Court Opinion

ID: 3656
Source: CourtListenerOpinion
Date Created: 2010-04-24 19:32:33+00
Date Added: 2024-06-11T16:42:23.612107
License: Public Domain

09-2987-cv
     Malmsteen v. Berdon, LLP

                                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.

 1           At a stated term of the United States Court of Appeals for the Second Circuit, held
 2   at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
 3   New York, on the 12th day of March, two thousand ten.
 4
 5   PRESENT:
 6               JOHN M. WALKER, JR.,
 7               DEBRA ANN LIVINGSTON,
 8               GERARD E. LYNCH,
 9                                 Circuit Judges.
10   _________________________________________________
11
12   YNGWIE MALMSTEEN,
13            Plaintiff-Appellee,
14
15           -v.-                                             No. 09-2987-cv
16
17   BERDON, LLP and MICHAEL MITNICK,
18             Defendants-Appellants,
19
20   JAMES LEWIS and JAMES LEWIS ENTERTAINMENT, INC.,
21               Defendants.
22   _________________________________________________
23
24                                   James P. Cinque, Cinque & Cinque, P.C., New York, NY,
25                                   for Plaintiff-Appellee.
26
27                                   William J. Kelly (Thomas R. Manisero, Peter J. Larkin, on
28                                   the brief), Wilson Elser Moskowitz Edelman & Dicker,
29                                   New York, NY, for Defendants-Appellants.
30
31

                                                     1
 1          UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, AND

 2   DECREED that the judgment of the district court be AFFIRMED.

 3          Defendants-Appellants Berdon LLP and Michael Mitnick (“Defendants”) appeal

 4   from a final judgment of the United States District Court for the Southern District of New

 5   York (Holwell, J.), entered January 20, 2009, awarding Plaintiff-Appellee Yngwie

 6   Malmsteen (“Plaintiff”) $450,000 in damages for breach of fiduciary duty and breach of

 7   contract despite Defendants’ motion for judgment as a matter of law or for a new trial.

 8   Defendants argue that the breach of fiduciary duty claim is time barred and that the award

 9   of damages is unsupported by the evidence. We assume the parties’ familiarity with the

10   underlying facts, procedural history, and specification of the issues on appeal.

11           We review de novo a district court’s ruling on a motion pursuant to Federal Rule

12   of Civil Procedure 50(b) for judgment as a matter of law. Runner v. N.Y. Stock Exch.,

13   Inc., 568 F.3d 383, 386 (2d Cir. 2009). A Rule 50 motion may be granted only if, “after

14   viewing the evidence in the light most favorable to the non-moving party and drawing all

15   reasonable inferences in favor of the non-moving party, [the district court] finds that there

16   is insufficient evidence to support the verdict.” Fabri v. United Tech. Int’l, Inc., 387 F.3d

17   109, 119 (2d Cir. 2004). Moreover, such a motion must be brought before the case is

18   submitted to the jury under Rule 50(a), “specify[ing] the judgment sought and the law

19   and the facts on which the moving party is entitled to the judgment.” Fed. R. Civ. P.

20   50(a)(2). It may be renewed after an unfavorable verdict but limited only to the grounds

21   specifically raised in the prior motion for judgment as a matter of law; new grounds may

22   not be added post-trial. Tolbert v. Queens College, 242 F.3d 58, 70 (2d Cir. 2001). The

23   forfeited issue may be reached if “to ignore it would result in manifest injustice” or if it is

                                                   2
 1   a “purely legal error.” Fabri, 387 F.3d at 119. We review a district court’s denial of a

 2   Rule 59 new trial motion for abuse of discretion. Such a motion should not be granted

 3   “unless the trial court is convinced that the jury has reached a seriously erroneous result

 4   or that the verdict is a miscarriage of justice.” Medforms, Inc. v. Healthcare Mgmt.

 5   Solutions, Inc., 290 F.3d 98, 106 (2d Cir. 2002) (quoting Hugo Boss Fashions, Inc. v.

 6   Fed. Ins. Co., 252 F.3d 608, 623-24 (2d Cir. 2001)) (internal quotation marks omitted).

 7          Before the district court the parties agreed that this diversity case is governed by

 8   New York law. A cause of action for breach of fiduciary duty has a six-year statute of

 9   limitations in New York if the sought relief is equitable and a three-year statute of

10   limitations if money damages are sought. Weiss v. T.D. Waterhouse, 847 N.Y.S.2d 94,

11   95 (N.Y. App. Div. 2007). Generally, the claim accrues at the time of the breach.

