
[MR. STOLPER:] Let's look at your own words. Now, this is you to Mr. Younis. Do you see that?
[MR. TOURADJI:] Right.
[MR. STOLPER:] Your response email: "No, nothing to let him off hook. All quite the opposite." Do you see that?
[MR. TOURADJI:] Correct.
[MR. STOLPER:] This is the next sentence that I really want you to see. " He needs to come through for his master. " (emphasis added) You're talking about Gentry Beach?
[MR. TOURAJDI:] No.
[MR. STOLPER:] He needs to come through for you. You're the master. He's the puppet. He needs to come through for you.
[MR. TOURADJI:] No. We're talking about Gary Beach.
[MR. STOLPER:] "He needs to come through for his master to save his hide;" that's Gentry Beach?
[MR. TOURADJI:] Gary Beach.
[MR. STOLPER:] So your testimony here is that Gary Beach needs to save his hide?
[MR. TOURADJI:] Absolutely, yes.
[MR. STOLPER:] Okay. Let's go back to that first line that Mr. Younis asked you. "Did you in your conversation with Gentry let him off the hook in terms of having him ask his father to put in money." No. Your answer is "No, nothing to let him off hook." Gentry off hook. Let him off hook. You're here telling this jury that that person you're talking about is Gary, not Gentry?
[MR. TOURADJI:] Absolutely, yes.
[MR. STOLPER:] Judge, remind this man he's under oath, please.
[MR. TOURADJI:] Are you kidding me?
[THE COURT:] Mr. Stolper.
MR. STOLPER: I'm sorry, Judge.
(May 10, 2019 Tr., pp. 279:18—282:10).
Gentry Beach's account of the May 6th Email was that it confirmed the Plaintiffs' story that the Defendant/Counterclaim Plaintiffs held their compensation over them like a carrot and got them to act like "puppets" where Mr. Touradji was the "puppet master." The Defendant/Counterclaim Plaintiffs' account of the May 6th Email was that it was evidence of Gentry Beach trying to save his job.
During the course of the trial, the Plaintiffs had argued that among other things, Mr. Touradji had required Gentry Beach to stand up in a firm meeting and publicly apologize for certain subpar performance of their securities or not get paid the compensation he claimed was due. According to the Plaintiffs, Mr. Touradji referred to himself as the "puppet master" and Gentry Beach as the "puppet." It was uncontested that Gentry Beach was demoted and that on an investor call where certain subpar performance was discussed, Mr. Touradji identified that one way of addressing the performance was to demote Gentry Beach to analyst and not terminate his employment (i.e. , Mr. Touradji's position being that the performance problems of certain positions was based on poor judgment from Gentry Beach, but that he nonetheless was still a "good analyst"). The Plaintiffs' position was that this meeting and investor call was orchestrated to humiliate Gentry Beach, provide justification for not paying him and otherwise scapegoat him for subpar performance — i.e. , that Mr. Touradji took credit for the good performance but blamed others for the bad performance.
Finally, the court notes that per Jury Note No. 4, the jury requested a calculator.
Simply put, although the court cannot speculate as to the basis for the jury's verdict, the verdict was well supported by the evidence. With respect to the actual amount of damages calculated by the jury, the jury could have factored in any formula outlined in Mr. Dwan's spreadsheets or factored in Gentry Beach's demotion from portfolio manager midway through 2008 and it could have considered the three-month differential in the termination dates between Mr. Beach and Mr. Vollero. It is not for the court to set aside the jury's considered verdict on such a speculative basis.
Nor is the jury's verdict on the defamation claim against the weight of the evidence. As the court noted, outside of the jury's presence, when the Plaintiffs moved for a directed verdict on the defamation counterclaim:
COURT: There is no way, as a factual matter, you put any facts in front of my jury that Gentry Beach had anything to do with the change between Gallowitz and the final version. None. Not a single inference. All of the evidence, everybody that's testified said that Gentry Beach was not involved in that process.
(May 22, 2019 Tr. , pp. 1827-28).
Notwithstanding the foregoing, the court reserved decision on the plaintiffs' motion. However, based on the evidence before the court and the jury, it is hardly surprising that the jury did not find there was defamation. As discussed in greater detail below, the evidence at trial simply failed to show that Gentry Beach was responsible for the change in the Fortress Report or that the Fortress Report, the ensuing lawsuit or that the Bloomberg Article (defined below) was defamatory.
For completeness, Amaranth Advisors was a large multi-strategy hedge fund that suffered significant losses. TCM entered into an agreement with Amaranth whereby TCM was to purchase certain metals provisions. It was uncontested that Gentry Beach and Robert Vollero were not involved in metals transactions and that Mr. Touradji himself entered into this agreement. When the Fortress Report was produced, the initial draft of the Fortress Report identified the Amaranth transaction and said that TCM's conduct was legal. The final draft of the Fortress Report, however, indicated that TCM's conduct was highly unethical and likely illegal and that the Defendant/Counterclaim Plaintiffs violated a "no-trade" provision in the agreement with Amaranth. The problem was that the agreement with Amaranth contained no such provision.
Amaranth subsequently sued TCM and certain of its employees, including Tom Dwan and Paul Crone, for $350 million. Bloomberg published a story (the Bloomberg Article ) which discussed not only the Defendant/Counterclaim Plaintiffs' lawsuit with Amaranth but also that the Defendant/Counterclaim Plaintiffs were being sued by others, including the Plaintiffs in the instant suit, i.e. , "Touradji is currently facing lawsuits from two former employees over $25 million each in back pay" (Stolper Affirm., ¶ 16).
Inasmuch as Amaranth knew that their agreement did not contain a "no-trade" provision, it is curious why Amaranth brought a lawsuit. In any event, it is uncontroverted that the Amaranth lawsuit settled.
Bloomberg
Amaranth Sues Touradji, Seeking at Least $350 Million (Update1)
By Chanyaporn Chanjaroen — Sep 21, 2009
Sept. 21 (Bloomberg) — Amaranth Advisors, LLC the hedge fund that lost $6.6 billion in September 2006, sued Paul Touradji and his employees, seeking at least $350 million for claims including breach of contract and misappropriation of trade secrets.
Amaranth says Touradji breached two contracts agreed to in September 2006 regarding the transfer and purchase of Amaranth's base-metals portfolio, according to a complaint filed Sept. 18 in New York State Supreme Court in Manhattan. Touradji and employees at Touradji Capital Management LP used the information "to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs' proprietary and confidential information," according to the document.
Paul Crone, Touradji's head trader, and Thomas Dwan, chief financial officer and compliance officer, were also listed among the defendants. Touradji didn't immediately return calls and e-mails seeking comment.
Touradji is currently facing lawsuits from two former employees over $25 million each in back pay. A former business partner is also suing Touradji claiming that the hedge fund manager pushed him out a venture to drill for oil in Texas and Louisiana. Touradji says the suits are without merit.
Touradji Capital Management has about $2.7 billion in commodities and raw-materials companies. The firm's Global Resources Master Fund, its largest, has delivered positive returns to investors since its 2005 inception.
$6.6 Billion Loss
Crone was head of trading for industrial metals Investee Bank U.K. and also worked for AIG International Trading. Dwan joined Touradji Capital from its start in January 2005.
Investors in Amaranth, founded by Nick Maounis in 2000, lost 60 percent of their assets in 2006 after bets on natural gas made by trader Brian Hunter drained the company by about $6.6 billion.
[emphasis added] (Bloomberg Article, DX 530 ).
Andrew O'Connell, former Senior Managing Director for Fortress (and a New York Law School Graduate, and prior to joining Fortress, a special agent for the United State Secret Service having protected the President of the United States, the Vice President of the United States, among others, and a former Assistant United States Attorney for the Southern District of New York) who was primarily responsible for the Fortress Report at issue testified at trial as to the Fortress Report. Mr. O'Connell testified that although he did not know who exactly was responsible for the change in the final Fortress Report, it could only have been one of three people, all of whom worked at Fortress: Mr. O'Connell himself, the case manager, or the researcher (May 17, 2019 Tr. , p. 1079:8-16). That is to say, it was not Gentry Beach. Mr. O'Connell's testimony was unequivocal that Gentry Beach had nothing to do with the editing of that document and that no one at Fortress spoke to Mr. Beach during the time that the document was being edited (id. , p. 1079:18-24). In fact, he was even asked:
Q Do you know if there's a single statement in this report that is attributable to Gentry Beach? Did Gentry Beach speak to Eric Gallowitz?
A As far as I know, he didn't.
Eric Gallowitz was the person who put together the initial draft of the report.
(id. , p. 1080:1-3).
There was also no evidence to suggest Mr. Beach knew that the Fortress Report contained a mistake or that Mr. Beach knew that the report was false (as discussed above, the Amaranth transaction was a metals transaction and Mr. Beach was not in any way involved in metals transactions at TCM). According to Mr. Bram's testimony, the only person who knew the terms of the Amaranth transaction was Mr. Touradji. And, indeed, Josh Goldstein, Advisor of NM Holdings that had a position in Amaranth, testified that he had never spoken with Mr. Bram (identified as the confidential witness in the Fortress Report who met with Eric Gallowitz) and indicated that his interaction was with Gary Beach, not Gentry Beach who was in a different lawsuit with Mr. Touradji.
In other words, there was simply no basis to suggest that Gentry Beach was the one who modified the Fortress Report as counsel to the Defendant/Counterclaim Plaintiffs sought to do, regardless of any so-called motive that he may or may not have had or that he even knew that its contents were false. In other words, although Fortress was retained by Gentry Beach's attorneys, the uncontroverted evidence was that he was not involved in the creation of the Fortress Report (other than hiring Fortress for the reasons set forth above — i.e. , that Mr. Touradji allegedly threatened his life) and could not have been responsible for the change in the report which the Defendant/Counterclaim Plaintiffs allege led to the lawsuit by Amaranth Advisors which the Defendant/Counterclaim Plaintiffs argue led to the Bloomberg article, which the Defendant/Counterclaim Plaintiffs then argue led to the harm to the Defendant/Counterclaim Plaintiffs' reputation.
In addition, the Bloomberg Article itself identifies the source of the information regarding the Amaranth lawsuit as the complaint filed Sept. 18 in New York State Supreme Court in Manhattan (i.e. , not the Fortress Report or Gentry Beach or Gary Beach).
Amaranth says Touradji breached two contracts agreed to in September 2006 regarding the transfer and purchase of Amaranth's base-metals portfolio, according to a complaint filed Sept. 18 in New York State Supreme Court in Manhattan. Touradji and employees at Touradji Capital Management LP used the information "to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs' proprietary and confidential information," according to the document [emphasis added].
(Bloomberg Article, DX 530 ).
