Notinger v. Brown, et al.

• Court: District Court, D. New Hampshire
• Decided: October 6, 2008
• Docket: 08-CV-005-SM
• Status: Published

Opinion

Notinger v. Brown, et a l . 08-CV-005-SM 10/6/08 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Steven M. Notinger, Trustee in Bankruptcy of Simply Media, Inc., Plaintiff

v. Civil No. 08-CV-05-SM Opinion No. 2008 DNH 1 Christina Brown, individually and as Trustee of First Marcus Trust. Defendant

O R D E R

This case arises out of a business operation that had all

the earmarks of an old-fashioned investment scam. It was run

the defendant, Christina Brown, and her husband, Deaver Brown.

The scheme proved to be highly effective, yet it was quite

simple.

First, the Browns formed Simply Media, Inc. Then, armed

with apparently bogus profit and loss statements prepared by

Deaver, a few sample products, and a compelling yarn of

historical success woven by Deaver, the couple approached well

to-do friends and acquaintances and offered them the

"opportunity" to own a portion of the company.

Seduced by the fictitious profit and loss reports, and

comforted by Denver's personal charm and his tales of enormous sales through substantial retailers like Target, Walgreens, and

Best Buy, investors parted with more than $1.6 million. The

Browns used that money to pay for all manner of personal expenses

including, for example, personal dry cleaning bills, individual

memberships at an athletic club, and payments on the mortgage

loan on their home. See generally Exhibit A to plaintiff's

amended complaint. Not surprisingly, the capital was soon spent

and the supply of gullible investors dried up. Simply Media was

put into bankruptcy.

The trustee in bankruptcy proceeded to inventory the

corporation's assets and liabilities. That effort was, however,

exceedingly difficult, as he soon discovered that the Browns

deliberately and systematically destroyed nearly every relevant

corporate document they ever received or generated - from

checking account statements, to a list of investors, to the

company's (claimed) inventory of products, to a statement of its

(claimed) retail sales channels. Not surprisingly, the Browns

provided no help. Eventually, however, the trustee was able to

uncover a trail of checks written on the corporation's accounts —

a trail that led to discovery of the Browns' use of company bank

accounts as their own personal funds. This litigation to recover

assets belonging to the company that Christina Brown used for

personal expenses ensued.

2 Following a four-day jury trial, a verdict in favor of the

trustee was returned on both claims that were submitted.

Defendant now moves to set aside the jury's verdict (document no.

82), to set aside the jury's award of damages (document no. 81),

and to reconsider its instructions to the jury on spoliation of

the evidence (document no. 83). Plaintiff objects.

Background

Although the trustee's amended complaint advanced fifteen

claims against nearly a dozen defendants, two claims were

presented to the jury. In count one, plaintiff asserted that

Christina Brown, both individually and in her capacity as trustee

of the First Marcus Trust (title holder of the Browns' residence

in Lincoln, Massachusetts), fraudulently transferred assets of

the debtor in bankruptcy (Simply Media, Inc.) and diverted them

to personal use. In the second count (count 15 of the amended

complaint), plaintiff claimed that Christina Brown participated

in a civil conspiracy whose unlawful object was to transfer money

out of Simply Media in order to hinder, delay, or defraud its

creditors.

As noted above, the jury returned a verdict in favor of the

trustee on both counts and awarded damages as follows:

3 Count one (fraudulent transfer)

Christina Brown, individually: $ 871,613.76

Christina Brown, trustee: $ 231,894.84

Count Two (civil conspiracy)

Christina Brown: $2,968,071.00

Jury Verdict Form (document no. 68). Brown argues that the

trustee failed to introduce sufficient evidence to support that

verdict. And, says Brown, even if the evidence was adequate to

support a finding of liability, it was insufficient to support

the jury's sizeable damage awards.

Two of Brown's motions can be resolved quickly. Her motion

to reconsider the court's instructions to the jury on spoliation

of the evidence is denied (presumably Brown is actually seeking a

new trial based upon prejudicially defective jury instructions,

since there is no point in "reconsidering" instructions already

given and relied upon). The spoliation issue was thoroughly

addressed by the parties during the course of these proceedings

and the court considered and ruled on the matter; further

discussion is unwarranted.

Brown's motion to set aside the jury's verdict on liability

is also denied. The evidence plaintiff introduced at trial was

4 more than sufficient to warrant the jury's conclusion that Brown

fraudulently transferred assets of the company and diverted them

to her personal use. That evidence was also sufficient to

sustain the jury's verdict on the civil conspiracy count.

The jury's award of damages on the civil conspiracy count

is, however, problematic.

