Malandris v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

• Decision Date: 19 October 1977
• Docket Number: Civ. A. No. 75 M 156.
• Citation: 447 F. Supp. 543
• Parties: Jung Ja MALANDRIS, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant.
• Court: U.S. District Court — District of Colorado

447 F. Supp. 543

Jung Ja MALANDRIS, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Defendant.

Civ. A. No. 75 M 156.

United States District Court, D. Colorado.

October 19, 1977.

William R. Fishman and David H. Drennen, Denver, Colo., for plaintiff.

Donald K. Bain and John M. Kobayashi, Holme, Roberts & Owen, Denver, Colo., for defendant.

MEMORANDUM AND ORDER

MATSCH, District Judge.

After a four day trial with sharply conflicting testimony and upon instructions that liability could be found for fraud and deceit and for the intentional infliction of emotional distress, a jury of six persons returned a verdict for the plaintiff for $1,030,000.00 in compensatory damages and $3,000,000.00 in punitive damages. The defendant seeks a judgment notwithstanding the verdict or, alternatively, a new trial. A proper consideration of these motions requires some comment on the evidence.

The plaintiff, Jung Ja Malandris, is a naturalized citizen of the United States who was born and raised in the Republic of Korea. She has had no formal education of any kind and she is unable to read or write in any language. The plaintiff married Steven Malandris when he was on active duty as a truck driver in the United States Army in Korea.

After discharge, Mr. Malandris obtained employment as a baggage handler for United Airlines working first in New Jersey and later at Stapleton International Airport in Denver, Colorado. Recognizing that as an uneducated and unskilled worker his earning capacity is entirely dependent upon his physical strength, Steven Malandris has relentlessly worked double shifts and all of the overtime and holiday time which he could obtain from his employer.

Steven and Jung Ja Malandris have pursued an extraordinary life style, wholly dominated by a search for financial security. Although their income has been maximized, Mr. and Mrs. Malandris have avoided most of the expenditures ordinarily incurred by other couples in comparable circumstances. They have not gone to restaurants or movies; they have not subscribed to magazines or newspapers; they have not visited in the homes of others or had guests in their apartment; and they have lived at a subsistence level. In sum, Mr. and Mrs. Malandris have existed in an isolated environment wholly separate from the society surrounding them.

Steven's hard work and their unusual life style enabled Mr. and Mrs. Malandris to accumulate more than $60,000.00 and, as a result of a posting of the price and income record of United Airlines stock on an employees' bulletin board, they invested all of their savings in United's common stock.

Jung Ja Malandris was the dominant marriage partner and, although Steven earned it, she controlled the couple's money. In this way, she also controlled her husband.

When the plaintiff became disquieted and uncomfortable about the future of United Airlines stock, she directed her husband to sell it and to put the proceeds into bank deposits. Mr. Malandris went to Merrill Lynch for that purpose and there he met Mr. John Barron, an account executive who was a retired army officer. While the testimony of Steven Malandris and John Barron sharply conflicts in most important respects, taken as a whole the evidence supports the version of Mr. Malandris. He said that John Barron induced him to leave the proceeds of the United Airlines sale with Merrill Lynch because the firm could make money for him just as banks made income from the investment of funds placed on deposit. Steven Malandris testified that John Barron said that there would be a "partnership" with Merrill Lynch with an assured gain and no possibility of any loss. The plaintiff's husband also said that he was induced to mislead his wife and to forge her signature on a power of attorney by the representations and later the threats of John Barron. What remains undisputed is that a margin account was opened in the name of Jung Ja Malandris and that a number of transactions were made on the Chicago Board of Options Exchange for this account. The account was closed with a loss of approximately $30,000.00.

The conflicting testimony of John Barron was that Steven Malandris came to him and directed him not only to sell the United Airlines stock, but also instructed him to open a margin account in his wife's name and, after computing the margin requirement without assistance, gave specific directions for each of his options trades.

After viewing the demeanor and manner of these two witnesses while they testified during the trial and after consideration of the other evidence in the case, including the documents in evidence and the unexplained absence of some of the routine documentation, I join the jury in rejecting the testimony of John Barron as lacking credibility. The evidence fully supports the finding that John Barron knew that he was dealing with a man and his wife who were wholly innocent of the risks involved in the securities market; that he knew of the extraordinary efforts to achieve the life savings brought to him; that he knew that the airlines stock was in the name of the plaintiff and that Mr. Malandris had delivered all of his earnings to his wife; that he deliberately manipulated Steven Malandris to deceive his wife and to conceal from her the investments which were made; that he knew Jung Ja Malandris was a Korean from a background of poverty and deprivation to whom financial security was of great importance; that he knew of the extraordinary life style which this couple followed; and, finally, that he, Barron, had no previous experience with options trading.

The evidence also shows, beyond doubt, that Jung Ja Malandris has sustained permanent emotional injury which has destroyed her ability to function as a human being. She has rejected this world and lives only in the anticipation of life after death. This results in her total preoccupation with religion.

The defendant urges that the verdicts be set aside because they are "so grossly excessive as to shock the judicial conscience." What is most relevant in this case is not the judicial conscience, it is the conscience of the community as represented by the six people who served on this trial jury. They heard this evidence and they considered whether the conduct of John Barron went beyond the bounds of decency and was utterly intolerable in a civilized community. The defendant's counsel wish to make much of the fact that there was only a $30,000.00 economic loss. They, like their client, fail to understand that such economic losses can and...