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14-3091-cv 

Wells Fargo v. Konover 

UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT 

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED 

BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. 

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY 

MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE 

NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY 

OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 At a stated term of the United States Court of Appeals for the Second Circuit, held at the 

Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 

17th day of November, two thousand and fifteen. 

Present: 

PIERRE N. LEVAL, 

PETER W. HALL, 

GERARD E. LYNCH, 

 Circuit Judges. 

____________________________________________________ 

WELLS FARGO BANK, N.A., TRUSTEE FOR THE REGISTERED HOLDERS OF SALOMON BRO 

MORTGAGE SECURITIES VII INC, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000 C-2, BY 

ORIX CAPITAL MARKETS LLC, ITS ATTORNEY IN FACT, 

 Plaintiff-Appellee,

 v. No. 14-3091-cv 

KONOVER DEVELOPMENT CORPORATION, KONOVER 

CONSTRUCTION CORPORATION, KONOVER & ASSOCIATES, INC.,

BLACKBOARD LLC, RIPPLE LLC, 

 Defendants, 

MICHAEL KONOVER, 

 Defendant-Appellant. 

____________________________________________________ 
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For Defendant-Appellant: WILLIAM J. MURPHY and Conor B. O’Croinin, Zuckerman Spaeder 

LLP, Baltimore, MD; James T. Shearin, Pullman & Comley, LLC, 

Bridgeport, CT. 

For Plaintiff-Appellee: P. MICHAEL JUNG, Strasburger & Price, LLP; John B. Nolan, Erick 

M. Sandler, Jeffrey P. Mueller, and John W. Cerreta, Day Pitney 

LLP, Hartford, CT; Jeff Joyce, Joyce + McFarland LLP, Houston, 

TX. 

____________________________________________________ 

Appeal from a final judgment of the United States District Court for the District of 

Connecticut (Thompson, J.). 

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND 

DECREED that the judgment of the district court is AFFIRMED. 

 Michael Konover (“Konover”) appeals from an August 19, 2014 final judgment of 

liability entered in the United States District Court for the District of Connecticut (Thompson, 

J.). A jury found Konover jointly and severally liable for the full unpaid amounts due pursuant to 

the judgments entered against Konover Management Corporation (“KMC”) by the Circuit Court 

for Baltimore County, Maryland in the matter of Wells Fargo Bank Minnesota, NA. v. Diamond 

Point Plaza Limited Partnership, No. 3-c-03-002499 (“Maryland Judgment”). In this appeal 

Konover argues that the district court lacked subject matter jurisdiction, incorrectly applied 

Connecticut veil piercing law when admitting evidence and instructing the jury, and erred by 

giving collateral estoppel effect to the Maryland Judgment. Konover also contends that the 

plaintiff’s claims were barred by res judicata and that the district court erred by denying his 

motion for judgment as a matter of law and by awarding litigation expenses. We assume the 

parties’ familiarity with the underlying facts, procedural history, and issues on appeal. For the 

reasons stated below, we affirm. 
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 Beginning with Konover’s argument that the district court lacked subject matter 

jurisdiction, “we review factual findings for clear error and legal conclusions de novo.” 

Creaciones Con Idea, S.A.de C.V. v. Mashreqbank PSC, 232 F.3d 79, 81 (2d Cir. 2000). Federal 

district courts have original jurisdiction where the matter in controversy exceeds $75,000 and is 

between “citizens of different States.” 28 U.S.C. § 1332(a)(1). “Trustees of an express trust are 

entitled to bring diversity actions in their own names and upon the basis of their own 

citizenship.” Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 462 (1980). When a trustee “possesses 

certain customary powers to hold, manage, and dispose of assets for the benefit of others,” the 

trustee qualifies as a “real party to the controversy” and may sue based on its own citizenship. Id. 

at 464. Wells Fargo is a citizen of South Dakota and the defendants are citizens of Connecticut; 

thus the named parties are “citizens of different States.” Wells Fargo is the trustee of the SBMS 

VII pool, retains “certain customary powers to hold, manage, and dispose of assets” for the 

trust’s beneficiaries, and is bringing suit to enforce a judgment in its name. Navarro at 464. 

Wells Fargo’s delegation of its powers to ORIX Capital Markets LLC does not alter Wells 

Fargo’s status as a real party to the controversy and does not transform it into a “naked trustee[] 

who act[s] as [a] mere conduit [] for a remedy flowing to others.” Id. at 465 (internal quotation 

omitted). We therefore hold that the district court had subject matter jurisdiction over the suit 

based on complete diversity of the parties. 