12   Kaufman v. Cohen, 760 N.Y.S.2d 157, 166 n.3 (N.Y. App. Div. 2003). A breach of

13   contract claim, in contrast, always has a statute of limitations of six years. N.Y. C.P.L.R.

14   213(2). However, New York law permits certain actions for damages to property or

15   pecuniary interest to be brought under either a tort or contract theory, and hence applies

16   the longer of the two statutes of limitations, as long as the “asserted liability ‘ha[s] its

17   genesis in the contractual relationship of the parties.’” Baratta v. Kozlowski, 464 N.Y.S.

18   2d 803, 807-08 (N.Y. App. Div. 1983) (quoting Sears, Roebuck & Co v. Enco Assoc., 372

19   N.E.2d 555, 558 (N.Y. 1977)); see also Gebhardt v. Allspect, Inc., 96 F. Supp. 2d 331,

20   335 (S.D.N.Y. 2000); Rodriguez v. Central Parking Sys. of N.Y., Inc., 848 N.Y.S.2d 807,

21   808-09 (N.Y. App. Term. 2007); Masterpiece Int’l Ltd. Inc. v. Elite Systematic Arts &

22   Ace Crating Inc., No. 41512/07, 2008 WL 725526, at *3 (N.Y. Sup. Ct. Mar. 18, 2008).

                                                  3
 1          Plaintiff filed his lawsuit on January 28, 2005, seeking only money damages. It is

 2   uncontested that no breach occurred after early 2000, when the business relationship

 3   between Plaintiff and Defendants was terminated. Defendants argue that a three-year

 4   statute of limitations should have been applied, barring relief in this case, because (i) the

 5   breach of fiduciary duty and breach of contract claims are really disguised malpractice

 6   claims; (ii) Plaintiff failed to prove breach of an express contract provision; (iii) the

 7   jury’s award of zero damages on the breach of contract claim indicates that it was

 8   unsuccessful; and (iv) Florida’s statute of limitations bars the action.

 9          Defendants failed to raise their disguised malpractice argument in their Rule 50(a)

10   motion, and this Court will therefore set aside the verdict only if we find manifest

11   injustice or purely legal error will otherwise result. We do not so conclude. Defendants

12   were engaged by Plaintiff both as accountants and as business managers, but they can be

13   liable for malpractice only in their capacity as accountants. The limitations provision

14   governing non-medical malpractice in New York, N.Y. C.P.L.R. 214(6), applies only to

15   professionals, where “professional” is defined by qualities including “extensive formal

16   learning and training, licensure and regulation indicating a qualification to practice, a

17   code of conduct imposing standards beyond those accepted in the marketplace and a

18   system of discipline for violation of those standards.         Additionally, a professional

19   relationship is one of trust and confidence, carrying with it a duty to counsel and advise

20   clients.” Chase Scientific Research, Inc. v. NIA Group, Inc., 749 N.E.2d 161, 166 (N.Y.

21   2001) (internal citations omitted). Accountants are commonly considered to fall within

22   this definition. See id.

                                                   4
 1          To be a business manager, on the other hand, one need not be licensed or trained

 2   in any particular way, nor are business managers regulated by a code of conduct or

 3   disciplinary system. A business manager, then, is not a professional and may not be sued

 4   in malpractice. The breaches alleged here arise from Defendants’ failure to collect and

 5   monitor Plaintiff’s income, a function of a business manager rather than an accountant.

 6   Therefore, Plaintiff’s claims are not disguised malpractice claims.     Rather, they are

 7   contract and tort causes of action and the standard statutes of limitation apply. See

 8   Certain Underwriters at Lloyd’s, London v. William M. Mercer, Inc., No. 604515/02,

 9   2005 WL 841012, at *10-11 (N.Y. Sup. Ct. Apr. 12, 2005).