Standard of Review

"In reviewing an award of damages, the district court is

obliged to review the evidence in the light most favorable to the

prevailing party and to grant remittitur or a new trial on

damages only when the award 'exceeds any rational appraisal or

estimate of the damages that could be based upon the evidence

before i t .'" Eastern M t . Platform Tennis. Inc. v. Sherwin-

Williams C o ., 40 F.3d 492, 502 (1st Cir. 1994) (quoting Kolb v.

Goldrinq, Inc., 694 F.2d 869, 872 (1st Cir. 1982) (emphasis

added)). So, to be entitled to remittitur or a new trial. Brown

must establish that, in light of the evidence introduced at

trial, "the damage award is grossly excessive, inordinate,

shocking to the conscience of the court, or so high that it would

be a denial of justice to permit the award to stand." Forgie-

Buccioni v. Hannaford Bros.. Inc. 413 F.3d 175, 183 (1st Cir.

2005) (citing Havinqa v. Crowley Towing & Transp. Co.. 24 F.3d

5 1480, 1484 (1st Cir. 1994)). It is the court's task "to

determine the maximum dollar amount that is supported by the

evidence." Soto-Lebron v. Federal Express Corp.. 538 F.3d 45,

69-70 (1st Cir. 2008) (emphasis in original).

Discussion

As part of his case, the trustee introduced evidence (in the

form of cancelled checks drawn on Simply Media's accounts)

demonstrating, beyond any reasonable doubt, that Brown diverted

more than $1,103,000 from Simply Media to pay for personal,

family, and trust expenses (she being the apparent beneficiary as

well as Trustee of the First Marcus Trust). Accordingly, in

returning a verdict for the trust, the jury apportioned damages

between Brown in her individual capacity (i.e., approximately

$871,000), and Brown in her capacity as trustee of the beneficial

trust (i.e., approximately $232,000). As to count one of the

amended complaint (fraudulent transfer), then, the jury's verdict

and its award of damages is fully supported by the evidence.

The rationale behind the jury's award of damages on the

civil conspiracy count is less apparent. As to that count, the

jury returned a verdict for the trustee in the amount of

$2,968,071. But, the court is unable to discern how the evidence

introduced at trial could reasonably support such an award. And,

6 perhaps more importantly, the trustee has failed to point to

evidence in the record which might support that amount.

In an effort to avoid remittitur, the trustee argues that,

in addition to introducing the cancelled corporate checks, he

elicited testimony supportive of his case from Brown's husband

and alleged co-conspirator, Deaver. Among other things, Deaver

Brown testified that investors parted with approximately

$1,648,000 to capitalize Simply Media. Thus, says the trustee.

Brown and her co-conspirator (Deaver) took at least that amount

of money out of Simply Media in order to hinder, delay, or

defraud its creditors. Plus, says the trustee. Simply Media's

bankruptcy schedules list creditors totaling $521,000 in claims.

According to the trustee, that amount should be added to the sums

invested in Simply Media ($1,648,000), to give a total of

$2,169,000. The additional $800,000 awarded by the jury on the

civil conspiracy count can be explained, he argues, by "taxes,

interest, costs, and expenses of bankruptcy administration

(through two trials)." Plaintiff's memorandum (document no. 87)

at 5. The court disagrees.

First, there was no evidence introduced at trial related to

"taxes, interest, costs, and expenses" incurred by Simply Media's

bankruptcy estate. To the extent the jury included such factors

7 in its award, it was based on speculation and cannot stand.

Moreover, the trustee's suggestion, that the $1,648,000 invested

in the company should be added to the amounts shown on the

company's bankruptcy schedules as owed to unsecured creditors,

appears to constitute double counting of the same funds. If

slightly more than $1.6 million was invested in the company by

unsecured creditors (assuming the "investors" are properly viewed

as unsecured creditors), then perhaps that amount should have

been reflected on the company's bankruptcy schedules, rather than

the $521,000 figure that was actually reported. There does not,

however, appear to be any good reason why those two figures

should be added together - at least the trustee has not offered

one.

Finally, it is important to remember the precise character

of the claim asserted against Brown in count two: civil

conspiracy aimed at diverting Simply Media's funds to pay Brown's

personal expenses, thereby hindering, delaying, or defrauding

Simply Media's creditors. The nature of that cause of action

necessarily limits the type of damages the trustee may properly

recover. The damages sustained by the bankruptcy estate as a

result of the charged civil conspiracy proved in this case were

entirely economic and, upon proper proof, subject to

straightforward calculation. The jury's award of damages cannot include sums intended to compensate the bankruptcy trustee for

other harm or injury not pled or tried.

