United States District Court, D. Kansas
ERIC C. RAJALA, Plaintiff,
ROBERT H. GARDNER, et al., Defendants.
MEMORANDUM AND ORDER
ETIC F. MELGREN, District Judge.
Plaintiff Eric C. Rajala, the Trustee for the bankruptcy estate of Generation Resources Holding Company, LLC ("GRHC"), brought suit in 2009 asserting numerous claims against several individual defendants and corporate entities. After several years and rounds of motion practice, the case proceeded to trial on a breach of fiduciary duty of loyalty claim against three individual defendants. Plaintiff's breach of fiduciary duty of loyalty claim was based on the fact that Defendants engaged in self-dealing or self-serving transactions when they paid themselves a salary in 2002, 2003, and 2004, despite knowing that GRHC was or would become insolvent.
A jury trial was held on June 10 through June 12, 2014. During trial, Defendants moved for judgment as a matter of law after the close of Plaintiff's evidence and at the close of all evidence, which the Court denied. After deliberating, the jury rendered a verdict in favor of Plaintiff in the amount of $329, 000 against each individual Defendant.
The matter now comes before the Court on Defendants' Renewed Motion for Judgment as a Matter of Law, or Alternatively for Remittitur or New Trial (Doc. 343). In addition, Plaintiff filed a Motion to Alter Judgment to Add Prejudgment Interest (Doc. 338). The Court will first address Defendants' motion and then Plaintiff's motion. For the reasons explained in more detail below, the Court denies Defendants' motion and grants Plaintiff's motion.
I. Defendants' Motion for Judgment as a Matter of Law, or Alternatively for Remittitur or New Trial (Doc. 343)
Defendant renews its motion for judgment as a matter of law, or in the alternative, moves for remittitur or for a new trial. Federal Rule of Civil Procedure 50(a)(1) provides that judgment as a matter of law is appropriate "[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue...." "Judgment as a matter of law [under Rule 50(a)] is only appropriate if the evidence points but one way and is susceptible to no reasonable inferences which may support the opposing party's position."
A motion for new trial pursuant to Fed.R.Civ.P. 59(a) is committed to the sound discretion of the trial court. These motions are "not regarded with favor and should only be granted with great caution." In reviewing a motion for a new trial, the court must view the evidence in the light most favorable to the prevailing party. "The party seeking to set aside a jury verdict must demonstrate trial errors which constitute prejudicial error or that the verdict is not based on substantial evidence." The court should "ignore errors that do not affect the essential fairness of the trial."
A. Insolvency Evidence
Plaintiff's breach of fiduciary duty of loyalty claim was premised on the fact that Defendants engaged in self-dealing or self-serving transactions when they paid themselves a salary in 2002, 2003, and 2004, despite knowing that GRHC was or would become insolvent. Defendants' Motion for Judgment as a Matter of Law presents two reasons why Plaintiff failed to present sufficient evidence of insolvency that would allow a jury to find for Plaintiff. In the alternative, Defendants assert that Plaintiff's damages should be reduced.
1. Expert testimony
Defendants first argue that Plaintiff's failure to present expert testimony on insolvency is fatal to Plaintiff's breach of fiduciary duty claim. Although the Court agrees that proof of insolvency is generally presented through expert testimony, it does not appear that the law requires expert testimony to prove insolvency at trial. Thus, Defendants' motion fails on this point.
2. Evidence of insolvency
Next, Defendants assert that even if expert testimony was not needed, Plaintiff's evidence of insolvency was insufficient. Defendants first contend that Plaintiff must prove insolvency at the time of each breach of fiduciary duty, which Plaintiff failed to do. This contention is not a correct statement of the claim presented to the jury. Defendants asserted several times to the Court that proof of insolvency was required at the time of each salary payment (each alleged breach of fiduciary duty). Ultimately, the Court disagreed. The Court, however, did find that insolvency was an element of Plaintiff's breach of fiduciary duty claim. And in the Court's jury instruction setting forth the elements of a claim for breach of fiduciary duty of loyalty, the Court instructed the jury that Defendants' self-dealing could "only arise where at the time of the transaction the business entity was insolvent or likely to become insolvent." Thus, Plaintiff did not need to demonstrate insolvency at the time of each alleged breach. Instead, Plaintiff was required to demonstrate either insolvency at the time of the transaction or the likelihood that the business entity (GRHC) would become insolvent at the time of the transaction.
Defendants also contend that Plaintiff presented insufficient evidence of insolvency or the likelihood of GRHC becoming insolvent. The jury instructions defined insolvency as a company "unable to pay its debts as they fall due in the usual course of business, or a company is insolvent if it has liabilities in excess of a reasonable market value of assets held." Defendants assert that Plaintiff presented no evidence ...