Stanton Kremsky v. Kenneth Kremsky

• Court: Court of Appeals for the Third Circuit
• Decided: December 20, 2018
• Docket: 17-3707
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________

No. 17-3707 _____________

STANTON S. KREMSKY

v.

KENNETH F. KREMSKY,

Appellant _____________

On Appeal from the United States District Court for the Eastern District of Pennsylvania District Court No. 2-16-cv-04474 District Judge: The Honorable Mark A. Kearney

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) December 10, 2018

Before: SMITH, Chief Judge, McKEE, and FISHER, Circuit Judges

(Filed: December 20, 2018) _____________________

OPINION*

_____________________

*This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. SMITH, Chief Judge.

Stanton Kremsky (Uncle) brought this lawsuit against his nephew Kenneth

Kremsky (Nephew) based on Nephew’s alleged misconduct in managing Uncle’s

financial investments. Uncle asserted claims for fraudulent misrepresentation, negligent

misrepresentation, breach of fiduciary duty, and conversion. After a four-day trial, the

jury awarded judgment to Uncle on his fraudulent misrepresentation, negligent

misrepresentation, and breach of fiduciary duty claims. The jury also awarded punitive

damages on the fraudulent misrepresentation and breach of fiduciary duty claims.

Nephew raises several issues on appeal: (1) whether Nephew was entitled to

judgment as a matter of law on breach of fiduciary duty and punitive damages; and (2)

whether the District Court erred in failing to grant a new trial based on the jury’s findings

as to the statute of limitations and damages. We will affirm.

I.

We exercise plenary review over orders denying a motion for judgment as a matter

of law. Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655, 664 (3d Cir. 2002). A party is

entitled to judgment as a matter of law where a “reasonable jury would not have a legally

sufficient evidentiary basis to find for the party on that issue.” Fed. R. Civ. P. 50. The

reviewing court “must draw all reasonable inferences in favor of the nonmoving party,

and it may not make credibility determinations or weigh the evidence.” Goodman, 293

F.3d at 665 (quoting Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150 (2000)).

Nephew’s arguments fail under this demanding standard.

2 First, we assess whether Nephew was entitled to judgment as a matter of law on

Uncle’s breach of fiduciary duty claim. In Pennsylvania, fiduciary duty may be

established as a matter of law or as a matter of fact. Basile v. H & R Block, Inc., 52 A.3d

1202, 1210 (Pa. 2012). The Pennsylvania Supreme Court has noted the “intensely fact-

specific nature of this inquiry.” Id. at 1210 (internal quotation marks omitted). Under the

fact-based test, there can be no single set of “specific circumstances” that amounts to a

fiduciary relationship. In re Scott’s Estate, 316 A.2d 883, 885 (Pa. 1974) (internal

citation omitted). Instead, courts have explained that “[t]he essence of such a relationship

is trust and reliance on one side, and a corresponding opportunity to abuse that trust for

personal gain on the other.” Id.; see also Wisniski v. Brown & Brown Ins. Co. of PA, 906

A.2d 571, 577–78 (Pa. Super. Ct. 2006) (“The critical question is whether the relationship

goes beyond mere reliance on superior skill, and into a relationship characterized by

overmastering influence on one side or weakness, dependence, or trust, justifiably

reposed on the other side.”); Owens v. Mazzei, 847 A.2d 700, 709–10 (Pa. Super. Ct.

2004) (“[T]he relationship may be indicated whenever a party in a superior position

engenders the other’s trust and purports to act or advise with the other’s interest in mind.”

(internal quotation marks omitted)).

Uncle presented sufficient evidence for a reasonable jury to conclude that he was

in a fiduciary relationship with Nephew. Uncle described himself as a “fiscal idiot,” and

repeatedly testified that he had complete trust in Nephew based on their close relationship

and Nephew’s purported expertise. Uncle also testified that Nephew consistently

reassured Uncle that he knew what he was doing and that the investments were doing

3 well, and that Uncle relied completely on Nephew’s representations. Under Pennsylvania

law, this testimony provided a sufficient basis for a reasonable jury to conclude that a

fiduciary duty existed. Nephew was not entitled to judgment as a matter of law.

Nephew’s second argument is that the District Court erred by failing to grant him

judgment as a matter of law on Uncle’s claims for punitive damages. Uncle presented

evidence that Nephew engaged in intentional conduct, diverting for his personal use

hundreds of thousands of dollars from Uncle’s accounts that were supposed to go towards

investments for Uncle’s benefit. In accordance with Pennsylvania law, jurors were

instructed that they had to determine whether Nephew’s conduct was “so outrageous as to

warrant punitive damages” and that “under the law a person’s conduct is outrageous

when it is malicious, wanton, willful, oppressive or shows reckless indifference to the

interest of others.” See Pa. Suggested Standard Civ. Jury Instrs.—Punitive Damages

General Instructions 8.00; Johnson v. Hyundai Motor Am., 698 A.2d 631, 639 (Pa.

Super. Ct. 1997).

Based on the relationship of trust between Uncle and Nephew and the large

amount of money taken by Nephew, there was sufficient evidence for a reasonable jury to

conclude that Nephew had acted outrageously and that punitive damages were warranted

on the fraudulent misrepresentation and breach of fiduciary duty claims.1 We will

1 Nephew argues summarily that the evidence does not satisfy the constitutional requirements for an award of punitive damages. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003) (“[P]unitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.”). 4 therefore affirm the District Court’s order denying Nephew’s motion for judgment as a

matter of law.

II.