To wit, Bloomberg like many other publications may very well have published the article because it was following the Defendant/Counterclaim Plaintiffs and determined on its own that the lawsuit itself was newsworthy and that the factual reporting in the article was that certain allegations by Amaranth Advisors and others were being leveled at the Defendant/Counterclaim Plaintiffs. Inasmuch as the Bloomberg Article is also about Amaranth Advisors — the fund that lost $6.6 billion and 60% of its assets — Bloomberg may well have found this lawsuit newsworthy because of Amaranth Advisors and having much less to do with the Defendant/Counterclaim Plaintiffs and its employees. Or, Bloomberg may have found it newsworthy because of all of it. In any event, and because Amaranth Advisors did its own due diligence with its own legal counsel as Mr. Goldstein testified, and decided to bring a lawsuit based on breach of a no-trade provision which the agreement with the Defendant/Counterclaim Plaintiffs apparently did not have, the connection between the Fortress Report and the ensuing lawsuit is tenuous.
There was also simply no evidence of any causation of harm to the Defendant/Counterclaim Plaintiffs resulting from the Fortress Report. The one investor who was identified at trial (but who did not testify at trial) to have redeemed — Daniel Mooney — contradicted the notion that he redeemed because of Amaranth. As Mr. Touradji testified on redirect by Mr. Stolper:
Q Do you know the name David Mooney?
A He was one of our investors, yes. Or he was the employee representing one of the investors.
Q Didn't you claim he was one of the investors who redeemed his investment in Touradji Capital as a response to Amaranth?
A I think so, yes.
Q And do you remember submitting an affidavit in this case?
A Yes. Q I'm looking at one from March 10th. I'm sorry, March 31, 2010.
A Okay.
Q Now, March 2010, that's after the Amaranth episode that you described, right?
A Yes.
Q And the name of Mr. Moody's company was something called New Finance?
A That sounds right.
Q And in this affidavit you told — you stated that you had spoken with Mr. Mooney about Amaranth; do you recall that?
A Yes.
Q And you said, in sum and substance that Mr. Mooney redeemed because of the Amaranth lawsuit?
A I think so, yes.
Q Do you remember that Mr. Mooney testified in this case?
A I don't think I was there, but I'm aware of it. I think he gave a deposition.
Q Yes, a deposition. Are you aware that he testified and was asked about your affidavit and whether he spoke to you; do you know that?
A No.
Q Did you ever get to see his testimony, his deposition testimony? Ever told to you?
A I think so, but it's a while ago.
Q Let me refresh your recollection.
A Okay.
Q Do you recall being told that Mr. Mooney said we redeemed from your fund, not because of Amaranth, but because you were too expensive and because you got involved in too many lawsuits; do you remember that?
A Well, the lawsuits with Amaranth.
Q Well, the lawsuits plural.
A Okay.
* * *
Q Here's the question: "Paul Touradji filed an affidavit in this action dated March 31, 2010. And there he stated that — and I'll just read this to you — Paragraph 21, that quote, ‘One of the investors who redeemed shortly after the Amaranth lawsuit was David Mooney of New Finance.’ End quote. The three items that you described, did any one of them refer to the Amaranth lawsuit?" That's the question. The Answer from Mr. Mooney: " No. We were very, very clear. The volume of litigation posed a risk that the manager be distracted. It was not about the content of the lawsuit [emphasis added]. "Question: You told us that the fees were three and 30, that the traditional would be two and twenty, correct? Answer: Two and twenty, yes." Now you were charging Mr. Mooney three and 30; is that right?
A I guess so.
Q Just to take the jury back, three and 30, can you explain what that is?
A Three percent management fee and 30 percent incentive fee.
Q Now, having just read that testimony, do you take back what you said, Mooney is not a guy who redeemed because of the Amaranth lawsuit?
A No. He's talking about we were getting so much bad press. He didn't care even the substance. Just that we were getting so much bad press because of lawsuits that were filed. So, no, I'm sorry, I don't take it back.
(May 14, 2019 Tr. , pp. 585:20-587:13; 588:13-589:18).
Finally, and equally importantly as it relates to the jury's verdict finding of no defamation, the Bloomberg Article was not entirely about (i) the lawsuit that Amaranth Advisors brought against the Defendant/Counterclaim Plaintiffs, Mr. Crone and Mr. Dwan, (ii) the lawsuit with Mr. Touradji's former business partner or (iii) the instant lawsuit. Simply put, the jury may well have found that the Bloomberg Article was not defamatory as it was not a hatchet job besmirching the reputation of the Defendant/Counterclaim Plaintiffs. The Bloomberg Article also discussed that TCM had approximately $2.7 billion in commodities and raw-materials companies and had been delivering positive financial returns since its inception (i.e. , including through the financial crisis of 2007-2008):
Touradji Capital Management has about $2.7 billion in commodities and raw-materials companies. The firm's Global Resources Master Fund, its largest, has delivered positive returns to investors since its 2005 inception.
(Bloomberg Article, DX 530)
Accordingly, here too, the verdict was well supported by the evidence.
THERE IS NO BASIS FOR A NEW TRIAL IN THE INTEREST OF JUSTICE
On a motion for a new trial in the interest of justice, the issue is "whether substantial justice has been done or whether it is likely that the verdict has been affected" ( Califano v. City of New York , 212 AD2d 146, 153 [1st Dept 1995] [internal quotation and citation omitted] ). In determining whether to set aside a verdict and order a new trial, the court must look to its "own common sense, experience and sense of fairness rather than to [specific] precedents in arriving at a decision" ( Micallef v. Miehle Co., Div. of Miehle-Goss Dexter , 39 NY2D 376, 381 [1976], citing 4 Weinstein-Korn-Miller, NY Civ. Prac ¶¶ 4401.11, 4401.12). Critically, to serve as a ground for a new trial, any error by the court at trial must bear upon an issue that the jury actually reached in its verdict (see Gilbert v. Luvin , 286 AD2d 600, 600 [1st Dept 2001] ).
First, the Defendant/Counterclaim Plaintiffs argue that the court erred in letting the Plaintiffs proceed on both a contract and quasi-contract theory at trial. By way of background, the First Department had previously ruled in this case that the Plaintiffs should have been permitted to maintain both contract and quasi contract claims in the alternative ( Beach v. Touradji Capital Mgt. L.P. , 85 AD3d 674 [2011] ). Prior to trial, counsel for the Defendant/Counterclaim Plaintiffs sent an email, dated January 22, 2019, indicating that the Plaintiffs should be required to elect their remedy. By email, dated January 28, 2019, counsel for the Plaintiffs responded. Counsel for the Defendant/Counterclaim Plaintiffs sent a "reply" email on January 29, 2019. And, by email, dated February 1, 2019 (three months before the trial commenced), the court advised that no election of remedies was required and explained the basis for the court's position. To wit, the court ruled that the Plaintiffs could proceed on both theories because there was a bona fide dispute as to the existence of a valid contract ( Sternberg v. Walber 36th Street Assocs. , 187 AD2d 225 [1st Dept 1995] ). The Defendant/Counterclaim Plaintiffs now argue that this ruling was incorrect as a matter of law and that it prejudiced the Defendant/Counterclaim Plaintiffs by allowing Messrs. Beach and Vollero to present "irrelevant evidence designed to elicit sympathy and prejudice from the jury" (Def. Supp. Memo. , p. 3). Specifically, counsel for the Defendant/Counterclaim Plaintiffs claims that it was not disputed at trial that the parties had a contract, and that:
The only disagreement concerned the amount and method of calculating bonuses, if any, to which Beach and Vollero were entitled (See Tr. 94-95, 182, 394-395, 403-404, 919-924). Thus, the parties agreed that a contract governed the subject matter of their compensation. Under such circumstances, it was legal error to permit Plaintiffs to proceed on their quasi-contract claims.
(Def. Supp. Memo. , p. 4).
Except that this is not what counsel for the Defendant/Counterclaim Plaintiffs had argued to the court or to the jury .
By way of example, in his opening statement, he stated:
I will submit to you that you will conclude that the contracts, the percentage, no-lose guaranteed contracts didn't exist . So on their claim of this oral percentage-guaranteed contract, I submit you will conclude [that it] did not exist and they're not entitled to a penny more.
(May 8, 2019 Tr. , p. 44:9-11,44:16-19 [emphasis added] ).
Counsel for the Defendant/Counterclaim Plaintiffs further told the jury:
the Plaintiffs say they entered into a second guaranteed percentage oral agreement with Mr. Touradji. This one related to something you'll hear a bunch about in this case called private equity companies.
* * *
And they say they entered into an agreement where they got ten percent of the profits on all these private companies.
* * *
they say they're going to bring an expert here to talk about this contract.
Ladies and gentlemen, when you need an expert to prove that you have a contract to come in here and tell you what everyone knows, which is that these people would have put this contract in writing, when you need an expert that means you don't have a contract
(id. , pp. 50:5-8; 50:13-15, and 61:20-62:2 [emphasis added throughout] ).
Thus, the primary contest at trial was not about the terms of a single, non-disputed contract, but whether there was an oral agreement concerning year-end performance compensation that included a fixed percentage of the profits generated on the portfolios and funds that Messrs. Beach and Vollero managed. The Plaintiffs asserted that there was such an agreement and the Defendant/Counterclaim Plaintiffs manifestly asserted that there was not. The only uncontested facts concerned the Plaintiffs' base salary. Under the circumstances, no election of remedies was required. It was appropriate for the jury to consider alternative forms of relief ( Leroy Callender, P.C. v. Fieldman , 252 AD2d 468, 469 [1st Dept 1998] ["where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute at issue, plaintiff may proceed upon a theory of quantum meruit and will not be required to elect his or her remedies"] ).
In any event, significantly, the jury never reached the issue as it awarded the Plaintiffs damages based on breach of contract, not on any quasi-contract theory of liability. Further, to the extent that the Defendant/Counterclaim Plaintiffs now complain that the court should not have permitted evidence showing that TCM earned approximately $750 million in income during the years of 2005-2008, and that it was prejudicial and unfair to submit evidence that TCM was owned by Mr. Touradji ("which strongly suggested to the jury that [TCM] and Paul Touradji were very wealthy and could easily afford a substantial award"), this evidence was elicited without any objection (May 9, 2019 Tr. , pp. 147:24-148:4; Def. Supp. Memo., p. 5).
By email, dated May 23, 2019, Sarah Welch wrote to the court and David Greenberger at the Part 53 Email Address (and cc'ing Michael Stolper, Sean O'Brien and A.J. Monaco):
We are submitting here Touradji Capital and Paul Touradji's proposed revisions to the Jury Charges and Verdict Sheet. As you will see, we are continuing to propose certain changes as it relates to the quasi-contract charges, specifically, what conditions we believe should be met before that charge is given [emphasis added]. We understand that the Court has expressed its view, but we nonetheless respectfully submit that the attached proposed charge is the one that should be provided. Another material change is the addition of a faithless fiduciary charge. Most of the other proposed changes we believe are self-explanatory. We look forward to discussing this further with the Court.
(NYSCEF Doc. No. 910).
