Fairfax Fin. Holdings v. S.A.C. Capital Mgmt.
| Decision Date | 12 January 2023 |
| Docket Number | A-3647-18 |
| Court | New Jersey Superior Court — Appellate Division |
| Parties | FAIRFAX FINANCIAL HOLDINGS LIMITED, Plaintiff, v. S.A.C. CAPITAL MANAGEMENT, LLC, S.A.C. CAPITAL ADVISORS, LLC, S.A.C. CAPITAL ASSOCIATES, LLC, SIGMA CAPITAL MANAGEMENT, LLC, and STEVEN A. COHEN, Defendants-Respondents, and CRUM & FORSTER HOLDINGS CORP., Plaintiff-Appellant/ Cross-Respondent, and EXIS CAPITAL MANAGEMENT, INC., EXIS CAPITAL, LLC, EXIS DIFFERENTIAL PARTNERS, L.P., and EXIS INTEGRATED PARTNERS, L.P., Defendants-Respondents/ Cross-Appellants, and ADAM D. SENDER and ANDREW HELLER, Defendants-Respondents, and SPYRO CONTOGOURIS, MAX BERNSTEIN, MAX BERNSTEIN, MI4 INVESTORS, LLC, MI4 RECONNAISSANCE LLC, MI4 LIMITED PARTNERSHIP, ROCKER PARTNERS, L.P., COPPER RIVER PARTNERS, L.P., DAVID ROCKER, THIRD POINT LLC, DANIEL S. LOEB, JEFFREY PERRY, MORGAN KEEGAN &COMPANY, INC., JOHN D. GWYNN, CHRISTOPHER BRETT LAWLESS, INSTITUTIONAL CREDIT PARTNERS, LLC, WILLIAM GAHAN, JAMES S. CHANOS, and KYNIKOS ASSOCIATES LP, Defendants. |
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
Argued December 20, 2022
On appeal from the Superior Court of New Jersey, Law Division Morris County, Docket No. L-2032-06 and L-5000-06.[1]
Michael J. Bowe (Brown Rudnick LLP) of the New York bar admitted pro hac vice, and Bruce H. Nagel argued for appellant/cross-respondent (Nagel Rice LLP, attorneys; Michael J. Bowe and Lauren Tabaksblat, of counsel and on the briefs; Bruce H. Nagel and Andrew L. O'Connor, on the briefs).
Benjamin P. McCallen (Willkie Farr &Gallagher LLP) of the New York bar, admitted pro hac vice, argued the cause for respondents S.A.C. Capital Management, LLC, S.A.C. Capital Advisors, LLC, S.A.C. Capital Associates, LLC, Sigma Capital Management, LLC, and Steven A. Cohen (Weil, Gotshal &Manges, LLP, attorneys; Diane P. Sullivan, Benjamin P. McCallen, and Martin B. Klotz (Willkie Farr &Gallagher LLP) of the New York bar, admitted pro hac vice, on the brief).
Cindy Nan Vogelman argued the cause for respondents/cross-appellants Exis Capital Management, Inc., Exis Capital, LLC, Exis Differential Partners, L.P., and Exis Integrated Partners, L.P., and respondents Adam D. Sender and Andrew Heller (Chasan Lamparello Mallon &Cappuzzo, PC, attorneys; Cindy Nan Vogelman, of counsel and on the briefs; Qing H. Guo, on the briefs).
Before Judges Geiger, Susswein and Fisher.
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Plaintiff Crum &Forster (C &F) is a New Jersey corporation which is wholly owned by plaintiff Fairfax Financial Holdings, Limited, a Canadian corporation listed on the New York Stock Exchange. Plaintiffs came to believe in 2003 that defendants were conspiring to impugn plaintiffs' financial stability to cause a reduction in their value that would allow defendants to profit on short sales of plaintiffs' securities. Plaintiffs filed this action in 2006, alleging that defendants had engaged in racketeering and conspired to commit business torts. Most of the defendants are New York financial firms and New York residents; plaintiffs also alleged that certain New Jersey residents had conspired with the New York defendants and that some acts in furtherance of defendants' harmful enterprise were committed or had impacts in New Jersey.
By late 2012, all plaintiffs' claims had been summarily dismissed, generating an earlier appeal that concluded with our affirmance in part and reversal in part. Fairfax Fin Holdings Ltd. v. S.A.C. Capital Mgmt., LLC, 450 N.J.Super. 1 (App. Div. 2017). Following that decision, the S.A.C. defendants[2]successfully moved for a dismissal for lack of personal jurisdiction. Defendants
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Spyro Contogouris and Morgan Keegan &Company, Inc., amicably resolved their differences with plaintiffs. And the remaining defendants - the Exis defendants,[3] their principal Adam Sender, and their chief operating officer, Andrew Heller - proceeded to a six-week trial that started in September 2018.
