Opinion ID: 482811
Heading Depth: 2
Heading Rank: 1

Heading: The Alleged Errors During the Jury Trial

Text: 21 On direct examination, John Krear testified with respect to Krear's anticipated profits on the Contracts and described the employment contracts he and Weiner had with Krear. The Trustees cross-examined John Krear with respect to Krear's prospects but not with respect to the employment contracts. Following the close of John Krear's redirect examination, which did not include questions regarding the employment contracts, those contracts were received in evidence. When the Trustees conducted recross-examination they attempted to question John Krear with respect to the validity and authenticity of those agreements. The district court sustained objections to these questions on the grounds that they were not within the parameters of redirect. The Trustees contend that this ruling was error. We disagree. 22 Fed.R.Evid. 611(b) provides that [c]ross-examination should be limited to the subject matter of the direct examination and matters affecting the credibility of the witness; it gives the trial court discretion to permit additional latitude in cross-examination. Thus, the proper scope for cross-questioning is, like the qualification of witnesses, a matter of trial court discretion which we do not lightly disturb. N.V. Maatschappij Voor Industriele Waarden v. A.O. Smith Corp., 590 F.2d 415, 421 (2d Cir.1978). This deferential standard of review is equally applicable to recross-examination. See United States v. Kahn, 472 F.2d 272, 281 (2d Cir.), cert. denied, 411 U.S. 982, 93 S.Ct. 2270, 36 L.Ed.2d 958 (1973). 23 Since the redirect examination of John Krear did not include questioning with respect to the employment agreements, it was plainly not error for the district court to exclude the Trustees' recross-examination questions on that subject.
24 The Trustees contend that the district court erred in excluding the proffered expert testimony as to Krear's performance, comparable administrative fees, and the enforceability of the Contracts. We find no basis for reversal. 25 Rule 702 of the Federal Rules of Evidence provides that an expert may testify to specialized knowledge that may assist the trier of fact in determining a factual issue. Rule 403, however, permits the trial judge to exclude relevant evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence. Fed.R.Evid. 403. Thus, the trial judge has broad discretion in the matter of admission or exclusion of expert evidence, and his action is to be sustained unless manifestly erroneous. Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S.Ct. 1119, 1122, 8 L.Ed.2d 313 (1962); see also N.V. Maatschappij Voor Industriele Waarden v. A.O. Smith Corp., 590 F.2d at 418 (Rule 702, broadening the range of admissible expert testimony, does not alter the manifestly erroneous standard of review). In the present case, the district court's exclusion of the Brookhart and Raysman testimony was within the proper bounds of discretion and was not manifestly erroneous. 26 According to the Trustees' offer of proof, Brookhart was to testify that Krear had not computerized the Funds as required by the Contracts. However, Krear's proposal and Grauso's recommendation showed that the parties understood that computerization of the Funds pursuant to the Contracts would not be immediate, but instead would be implemented over approximately eight-to-twelve months. Cf. Gordon v. Vincent Youmans, Inc., 358 F.2d 261, 263 (2d Cir.1965) (under New York contract law, all writings from a single transaction must be read together). The Trustees claimed that Krear's breach had occurred after less than four months. Although Brookhart was to have testified that there were defects in the computerization plan, the offer of proof did not suggest that such defects would not have been curable in the remaining four-to-eight months anticipated for Krear's performance had the Trustees not ceased paying Krear and barred it from the Funds' offices. The district court thus did not abuse its discretion in excluding Brookhart's nonperformance testimony as irrelevant and misleading. 27 Nor did the court abuse its discretion in excluding Brookhart's proposed testimony as to the excessiveness of the administrative fees charged by Krear in comparison to the fees charged by other companies. In light of the testimony of at least four other witnesses as to administrative fees they charged or of which they had knowledge, Brookhart's testimony would have been cumulative. 28 Finally, the district court did not err in excluding Raysman's proposed testimony that the Contracts were unenforceable for lack of essential terms. It is not for witnesses to instruct the jury as to applicable principles of law, but for the judge. Marx & Co. v. Diners' Club, Inc., 550 F.2d 505, 509-10 (2d Cir.) (admission of expert testimony as to party's contractual obligations constituted reversible error), cert. denied, 434 U.S. 861, 98 S.Ct. 188, 54 L.Ed.2d 134 (1977). 29
