Opinion ID: 705082
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: 2 Robert Nesta (Bob) Marley died intestate on March 11, 1981 survived by his wife Rita and 11 children. Under Jamaican intestacy law his wife was entitled to 10 percent of his estate outright and held a life interest in another 45 percent of it. Marley's 11 children were entitled to equal shares of the remaining 45 percent outright, plus a remainder interest in Rita's 45 percent life estate. 3 For five years from the time of Marley's death in 1981 until 1986, defendants David Steinberg, Marley's attorney, and Marvin Zolt, Marley's accountant, with the aid of his wife, Rita Marley, developed and implemented numerous schemes that allegedly diverted foreign music assets and royalty income from Marley's estate to themselves. Defendants argued that their activities in creating new corporations and transferring funds from the estate to a chain of international companies were aimed at minimizing the estate's tax liabilities, leaving more to be distributed to Marley's beneficiaries.
4 Of the numerous schemes by which defendants diverted estate assets and income, only the four principal ones will be outlined. 5 1. Share Transfer Scheme. Before Bob Marley died he, individually, and his three wholly-owned British Virgin Islands companies (BVI Companies), received royalty payments and income from various recording and publishing contracts. The BVI Companies as personal assets of Marley would have become estate property upon his death, resulting in the estate's receipt of all of the royalty income due him. But defendants advised Rita Marley to forge her husband's signature on three documents transferring the ownership of the BVI Companies from Bob Marley to herself. The documents were pre-dated to 1978 to make it appear that Marley had made these transfers during his lifetime, thereby excluding them from estate property. Steinberg signed the documents as a witness. 6 Ownership of the BVI Companies was then transferred to a Netherlands Antilles company known as Music Publishing Companies of Bob Marley, N.V. (the NV or Netherlands Antilles Company), whose sole shareholder was Rita Marley. Later the BVI Companies were liquidated, their royalty-producing assets transferred to the NV Company and then, in turn, to a wholly-owned Dutch subsidiary, Bob Marley Music B.V. (the BV or Dutch Company). The result was that various amounts of royalty and other income rightfully belonging to the BVI Companies--and indirectly to the estate--were funnelled between bank accounts in the names of Steinberg, the NV Company, and the BV Company and subsequently transferred into Rita Marley's personal account or into special escrow accounts set up in Zolt's name. 7 2. The Almo Scheme. This scheme is set forth in a letter dated December 29, 1981. It involved a signed agreement between Zolt, Steinberg, and Rita Marley not to report to the estate Bob Marley's personal share of royalty checks received from Almo Music, a music administration company for Bob Marley's song publishing activities. These royalty payments totalled about $1 million for the two years from the date of Marley's death until 1983. 8 3. The Island Assignment Scheme. Under this plan Rita Marley forged her late husband's signature on an assignment, again signed by Steinberg as a witness. The document, backdated to August 13, 1980, assigned Bob Marley's individual rights under contracts with Island Records to one of the BVI Companies, causing the royalties produced under those contracts to be transferred to the bank accounts of the NV Company and BV Company mentioned above, rather than to the estate. 9 4. The Rondor Scheme. This scheme was accomplished by assigning the assets of Tuff-Gong Productions Ltd. (Tuff-Gong Delaware), a company individually owned by Bob Marley that would have been estate property, to one of the BVI Companies. The assignment was dated as of November 30, 1980 but actually made after Bob Marley's death. It stated that the assets were transferred for the alleged consideration of $100,000, although the copyrights at issue generated millions in royalties from 1980 to 1985.
10 On December 17, 1981 letters of administration for Marley's estate were issued to co-trustees Rita Marley, Mutual Security Merchant Bank & Trust Company, a Jamaican bank, and George Desnoes, a prominent Jamaican attorney. Mutual Security, acting through George Louis Byles, its managing director, had primary responsibility for administering the estate. At a meeting to examine the estate's assets and liabilities, Steinberg told Byles that a large portion of Bob Marley's assets had been transferred to others before his death. At a later meeting on January 4, 1982 where Byles, Rita Marley, Steinberg, and Zolt were present, Steinberg specifically indicated that the BVI Companies were not part of the estate because they had been transferred to Rita Marley before Bob Marley's death. 11 On June 14, 1982 Byles called another meeting in Jamaica, attended by Zolt, Steinberg, Desnoes, and Rita Marley. When Byles again inquired about the ownership of the BVI Companies, Steinberg gave him copies of the forged share transfers, dated June 6, 1978, showing that Bob Marley transferred his shares in the companies to Rita Marley before his death. Steinberg and Zolt also represented to Byles that the assets of Tuff-Gong Delaware barely exceeded that company's liabilities. 12 Defendants further led Byles to believe that Bob Marley had assigned his contract rights with Island Records to one of the BVI Companies. In accounting to the estate over the next six years, defendants reported only minimal amounts of royalty proceeds, failing to remit to the estate millions of dollars they had received and transferred to bank accounts of the NV Company, the BV Company, Rita Marley, Steinberg, and Zolt.
