Kaye v. Grossman
| Decision Date | 01 August 1999 |
| Docket Number | Docket No. 99-7571 |
| Parties | (2nd Cir. 2000) LESLIE BLOCK KAYE, Plaintiff-Appellee, v. MARC E. GROSSMAN, Defendant, LAURA ANNE GROSSMAN, Defendant-Appellant |
| Court | U.S. Court of Appeals — Second Circuit |
Appeal from a final judgment of the United States District Court for the Southern District of New York (Richard Owen, Judge) following a jury verdict in favor of plaintiff-appellee Leslie Block Kaye on claims of fraud, promissory estoppel, and unjust enrichment against defendant-appellant Laura Anne Grossman.
Reversed.
Leslie Block Kaye, Dill, Dill, Carr, Stonbraker & Hutchings, Denver, CO, submitted a brief for plaintiff-appellee.
Joel Martin Aurnou, White Plains, NY, submitted a brief for defendant-appellant.
Before: WALKER, NEWMAN, and SOTOMAYOR, Circuit Judges.
Defendant-appellant Laura Anne Grossman appeals from a judgment entered on April 19, 1999 by the United States District Court for the Southern District of New York (Richard Owen, Judge) in favor of plaintiff-appellee Leslie Block Kaye on Kaye's claims of fraud, promissory estoppel, and unjust enrichment. Following a jury verdict in favor of Kaye, the court denied Grossman's motion for judgment as a matter of law. For the reasons that follow, we reverse.
Plaintiff-appellee Leslie Block Kaye is an attorney practicing in Denver, Colorado. In the early 1980s, Kaye became acquainted with defendant Marc Grossman, also an attorney, in New York. The two became friendly, and Kaye began referring cases to Marc and otherwise communicating with him professionally until she moved from New York to Arizona in 1988. After leaving New York, Kaye heard from Marc only sporadically.
In January 1993, Marc contacted Kaye to request a $50,000 loan. According to Kaye, Marc informed her that he was desperate and that the money was a matter of life and death for his children. Though Kaye initially refused the loan, after repeated requests she relented and agreed to wire Marc the money. In return, Marc agreed to prepare a promissory note arranging for repayment of the loan at eight percent interest.
Kaye wired $50,000 to Marc on January 26, 1993. Marc sent no promissory note in return, however, nor did he contact Kaye for several months. When Kaye eventually called Marc at his office, he at first assured her that he would repay the loan, but soon stopped returning her phone calls. Kaye then called Marc's home and spoke to his then-wife, defendant-appellant Laura Grossman, about the loan. Between late 1993 and July 1994, Kaye spoke to Laura several times regarding her desire for repayment. According to Kaye, Laura assured her during these conversations that Kaye would be repaid from the proceeds of the upcoming sale of the Grossmans' home. In January 1995, Kaye sent Laura a letter stating that because Kaye was reluctant to file suit for the money, she was "rely[ing] on your word that you are an honorable person and will see that I am paid back following your sale of the house." Over the next few months, Kaye sent Laura several similar letters, repeatedly indicating that she was relying on a promise by Laura to repay the loan out of the proceeds from the sale of the Grossmans' home.
In February 1996, Kaye prepared a promissory note for the loan and sent it to Laura. Laura requested that Kaye revise the note to provide that demand would not be made until January 25, 1997 or the sale of the Grossmans' "marital residence," whichever came first. Kaye made the revisions and sent the note to Marc, who executed it on April 15, 1996. Laura did not sign the note.
At some point, Kaye learned that the $50,000 she had lent Marc had gone not to pay for an emergency relating to the Grossmans' children, but to replace client escrow funds that Marc had converted and to pay other expenses Marc had accumulated in the course of his legal practice. In 1996, in fact, Marc became the subject of a grievance proceeding before the bar association for converting his clients' escrow funds. As a result of this misconduct, Marc was disbarred in July 1996 and subsequently pled guilty to a state charge of grand larceny. Laura and Marc began divorce proceedings in 1995.
In June 1997, Laura sold the Grossmans' marital home, to which she held the title, for $880,000. After paying debts and other expenses, Laura retained approximately $48,000, but did not repay the loan out of the house proceeds. Kaye filed suit in November 1997 against both Laura and Marc for, inter alia, common law fraud based on their failure to repay the loan. Kaye also brought claims against Laura for promissory estoppel and unjust enrichment, alleging that she had relied to her detriment on Laura's promise of repayment out of the house proceeds and claiming that Laura had benefitted from the loan to Marc at Kaye's expense. On motions for summary judgment, Judge Jed S. Rakoff, to whom the case was then assigned, granted summary judgment against Marc on a contract claim based on the note and granted summary judgment in favor of Laura on Kaye's contract claim against her.
At the close of trial in March 1999, the jury returned a verdict in favor of Kaye on all remaining claims. On the fraud count, the jury awarded Kaye $50,000 in compensatory damages against both Marc and Laura, with eight percent interest calculated from the date of the loan. The jury also awarded Kaye punitive damages of $50,000, plus interest, on her fraud claim against Laura and $100,000, plus interest, in punitive damages against Marc. In addition, the jury found that Kaye was entitled to $50,000, plus interest, in compensatory damages on her promissory estoppel and unjust enrichment claims against Laura. The court subsequently denied the defendants' motions for judgment as a matter of law and entered judgment ordering Marc and Laura Grossman, jointly and severally, to pay $50,000 in compensatory damages, $24,865.75 in interest, and $304.00 in taxable costs. The court also ordered Laura to pay $50,000 and Marc to pay $100,000 in punitive damages. Laura now appeals from that judgment.
We review de novo a trial court's denial of judgment as a matter of law. See Muller v. Costello, 187 F.3d 298, 312 (2d Cir. 1999). In reviewing the court's decision, we must draw all inferences and view all evidence in the light most favorable to the non-moving party. See id. We may only set aside a jury verdict "when there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture." Id. (citations and internal quotation marks omitted).
To prevail on a fraud claim under New York law,1 a plaintiff must establish five elements by clear and convincing evidence: 1) the defendant made a material misrepresentation; 2) the defendant knew of its falsity; 3) the defendant possessed an intent to defraud; 4) the plaintiff reasonably relied on the misrepresentation; and 5) the plaintiff suffered damage as a result of the misrepresentation. SeeSchlaifer Nance & Co. v. Estate of Andy Warhol, 119 F.3d 91, 98 (2d Cir. 1997). To support her claim for fraud, Kaye argues that Laura misled her by promising that she would repay the money out of the proceeds from the sale of the Grossmans' house when Laura in fact had no intention of doing so. As a result, Kaye claims, she refrained from filing suit against Marc for the $50,000, believing that she would be repaid when the house was sold. Kaye argues that had she filed suit against Marc earlier, she would have enjoyed priority over his other creditors and thus would have been able to collect the money before he became judgment-proof. Assuming, arguendo, that Kaye successfully established the first four elements of her fraud claim against Laura, we nonetheless vacate the fraud verdict because Kaye failed to show any injury resulting from Laura's alleged misrepresentation.
To prove damage in a fraud action, a plaintiff must demonstrate that the defendant's conduct proximately caused her economic harm. See Kregos v. Associated Press, 3 F.3d 656, 665 (2d Cir. 1993). A fraud verdict may not rest on allegations of speculative or remote injury to the plaintiff; rather, the plaintiff must have suffered losses as a "direct, immediate, and proximate result" of the defendant's misrepresentation. Id. Kaye failed at trial to proffer evidence of any such injury. Although Kaye testified that s...
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