Of course, given the Browns' conscious and deliberate

destruction of all corporate records, it was difficult for the

trustee to find evidence supportive of his claims. Nevertheless,

he did so to a remarkable degree. And, viewing that evidence in

the light most favorable to the jury's verdict, still, the court

cannot discern how the jury could (without engaging in

impermissible speculation) return a verdict on the civil

conspiracy count in excess of $1,648,000 - the amount Deaver

Brown testified he raised from investors. There was a

suggestion, but scant evidence, that more was raised, and

evidence produced no doubt satisfied the jury that rampant fraud

had been perpetrated. But, again, insufficient evidence was

offered tending to establish that Brown's fraud resulted in

greater than $1,648,000 in economic harm.

Because it was not in Deaver Brown's interest to be entirely

forthcoming when discussing the amounts invested in Simply Media,

the jury could rationally and reasonably conclude that the

roughly $1.6 million referenced by Deaver was, if anything, an

understatement of the total funds actually invested in the

company. Additionally, because the evidence painted a picture of

9 Simply Media as little more than a sham corporation with few, if

any, real customers, virtually no inventory of products and/or

operational expenses, and laughably fictitious "accounting

records" obviously fabricated by Deaver, the jury could have

reasonably concluded that very little of the money invested in

Simply Media was actually used to fund legitimate business

operations, and what little was used for those purposes should be

the responsibility of Brown. The jury could have also reasonably

concluded that the minimal expenditures made by Brown to keep up

the appearance that Simply Media was a legitimate business were

properly viewed as fraudulant. Accordingly, the jury could have

reasonably concluded that Christina and Deaver Brown conspired to

divert, from corporate to personal use, all of the $1,648,000

Deaver said he raised from investors, all in an effort to hinder,

delay, and/or defraud creditors of the company. But, any award

in excess of that amount on the civil conspiracy claim is not

supported by evidence of record.

Conclusion

As noted above, plaintiff alleged that Christina Brown

conspired with others to transfer assets of Simply Media to

hinder, delay, or defraud creditors. Plainly, she could not have

fraudulently transferred more than SimplyMedia raised. And,

viewed in the light most favorable to the jury's verdict, the

10 evidence of record supports the conclusion that Simply Media's

assets totaled $1,648,000. An amount any larger than that would

necessarily be based upon speculation, not on evidence presented.

In light of the foregoing, the court holds that the jury's

award of nearly $3 million in damages on plaintiff's civil

conspiracy claim is plainly in excess of that which is properly

supported by the evidence. Accordingly, the court shall order a

new trial, limited exclusively to the issue of damages on the

civil conspiracy claim, unless plaintiff consents to the entry of

judgment in his favor on that count in the reduced amount of

$1,648,000.00. See Hetzel v. Prince William County. 523 U.S. 208

(1998). See generally 11 C. A. Wright, A. R. Miller & M. K.

Kane, Federal Practice and Procedure § 2815 (2d ed. 1995). If

plaintiff agrees to such a reduced judgment. Brown's liability

(in her individual capacity and in her capacity as trustee of the

First Marcus Trust) will be as follows:

Count one (fraudulent transfer)

Christina Brown: $1.648.000.00

Total Damages $1,648,000.00

11 Of the $1,648,000.00 awarded in total damages.1 Christina Brown,

in her personal capacity, is liable for the entire amount. In

her capacity as trustee of the First Marcus Trust, Brown is

jointly and severally liable for $231,894.84.

Defendant's motion to set aside the jury verdict with regard

to damages (document no. 81) is granted in part and denied in

part, as discussed above. Her motion to set aside the jury

verdict (document no. 82) and her motion for reconsideration

(document no. 83) are denied.

If plaintiff elects to accept a reduced damages award of

$1,648,000 on his civil conspiracy claim he shall, on or before

October 31, 2008, file a statement with the court accepting a

remittitur to that amount, whereupon the court will enter

judgment in his favor and against Christina Brown (both

individually and as trustee), as outlined above. Should

plaintiff fail to file a timely statement agreeing to remittitur,

the court will set the case down for a new trial limited

exclusively to the issue of damages on plaintiff's claim that

1 Plaintiff implicitly suggests that the damages awarded by the jury on counts one and two should be added together. That is incorrect. In light of the evidence introduced at trial, the trustee is entitled to recover a total of $1,648,000 in damages from Christina Brown, apportioned between her individual and trustee capacities, as set forth above.

12 Christina Brown conspired to transfer money of Simply Media in

order to hinder, delay, or defraud its creditors.

SO ORDERED.

Sireven J./McAuliffe Chief Judge

October 6, 2008

cc: Geraldine L. Karonis, Esq. Stephen F. Gordon, Esq. Todd B. Gordon, Esq. Andrew G. Bronson, Esq. James V. Tabner, Esq. Douglas A. Grauel, Esq. Angelika Thumm, pro se Katherine San Filippo, pro se Middlesex Savings Bank, pro se Dudley C. Goar, pro se Bruce A. Harwood, Esq.