13 On December 10, 1986 Mutual Security, in its capacity as administrator of the estate, filed the instant case against Zolt, Steinberg, and their affiliated firms. Rita Marley was not named as a defendant, although there is an action by the estate pending against her in Jamaica and she was subsequently named as a third-party defendant in the instant case. In March of 1987 J. Reid Bingham, having been appointed ancillary administrator of the estate in New York, was substituted as the plaintiff in the instant litigation. Additional defendants were named, including several other law firms from which Steinberg had leased offices, a tax lawyer Steinberg and Zolt had hired, and the firm where the tax lawyer practiced law (collectively other law firms). The suit alleged violations under the Racketeer Influenced and Corrupt Organizations Act (RICO), specifically 18 U.S.C. Sec. 1962, and causes of action for conversion, fraud, breach of fiduciary duty, negligence, and gross negligence for improperly diverting the estate's assets. 14 A jury trial began on August 5, 1992 and lasted 12 weeks. With respect to damages, the estate submitted an accounting report stating that between 1981 and 1986, $13.4 million had been diverted from the estate. This amount was comprised of $2.9 million in bank accounts existing at the date of Marley's death and $10.5 million in royalties received after his death. After crediting defendants for funds diverted and subsequently recovered by the estate and for payments acknowledged to be legitimate, the estate sought $9.7 million in compensatory damages plus $1 million in consequential damages incurred in accounting costs. 15 The jury was given a 72-question special verdict sheet. Steinberg and Zolt were found liable for three RICO counts under 18 U.S.C. Sec. 1962(b), (c), and (d), breach of their fiduciary duty, common law fraud, conversion, negligence, and gross negligence. The jury found the other law firm defendants not liable for any of the estate's damages. In addition, the jury was asked to determine when the estate actually knew of defendants' alleged wrongful acts. It found the estate had actual knowledge of the wrongful acts before December 10, 1982, more than four years before suit was brought. However, based upon the jury's findings that all of the RICO damages occurred after December 31, 1982, the district court concluded that the estate's RICO claims were not time-barred. See Bingham v. Zolt, 823 F.Supp. 1126, 1130 (S.D.N.Y.1993). 16 On January 8, 1993 the district court entered judgment based on the jury's verdict for the estate and against Steinberg and Zolt for $2,861,409.79 in compensatory damages, and, in addition, for $1,000,000 against Steinberg in punitive damages. Compensatory damages consisted of $800,000 in RICO damages, trebled to $2,400,000 pursuant to 18 U.S.C. Sec. 1964(c), $250,000 in damages pursuant to the estate's common law claims, and prejudgment interest on the common law claims in the amount of $211,409.79. The common law awards were left standing even though the district court dismissed the negligence, gross negligence, and conversion claims as time-barred. Plaintiff was also awarded, pursuant to RICO, its reasonable attorney's fees. Steinberg and Zolt were jointly and severally liable, but for purposes of contribution the jury found that Steinberg was liable for 75 percent and Zolt for 25 percent of this award. 17 In response to defendants' post-trial motions, the district court determined that the punitive damages award was erroneous to the extent it was based on the RICO claims. As a result, the trial court reduced it to $250,000. See Bingham, 823 F.Supp. at 1135. On July 21, 1993 an amended judgment was therefore entered awarding the estate $2,861,409.79 in damages against defendants consisting of the trebled RICO award, common law damages and prejudgment interest upon the common law award, $3,029,428.46 in attorney's fees and disbursements, and $250,000 in punitive damages against Steinberg. From this judgment, Steinberg and Zolt appeal. For the reasons discussed below, we affirm.