Court Opinion

ID: 1019770
Source: CourtListenerOpinion
Date Created: 2013-07-04 22:40:43.133411+00
Date Added: 2024-06-11T11:30:46.413230
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 05-1189

MARY LAFONTAINE PARMENTER,

                                               Plaintiff - Appellee,

           versus

ROLLINS FINANCIAL     COUNSELING   INCORPORATED;
JOSEPH R. ROLLINS,

                                            Defendants - Appellants.

Appeal from the United States District Court for the District of
South Carolina, at Beaufort.    Patrick Michael Duffy, District
Judge. (CA-03-2150-9-23)

Argued:   May 22, 2006                       Decided:   June 29, 2006

Before WILKINS, Chief Judge, and MOTZ and KING, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Frank W. Virgin, SLAUGHTER & VIRGIN, Atlanta, Georgia, for
Appellants. Edward Steven Feig, ARENT FOX, P.L.L.C., New York, New
York, for Appellee.     ON BRIEF: Brian C. Pitts, SMOOT, PITTS,
ELLIOTT & BIEL, Hilton Head Island, South Carolina, for Appellants.
Eric S. Lent, ARENT FOX, P.L.L.C., New York, New York, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:

      Joseph R. Rollins and his investment advisory company, Rollins

Financial Counseling Incorporated, (collectively, “Rollins”) appeal

a district court judgment entered in favor of Mary LaFontaine

Parmenter following a jury verdict for Parmenter on her claims

alleging      that   Rollins    mismanaged          her   investment   account.

We affirm.

                                     I.

      In early 1999, Parmenter, a widow with little investment

experience, transferred her investment portfolio to Rollins and

granted him full discretionary authority over her account.                  The

portfolio was then valued at $729,586.              Parmenter informed Rollins

that she needed to withdraw $6,000 per month from her account to

cover living expenses.          Rollins initially invested Parmenter’s

assets in a mix of stock and bond mutual funds, but by late 1999 he

had   moved    the   account    entirely      into    stock   mutual   funds,    a

substantial     portion    of    which       were    aggressive,   higher-risk

investments.     By early 2000, the value of Parmenter’s account had

increased significantly, peaking at approximately $1.1 million.

Thereafter, however, the account value declined dramatically.                   In

May 2002, Parmenter terminated Rollins’ services; at that time, her

account was worth $342,105.

                                         2
     Parmenter brought this action against Rollins, alleging claims

for breach of fiduciary duty, negligence, breach of contract,

negligent misrepresentation, constructive fraud, and violation of

the Investment Advisers Act of 1940, see 15 U.S.C.A. § 80b-6 (West

1997).   A jury returned a verdict for Parmenter on each of her

claims, awarding her $423,000 in compensatory damages and $22,000

in restitution (for management fees she paid to Rollins).             Rollins

moved, inter alia, for a new trial on several grounds, but the

district court denied his motion.

                                   II.

     Rollins first contends that the district court erroneously

admitted expert testimony offered by Parmenter regarding damages.

Rollins argues that the expert’s method of calculating damages was

unreliable.    See Fed. R. Evid. 702; Kumho Tire Co. v. Carmichael,

526 U.S. 137, 147-49 (1999).      We review a district court decision

to admit or exclude expert testimony for an abuse of discretion.

See Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir.

1999).

     At trial, Parmenter called F. John Hermann, an experienced

investment    advisor   and   arbitrator,    to    testify,   inter     alia,

regarding    the   appropriate   measure    of    damages   resulting   from

Rollins’ alleged mishandling of Parmenter’s investments.           Hermann

testified that Rollins breached his legal and professional duties

                                    3
to Parmenter in several ways, including placing her assets into

investments that were not suitable for her investment objectives

and needs.    Hermann testified that Rollins’ most serious breach

occurred when, after Parmenter’s account had increased in value, he

failed to take corrective action by shifting Parmenter’s assets

into more conservative investments that could have achieved her

investment goals with less risk.        Based on various points during a

nine-month period when Hermann claimed Rollins could have taken

such   corrective   action,   Hermann    identified   different   possible

starting values for calculating damages.          Using these starting

values, Hermann calculated how a properly managed portfolio would

have performed (assuming the same level of withdrawals), and then

subtracted the actual ending value of the account.        Based on these

calculations, Hermann concluded that the loss attributable to

Rollins’ mismanagement was between $244,495 and $505,395.

       Rollins does not dispute that the general method used by

Hermann to calculate damages--comparing actual investment results

to those that could have been achieved had the account been

properly managed--is generally accepted and reliable.         See, e.g.,

Rolf v. Blyth, Eastman Dillon & Co., 637 F.2d 77, 84 (2d Cir.

1980).   Rollins argues, however, that Hermann improperly deviated

from this method by using a starting point other than the value of

the account when it was first opened.       The district court rejected

this argument, finding that Hermann’s methodology was sufficiently

                                    4
reliable in light of his testimony that Rollins committed multiple

breaches of duty and that one of those breaches was his failure to

take corrective action to preserve Parmenter’s account after it had

appreciated.