Nephew next argues that the District Court erred by failing to grant a new trial

based on the jury’s findings as to the statute of limitations defense and damages. A

district court should grant a motion for new trial “only when the great weight of the

evidence cuts against the verdict and . . . a miscarriage of justice would result if the

verdict were to stand.” City Select Auto Sales Inc. v. David Randall Assocs., Inc., 885

F.3d 154, 163 (3d Cir. 2018) (alteration in original) (quoting Leonard v. Stemtech Int’l

Inc., 834 F.3d 376, 386 (3d Cir. 2016)). We review an order denying a motion for a new

trial for abuse of discretion. Id. Here, the jury’s verdict was supported by the evidence

and did not result in a miscarriage of justice.

Uncle filed this case in August 2016. The parties agree that Uncle’s claims are

subject to a two-year statute of limitations, and there is no dispute that some of Uncle’s

claims are based on conduct occurring prior to August 2014. Uncle therefore relied on

the discovery rule to support his claims. In Pennsylvania, application of the discovery

rule is generally an issue of fact for the jury. Gleason v. Borough of Moosic, 15 A.3d

479, 485 (Pa. 2011) (“The point at which the complaining party should be reasonably

aware that he or she has suffered an injury and its cause is ordinarily an issue of fact to be

We conclude that punitive damages were authorized under Campbell because the jury had reason to find that Nephew’s conduct was reprehensible. 5 determined by the jury due to the fact intensive nature of the inquiry.”). The jury

found—in three separate sections of the special verdict form—that by exercising

reasonable diligence Uncle would not have discovered the fraudulent misrepresentation,

negligent misrepresentation, or breach of fiduciary duty prior to August 15, 2014. 2

This finding was supported by the evidence presented at trial. Uncle testified that

he trusted Nephew and relied completely on Nephew’s representations that the

investments were doing well. The jury therefore had a basis for finding that Uncle could

not have known of the fraud prior to August 2014 even through the exercise of

reasonable diligence. Accordingly, the District Court did not abuse its discretion in

declining to grant a new trial on this ground.

Nephew’s final contention on appeal is that the District Court erred in failing to

grant a new trial based on the jury’s calculations of damages. First, Nephew argues that

he was entitled to a new trial because the jury did not give him credit for Uncle’s

possessory interest in three investment properties. Prior to trial, the parties entered into a

joint stipulation agreeing that Uncle had a possessory interest in the three properties.

There is no dispute, however, that Uncle is not named on the deeds for those properties ,

and the stipulation was never entered into evidence at trial. Nor was the jury instructed

that it was bound by a stipulation of fact, and it does not appear that the parties even

requested such an instruction. Accordingly, the questions of whether Uncle had an

2 The verdict form contained an error in the question regarding the statute of limitations for the breach of fiduciary duty claim. The question asked whether Uncle should have discovered the “conversion” instead of “breach of fiduciary duty.” Neither party raised this apparent clerical error as an issue on appeal. 6 interest in the properties and whether Nephew was entitled to an offset for that interest

were presented at trial as questions of fact for the jury.

Uncle’s expert forensic accountant testified that he was not giving Nephew credit

for Uncle’s interest in the properties because Uncle was not named in the deeds. Nephew

cross-examined Uncle’s expert on this point, and Nephew’s forensic accountant expert

did give Nephew credit for the value of the properties. It was entirely appropriate for the

jury, as factfinder, to accept the reasoning of Uncle’s expert and conclude that Nephew

was not entitled to an offset. Accordingly, the District Court did not abuse its discretion

by declining to grant a new trial on this ground.

Second, Nephew argues that he was entitled to a new trial because the jury relied

on the valuation method for coins and precious metals put forth by Uncle’s expert

witness. Nephew had an opportunity to cross-examine the expert regarding his method,

and Uncle’s expert conceded its weaknesses. Nephew then introduced an alternative

method through his own expert, and Uncle in turn highlighted the weaknesses in that

valuation method. Given this battle of experts at trial, the jury had a basis in the evidence

for adopting Uncle’s valuation method as the method that best reflected the damages

incurred by Uncle.

Third, Nephew argues that Uncle’s coin appraisal expert testimony did not satisfy

the standards for expert witness testimony. The District Court held a Daubert hearing

and concluded that Uncle’s coin appraisal expert, Mr. Woodlock, was qualified (albeit

“barely qualified”) to offer opinion testimony. Nephew does not expressly challenge the

7 District Court’s Daubert ruling.3 Instead, he argues that the inappropriate admission of

Mr. Woodlock’s testimony inflated the damages award and that he is entitled to a new

trial because of the unfounded award. That argument fails based on the evidence

presented at trial.

Mr. Woodlock testified regarding his experience, including the fact that all of his

appraisal training was on-the-job training. Nephew was free to cross-examine Mr.

Woodlock regarding the methods he used to appraise the coins and the limited time he

spent on the appraisal, and Nephew did so. It was entirely within the province of the jury

to adopt or reject Mr. Woodlock’s appraisal and to consider its weaknesses. The District

Court did not abuse its discretion by declining to grant Nephew a new trial.

***

For the reasons set forth above, we will affirm the District Court’s judgment.

3 To the extent Nephew does challenge the admission of the coin appraisal expert testimony under Daubert, the District Court’s ruling is reviewed for abuse of discretion. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999) (“[A] court of appeals is to apply an abuse-of-discretion standard when it review[s] a trial court’s decision to admit or exclude expert testimony.” (second alteration in original) (internal quotation marks omitted)). The District Court’s ruling was well-reasoned and applied this Court’s “policy of liberal admissibility,” where an individual possesses “skill of knowledge greater than the average layman.” Elcock v. Kmart Corp., 233 F.3d 734, 741 (3d Cir. 2000) (quoting Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998)). The District Court did not abuse its discretion by admitting the expert appraisal testimony. 8