This email was discussed the very next day. Counsel for the Defendant/Counterclaim Plaintiffs required that the verdict sheet include the question as to whether the Plaintiffs had entered into an oral contract for a base salary and a discretionary in the future are left untouched — and potentially left unaware of the conduct in which they have engaged [emphasis added]
The court notes additionally that there appears to have been a Regulation M inquiry regarding Amaranth as well. The scope of this inquiry is not clear. The June 4th Letter provides:
In addition, Kate Fleet from the Investor Relations group at Touradji Capital followed up on May 11, 2007, with an email to the firm describing Amaranth's settlement of Regulation M violations with the SEC.
It is unknown to the court if this email referred to in the July 4th Letter (which July 4th Letter was not produced during discovery) was ever produced in discovery. As described herein, the Defendant/Counterclaim Plaintiffs' Amaranth lawsuit was based on a purported violation of a "no-trade" provision in the agreement with Amaranth Advisors — i.e. , presumably additional or other trades by the Defendant/Counterclaim Plaintiffs in the same metal positions that were the subject of the Amaranth transaction — which "no trade" provision did not actually exist. The Kate Fleet email described in the July 4th Letter refers to "Amaranth's settlement of Regulation M violations with the SEC." It is also unknown whether any discovery was taken as to Amaranth's settlement of Regulation M violations and what the Defendant/Counterclaim Plaintiffs' role was, if any, in those alleged violations or if this otherwise was part of what counsel to the Defendant/Counterclaim Plaintiffs refers to as the "back and forth" with the SEC in negotiating the SEC Consent Decree. Finally, with respect to the foregoing sentence regarding Amaranth Regulation M violations, the court also notes that the letter or other correspondence from the SEC with respect to the scope of the Regulation M inquiry of the Defendant/Counterclaim Plaintiffs was not produced to the court. This is particularly concerning in that the Defendant/Counterclaim Plaintiffs argue that the final version of Fortress Report (which says that the Defendant/Counterclaim Plaintiffs conduct was likely illegal) and the subsequent Bloomberg Article was defamatory — i.e. , if Regulation M violations were actually asserted by the SEC as against the Defendant/Counterclaim Plaintiffs, the Fortress Report may even have been true (i.e., a further defense to the defamation claim).
The court further notes that in the June 4th Letter it is remarkable that Mr. O'Brien claimed that the Plaintiffs would be "left unaware" of the issue, as Mr. O'Brien specifically wrote later on in the June 4th Letter that:
Equally as important, Touradji Capital took reasonable steps in an effort to make sure that improper trading — including violations of Regulation M — did not occur at the Firm. In March 2007, Touradji Capital hired an outside law firm, Wilmer, Cutler, Pickering, Hale and Dorr LLP, to conduct a training seminar for members of the firm on proper trading practices. A copy of the presentation given that day shows that Regulation M in particular was specifically discussed as part of the subject of "hot topics" (Ex. 18 at 34). Mr. Vollero and Mr. Bram signed a sign-in sheet indicating their participation in this seminar (Ex. 19), and the email evidence shows that Mr. Beach attended as well by telephone from Houston (Ex. 20).
The court further notes that Mr. O'Brien made the SEC aware of the Plaintiffs' lawsuit against the Defendant/Counterclaim Plaintiffs in his effort to have the SEC change the focus of their inquiry from TCM to the Plaintiffs.
It is also worth noting that Mr. Beach and Mr. Vollero brought litigation against Mr. Touradji and Touradji Capital based upon a dispute that they claim dates back to early 2008 and before. As a result, there is every reason to question whether Mr. Beach and Mr. Vollero were acting in the best interests off the Firm, and maintaining direct and open communications with Mr. Touradji, during the period in which the trades at issue occurred. Given all of these facts, this is an instance in which traditional concepts of respondeat superior are ill-suited to govern enforcement decisions. Proceeding in the manner requested by Touradji Capital is most consistent with the Commission's mandate and the purpose of the securities laws, and ensures that the Firm will not be unfairly or excessively harmed by the mere existence of such an inquiry.
To be clear, the June 4th Letter included certain exhibits that were not included in the materials submitted to the court which are identified in the June 4th Letter as documentary evidence of the Plaintiffs' Regulation M violations as it related to the CHK and GMXR trades. As discussed above, it is also unknown to the court whether the email from Kate Fleet referred to in the June 4th Letter regarding the Amaranth's settlement of Regulation M violations was also ever disclosed. Finally, the June 4th Letter in which the Defendant/Counterclaim Plaintiffs asked the SEC to go after the Plaintiffs and not the Defendant/Counterclaim Plaintiffs requests that it be kept confidential:
Touradji Capital requests that this letter and the materials that accompanies (the "Confidential Materials") be maintained in confidence by the Commission and be used solely for the purpose of this inquiry.
Ultimately, by email, dated August 29, 2011, at 2:11 pm, from Gregory Faragasso from the SEC to Mr. O'Brien and Sarah Welch, cc'ing Gerald Hodgkins and Lauren B. Popper re: Touradji, Mr. Faragasso wrote:
Sean and Sarah, if we were to reach an overall settlement proposal that is otherwise acceptable, I think we would feel comfortable recommending the following language, which is slightly revised from what you proposed. The trading decisions that gave rise to the foregoing violations of Regulation M were made by two former employees of Touradji Capital and whose employment with the firm ended in late 2008. Please let us know if this is acceptable to your client [emphasis added]. Thank you. Gregory Faragasso.
In discussing this email with counsel for the Defendant/Counterclaim Plaintiffs and counsel for the Plaintiff's outside the presence of the jury, the court commented:
It appears, at least from this email, that Mr. O'Brien or Sarah Welch, or both had proposed language as part of this client's settlement with the SEC that included, at their request, the language we discussed during the opening statements where Mr. O'Brien had indicated, initially to the jury, that the SEC made findings about Mr. Beach and Mr. Vollero, when it now looks like — in which I did my best to try to address, but at the same time wanting to understand what the correspondence was at the time. That language in the SEC order in the finding section, which I believe, from my recollection was paragraph 2 of the finding section, was inserted as part of a deal to settle a claim with his client, which I understand was not otherwise disclosed. Notwithstanding the fact that this compromise forms the basis for the breach of fiduciary counterclaim in this action.
(May 9, 2019 Tr., pp. 209:3—210:8).
The specific request that Mr. Faragasso refers to in his email does not appear to have ever been produced to the court. In any event, the SEC flatly refused to identify Mr. Beach and Mr. Vollero by name. Mr. O'Brien was aware of that because he had requested them to do so. Having been the primary point of contact on this very issue and having requested the SEC to include the Plaintiffs by name, and having been told by the SEC they were not comfortable including a finding against Mr. Vollero or Mr. Beach, it stretches credibility to think that what initially appeared to be a careless slip in his opening statement, was not a knowing and deliberate attempt to mislead the jury.
THE COURT: When you say — you're the one that proposed that language.
MR. O'BRIEN: Sure, because it's true.
THE COURT: They otherwise didn't have any of that language in there. I need to understand this, sir. I don't have what it is that you proposed [emphasis added].
MR. O'BRIEN: I am sure we proposed at some point.
THE COURT: Wait. Respectfully, yes, you can be heard, but that doesn't mean that I am going to let you make a soliloquy into the record at this point.
MR. O'BRIEN: Sure.
THE COURT: So I'm asking you, you say the SEC undoubtedly agreed with us or maybe its findings, I don't — the evidence doesn't really suggest that, sir. The evidence suggests that your firm — that the request to include this language in the consent agreement, the consent order with Touradji Capital, was proposed by you and required by you to settle the case with the SEC and that you wouldn't even settle without it.
MR. O'BRIEN: Your Honor, I don't know if the latter part is true. The proposal, probably. I couldn't say — the SEC was going to find them. The SEC was going to bring this case. There was no way we were going to tell them what to do.
THE COURT: Your client wouldn't have signed a consent order and they would have gone to trial.
MR. O'BRIEN: Your Honor, we don't know that. The SEC was going after a lot of people at the time and whether we were going to be able to get some language or not get some language, I don't know. So I don't know.
THE COURT: I mean, it says right here.
MR. O'BRIEN: It says the SEC says they'd be willing to do it.
THE COURT: No, it doesn't say that. It says, "otherwise, if we were to reach an overall settlement that is otherwise acceptable," meaning to them, "I think we would feel comfortable recommending the following language which is slightly revised from what you proposed." In other words, you proposed some language as part of a settlement conversation with the SEC. This wasn't something that they wanted. This is something —
MR. O'BRIEN: It was part of the back and forth, yes.
THE COURT: No, it wasn't part of the back and forth. This was something that you wanted. You asked them for this and they said, "look, we're not going to do that but we might be able to do this if we can get there on all the other things that we care about." That's essentially, in sum and substance, what this August 29 letter. The same way that the SEC undoubtedly found this stuff is a misstatement.
MR. O'BRIEN: My experience with the SEC is you make a lot of arguments, you put a lot of evidence to them. Some of it they accept, some of it they don't. They don't put things, my experience is, in findings if they don't feel that —
THE COURT: Here's what is wrong with what you're saying. See, there's no evidence that they actually investigated whether or not Mr. Beach and Mr. Vollero did this. They said, "look, we might be willing to include this language." You presented evidence to them. They didn't write back, "we find your evidence credible. Thank you very much for sending this to us. We're going to start an investigation on Mr. Vollero and Mr. Beach right away." They said, "look, we might be willing to let you include some of that language in the consent order as long as we get these other things that we agreed to." Honestly, to me, it suggests the opposite of what it is that you're saying.
See, I don't think from the SEC's perspective, at this stage, they were really concerned about which of the two traders made these trades. They were concerned that these trades happened. A red flag came up at the SEC. They wanted to know what was being done to prevent this kind of stuff in the future. Your client put some stuff in place, training and otherwise. They said, "that's not enough, but you have to do more." Your client probably did more ultimately in complying with the SEC.
As far as Mr. Beach and Mr. Vollero goes, you don't have any evidence, any evidence that they did any investigation as it relates to Mr. Beach and Mr. Vollero.
MR. O'BRIEN: They asked us for the very communications [emphasis added] giving rise to the trade and they all are between Gentry and Rob.
THE COURT: No. You forwarded it, sir, that's your letter.
MR. O'BRIEN: Your Honor, they asked us —
THE COURT: No, no, no, they didn't. This letter, this June 14 letter — no.
MR. O'BRIEN: The SEC asked us for information about the trades [emphasis added]. They identified trades and they said, "hey, give us documents about those trades." We went and got those documents and they all were between these two men, that's what happened, and we produced them. We produced that to them, your Honor, years ago. They've had those documents for years. That's what happened.