 We next address Konover’s claims that the district court erred by admitting irrelevant 

evidence at trial. We review evidentiary rulings for abuse of discretion and will reverse only 

where the improper admission of evidence “affects a substantial right of one of the parties” such 

that “it is likely that in some material respect the factfinder’s judgment was swayed by the error.” 

Constantino v. David M. Herzog, M.D., P.C., 203 F.3d 164, 174 (2d Cir. 2000) (internal 
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quotation omitted). Evidence is relevant if “it has any tendency” to make a fact of consequence 

“more or less probable than it would be without the evidence.” Fed. R. Evid. 401. Under 

Connecticut’s veil piercing laws, the identity rule requires that “there [have been] such a unity of 

interest and ownership that the independence of the corporation had in effect ceased or had never 

begun, [such that] an adherence to the fiction of separate identity would serve only to defeat 

justice and equity by permitting the economic entity to escape liability arising out of an operation 

conducted by one corporation for the benefit of the whole enterprise.” Saphir v. Neustadt, 413 

A.2d 843, 854 (Conn. 1979). The district court did not abuse its discretion when it admitted 

evidence related to KMC’s guaranty of the underlying loan because that evidence was relevant to 

whether KMC and Konover had “such a unity of interest and ownership” that recognizing 

separate identities “would serve only to defeat justice and equity.” 

 Turning to the district court’s jury instructions, “[w]e review a jury instruction challenge 

de novo, but [] will reverse only where the charge, viewed as a whole, demonstrates prejudicial 

error.” United States v. Coppola, 671 F.3d 220, 247 (2d Cir. 2012). A jury instruction is 

erroneous “if it misleads the jury as to the correct legal standard or does not adequately inform 

the jury on the law.” Anderson v. Branen, 17 F.3d 552, 556 (2d Cir. 1994). Under Connecticut’s 

veil piercing law there is “[n]o hard and fast rule,” Angelo Tomasso, Inc. v. Armor Const. & 

Paving, Inc., 447 A.2d 406, 411 (Conn. 1982), and each case “should be regarded as sui generis, 

to be decided in accordance with its own underlying facts,” Comm’r of Envtl. Prot. v. State Five 

Indus. Park, Inc., 37 A.3d 724, 731 n. 13 (Conn. 2012). When describing the elements of 

Connecticut’s veil piercing rules to the jury, the district court recited language directly from the 

opinions of the Supreme Court of Connecticut. See Zaist v. Olson, 227 A.2d 552, 558 (Conn. 

1967); Angelo Tomasso, 447 A.2d at 411. The instructions adequately informed the jury of the 
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correct legal standard. Further, we find no error in the district court’s decision not to specify in 

its instructions which transactions the jury could consider under each theory of liability. 

Connecticut law imposes no bright-line rule prohibiting a jury from finding that a pre-judgment 

transfer proximately caused a party’s inability to collect a judgment, and the jury was entitled to 

make its own proximate cause determination for each of the transactions challenged by Wells 

Fargo. 

As to Konover’s argument that the district court improperly applied collateral estoppel to 

the Maryland Judgment, we review “a district court’s application of . . . collateral estoppel de 

novo,” Chartier v. Marlin Mgmt., LLC, 202 F.3d 89, 93 (2d Cir. 2000), and the generalized 

assessment of “whether collateral estoppel is fair” for abuse of discretion, Bear, Stearns & Co. v. 

1109580 Ont., Inc., 409 F.3d 87, 92 (2d Cir. 2005). Collateral estoppel bars re-litigation of 

previously decided issues, even where “the issue recurs in the context of a different claim.” 

Taylor v. Sturgell, 553 U.S. 880, 892 (2008). Under Maryland law collateral estoppel requires 

that “in a second suit between the same parties, even if the cause of action is different, any 

determination of fact that was actually litigated and was essential to a valid and final judgment 

[be] conclusive.” Standard Fire Ins. Co. v. Berrett, 910 A.2d 1072, 1083 (Md. 2006). The district 

court did not err when it gave collateral estoppel effect to the Maryland Judgment: Konover was 

an actual party to the Maryland litigation and was in privity with his co-defendants, see Bodnar 

v. Brinsfield, 483 A.2d 1290, 1296–97 (Md. Ct. Spec. App. 1984); the parties in the Maryland 

action had a full and fair opportunity to litigate and actually litigated the issues; and the findings 

of fact made in those proceedings were necessary to the judgment. In considering the fairness of 

applying collateral estoppel, we see no inequity in its application and determine that the district 

court did not abuse its discretion in so doing. 
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Addressing Konover’s assertion that res judicata bars this litigation, we review a district 

court’s application of the principles of res judicata de novo. Duane Reade, Inc. v. St. Paul Fire & 