     The decision by the district court to admit Hermann’s damages

testimony was not an abuse of discretion. Based on his experience,

Hermann testified that the appropriate starting value for measuring

damages in investment-loss cases is usually disputed and that a

starting value other than the opening value of the account is often

used. And, as the district court noted, Hermann identified several

distinct breaches of duty by Rollins and concluded that the most

serious breach occurred after the account value had risen, when

Rollins failed to preserve the account by shifting it into more

conservative investments.   In this regard, Hermann opined that

measuring damages using the opening value of Parmenter’s account

would not fully compensate her for the loss caused by Rollins’

mismanagement.   Based on this record, the district court did not

abuse its discretion in concluding that Hermann’s testimony was

sufficiently reliable to allow the jury to consider it in assessing

damages.1   See Kumho Tire, 526 U.S. at 150 (explaining that the

      1
       To the extent Rollins claims that the jury’s damages verdict
 was not supported by the evidence, we disagree. In contrast to
 Hermann’s testimony that Rollins never selected suitable
 investments for Parmenter’s account, Rollins testified that his
 investment selections for the account were always appropriate--
 both during the months of its initial buildup and after it had
 climbed in value. The jury could have reached its verdict, for

                                5
gatekeeping inquiry for expert testimony “must be tied to the facts

of   a   particular   case”   (internal    quotation   marks   omitted)).

Moreover, Rollins thoroughly challenged Hermann’s methods through

cross-examination.     See United States v. Moreland, 437 F.3d 424,

431 (4th Cir.), cert. denied, 126 S. Ct. 2054 (2006).

                                  III.

     Rollins next asserts that the district court should have

granted his motion for a new trial on the ground that false

evidence was admitted against him.        See Fed. R. Civ. P. 59; Conner

v. Schrader-Bridgeport Int’l, Inc., 227 F.3d 179, 200 (4th Cir.

2000).   The decision whether to grant a new trial “rests with the

sound discretion of the district court, and we review this decision

for a clear abuse of discretion.”       Bristol Steel & Iron Works, Inc.

v. Bethlehem Steel Corp., 41 F.3d 182, 186 (4th Cir. 1994).

Indeed, this decision “is not reviewable upon appeal, save in the

 example, by crediting Rollins’ testimony that the investments
 initially were suitable but accepting Hermann’s testimony that the
 investments were inappropriate once the account value had
 increased. Indeed, Hermann admitted that Rollins had done “a very
 good job” building up Parmenter’s account during its initial
 months, J.A. 432, and testified that Rollins’ more serious breach
 was his failure to take corrective action after the account value
 had risen. Further, Rollins conceded that Parmenter’s investment
 objectives could have been achieved had he shifted her funds into
 more conservative investments when the account value was near its
 peak. Finally, the damages award was within the range identified
 by Hermann.

                                    6
most exceptional circumstances.”             Id. (internal quotation marks

omitted).

       During questioning by Parmenter’s counsel, Rollins was asked

about the accuracy of information he had provided to the SEC in a

required annual filing.         Specifically, counsel showed Rollins his

most recent filing and directed him to a question about whether he

was involved in pending litigation, which Rollins had answered

“NO.”    J.A. 1185.   Rollins stated that his answer to that question

was “clearly, wrong.”      Id. at 313.       Further, in response to later

questioning    by   his   own    attorney,    Rollins   testified   that   his

response to the SEC question was an “oversight” and that the filing

was being amended to disclose pending lawsuits against him. Id. at

542.     After trial, however, Rollins reviewed the instructions and

definitions for the SEC filing and discovered that the question at

issue did not require him to list private civil actions, and

therefore that he had answered the question accurately.

        Rollins argues that the admission of this false evidence was

prejudicial and warrants a new trial.           We conclude, however, that

the district court did not abuse its broad discretion in denying a

new trial.     Assuming that Rollins was surprised by the questions

about the SEC filing and that his failure to correct the record

before the end of trial was excusable, any prejudice to Rollins was

not so great as to require a new trial.                 Although Parmenter

introduced evidence concerning the SEC filing to impeach Rollins’

                                       7
credibility, this evidence was minor in relation to the overall

evidence presented against him.2     Parmenter introduced extensive

evidence concerning Rollins’ numerous alleged breaches of legal and

professional duties.   In addition, Rollins admitted that he had

made another error on the same SEC filing by failing to indicate

that providing investment advice was his primary business.3

                               IV.

     For the reasons set forth above, we affirm the judgment of the

district court.

                                                              AFFIRMED

      2
       There is no indication that Parmenter       or   her   counsel
 intentionally presented false evidence.
      3
       Rollins also contends that the district court erroneously
 failed to instruct the jury on various affirmative defenses
 relating to Parmenter’s conduct in connection with her investment
 losses. Based on the record, we conclude that the district court
 did not err in declining to instruct the jury on these defenses.

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