THE COURT: This is a critical document, respectfully. This email exchange is a critical document that they were entitled to during the course of discovery because it goes to how the consent order and how the clients were identified in the consent order. You didn't meet your production requirements, sir, no, you didn't. If I had known this a while ago, we would have a very, very different conversation [emphasis added]
MR. GREENBERGER: I want to make one factual point. I don't have the date because we just got it. It's worse than you're making it out because after that letter there's another letter in there from the SEC that says something in the order of, "after your submission, we've reviewed what you have provided and our intention is to prosecute Touradji Capital Management." Not Vollero Beach.
MR. O'BRIEN: They put the findings in the order.
THE COURT: Because you asked them to do it, sir.
MR. O'BRIEN: Sure.
MR. GREENBERGER: We're going in circles. All I want to bring to your attention is that it's worse because there's an intervening event. A letter from the SEC to Mr. O'Brien's firm in which it says effectively, "I don't have it in front of me. Thank you for your submission, we have considered it. We have made a decision that we are going to initiate a prosecution against Touradji Capital Management."
MR. O'BRIEN: And as part of that proceeding, they made a finding in accordance with this language.
MR. GREENBERGER: They entered into a settlement agreement.
MR. O'BRIEN: With findings, David.
MR. GREENBERGER: One thing that your client wanted to enter into the settlement and then, without telling anybody about it, without telling the First Department or the Supreme Court New York County Commercial Division
MR. STOLPER: It's a fraud on the court —
MR. O'BRIEN: It's not a fraud on the court. Enough.
MR. GREENBERGER: — and the attorney for Beach or Vollero. Without telling anyone any of that, you filed a claim for breach of fiduciary duty with the predicate being the very settlement language you insisted on.
(May 9, 2019 Tr., pp. 217:7 — 224:11)
In other words, telling the jury that the SEC made the very finding that they refused to make (ultimately agreeing only to Bullet Point 3) was grossly inappropriate. Put another way, as counsel for the Plaintiffs summarized, this was "deeply troubling" because it showed "a pattern of conduct and negotiation here between the SEC and Touradji Capital that [the Plaintiffs] didn't know about" and which the Plaintiffs were entitled to know about if Bullet Point 3 was to form the evidentiary basis for a breach of fiduciary claim against their clients (May 10, 2019 Tr. , p. 239:12-15). In any event, inasmuch as the communications were between the SEC and Mr. O'Brien (and the Plaintiffs were not a party to such proceedings or otherwise included in such communications), Mr. O'Brien was a material witness that the Plaintiffs undoubtedly would have wanted to call at trial. As Plaintiffs' counsel stated:
MR. STOLPER: I do think we have a challenge because I do think, based on that correspondence, Mr. O'Brien is a witness. And there is a history in this case of us applying to have Mr. O'Brien testify on an unrelated issue. We did not know about this. Had we known about this, he would have had to give testimony because he's now made himself a material witness on the counterclaim that he asserted. Among other problems that have been presented about what we learned a day and a half into this trial.
(May 9, 2019 Tr., pp. 215:24-216:8).
In an effort to cure this situation, after lengthy conference with counsel for both sides, the court prohibited the Regulation M violations to "be used as a basis to find a breach of fiduciary duty in this trial under any circumstances" (id. , pp. 251:25-252:1). The court also determined that:
to the extent that the [Defendants/] counterclaim Plaintiffs do not have clean hands [as a result of their failure to disclose this highly relevant and arguably exculpatory information], they will not be permitted to comment on any failure of the Plaintiffs to produce information or any destruction of information.
(id., p. 252:15-18).
To address the issue with the jury, the court instructed the jury as follows:
In the beginning of the trial when we first spoke, I indicated to you that the Court may exclude certain evidence if it is legally inadmissible. I instructed you that if I do that, you must not infer anything from my rulings or that I favor either side in this trial. Again, as I told you at the beginning of this trial, I don't. Due to a discovery issue that you need not concern yourself with, Court Exhibit I is stricken from the record. Any mention to it is stricken from the record. Do not speculate why. In addition, certain remarks were made regarding violations of the securities laws. Those remarks are also stricken from the record and are not relevant to any issue that you will deliberate on at the end of this trial. Keep an open mind. Let's move on.
(id. , p. 257:8-23).
It is worth noting that at several points prior to issuing this curative instruction, the court offered to declare a mistrial. As further discussed below, both sides adamantly and repeatedly rejected the offer and Defendant/Counterclaim Plaintiffs' counsel, in particular, stated "[w]e certainly don't want a mistrial. Yes, under the circumstances, we consent to [the curative instruction]" (id. , p. 256:10-12; see also, pp. 248:19-25; 249:5-8; 253:15-254:24; 256:15-17).
Putting aside the ethical obligations under the New York Rules of Professional Conduct which expressly prohibit an attorney from "making a false statement of fact or law to a tribunal" or from "offer[ing] or us[ing] evidence that the lawyer knows to be false" (Rules of Professional Conduct [22 NYCRR 1200.00] Rule 3.3 [a] [1] and [3] ) or from "act[ing] as an advocate before a tribunal in a matter which the lawyer is likely to be a witness on a significant issue of fact " (id. , Rule 3.7), what is also troubling is that, without ever disclosing his role in negotiating the language of the SEC Consent Decree or the fact that the "two former employees" language was inserted only at TCM's insistence , the Defendant/Counterclaim Plaintiffs' attorneys relied on this purported "SEC finding" as evidence in its papers to this court and the First Department. To wit, counsel to the Defendant/Counterclaim Plaintiffs wrote in the appellate brief:
Discovery [has] revealed [ ] that in connection with that trading, Beach and Vollero repeatedly and knowingly violated an anti-manipulation rule promulgated by the SEC, called Regulation M. As a result, the SEC imposed penalties and required disgorgement against Touradji, and noted that the violations were effected by "two former employees" of the firm [emphasis added] (R. 271 at 3; see also R. 270-273). As Touradji alleged in its Amended Counterclaims, those "former employees" were Beach and Vollero (R. 310 ¶ 107). The motion court granted Touradji's motion to amend to include the allegations on this point, noting that the allegations related directly to allegations found in Plaintiffs' own pleading, and that the conduct constituted a breach of fiduciary duty (R. 70).
(Brief for Defendant/Counterclaim Plaintiffs-Respondents-Appellants , available at 2015 WL 13768906, *33 ).
As explained above, discovery did not "reveal" anything. The SEC Consent Decree was heavily negotiated by Mr. O'Brien and such SEC Consent Decree was within the Defendant/Counterclaim Plaintiffs' possession. Indeed, the Defendant/Counterclaim Plaintiffs failed to disclose their communications with the SEC in response to the Plaintiffs' discovery demands. And, the fact that counsel to the Defendant/Counterclaim Plaintiffs was largely responsible for creating this "discovery" that they cited in support of their breach of fiduciary duty counterclaim would certainly have been relevant information for the judges of this court and the First Department to consider in assessing the viability of the breach of fiduciary duty counterclaim. At a bare minimum, the Plaintiffs were entitled to this information and to depose Mr. O'Brien or call him as a witness.
As concerns the Defendant/Counterclaim Plaintiffs' counsel's statement in his closing argument that Messrs. Beach and Vollero were fired from Solstice, their previous employer, there was simply no evidence introduced at trial to suggest that conclusion. As discussed in more detail above, instead, the trial evidence showed that Solstice was shut down (May 20, 2019 Tr. , p. 1454:4-7; 1454:17-22). Counsel's statement that the Plaintiffs were "fired" was a misstatement of fact, plain and simple.
Now, however, the Defendant/Counterclaim Plaintiffs complain that, "the Court interjected, without objection by Plaintiffs' counsel, to suggest that [the Defendant/Counterclaim Plaintiffs']' attorney was misrepresenting evidence" and maintain that "Mr. Stolper [the Plaintiffs' counsel] had not, in fact, objected; only the Court had suggested that there was any issue." (Def. Supp. Memo. , p 12). This claim is utterly refuted by both Plaintiffs' counsel's closing to the jury and by Plaintiffs' counsel's affirmation. Counsel for the Plaintiff did object. We discussed Mr. Stolper's objection and inasmuch as Mr. O'Brien had already closed, the court decided that the better part of discretion was to have Mr. Stolper address the misstatement in Mr. Stolper's closing so that it would not in any way be too heavy handed or seen as an admonishment from the court in front of the jury. (Just as in the beginning of the trial when Mr. O'Brien had stated that the SEC had made a finding that the Plaintiffs had breached the securities laws, and prior to Mr. O'Brien turning over the discovery materials, the court asked Mr. O'Brien to address the misstatement to avoid having the court admonish counsel in front of the jury [see first curative instruction, infra ]). To the extent that Mr. Stolper almost forgot that it was he and not the court that would cure the statement, the court prompted Mr. Stolper to make the cure to avoid a heavy-handed cure at the end of the trial.
THE COURT: One thing sir, Solstice.
MR. STOLPER: Your Honor, Mr. O'Brien mentioned my clients were fired from Solstice. That was inaccurate. I objected [emphasis added]. I wanted to clarify the record. They were not fired. It was a misstatement. I am sure it was inadvertent. I wanted to point that out to you. Thank you for your time. I do appreciate it.
(May 23, 2019 Tr., pp. 1944:21—1945:3).
In addition, in his affirmation, counsel for the Plaintiffs confirms that the Plaintiffs did object and explains that although "the transcript of the closing argument does not reflect my objection at the moment TCM's counsel stated that Plaintiffs had been fired, [ ] I did utter an objection that the Court observed" (Stolper Affirm., ¶ 45). As Mr. Stolper goes on to explain:
At the next break, as TCM's motion acknowledges, there was an "off-the-record sidebar" at which I reiterated by objection. TCM's motion omits the substance of that exchange but we specifically recall the Court threatening a mistrial and disciplinary proceedings against TCM's counsel over what, by this point, had become an obvious intentional strategy to deceive the jury. The issue was not sua sponte.
(id. ).
In any event, as indicated above, a court is absolutely permitted to correct misstatements presented to the jury and to generally clarify evidence ( Carson v. New York City Health & Hosps. Corp. , 178 AD2d 265 [1st Dept 1991] ). Thus, to the extent that the Defendant/Counterclaim Plaintiffs complain, generally, that the court commented on any evidence during the trial, this is also entirely permitted and in this case was entirely necessary as a result of counsel for the Defendant/Counterclaim Plaintiffs' conduct ( Peralta v. Grenadier Realty Corp. , 84 AD3d 486, 487 [1st Dept 2011] ["trial court has broad authority to control the courtroom, rule on the admission of evidence, elicit and clarify testimony, expedite the proceedings and to admonish counsel and witnesses when necessary"] ). Although in raising this issue, the Defendant/Counterclaim Plaintiffs fail to cite to any specific instance of "skepticism" and criticism in the record, each of the Defendant/Counterclaim Plaintiffs' enumerated issues aptly demonstrate the reason for the court's decisions.
