Opinion ID: 772567
Heading Depth: 3
Heading Rank: 2

Heading: Unconsummated Sales Opportunities and the October 15, 1998 Order

Text: 59 The evidence presented at the first trial included DeFalco's unsuccessful attempts to sell certain portions of the project to two entities known as Tri Sec and Valente in 1989. Plaintiffs' theory that the defendants were responsible for frustrating the Tri Sec and Valente deals was set forth in their post trial brief: 60 The evidence established that [DeFalco] at one point, received an offer to sell [the] property (including the JOBO gravel pit) to an entity called Tri Sec for an aggregate purchase price of $8.3 million [Tr.12/11, p. 342 343; Tr.12/12, p. 485]. The gravel pit itself was to be sold for $2,000,000.00 [Ex. C & D 51; Ex. B 25]. Rouis, however, upon learning of that, threatened to have the Town of Delaware take detrimental action regarding road dedications at [DeFalco's] development if DeFalco went ahead with his plans to sell the gravel pit to Tri Sec.... 61 Thus, Rouis' extortionate infusion [sic] as accountant for [DeFalco's] development project resulted in his ability to (1) know of the prospective sale to Tri Sec; and (2) threaten the further misuse of his public office and control of the enterprise to cause the sale not to take place [Tr.12/11, p. 350]. The result was that Rouis killed the deal [Tr.12/12, p. 485]. Clearly, the fact that [DeFalco] would lose the profits from that transaction were foreseeable when Rouis acted in the manner that he did. Rouis' actions just in this regard were sufficient to support the jury's damage award against him. 62 The evidence also established that the defendants (including Rouis) pressured DeFalco into not making another deal to sell a portion of the property [Tr.12/11, p. 352 356]. This deal was with Louie Valente who agreed to purchase the gravel pit and another 800 acres of [DeFalco's] land... for a purchase price of $6 million [Tr.12/11, p. 353 354]. Valente and DeFalco entered into a letter agreement for that sale, and Valente tendered a $5,000.00 deposit [Tr.12/11, p. 353]. Again, because of Rouis' predicate acts of compelling [DeFalco] to convey JOBO stock to Bernas, Bernas was placed in a position of being able to take action intended to kill this deal as well, which Bernas intentionally did [Tr.12/11, p. 355]. Again, the damages flowing from that (i.e., the loss to [DeFalco] of the profit that [he] would have made from this deal) was clearly foreseeable. (sic) (Plaintiffs' Memorandum of Law in Opposition to Post Trial Motion by Defendant Paul Rouis, ¶. 22 24.) 63 DeFalco v. Dirie, 978 F. Supp. 491, 498 (S.D.N.Y. 1997). 64 In ruling on certain post-trial motions, however, the Court held that this theory was analytically inadequate because neither the retention of Rouis as the Project's accountant nor the transfer of one third of the shares of JOBO to Bernas could be reasonably concluded to have been the proximate cause of any lost profits from unconsummated sales opportunities. There was no direct relationship between the plaintiffs' injury and the defendants' injurious conduct. DeFalco, 978 F. Supp. at 498. The Court stated that: 65 Common experience teaches that real estate developments are inherently speculative and that myriad factors - foreseen and unforeseen - can frustrate their completion. DeFalco's proof at trial of the two inchoate land deals was insufficient. There was no testimony to indicate that either of the deals had progressed to the point where any enforceable obligations had been created. No written agreement between DeFalco and Valente was produced at trial. A two page agreement with Tri Sec was introduced but it was no more than a preliminary document. It contained none of the provisions customarily found in a formal commitment to convey land, much less the sorts of provisions essential to a large, complex real estate transaction of the sort DeFalco claims was contemplated. Moreover, the trial testimony conclusively showed that the purported Tri Sec agreement was signed not by the purchaser but by DeFalco's secretary. As a result, the proffered documentation did not satisfy the New York Statute of Frauds. 66 DeFalco, 978 F. Supp. at 499 (citing N.Y. Gen. Oblig. Law § 5 703(2) (McKinney 1989)). 67 The Court also noted that DeFalco paid approximately $960,000 for the land in 1987 and claims to have lost the opportunity to sell the land for approximately $7,300,000 in 1989. However, at the time of the trial DeFalco still owned the land. Consequently, the critical issue was not simply the purchase price for the land, or the value of the contract said to have been frustrated. DeFalco was also obligated to offer satisfactory evidence of the market value of the land at the time of trial. No such evidence was adduced. Id. at 499 n.3. With respect to the unconsummated sales opportunities, the Court concluded that: 68 There was no evidence offered at trial to establish adequately the existence of an agreement with respect to either transaction whose consummation DeFalco claims were thwarted. Moreover, there was no adequate proof that the conduct of the defendants actually interfered with either of these purported deals. Assuming, arguendo, that DeFalco had entered into purchase and sale agreements, and that the defendants illegally impeded their completion, DeFalco's evidence of any RICO damages was far too speculative and uncertain. 69 Id. at 499-500. The Court therefore concluded that the plaintiffs' evidence of RICO damages alleged to have been incurred as a consequence of DeFalco's inability to consummate the Tri-Sec and Valente real estate transactions was highly speculative and legally insufficient. 70 With this problem in mind, on May 1, 1998, the Court directed counsel for the plaintiffs to supply an affidavit informing the Court what evidence of the Tri-Sec and Valente deals would be offered at the second trial that was not offered at the first. The plaintiffs were also instructed to append to the affidavit or otherwise clearly identify any documentation that would be offered at trial to establish that the deals existed and that they were frustrated by the conduct of the defendants. See Memorandum and Order dated Oct. 15, 1998 (Parker, J.) at 2 (JA:614). 71 In response, counsel for the plaintiffs submitted an affirmation regarding damages dated June 25, 1998. (JA:573-82). The affirmation indicated that, at the second trial, the plaintiffs intended to offer essentially the same proof with respect to the Valente and Tri-Sec deals that was offered at the first trial. See Memorandum and Order dated Oct. 15, 1998 at 2 (JA:614). 72 In an October 15, 1998 decision, the Court held that: 73 This Court has carefully considered the evidence proffered and concludes that it is still too speculative, conjectural and contingent to serve [as] a predicate for the possible imposition of RICO damages. Sedima S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479 (1985); Holmes v. SIPC, 503 U.S. 258 (1992) and Norman v. Niagra Mohawk Power Corp., 873 F.2d 634 (2d Cir. 1989). 74 As the first trial of this action demonstrates, in a RICO jury trial, the danger of massive damage awards based on factors other than adequate proof of RICO injury is a source of potentially serious prejudice. Norman at 636. In view of this Court's experience with plaintiff's [sic] proof with respect to the Valente and Tri-Sec deals, this Court would exclude at retrial such evidence pursuant to Rule 403 Fed. R. Evid. since its probative value is substantially outweighed by its prejudicial effects. 75 Independent of this conclusion, this Court grants defendants' motion in limine with respect to the Valente and Tri-Sec transactions. For the reasons set forth herein and in this Court's opinion of September 26, 1997, this Court concludes that such evidence should also be excluded as too speculative and conjectural. 76 Id. at 2-3 (JA:614-15). Accordingly, the plaintiffs' proffered evidence regarding the unconsummated Valente and Tri-Sec deals was ordered excluded at the second trial.