Marine Ins. Co., 600 F.3d 190, 195 (2d Cir. 2010). Claim preclusion “foreclos[es] successive 

litigation of the . . . same claim,” New Hampshire v. Maine, 532 U.S. 742, 748 (2001), in a 

second lawsuit between the same parties for claims arising out of the same transaction or natural 

grouping of operative facts, Colandrea v. Wilde Lake Comty. Ass’n, 761 A.2d 899, 910 (Md. 

2000). Res judicata also bars claims “that could have been litigated in the original suit”; 

therefore, “a party must assert all the legal theories he wishes to in his initial action.” Colandrea, 

761 A.2d at 910. Maryland applies the “transactional” approach to claim preclusion, id. at 908–

09, which defines transaction as a “natural grouping or common nucleus of operative facts.” 

Restatement (Second) of Judgments § 24 & cmt. b (1982). Here, res judicata does not bar Wells 

Fargo’s claims because despite significant overlap between the Maryland litigation and Wells 

Fargo’s veil piercing claims before the district court, the veil piercing claims involve operative 

facts that had not occurred, or that Wells Fargo was not aware of, at the time of the Maryland 

litigation. The district court properly declined to apply res judicata to bar Wells Fargo’s veil 

piercing claims. 

Konover further contends that the district court erred by denying his motion for judgment 

as a matter of law. We review de novo the denial of a motion for judgment as a matter of law and 

“draw all reasonable inferences in favor of the nonmoving party.” SR Int’l Bus. Ins. Co., Ltd. v. 

World Trade Ctr. Props., LLC, 467 F.3d 107, 118 (2d Cir. 2006). Judgment may be entered 

“only when there is such a complete absence of evidence” that no fair minded juror could have 

reasonably arrived at the verdict. Id. at 119 (internal quotation omitted). “Whether the 

circumstances of a particular case justify the piercing of the corporate veil presents a question of 
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fact.” State Five, 37 A.3d at 732 (quoting Naples v. Keystone Bldg. & Dev. Corp., 990 A.2d 326, 

340 (Conn. 2010)). Wells Fargo presented evidence of 1) Konover’s domination of KMC during 

the loan procurement, 2) Konover’s decision to sell a portfolio of properties after the loan 

default, and 3) a flurry of transactions in 2005 when the Maryland litigation had concluded but 

prior to the award of judgment. Drawing all reasonable inferences in Wells Fargo’s favor, we 

cannot say that there was such a complete lack of evidence that no fair minded juror could have 

found that either Konover was a substantial factor in preventing Wells Fargo from collecting the 

Maryland Judgement under the instrumentality rule or that Konover dominated KMC completely 

under the identity rule. We therefore affirm the district court’s denial of Konover’s motion for 

judgment as a matter of law. 

 Finally, we review the district court’s decision to award attorneys’ fees under 

Connecticut’s punitive damages law or, in the alternative, under the fee shifting provisions in the 

underlying loan documents. We review a district court’s determination of state law de novo. 

Salve Regina College v. Russell, 499 U.S. 225, 231 (1991). In Connecticut, punitive damages 

“compensate the plaintiff for his injuries, and thus, are properly limited to the plaintiff’s 

litigation expenses less taxable costs.” Berry v. Loiseau, 614 A.2d 414, 435 (Conn. 1992). 

Connecticut courts look to the character of a defendant’s actions to determine whether an award 

of punitive damages is appropriate even if the underlying claims do not usually warrant such a 

remedy. See L.F. Pace & Sons, Inc. v. Travelers Indem. Co., 514 A.2d 766, 775–76 (Conn. 

1986). When a defendant’s conduct is malicious, wanton, or recklessly indifferent to the interests 

of others, it is within a court’s discretion to award punitive damages. Id. Here, a jury found that 

Konover acted with reckless indifference and intentionally violated Wells Fargo’s rights. We 

discern no error in the district court’s award of punitive damages. We need not address the 
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district court’s decision to award attorneys’ fees under the fee shifting provisions in the 

underlying loan documents because the award of punitive damages was appropriate under 

Connecticut law. 

We have considered Konover’s remaining arguments, and find them to be without merit. 

The judgment of the district court is AFFIRMED. 

 FOR THE COURT: 

 CATHERINE O’HAGAN WOLFE, CLERK