An early example of the court's effort to be evenhanded and to give both sides a fair opportunity to be heard involved a troubling concern from an observer in the courtroom that they "saw what they were concerned might be a gesture that could have been interpreted, potentially, as influencing the witness's testimony by of Touradji Capital's lawyer[s]" (May 9, 2019 Tr. , p. 128:6-10). Specifically, a concern was raised that a member of the Defendant/Counterclaim Plaintiffs' legal team was "coaching" Mr. Touradji on the witness stand by sending him signals during his testimony. The court immediately addressed the issue, outside the presence of the jury, verified that no misconduct appeared to have actually taken place, and indicated for the record that:
THE COURT: We've discussed the concern I note for the record I didn't see anything like that. I admittedly wasn't looking for it. I was doing what I normally do, which is listen to the testimony, listen to the objections, watch the jury, make sure that the jury is paying attention and not in need of a break. I will pay attention. I brought it to the lawyers' attention and I'm quite certain that this is the last that we will have to talk about this.
(id. , p. 128:12-21).
Inasmuch as the court ultimately did not see any evidence of the alleged coaching by the member of the Defendant/Counterclaim Plaintiffs' legal team, no further action was taken by the court. The court cites this example only to illustrate the manner in which the court attempted to evenly and fairly address the multitude of issues that came up during this trial.
This was not the first time that the court was faced with the issue as to whether Defendant/Counterclaim Plaintiffs' lawyers should be disqualified. When it became clear that Mr. O'Brien was a material witness to the negotiated SEC Consent Decree, the Plaintiffs' attorneys asked the court to disqualify him (May 9, 2019 Tr. , p. 225:24-25). Inasmuch as the trial had already commenced, the court determined that disqualification "would work substantial hardship on the client" (see Rules of Professional Conduct [22 NYCRR 1200.00] Rule 3.7) and declined to do so.
Although the Defendant/Counterclaim Plaintiffs allege that the court was biased against them, they conveniently neglect to mention all the rulings the court made in their favor. By way of one example, a number of the pre-trial rulings were issued in favor of the Defendant/Counterclaim Plaintiffs. First, the court granted the Defendant Counterclaim Plaintiffs motion (seq. no. 039) to preclude certain purported bad acts by Mr. Touradji (e.g. , his mistreatment of other employees) and held that evidence of bad acts would only be admissible as it related to either the breach of contract claim in this case, the quantum meruit/unjust enrichment claim or any potential defense to the allegations regarding the alleged statements regarding the violation of the ‘no trade’ provision with Amaranth which formed the basis of the defamation counterclaims. The court also denied the plaintiffs' motion (seq. no. 040) to preclude the Defendant/Counterclaim Plaintiffs from referring or introducing evidence regarding the plaintiffs' original complaint (i.e. , so that Defendant/Counterclaim Plaintiff could present evidence and argue to the jury that the amounts claimed by the plaintiffs significantly changed) and resolved motion seq. 041 and 42 by stipulation satisfying the concerns of both parties.
The Defendant/Counterclaim Plaintiffs also complain about the court's clarification when they sought to introduce the Bloomberg Article. The exchange over the Bloomberg Article was not sua sponte. The Plaintiffs had raised objections to the Defendant/Counterclaim Plaintiffs' proffered evidence of causation before the Bloomberg Article was even introduced (id. , ¶ 17). Much of the discussion concerning the Bloomberg Article took place in the robing room, outside of the jury's view.
MR. STOLPER: I don't want to say out loud what I said inside. I object, Your Honor
(May, 14, 2019, Tr. , p 659: 3-4).
Plaintiffs' counsel had objected based on the speculative nature of the causation link that counsel to the Defendant/Counterclaim Plaintiffs sought to establish. At that time, and outside the presence of the jury, counsel to the Defendant/Counterclaim Plaintiffs, counsel to the Plaintiffs, and the court discussed that the best evidence of what they sought to establish would be presented through an actual investor who redeemed their investment as a result of the Amaranth lawsuit. The Defendant/Counterclaim Plaintiffs never did this (and the sole investor who was identified (as discussed above), Mr. Mooney, denied that his redemption was because of Amaranth). In any event, when counsel to the Defendant/Counterclaim Plaintiffs sought to introduce this article (DX 530), he did not take the objection made by counsel to the Plaintiffs to heart. Accordingly, when the court admitted the Bloomberg Article, over the Plaintiffs' objection, the court gave the following limiting instruction:
THE COURT: It may also be about Amaranth, but it is also about the lawsuit by two former employees who seek over $25 million in back pay. It is what it is. And it speaks for itself to the jury. But, respectfully, that's not an accurate description. It's in evidence. [emphasis added]
(May 14, 2019, Tr., p. 660:13-17).
Notably, and in any event, the jury found no defamation.
The Defendant/Counterclaim Plaintiffs also allege that the court improperly took issue with Mr. Dwan's testimony. By way of background, Mr. Dwan testified on cross-examination by Mr. O'Brien that Gary Beach had taken $500,000 of TCM's investor capital.
Q This is dated May 28, 2008, and it's from Gentry Beach. Do you recall what, if anything, occurred with respect to the Playa investment at or about this same date?
A Yes.
Q What sir?
A Basically, his father — Gentry Beach's father, Gary Beach, after we told him not to make any cash distributions whatsoever, had taken a distribution to himself for $500,000 of our investor capital [emphasis added].
(May 15, 2019 Tr., p. 837:2-11).
On redirect, by counsel for the Plaintiffs, Mr. Greenberger, Mr. Dwan testified:
Q I want to clarify something you said earlier. You testified about what Gary Beach may or may not have done. There's a distribution of $2.5 million; correct?
A From Playa to DeepRock Venture Partners?
Q Right. You said — I wrote it down to the best my ability — Gary Beach sent money to himself. But I just want to be clear, there is a distribution of $2.5 million that evening; correct?
A I thought we — the distribution I was talking about, I thought it was 500,000 that he took to pay himself [emphasis added].
Q Okay. Are you aware, as you sit here, Mr. Dwan, that there is a $2.5 million distribution?
A I believe there may have, yes.
Q 80 percent of that $2.5 million went to Deeprock Venture Partners?
A I can't recall. I would say I think — the 2.5, did it go — I can't recall the exact amounts. I know there was a distribution from Playa to DeepRock Venture Partners.
Q You don't recall the amount?
A I don't recall the amount.
Q Or the splits?
A I think it might have been — I can't remember the amount that distributed to each. I remember the amount that that Gary Beach had taken was $500,000 [emphasis added].
(May 15, 2019 Tr., pp. 875:10—876:10).
The court sough to clarify Mr. Dwan's testimony:
THE COURT: When you say "taken," you mean his share of the distribution, sir [emphasis added]?
THE WITNESS [Mr. DWAN] I think what it was, we told him explicitly not to make any cash distribution —
THE COURT: That's not what I asked you. What I asked you was a very specific question. When you say "taken," you mean his share of the distribution, is that what you mean by taken?
THE WITNESS: I don't know if it was his share of his distribution because I don't know if it was — [emphasis added]
THE COURT: I'm not saying whether he was entitled to it or not. I want to know what you mean by the word "taken."
THE WITNESS: Yes, he was taking distribution to himself, yes. [emphasis added]
(May 15, 2019 Tr. , p. 876:11-25).
When Mr. Dwan, the CFO of TCM, would not acknowledge that the $500,000 "taken" by Gary Beach was part of the larger $2.5 million distribution (80 percent of which went to a TCM affiliate), the court excused the jury and advised Mr. Dwan that he was "testifying under penalties of perjury" and that if he thought it appropriate to obtain his own counsel, he should do so (id. , p. 877:6-12). For the avoidance of doubt, it was not contested at trial that Gentry Beach's father, Gary Beach, caused an unauthorized distribution to be issued from an entity called Playa in the amount of $2.5 million to its stakeholders: $2 million to a TCM entity and $500,000 to an entity owned by Gary Beach. However, Mr. Dwan testified that Gary Beach "had taken" $500,000. The court merely sought to clarify Mr. Dwan's testimony so that it was not confusing to the jury as it was not clear if he meant that Gary Beach had taken $500,000 separate and apart from the unauthorized distribution of Playa. In addition, to the extent that both counsel for the Defendant/Counterclaim Plaintiffs and Mr. Dwan identified the $500,000 as "investor capital", counsel for the Defendant/Counterclaim Plaintiff confirmed to the court that none of the $2.5 million distribution (including the $2 million distributed to the TCM affiliate) was returned to the investors.
Outside of the jury's presence, the court explained the issue to counsel:
THE COURT: I asked for clarity in the hope that he would correct the testimony
on the record. He chose instead to say that he took it rather than it was a distribution of 2 and a half million dollars, which was the Texas court — was inappropriately taken. It's just a false statement under oath. I asked him to clarify it, he chose not to clarify it.
* * *
If we continue down this road, I am going to declare a mistrial.
(id. , p. 878:6-12; 878:19-20).
Ultimately, the parties voluntarily stipulated to cure this issue with the following instruction to the jury, which the court read when the jury re-entered the courtroom:
THE COURT: The parties in this lawsuit have stipulated that the $500,000 that went to Gary Beach was part of the 2 and a half million-dollar distribution from Playa where Gary Beach got $500,000 and the affiliate of Touradji Capital[,] Deeprock[,] got $2 million. The Court is not commenting on whether the distribution was appropriate or not.
(id. , p. 886:17-23).
Notably, at this point, prior to reading the parties' stipulation to the jury, the court again asked the parties if they wished to move for a mistrial. Both sides said no (id. , p. 886:9-12).
The Defendant/Counterclaim Plaintiffs also argue that the court's interruption of its cross-examination of non-party witness Benjamin Bram was "especially prejudicial" (Def. Supp. Memo. , p. 9). Mr. Bram is a former TCM employee and the only non-party witness at trial who claimed that Mr. Touradji had told him that the Plaintiffs were compensated differently from other employees (i.e., with a non-discretionary bonus). Prior to trial, TCM had sued Mr. Bram in arbitration for breach of the confidentiality and non-disparagement provisions contained in his Separation Agreement. At trial, counsel for the Defendant/Counterclaim Plaintiffs sought to examine him about these issues to establish his purported bias. When Mr. Bram testified that the $700,000 paid to him under the Separation Agreement was money to which he was already legally entitled, counsel for the Defendant/Counterclaim Plaintiffs asked: "Sir, you made that very argument in the arbitration and you lost; correct, sir?" (May 21, 2019 Tr. , p. 1619:22-23). Mr. Bram replied: "no" (id. , p. 1619:24). At this point a discussion about the Arbitration Award was held outside the hearing of the jury. The Defendant/Counterclaim Plaintiffs take issue with the fact that the court then clarified to the jury that the "arbitration made no decision with respect to the source of the $700,000 the issue in front of the arbitrator, just for the jury's purposes, was whether or not there was a breach of the severance agreement" (id. , p. 1620:4-9). The Defendant/Counterclaim Plaintiffs now maintain that this curative instruction was inappropriate. In fact, the instruction would not have been necessary if counsel to the Defendant/Counterclaim Plaintiffs did not seek, once again, to mischaracterize the facts to mislead the jury. The arbitrator, in issuing his award, never rejected Mr. Bram's argument, as counsel stated, but instead merely said that the argument was "not substantiated," which is plainly not the same thing (id. , p. 1622:11-20).