30 One of the Trustees' defenses to Krear's claim was that the Contracts were unenforceable under ERISA because Krear was an ERISA fiduciary, and its allegedly excessive fees violated the ERISA requirement that fiduciaries charge no more than reasonable compensation for their services. 29 U.S.C. Sec. 1108(b)(2) (1982). They also contended that Mozer was an ERISA fiduciary and thus was liable for having caused the Funds to agree to pay Krear excessive compensation. They asked the district court to instruct the jury that Krear and Mozer were ERISA fiduciaries of the Funds as a matter of law. The court declined and instead instructed the jury as follows: 31 I instruct you that as a matter of law, the Trustees were all fiduciaries of all three funds. You must consider whether the Trustees have proved, by a preponderance of the evidence, that Krear & Company, Grauso and/or Mozer were fiduciaries. 32 The court explained the requirements of ERISA, and continued: 33 The Trustees assert that one of the ways Krear & Company breached its fiduciary duty was by charging excessive fees. You must find that the Trustees have proved, by a preponderance of the evidence, that Krear & Company was, in fact, a fiduciary, and if so, that it breached its fiduciary duty to the funds.... 34 On appeal, the Trustees contend that this instruction was erroneous and that the court should have given the instruction they requested. We disagree because the evidence in the record did not establish that either Krear or Mozer was, as a matter of law, an ERISA fiduciary with respect to Krear's rate of compensation. ERISA defines a fiduciary as follows: 35 [A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. 36 29 U.S.C. Sec. 1002(21)(A) (1982). Under this definition, a person may be an ERISA fiduciary with respect to certain matters but not others, for he has that status only to the extent that he has or exercises the described authority or responsibility. 37 When a person who has no relationship to an ERISA plan is negotiating a contract with that plan, he has no authority over or responsibility to the plan and presumably is unable to exercise any control over the trustees' decision whether or not, and on what terms, to enter into an agreement with him. Such a person is not an ERISA fiduciary with respect to the terms of the agreement for his compensation. See, e.g., Schulist v. Blue Cross, 717 F.2d 1127, 1131-32 (7th Cir.1983): 38 Before entering into the Contract which included the rates alleged to have provided it with unreasonable compensation, BC/BS [Blue Cross/Blue Shield] had no relationship to the Trust at all. 39 ... BC/BS had no control over what plan and what hospital service organization were chosen for the Trust. After the Contract was signed, BC/BS may have come into a fiduciary relationship to the Trust with respect to the processing of claims, the area over which BC/BS had discretionary authority.... As to the terms and conditions upon which it became a provider, therefore, BC/BS entered into an arm's length bargain presumably governed by competition in the marketplace.... BC/BS was not a fiduciary under ERISA with respect to ... its compensation.... 40 On the other hand, after a person has entered into an agreement with an ERISA-covered plan, the agreement may give it such control over factors that determine the actual amount of its compensation that the person thereby becomes an ERISA fiduciary with respect to that compensation. See Sixty-Five Security Plan v. Blue Cross & Blue Shield, 583 F.Supp. 380, 387-88 (S.D.N.Y.1984) (Blue Cross was a fiduciary with respect to its own compensation where its fees were based on a percentage of claims paid, and Blue Cross had complete discretion and control over what claims would be paid). 41 The district court's instructions to the jury were consistent with these principles. While Krear may have become an ERISA fiduciary at some point after entering into the Contracts, it plainly held no such status prior to the execution of the Contracts, for it had no relationship with the Funds and no authority or responsibility for the terms under which the Trustees would retain it. Thus, the court properly rejected the Trustees' request for an instruction that Krear had been an ERISA fiduciary with respect to its compensation as a matter of law. 42 Nor would it have been appropriate for the court to charge that Mozer, the Funds' attorney, was, as a matter of law, an ERISA fiduciary with respect to Krear's compensation. Although generally [a] lawyer's duty to his client is that of a fiduciary or trustee, Cinema 5, Ltd. v. Cinerama, Inc., 528 F.2d 1384, 1386 (2d Cir.1976), an attorney for an ERISA-governed fund is not necessarily a fiduciary for all purposes within the meaning of ERISA, a fact recognized in the Department of Labor's regulations promulgated under ERISA: 43 [A]n attorney, accountant, actuary or consultant who renders legal, accounting, actuarial or consulting services to an employee benefit plan ... [is not] a fiduciary to the plan solely by virtue of the rendering of such services, absent a showing that such consultant (a) exercises discretionary authority or discretionary control respecting the management of the plan, (b) exercises authority or control respecting management or disposition of the plan's assets, (c) renders investment advice for a fee, direct or indirect, with respect to the assets of the plan, or has any authority or responsibility to do so, or (d) has any discretionary authority or discretionary responsibility in the administration of the plan. 44 29 C.F.R. Sec. 2509.75-5 (1986). 45 In the present case, Mozer participated in negotiating the fee term of the contracts with Krear, but the record does not indicate that he had either the authority or the responsibility to determine what amount the Trustees were willing to pay. In light of the evidence of record, the district court did not err in refusing to rule that Mozer was a fiduciary as a matter of law and instead treating that question as one of fact for the jury.