C &F[4] had elected at trial not to pursue further its "tortious interference claim" but instead chose to "proceed on the two claims . . . left": commercial disparagement and conspiracy. On October 12, 2018, the jury returned its verdict. The jury found liability on both remaining claims and awarded C &F compensatory damages of $5,464,000. The jury was also asked to assign responsibility for the wrongs it found had occurred, even for those defendants no longer participating. The jury assigned no responsibility to Adam D. Sender, Andrew Heller, Steven A. Cohen, Daniel S. Loeb, and Kynikos Associates LP, but assigned responsibility to the others as follows:
The jury also awarded punitive damages of $3,000,000 against the Exis defendants, $2,250,000 against Sender, and $250,000 against Heller.
The judge later granted Sender's and Heller's motions to vacate the punitive damage awards against them, and correspondingly denied C &F's motion to mold the compensatory damages verdict by making Sender and Heller personally liable, in accordance with the jury verdict, and thus liable for punitive damages. The judge also denied Exis's motion to vacate the compensatory damages award for failure to prove special damages, as well as its motion to set off the amount of Morgan Keegan's settlement from the compensatory and punitive damage awards. The judge also granted a motion to render Exis liable for the full amount of compensatory damages due to joint and several liability for conspiracy, and it issued a superseding order to that effect.
On appeal, C & F argues that the trial judge erred (1) by refusing to reconsider a choice-of-law determination, (2) by dismissing the S.A.C. defendants for lack of personal jurisdiction, (3) by failing to mold the verdict to attribute personal liability to Sender and Heller in light of the finding against
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Exis; and (4) by giving a charge on causation that mistakenly compelled the jury to deny recovery of lost profits from prospective customers, while Exis crossappeals, arguing the judge erred (5) by denying its pretrial and post-trial motions to dismiss because C &F failed to prove special damages, and (6) by failing to set off Morgan Keegan's settlement payment from the damages awarded. For the reasons that follow, we reject all these arguments except the fourth and the sixth.
C &F first claims that the trial judge erred by denying its pretrial motions for reconsideration of the law to be applied to its common law and racketeering claims. We disagree.
In our prior decision, the choice-of-law analysis presupposed what Fairfax and C &F consistently maintained: their finances and interests were too intertwined to be separated for any purpose and, in particular, attempts to identify a financial harm or loss from the scheme that might affect only one of them without also substantially redounding upon the other. Fairfax, 450 N.J.Super. at 34-36. We also observed that "[a] sudden alteration" in that perspective was "sought by no one here, even now on appeal." Id. at 36.
We recognized that defendants' alleged misconduct "predominantly occurred in New York rather than New Jersey and was primarily aimed at
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harming plaintiffs indirectly by damaging their reputation by influencing the mostly New York-based financial markets and financial news media." Id. at 49. In tackling the choice-of-law issues, we recognized that New York and New Jersey had manifestly different policies for defining and policing racketeering, but that New York had the most significant relationship with the parties and the alleged misconduct. And so, we concluded that New York law should govern the racketeering claims, which compelled their dismissal because New York does not recognize such a private right of action. Id. at 36-57. We reached the same conclusion in determining that New York law would apply to the remaining common law claims. Id. at 63 &n.40.
Following our remand, C &F unsuccessfully moved for reconsideration of our determination that New York law should apply to its common law claims. C &F based its motion on the fact that Fairfax's absence from the remaining proceedings meant the case was no longer about what we had seen as Fairfax's and C &F's New York-centric and impenetrable tangle of interests, and that the case had instead been reduced to the harm that C &F - a New Jersey entity -had sustained from the common law torts.
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After careful consideration of the parties' arguments, we are satisfied that the trial judge correctly recognized that our decision continued to control the proceedings. Indeed, if our view had been limited, we would have then so held.
At another hearing closer to the start of trial, the judge denied C &F's motion to reconsider the denial of reconsideration. The judge found this court's description of plaintiffs' assertions of an "alleged enterprise of multistate disparagement" encompassed all the misconduct they urged, and that it all was covered by our ruling that the "weight of the conduct" was in New York. Finding our choice-of-law ruling could be revisited only "in truly exceptional circumstances" that revealed adherence would be unworkable or unjust, the motion was denied.
The trial judge correctly rejected C &F's contentions which were based on an erroneously perceived change in the status of the parties or claims between the prior appeal and the remand necessitating a reconsideration of the law to be applied. Indeed, there had been...
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