In another attempted mischaracterization, the Defendant/Counterclaim Plaintiffs sought to present Gentry Beach's resignation letter (the Resignation Letter ) dated September 26, 2008, during the testimony of Mr. Dwan and to have him read to the jury the statement contained therein: "the last nine months without being paid have been very difficult for me and my family." This was an obvious attempt to try to establish Mr. Beach as a liar (before he even testified) because Mr. Dwan would then testify that Mr. Beach had been paid his base salary during his entire employment, notwithstanding the fact that it was clear that the Resignation Letter was referring to Mr. Beach's 2007 bonus. To the extent that the court had to admonish counsel for the Defendant/Counterclaim Plaintiffs to be careful not to mislead the jury, this was done in the robing room, outside of the jury's view. For the jury, it was, quite simply, a non-event.
Similarly, the Defendant/Counterclaim Plaintiffs now complain that the court corrected the Defendant/Counterclaim Plaintiff's attorney during Mr. Vollero's cross-examination when counsel misstated that Mr. Vollero, personally, "wrote" the Amended Complaint by noting that, "he didn't write anything. His lawyers wrote [it]" (May 20, 2019 Tr., p. 1288:23; 1289:1-2). It is curious that counsel for the Defendant/Counterclaim Plaintiffs raises this issue now, when his response to the court's simple clarification at the time was "fair enough" (id., p. 1289:3). Perhaps, that was counsel's response at trial and on the record because we had discussed this point prior to the commencement of trial. To wit, on April 30, 2019, when Mr. O'Brien indicated his intention to use the original complaint filed to impeach not only Gentry Beach but also Robert Vollero (who was not a party to the lawsuit when the original complaint was filed) as an admission on the issue of the Plaintiffs' view of the amount due:
THE COURT: He didn't put it down. His lawyer put it down [emphasis added] MR. O'BRIEN: His lawyer did, but he testified under oath he reviewed it first
THE COURT: Let me be clear I'm not letting the numbers in as it relates to Mr. Vollero. I think that's absolutely inappropriate and prejudicial. He didn't sign. He wasn't even in the lawsuit when they filed their amended complaint. There is absolutely no basis But I am mindful of the fact that Mr. Beach did file a complaint. And I think it probably does have to come in under those circumstances as it relates to Mr. Beach. But I am likely to give an instruction, if you do that, telling the jury that they may only consider this as it relates to Mr. Beach. That's likely the way that I'm going to be handling if you choose to go this route. And I might say something in sum and substance that, you know, to be clear, Mr. Vollero was not a part of this lawsuit and this document could in no way be considered as it relates to Mr. Vollero. And once I do that, I'm not going to limit his ability to say they talked about it and they got clear on the numbers. So if you do this, you're opening the door to a significant argument by them. So you do it at your own peril.
MR. O'BRIEN: Sure. Just so I understand, a significant argument as to what, Your Honor?
THE COURT: That they sharpened the numbers, that they actually sat down and talked and that they have different recollections as to what the numbers were.
MR. O'BRIEN: Fair enough.
(April 30, 2019 Tr., p. 18:4—26:1).
When counsel then, accurately, questioned Mr. Vollero whether he had " approved the filing of a document that said you received $1.325 million less than the agreements required" and whether, now, his claim was that, "somehow that number is really 4 million," the court did not interject.
The Defendant/Counterclaim Plaintiffs also take issue with the fact that the court permitted Miko Sibila to testify. Contrary to what the Defendant/Counterclaim Plaintiffs claim, Mr. Sibila's testimony, as a former employee of TCM, was relevant to issues raised in this action. For starters, Mr. Sibila's testimony about the TCM work environment was relevant as Mr. Touradji, himself, opened the door to that issue when he testified that Gentry Beach was a disruptive force at TCM, that he was demoted because of his performance and was not entitled to additional compensation (an issue in this case) because of his performance and conduct. Significantly, the question that was asked of Mr. Sibila was entirely neutral:
Q How would you describe the professional atmosphere at Touradji Capital Management during 2005 to 2008?
A It's a two-prong answer. I will provide it right now.
From 2005, when I joined Touradji Capital, until probably the end of 2006, early 2007, it was a fantastic place to work. In fact, I would say it was almost a culmination of my dreams in terms of what I could ask to have in an employer.
Paul was a very, extremely intelligent, extremely bright investor, very accomplished, very sharp, had an amazing grasp of capital markets and how they worked, had vast experience that far eclipsed my own. I was looking up to him.
Moreover, he was friendly. He was nice in the office. We all ended up spending some time, even socially, even after office hours together. He even invited me to his wedding.
Now, after starting in 2007, that has changed 180 degrees. Paul became very irritable, very nervous, a lot of shouting, berating employees, just being verbally aggressive.
(May 20, 2019 Tr. , p. 1740:17-23—1741:1-8).
Mr. Sibila also had personal knowledge of the dispute relating to compensation between Gentry Beach and Mr. Touradji, contrary to what the Defendant/Counterclaim Plaintiffs now argue. For example, he testified:
Q Prior to when Mr. Beach left Touradji Capital, were you aware of a compensation-related dispute between him and Mr. Touradji?
A Yes, I was.
Q And can you tell us about that?
A I remember that Mr. Gentry Beach approached Paul Touradji on several occasions to ask about this, his compensation.
Q Did you personally observe that?
A Yes, I have.
(id. , p. 1742:13-22).
The Defendant/Counterclaim Plaintiffs' complaint here is yet another mischaracterization. Counsel for the Defendant/Counterclaim Plaintiffs raised this objection at trial (i.e., "lack of foundation") and the court ruled that it was subject to connection (id. , p. 1742:9-12). It was only after Mr. Sibila expressly testified to his personal knowledge that the court permitted the testimony and overruled the objection (id. , p. 1742:13-25). Similarly, while the Defendant/Counterclaim Plaintiffs complain that the court should not have permitted Mr. Sibila to testify as to conversations between Messrs. Vollero and Touradji because such testimony was hearsay, the court did not do so. The only testimony the court permitted was as to his own personal knowledge of what occurred (id. , p. 1749:1-14).
Finally, and perhaps most significantly, inasmuch as one of the bases for the breach of fiduciary duty claim asserted by the Defendant/Counterclaim Plaintiffs was Mr. Beach's role in a private equity transaction referred to as Madagascar Oil, Mr. Sibila was the person at TCM who actually travelled to Madagascar and did the due diligence himself.
Inadmissible Evidence
The Defendant/Counterclaim Plaintiffs object that the court "improperly hindered" them from attributing the change in the Fortress Report to Gentry Beach as they had intended (Def. Supp. Memo. , pp. 10-11). Here, the Defendant/Counterclaim Plaintiffs rely on a prior decision of the First Department where the Court, in ruling on a motion for summary judgment dismissal of certain counterclaims, stated that "[t]here is sufficient evidence that Gentry [Beach] conspired with Gary [Beach]" to cause the Fortress Report to be made ( Beach v. Touradji Capital Mgmt., LP, 144 AD3d 557, 559-560 [1st Dept 2016] ). The Defendant/Counterclaim Plaintiffs claim that the Fortress Report "falsely asserted that Mr. Touradji engaged in manipulative and ‘illegal’ trading in violation of a no-trade agreement" (Def. Supp. Memo., p. 11). The only problem with what the Defendant/Counterclaim Plaintiffs sought to do is that, at trial, there was no evidence of Gentry Beach's involvement in the creation of the change in the Fortress Report, nor evidence that Gentry Beach knew it was a mistake because the transaction with Amaranth Advisors was a metals transaction which Gentry Beach had nothing to with (i.e., the evidence at trial was that Gentry Beach's focus while at TCM was in oil and gas and not metals), which counsel for the Defendant/Counterclaim Plaintiffs concedes in the moving brief (id. , p. 11). However, notwithstanding the fact that there was no direct evidence of who made the final modification to include the statement that the Defendant/Counterclaim Plaintiffs' conduct was likely illegal, the Defendant/Counterclaim Plaintiffs argue that the court erred in not allowing them to present their speculative and wholly unsupported theory to the jury because Gentry Beach had a "motive to harm" TCM (id. ). In doing so, the Defendant/Counterclaim Plaintiffs entirely ignore the testimony of Andrew O'Connell, who unequivocally testified that Gentry Beach was not involved in making the mistake contained in the Fortress Report. In any event, the Defendant/Counterclaim Plaintiffs did make their case to the jury and the court instruct the jury as to defamation which charges the Defendant/Counterclaim Plaintiffs agreed to and did not take exception with at trial.
The Defendant/Counterclaim Plaintiffs also claim that they are entitled to a new trial because the court did not admit DX 221, an email from Mr. Sibila to Mr. Touradji, during the testimony of Mr. Touradji, but instead admitted it during the testimony of the email's author, Mr. Sibila. The court addressed the issue at length during the trial (outside of the jury's presence):
THE COURT: So I have in front of me a document which has been marked as Defendants' Exhibit 221 identification purposes. It is an e-mail sent from Miko Sibila to Paul Touradji and Eyad Younis. Subject, re: challenge. And, Counsel, you've made an objection as to the admissibility of this document.
MR. STOLPER: I do believe it's hearsay. I don't believe it's a business record. And Mr. Sibila is coming next week. He can ask him all about it when he's here next week. But I think that document doesn't come on hearsay grounds and particularly with this witness.
MR. O'BRIEN: Your Honor, first, the fact that a different witness might be able to testify to it, I think he's actually indicating he would have it come in through that witness. So it's clearly not actually an objection to the admissibility of the document.
MR. STOLPER: That's not what I said.
MR. O'BRIEN: Anyway, Your Honor, two points. First, it is, we believe we can submit, a business record. It was made in the ordinary course of business. Mr. Touradji can testify that it was the ordinary course of business for memoranda and evaluations to be maintained and exchanged like this. And he doesn't have to be the author of the e-mail. He can testify as to the practices and, certainly, create the foundation.
Secondly, Your Honor, they have plainly argued and put at issue or made the suggestion that Mr. Touradji made his decisions about Gentry Beach purely to deny him a bonus. This goes directly to that, because Mr. Sibila is explaining to Mr. Touradji that Gentry Beach is a disruptive force to the portfolio work that he does and that he's restless in the office with little purpose. It goes directly to his state of mind and the decision making process that they put at issue, Your Honor.
This e-mail could not be more material and important. It's right about Gentry Beach's performance. And, Your Honor, they're also arguing, as you know, a quantum meruit case. If you have someone who works with Miko Sibila giving a contemporaneous description of the fact that Mr. Beach is disruptive to the portfolio work, again, there's nothing that could be more relevant in this case.