10          Defendants further argue that, because Plaintiff did not prove the breach of an

11   express contractual provision, the statute of limitations for the breach of contract claim

12   cannot be extended to cover the breach of fiduciary duty claim. There is no such

13   requirement in this case. The liability must merely have its “genesis in a contractual

14   relationship.” The jury could reasonably have concluded that Defendants’ liability here

15   arose from a contractual relationship, given Plaintiff’s testimony that Mitnick had agreed

16   to ensure that Plaintiff’s income was collected and properly accounted for, and an

17   engagement letter noting that Defendants were being hired as “accountants and business

18   managers with respect to all of [Plaintiff’s] personal and financial activities.” Although

19   there is New York doctrine indicating that for a claim against a professional to sound in

20   breach of contract, the professional must guarantee a particular result or make an express

21   promise, such requirements do not apply when the defendant is not acting in a

22   professional capacity and hence do not apply here. See Clarke v. Mikail, 657 N.Y.S.2d

23   940, 940 (N.Y. App. Div. 1997) (“A breach of contract claim in relation to the rendition

                                                 5
 1   of medical or dental services by a physician or dentist will withstand a test of its legal

 2   sufficiency only when based upon an express special promise to effect a cure or

 3   accomplish some definite result.”); Senise v. Mackasek, 642 N.Y.S.2d 241, 242 (N.Y.

 4   App. Div. 1996).

 5          Defendants also claim that the breach of contract claim was “unsuccessful”

 6   because the jury awarded zero damages for that claim and that, therefore, it cannot

 7   support an extension of the statute of limitations for the breach of fiduciary duty claim.

 8   We agree with the district court that this is, at heart, a claim that the jury verdict is

 9   inconsistent and reject it for substantially the reasons stated by the court below. Finally,

10   we decline to consider the contention that Florida law bars this action, which was not

11   presented to the district court. Although this Court may consider forfeited arguments

12   “where necessary to avoid a manifest injustice or where the argument presents a question

13   of law and there is no need for additional fact-finding,” Allianz Ins. Co. v. Lerner, 416

14   F.3d 109, 114 (2d Cir. 2005) (quoting Sniado v. Bank Austria AG, 378 F.3d 210, 213 (2d

15   Cir. 2004) (per curiam)) (internal quotation mark omitted), we see no reason to exercise

16   that discretion here.

17          Defendants appeal the award of damages on the ground that there was insufficient

18   evidence of loss presented to allow the jury to avoid impermissible speculation in

19   arriving at an award. Because “[a]n action for breach of fiduciary duty is a prophylactic

20   rule intended to remove all incentive to breach – not simply to compensate for damages

21   in the event of breach,” there need not be “but-for” causation between the breach and the

22   asserted damages. ABKCO Music, Inc. v. Harrisongs Music, Ltd., 722 F.2d 988, 995-96

23   (2d Cir. 1983). The breach must merely be a substantial factor in causing the loss.

                                                  6
 1   Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543 (2d Cir. 1994); see also

 2   New York Pattern Jury Instructions – Civil 3:59 (2008). Moreover, it is sufficient for the

 3   plaintiff on a breach of fiduciary duty claim to provide the jury with “a sound basis for

 4   approximating with reasonable certainty” the loss as a result of the defendants’ actions;

 5   “it need not prove the amount of loss with certainty.” S&K Sales Co. v. Nike, Inc., 816

 6   F.2d 843, 852 (2d Cir. 1987).

 7            Substantially for the reasons stated by the district court in its January 20, 2009,

 8   opinion, we conclude that the testimony of Plaintiff and expert witness Gary Cohen

 9   provided the jury with a sound basis for estimating the measure of damages. Based on

10   Lewis’s testimony, Defendants argue that some of the money deposited into his account

11   and retained by him, though admittedly from sources with whom Malmsteen had a

12   business relationship, was attributable to clients other than Malmsteen. The defense

13   proffered no specifics as to which or how much income in the account was attributable to

14   these other clients, however, nor was the jury required to find Lewis credible on that

15   score.

16            We have carefully considered all of appellant’s other arguments and found them

17   to be moot or without merit.

18            For the foregoing reasons, the judgment of the district court is hereby affirmed.

19
20                                                         FOR THE COURT:
21                                                         Catherine O’Hagan Wolfe, Clerk
22
23

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