46 The Trustees contend that Krear's proof of damages was insufficient to support the jury's verdict because the claim of lost profits of the new corporation was entirely speculative and the John Krear and Weiner employment contracts were improperly submitted to the jury as evidence of damages. We find no merit in these contentions. 47 The fact that a business has not been long established does not mean that its projected profits are unduly speculative, see Lee v. Joseph E. Seagram & Sons, Inc., 552 F.2d 447, 455 (2d Cir.1977) (applying New York law and finding damages not too speculative when based on lost profits of business that had not yet begun), so long as there is a rational basis on which to calculate the lost profits, Perma Research & Development Co. v. Singer Co., 402 F.Supp. 881, 898 (S.D.N.Y.1975), aff'd, 542 F.2d 111 (2d Cir.), cert. denied, 429 U.S. 987, 97 S.Ct. 507, 50 L.Ed.2d 598 (1976); see also Kenford Co. v. County of Erie, 108 A.D.2d 132, 140-41, 489 N.Y.S.2d 939, 946 (4th Dep't 1985), aff'd, 67 N.Y.2d 257, 502 N.Y.S.2d 131, 493 N.E.2d 234 (1986). When the plaintiff has presented evidence of the minimum and maximum amounts it expected to receive pursuant to a written contract and evidence as to payments it has obligated itself to make, it lies well within the trial court's discretion to submit the issue of lost profits to the jury, and the jury has  'a large amount of discretion in determining the amount of its verdict.'  Lee v. Joseph E. Seagram & Sons, Inc., 552 F.2d at 456 (quoting 5 Corbin on Contracts, Sec. 1022, at 146 (1964)). 48 Here, Krear presented evidence of, inter alia, the actual profits it made in the four months prior to the termination of the Contracts, a projection of total profits it expected over the life of the Contracts, based on its four-month experience, and the employment contract expenses to which it had contractually obligated itself even if it made no profit from the Contracts. The court was well within the proper bounds of discretion to submit the damages issue to the jury. The jury awarded $269,400, an amount closely related to the compensation that Krear had bound itself to pay its two executives; this award was within the jury's discretion. 49
50 The Trustees contend that they were denied a fair trial because of Krear's inflammatory summation and its repeated references to Vito Pitta, who had recently been indicted on highly publicized charges of involvement with organized crime. We find no abuse of discretion in the court's denial of a new trial on these grounds. 51 The references during the trial to Pitta were hardly gratuitous. They were part of Krear's development of its main theory that the Trustees had breached the Contracts because the political struggle between the International and Local 69 had ended in the International's victory and the merger of Local 69 into Local 6, which was headed by Pitta. For example, Krear's counsel argued that 52 [o]ne of the most critical pieces of evidence in this case is the testimony of Mr. Mozer as to a conversation that he had with Vito Pitta.... 53 [A]ccording to Mr. Mozer's testimony, Mr. Pitta told him ... that the 69 [F]unds were going to be transferred to the International.... 54 The fact that Pitta had recently been indicted in connection with alleged organized crime activities did not preclude the mention of his name in the present case. 55 Nor are we persuaded that the Krear summation was, in light of the record as a whole, unduly prejudicial. The portion of the summation here challenged by the Trustees was as follows: 56 [Y]ou are going to be given the privilege of doing the right thing.... Too often, the people with the wealth and the power to do the right thing, Chicago officials with enormous trust funds, henchmen in New York, ... don't always act with decency and with justice, and according to principles. They crush their political rivals, they destroy the small businesses that try to compete with them. They don't do the right thing, they try to fix things, take care of things. They send lawyers out to make threats ... and they abuse people, they sneer at people, they--[.] 57 At that point, the court interrupted and, in a conference at the bench, admonished Krear's attorney as follows: I have asked the attorneys to use discretion, please. I want you to abide by what I am requesting. No further summation of this type occurred. 58 Although the quoted part of the summation was inflammatory, it did not suffice to warrant granting the Trustees a new trial. Indeed, Krear's summation statements may well have been invited by the Trustees' own intemperate summation, which had argued that Krear, Grauso, and Mozer sought to get rich by taking money out of the pockets of the workers, and that their actions had a bad smell: 59 I ask you, ladies and gentlemen of the jury, do you have a bad smell from this? Was this an arm's-length contract in its inception? Was it performed? Did they know what they were doing, even? Did they care? ... [T]hey want to take Pension and Welfare money out of the pocket[s] of workers and get rich on it. 60 The Trustees' summation was, of course, no excuse for Krear's counsel's improper references to henchmen, threats, fix[ing], and the like. The trial court, however, properly called a swift halt to such invective, and we cannot say that these statements constituted prejudicial error.