THE COURT: So there's a couple of things. So, first of all, business records, as an exception to the Hearsay Rule, raise two levels of hearsay. One level of hearsay is the form of the record itself. And that's the issue as to whether or not it is maintained in the ordinary course of business over time and all the usual things that we see.
The contents of the document also need to be admissible. This is a statement by somebody who's not here at this moment in time but I understand may be testifying later. And it's being offered for the truth of the matter asserted. Even if it would qualify as a business record, even if — meaning Mr. Touradji qualifies this is kept in the ordinary course of business, it's not admissible through this witness this way. It doesn't mean that it's not admissible and it certainly might be used for other purposes. Like, for example, if Mr. Touradji is asked a question simply did you receive concerns and complaints from some of the people that worked at Touradji Capital regarding Gentry Beach's involvement. Because you directed my attention to point number three, given what it is their claims are in the case. If he says, yes, I don't remember who, you might want to use this to refresh his recollection. You'd certainly be permitted to do that. You could also enter it when this person testifies later in the week.
(May 13, 2019 Tr. , pp. 476:4-478:20).
The court did, in fact, admit the DX 221 later in the trial — over the objections of the Plaintiffs' counsel — during Defendant/Counterclaim Plaintiffs' counsel's cross of Mr. Sibila (May 20, 2019 Tr. , pp. 1784:14-1785:15). This is simply not a basis for a new trial.
DX 249 is another email that the Defendant/Counterclaim Plaintiffs sought to introduce at trial. It was authored by a former TCM employee, Eyad Younis, who was not a party to this action and otherwise not in court to testify. It was hearsay. It was not error to preclude it.
The Defendant/Counterclaim Plaintiffs also take issue with the court's failure to admit DX 719, a two-page spreadsheet without title, author or any other indicia of corporate form that the Defendant/Counterclaim Plaintiffs sought to introduce to show investor redemptions following the Amaranth lawsuit. While it is true that financial statements and spreadsheets may qualify as admissible business records, DX 719 did not meet the required criteria (see CPLR 4518 [a] ; 703 Lenox LLC v. New York City Dept. of Finance , 103 AD3d 540, 540 [1st Dept 2013] ).
To meet the foundational requirements of the business records exception to the hearsay rule, the record must (1) be made in the regular course of business (i.e. , it must "reflect a routine, regularly conducted business activity" that is "needed and relied on in the performance of functions of the business"), (2) it must be the regular course of the business to make such a record ("a double requirement of regularity" that "the record be made pursuant to established procedures for routine, habitual, systematic making of such a record"), and (3) the record must "be made at or about the time of the event being recorded — essentially, that the recollection be fairly accurate and habit or routine of making the entries assured" ( People v. Kennedy , 68 NY2d 569, 579-80 [1986] ).
"As with other hearsay exceptions, the business records exception grew out of considerations of necessity and trustworthiness — the necessity for alternatives to permit large and small businesses to prove debts by their records of account, and the unusual degree of trustworthiness and reliability of such records owing to the fact that they were kept regularly, systematically and contemporaneously" ( id. , 68 NY2d at 579, citing 5 Wigmore, Evidence §§ 1421, 1422, 1546 [Chadbourn rev 1974] ). The requisite "element of unusual reliability is supplied by systematic checking, by regularity and continuity which produce habits of precision, by actual experience of business in relying upon them, or by a duty to make an accurate record as part of a continuing job or occupation" (id. , citing McCormick, Evidence § 306 [Cleary 3d ed.] ). None of these factors were present with respect to DX 719.
As the court explained during the trial: the so-called business record offered by the Defendant/Counterclaim Plaintiffs' counsel was particularly problematic as it did not have the indicia of reliability required for the business record exception to the hearsay rule. For example, referring to another TCM spreadsheet (i.e. , the spreadsheet prepared by the CFO, Tom Dwan , titled "Touradji Capital Management LP Compensation Summary — RV / GB Calculation Year ended 12/31/05" and sent to Mr. Touradji), Mr. Touradji previously testified that he would not "rely on" it for "anything" (May 10, 2019 Tr. , pp. 366:25-367:1). Mr. Touradji also testified: " this isn't official books. I mean, this is a spreadsheet. So I certainly think a lot of the numbers on here are not correct" [emphasis added] (id. , p. 369:2-3).
Mr. Touradji's testimony also previously revealed that the financial information contained in TCM spreadsheets changed constantly and without any procedures in place to ensure their accuracy and that such changes were made by Mr. Touradji without any policies or procedures in place as to the time that such changes were made and ensuring that such changes were accurate or appropriate. To wit, the so-called business records at TCM, appeared to be little more than what Mr. Touradji arranged them to be on any particular occasion:
[MR. STOLPER] Okay. So now from Exhibit 130, the first version of this document created on January 9, 2008, Vollero's bonus was 11.8 million; and now ten and a half months later, now his bonus is down to a negative 6 million; right?
[MR. TOURADJI] I know that you're hoping this constitutes some sort of agreement, but I wouldn't call — the numbers off the sheet are correct from one version to another.
[MR. STOLPER] So let's just look at how we get from 11.8 to a negative 6.8.
[MR. TOURADJI] Sure.
[MR. STOLPER] In this one we're looking at I see now, if you look where my finger is, right at the top in this box, the first one used to say RB/GV terms; right?
[MR. TOURADJI] Yes.
[MR. STOLPER] Now it doesn't say that anymore?
[MR. TOURADJI] Correct.
[MR. STOLPER] That was taken out?
[MR. TOURADJI] Okay.
[MR. STOLPER] It used to have this box, in the first version, had all those percentages; right? Percentage of OG, percentage of ST, and this one doesn't have anything?
[MR. TOURADJI] Correct.
[MR. STOLPER] Now, let's look at the expenses. The 2007 P & L, that remained the same in both documents, 45 million?
[MR. TOURADJI] Looks like it.
[MR. STOLPER] That's just in the OG/OGD book?
[MR. TOURADJI] It's a little bit different.
[MR. STOLPER] They're both 45 million and one is?
[MR. TOURADJI] One is 45,403- and change, the other one is 45,374- and change.
[MR. STOLPER] So in this later one, the income went down just a little bit?
[MR. TOURADJI] Right.
[MR. STOLPER] Now, let's look at the expenses.
[MR. TOURADJI] Okay.
[MR. STOLPER] It says in this one — hedging transactions, it says 7,834,000. Do you see that?
[MR. TOURADJI] Yes, I do.
[MR. STOLPER] How much was included in the original for hedging transactions?
[MR. TOURADJI] It's blank.
[MR. STOLPER] So it was zero?
[MR. TOURADJI] Sure.
[MR. STOLPER] Now we have another 7.8.
[MR. TOURADJI] Mm-hm.
[MR. STOLPER] I see in the ST/STD book, hedging transactions, we have 7.2 million here. How much was originally included?
[MR. TOURADJI] Again, it was blank.
[MR. STOLPER] Now, it says under the expenses line you have 2.1 million here; right?
[MR. TOURADJI] Yes.
[MR. STOLPER] How much was it originally?
[MR. TOURADJI] 205,000.
[MR. STOLPER] 205. So 205,000 versus 2.1 million?
[MR. TOURADJI] Correct.
[MR. STOLPER] Now, interest expense, you have 16.449 here in the negative. How much was it originally?
[MR. TOURADJI] 8.4.
[MR. STOLPER] 8.4 million?
[MR. TOURADJI] Correct.
[MR. STOLPER] The interest expense doubled?
[MR. TOURADJI] Looks like it's about double, yes.
[MR. STOLPER] So between January and October, after the year ended, the interest expenses doubled [emphasis added]?
[MR. TOURADJI] Right.
[MR. STOLPER] Now, I see — next to ST/STD book, in this one there's a blank space here on this exhibit. Do you see that?
[MR. TOURADJI] Yes.
[MR. STOLPER] What was there in the original one?
[MR. TOURADJI] TDR management fee.
[MR. STOLPER] How much was that?
[MR. TOURADJI] 5.2 million.
[MR. STOLPER] So that fee, that was just taken out here?
[MR. TOURADJI] Correct.
[MR. STOLPER] Let's look at the salaries. You have here $4.2 million in salaries that are being taken off of this calculation. You see that?
[MR. TOURADJI] Down at the bottom?
[MR. STOLPER] Down at the bottom. The total is 1.24 million; right?
[MR. TOURADJI] Yes.
[MR. STOLPER] How much was it originally in the first version? [emphasis added]
[MR. TOURADJI] 770,000.
[MR. STOLPER] So the salary against this calculation went up $500,000, approximately?
[MR. TOURADJI] Not sure where the salaries fall into, but, yes, it went up 500,000.
[MR. STOLPER] I think we covered this last time. The first two versions, Exhibit 130, 164, those are created by Mr. Dwan; right? [emphasis added].
[MR. TOURADJI] I assume so, yeah.
[MR. STOLPER] This last version created on October 30, 2008, you made those changes; right? [emphasis added]
[MR. TOURADJI] I remember sitting in Tom Dwan's office and updating the spreadsheet with him.
[MR. STOLPER] You got behind his computer and got in there and made some changes to the document? [emphasis added].
[MR. TOURADJI] I think so.
[MR. STOLPER] It was you who deleted RV/GB terms? [emphasis added].
[MR. TOURADJI] I don't remember specifically, but sure, probably.
[MR. STOLPER] It was you who added all these expenses?
[MR. TOURADJI:] I remember the interest. I mean, I'm assuming - yeah.
[MR. STOLPER:] It was you that removed the management fee that used to be here?
[MR. TOURADJI:] I would assume so.
[MR. STOLPER:] It would have been you that added people to the team to deduct the expenses?
[MR. TOURADJI:] That one may have been Tom, but, sure, could have been. [emphasis added].
(May 13, 2019 Tr. , pp. 386:4-390:15)
Based on the foregoing testimony as to the way that "business records" were kept at TCM, the court was reasonably cautious in considering whether other spreadsheets at TCM (i.e., DX 719) warranted an exception to the hearsay rule. More significantly, however, counsel for the Defendant/Counterclaim Plaintiffs simply failed to lay a proper foundation for the document to come in: he did not establish the policies or procedures for the keeping of such records, he did not identify any custodian that actually prepared such records in the ordinary course of TCM business, and he did not otherwise demonstrate why DX 719 fit the business records exception to the hearsay rule. Indeed, the testimony at trial was that DX 719 was not created in the ordinary course of business at all. It was created at the direction of Mr. Touradji.
[MR. O'BRIEN:] Okay, In or about the end of 2009, did you direct that a report be made of the withdrawals of capital following or in late 2009?
MR. STOLPER: Objection, Your Honor.
[MR. TOURADJI:] Yes. MR. STOLPER: He's also leading.
