Opinion ID: 597807
Heading Depth: 2
Heading Rank: 3

Heading: The Trial Court's Rulings and the Jury Verdict

Text: 18 After the close of the evidence, following motions by both sides for directed verdicts on various claims, the court determined a number of issues as a matter of law. Finding that there was no dispute that there were express warranties in the Agreement and that those warranties had been breached, and reading New York law as not requiring any other proof of reliance in such circumstances, the court granted Metromedia's motion for a directed verdict as to appellants' liability on the breach-of-warranty claim. 19 In addition, the district court ruled that the Bankruptcy Court Decision collaterally estopped William from denying that he had engaged in bankruptcy fraud in violation of 18 U.S.C. § 152. That section makes it unlawful for any person either individually or as an agent or officer of any person or corporation, ... with intent to defeat the provisions of title 11, [to] knowingly and fraudulently transfer[ ] ... the property of such other person or corporation. The bankruptcy court had found that William's conduct constituted a clear violation of § 549(a)(2)(B) of the Bankruptcy Code, 11 U.S.C. § 549(a)(2)(B) (1988), Bankruptcy Court Decision at 22, and that it was serious misconduct by William in a less than arms-length transaction in connivance with Roy, id. at 25-26. Accordingly, the district court decided that it would instruct the jury that, in considering Metromedia's RICO claim, the jury must find that William had engaged in bankruptcy fraud, but that whether or not that fraud constituted part of the alleged pattern of racketeering activity would remain a question for the jury to decide. 20 As for the counterclaims asserted by defendants, all but one asserted by William were withdrawn after the close of the evidence, and the court dismissed the one that remained. The court also dismissed one of defendants' two third-party claims against Kluge. 21 The court submitted the rest of the case to the jury in the form of special interrogatories. To the extent pertinent here, the jury found that Metromedia had proven its claims against William under § 12(2) of the 1933 Act and under RICO. As for the predicate acts for the RICO claim, in addition to finding pursuant to the trial court's instruction that William had committed bankruptcy fraud, the jury found that William had committed mail fraud in violation of 18 U.S.C. § 1341, wire fraud in violation of 18 U.S.C. § 1343, and securities fraud in violation of § 12(2). The jury found that Metromedia had suffered damages in the amount of $15,553,930.89. It denied punitive damages. As to defendants' surviving cross-claim against Kluge for indemnification, the jury found that defendants had not shown that Kluge entered into the claimed agreement. 22 Thereafter, defendants moved for judgment n.o.v. or, alternatively, a new trial. In support of the former, they argued, to the extent relevant here, (1) that Metromedia's § 12(2) claim should have been dismissed because that section was inapplicable and because the evidence did not support the verdict; (2) that that claim could not constitute a RICO predicate unless the violation were willful, and the jury was not instructed as to the need to find willfulness; (3) that the allegations of securities fraud, mail fraud, and wire fraud as RICO predicates should have been dismissed for lack of causation because there was no evidence of reliance by Metromedia itself; and (4) that the allegation of bankruptcy fraud should have been dismissed because Express's License was not an asset of the bankruptcy estate when William transferred it to Roy. In support of their motion for a new trial, appellants argued, inter alia, that the question of whether the warranties that were breached had been bargained for should have been submitted to the jury; that the court's instructions to the jury with respect to the RICO claims were erroneous; and that Metromedia had waived any right to assert collateral estoppel with respect to its allegation of bankruptcy fraud, because collateral estoppel had not been pleaded. 23 In an Opinion dated December 5, 1990, and published at 753 F.Supp. 93, the district court denied both motions. Reviewing the trial evidence in the light most favorable to Metromedia as the nonmoving party on the motion for judgment n.o.v., the court rejected all of defendants' challenges to the sufficiency of the evidence. It also rejected most of the legal premises of their motions for dismissal and their challenges to the instructions. Reviewing the evidence under a more relaxed standard on the new trial motion, the court stated that it would not order a new trial unless it were persuaded that prejudicial error had crept into the record or that a substantial injustice had been done, and it concluded that it was not so persuaded. The court noted that though appellants were perhaps correct in their contention that willfulness was a prerequisite for use of a § 12(2) claim as a RICO predicate, it would not grant a new trial on this basis since appellants had failed to raise this issue before the jury began its deliberations. 24 Following the denial of these motions, the court entered an amended judgment (judgment) in favor of Metromedia (1) against William, Travelco, and International, jointly and severally, in the amount of $15,553,930.89 for breach of warranty, and (2) against William alone in the amount of $46,661,792.67 on the RICO claim, representing treble the amount of damages found by the jury, and including $15,553,930.89 on the claim under § 12(2). The judgment provided that Metromedia shall not recover more than a total of $46,661,792.67. It dismissed all of Metromedia's other claims and dismissed all counterclaims and third-party claims. 25 This appeal followed, with appellants challenging so much of the judgment as awarded Metromedia damages on its claims for breach of warranty, securities fraud, and racketeering. Appellants have not addressed so much of the judgment as dismissed their counterclaims or third-party claims, and those dismissals are affirmed without discussion.