[MR. O'BRIEN:] Is this that document, sir?
[MR. TOURADJI:] Yes.
MR. STOLPER: There was an objection to the first question.
THE COURT: So the objection is sustained. But continue your questions.
[MR. O'BRIEN:] Was this document prepared at or about the events reflected on it in late 2009?
[MR. TOURADJI:] Yes
MR. O'BRIEN: Your Honor, we would offer Defendants' Exhibit 719.
THE COURT: Denied. MR. O'BRIEN: Your Honor, with that, no further questions.
(May 14, 2019 Tr., pp. 584:16—585:10).
In fact, the court — over Plaintiffs' counsel's objections — repeatedly explained to counsel to the Defendant/Counterclaim Plaintiffs how they could get in evidence of redemptions, e.g., the following exchange took place outside of the jury's presence:
THE COURT: There has been some difficulty in putting evidence in, evidence as it related to who redeemed and the amount of the redemptions and what effect that would have had on Touradji Capital, either with respect to the calculation of the management fee, which is probably more definitive or potential share in profits, which is probably more speculative or any other damages that Touradji Capital may be able to put in front of the jury to, in support of its defamation cause of action against Mr. Gary Beach, and either aiding and abetting of that or the actuality as it related to Mr. Gentry Beach.
I need to know — what I have said to you, when you tried to have Mr. Touradji testify as to the sheet of paper that we couldn't identify, who specifically had put together and how it was maintained, what the custody of it, whether it was done in the, you know, I wrote some notes at the time, what policies, what procedures were in place, you know were there regular logging of investor calls, what information was typically included, how it was maintained, what information was included, all that sort of thing and who had access to the database, you know the typical things that you would have established in the business record, the lack of trustworthiness of the out of Court statement.
We didn't get there with Mr. Touradji, but I told you at the time that if he wanted to refresh his recollection, based on any piece of paper whatsoever, that certainly would be permissible, but you didn't do that with him, but putting that aside for a minute, I don't know what it is that you want me to tell you when it comes to these documents.
I mean these documents have legal significance. Are they, in fact, redemptions? If they are redemptions, they have independent legal significance and they are not hearsay.
If they are communications, statements, and you need — if they don't have independent legal significance, they [are] hearsay.
* * *
Whether its evidence of causation or not is wholly besides the point[ ].
So, if you want to introduce or have someone testify as to the actual redemptions and what effect that had on Touradji Capital, you certainly can do that, the dates of the redemptions and amounts of the redemptions, and the jury can certainly draw an inference from, it's appropriate to do so or, you can argue to the jury, but as to statements made to [Kate Fleet], those are out of court statements which you are now proposing that you can offer for the truth of the matter asserted in those statements. That's a text book hearsay. It's not admissible.
(May 20, 2019 Tr. , p. 1414:7-1416:11).
Simply put, all the unreliability of hearsay was present in DX 719. The court did not err in refusing to admit it into evidence.
Beyond the Defendant/Counterclaim Plaintiffs' failure to establish that DX 719 was in fact a business record, there was also concern that the prejudicial effect outweighed its probative value. Providing the jury with a list of investors who redeemed their investment in the time period following the Amaranth lawsuit would have strongly suggested to the jury — potentially without the necessary factual basis — that there was a causal link between the two events. Under normal circumstances, two events close in time may have a casual connection and the jury may make an appropriate inference. Indeed, Pattern Jury Instruction 1:70 specifically permits such an inference. Here, however, that may have overstated their relationship. TCM's own witness, Kate Fleet, when asked about the redemptions at trial and shown the exhibit to refresh her recollection, could not recall any redeeming investor or the reason for their redemption. And most significantly, the lone redeeming investor who was identified by TCM during discovery, David Mooney, as described above, denied in his deposition testimony that he redeemed because of the Amaranth lawsuit. Rather, Mr. Mooney testified that his entity, New Finance, redeemed its investment because TCM was involved in too many lawsuits, generally (i.e. , it was the fact of the lawsuits, not the substance of any one lawsuit), and because its fees were too expensive . Certainly, TCM could have called an investor who redeemed as a result of the Amaranth lawsuit to testify at trial (assuming that such investor existed). It did not. That is not an error on the part of the court.
The Defendant/Counterclaim Plaintiffs are also mistaken in asserting that they had the right to have Gary Beach's criminal conviction admitted at trial. Under CPLR 4513, conviction of a crime and the underlying facts of the criminal acts may be used to impeach the credibility of a witness at trial ( Moore v. Leventhal , 303 NY 534 [1952] ). Gary Beach did not appear at trial. Liability against him was presumed, the jury was so instructed, and the only issue for the jury was the amount, if any, of the damages to be assessed against him. His prior criminal conviction was only admissible for purposes of impeaching his credibility, it had nothing to bear on the issue of damages, which was the only issue with respect to Gary Beach at the trial. Moreover, "[t]he determination of what evidence may be introduced for purposes of impeachment lies within the sound discretion of the trail court" ( Gedrin v. Long Is. Jewish-Hillside Med. Ctr. , 119 AD2d 799, 799 [2d Dept 1986], quoting People v. Coleman , 56 NY2d 269 [1982] ). A witness in a civil trial may be cross-examined with respect to any immoral, vicious or criminal act which may affect his or her character and show him or her to be unworthy of belief (id. , citing Richardson , Evidence § 498 [10th ed., Prince]; Fisch, New York Evidence § 455 [2d ed.] ). Here, Gary Beach's testimony was simply not at issue, and to the extent that the Defendant/Counterclaim Plaintiffs wished to impute Gary's prior criminal acts to his son Gentry Beach, that is simply not permitted by the rules of evidence. For the avoidance of doubt, the Defendant/Counterclaim Plaintiffs indicated that they wanted to call Gary Beach via deposition testimony and introduce the criminal conviction to impute his credibility having called him — i.e., to set up a straw man so that they could knock it down. It is black letter law that a party may not impeach one's own witness with the witness's prior immoral acts or criminal convictions ( People v. Minsky , 227 NY 94 [1919] ). The Plaintiffs did not call Gary Beach. The Defendant/Counterclaim Plaintiffs could not call Gary Beach just to impeach him. Gary Beach was never the Plaintiffs' witness. Therefore, there is no basis to suggest that under these circumstances, Gary Beach's prior criminal conviction should have been admitted. To the extent that the Defendant/Counterclaim Plaintiffs argue that when Plaintiffs counter-designated some portions of Gary Beach's testimony on the issue of damages, they waived their right to object to the admission of Gary Beach's criminal conviction, the Defendant/Counterclaim Plaintiffs did not make this argument to the court at trial. Having failed to make it, it is waived. Equally importantly, the Plaintiffs counter-designations of certain portions of Gary Beach's transcript in response to the Defendant/Counterclaim Plaintiffs' calling Gary Beach as their witness were entirely within the scope and subject matter of the Defendant/Counterclaim Plaintiffs' designations and therefore did not open the door to introduction of the criminal conviction.
Likewise, the Defendant/Counterclaim Plaintiffs are mistaken in their view that the court erroneously excluded certain party admissions (Def. Supp. Memo., p. 18). Not every party statement constitutes an admission under the rules of evidence. To be an admission, the statement must be relevant to a material fact at issue in the litigation ( Satra Ltd. v. Coca-Cola Co. , 252 AD2d 389, 390 [1st Dept 1998] ). The Defendant/Counterclaim Plaintiffs sought to submit an email by Gentry Beach that "disproved his claim that he had pre-existing plans on the evening of September 25, 2008" (Def. Supp. Memo., p. 18). This was not an admission relevant to any material fact in dispute in this action. It was not error to exclude such evidence, nor did it "unduly restrict[ ] [TCM's] presentation of its case" (id. ). Similarly, it was not error to exclude Gary Beach's Texas deposition testimony under CPLR 4517 even though Gary Beach was a party to the instant action. Significantly, the Plaintiffs were not parties to that Texas action and, thus, did not have the right (and opportunity) to examine Gary Beach in the deposition and it was being introduced to prove aiding and abetting by Gentry not to prove anything on behalf of Gary as liability was presumed as to Gary (May 21, 2019 Tr., pp. 1650:14-1651:3).
Finally, one of the more curious "errors" cited by the Defendant/Counterclaim Plaintiffs is the court's decision to permit Plaintiffs' counsel to show Mr. Touradji a picture of himself on the cover of Fortune magazine. Here, the Defendant/Counterclaim Plaintiffs assert that this photograph, along with Mr. Touradji's testimony about the watch he was wearing in the photograph , was prejudicial because it provoked the "jury's antipathy" and "discomfit[ed] Mr. Touradji" (Def. Reply Memo. , p. 9). While Mr. Touradji's answers may have lost him some credibility with the jury — e.g. , he was not able to recall the brand of the watch he was wearing which is visible in the photograph (and testified that he owns only three other watches) (May 10, 2019 Tr. , p. 287:7-288:9) and was uncomfortable acknowledging that it was even a photograph of him though it clearly was (id. , p. 285:20-25) — this was not the fault of the photograph he was presented with or the questions he was asked. Indeed, it is hard to imagine that Plaintiffs' counsel could have imagined that Mr. Touradji would not be able to answer such basic questions as: "Do you know the brands of the watches, the three that you do own?" (id. , p. 287:21-22) and "Do you recognize who that's a picture of?" (id. , p. 285:20).
Insofar as the Defendant/Counterclaim Plaintiffs now argue that the inquiry about the photograph and Mr. Touradji's watch were irrelevant, highly prejudicial and warrant a new trial, this court disagrees. Simply put, these were posed as mere background questions to the context in which Gentry Beach alleges that he had a conversation with Mr. Touradji regarding his compensation. The exchange complained of was introduced as evidence of the Defendant/Counterclaim Plaintiffs' breach of Gentry Beach's alleged contract. Mr. Touradji had allegedly asked Mr. Beach what watch he would purchase if he had "all the money in the world," and then after receiving Mr. Beach's answer, Mr. Touradji went out and purchased this same very expensive watch (i.e. , the watch in the photograph) and showed it off to Gentry Beach while all the while allegedly refusing to pay Gentry Beach his unpaid compensation. Coming across as not credible to the jury based on Mr. Touradji's inability to answer questions about the brand of his own wristwatch is not a basis for a new trial.
The court offered the Defendant/Counterclaim Plaintiffs chance after chance to put on their case or to get a new trial. It is only now, having received an unfavorable verdict, that the Defendant/Counterclaim Plaintiffs wish for a do-over. The instant motion appears to be their attempt to preserve what has already been waived. The Defendant/Counterclaim Plaintiffs are not entitled to a second bite of the apple. They received a fair trial. The jury duly considered the claims asserted by both sides and returned a verdict that was fairly supported by the evidence. The jury's verdict should not be disturbed.
Accordingly, based on the foregoing, it is now
ORDERED that the Defendant/Counterclaim Plaintiffs motion for a new trial is denied in its entirety.