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T. Levy Associates, Inc. v. Kaplan

United States District Court, E.D. Pennsylvania

August 21, 2017

KAPLAN, et al.


          KEARNEY, J.

         We now return to the unfortunate saga of an elderly widowed father suing his adult daughter and son-in-law for racketeering and related misconduct in managing the father's beauty supply business resulting in family fissure better resolved outside the courtroom. As the family could not amicably resolve their money issues for reasons best left to their consciences, we asked our jury to address the credibility of many witnesses in determining whether the daughter and son-in-law, along with her separate beauty supply business, engaged in racketeering, misappropriation, conversion, breach of fiduciary duty and tortious interference in light of defenses of the father's consent, knowledge and waiver. After the jury unanimously found the daughter, son-in-law, and their company liable for most, but not all of the father's claims, they now move to set aside the jury's verdict on grounds largely waived at trial or not constituting clear error. This lawsuit further fractures a once-close family over money but, having chosen to gamble on this jury route, we must respect the jury's consistent verdict for much, but not all, of the father's claimed damages based on the adduced evidence and correct instructions on the governing law. We deny the son-in-law's, daughter's, and her company's post-trial motion in the accompanying Order.

         I. Background.

         T. Levy Associates, Inc. ("the Company") is a beauty products company partially formed and largely owned by Ted Levy. In the mid-2000s, Ted Levy entrusted the Company's business operations to his son-in-law Michael Kaplan.[1] Ted Levy's daughter Nina Kaplan-whose spouse is Mr. Kaplan-owns a beauty products wholesale and retail operation called BLC Beauty, Inc. Nina Kaplan is a talented artist/graphic designer and relied upon her husband and bookkeeper to assist her in managing and operating BLC Beauty.

         In September 2016, the Company sued Mr. Kaplan, Mrs. Kaplan, and BLC Beauty for a variety of federal and state law claims, including violating the Racketeer Influenced and Corrupt Organizations Act ("RICO"), [2] conversion, breach of fiduciary duty, misappropriation of trade secrets, [3] and tortious interference with existing and prospective contractual relationships. Stated briefly, the Company's claims arose from Defendants' misappropriation and conversion of Company funds, products, and contractual relationships while Michael Kaplan managed the Company and Nina Kaplan owned and managed BLC Beauty.

         After discovery, summary judgment motions and an abundant variety of pretrial motions, we empaneled a jury to resolve multiple fact disputes in a family-run business largely relying on each other's good faith oral statements rather than lawyered documents. During the trial, the Company's damages expert David Anderson, a forensic accountant, testified the Company's damages exceeded $1, 660, 000.[4] After the Company's case-in-chief, Defendants did not move for judgment as a matter of law.[5]

         We held a charging conference with counsel. During our jury charge, we instructed the jury about the Company's burden of proof under the preponderance of the evidence standard. We then instructed the jury on Defendants' burden of proof on their affirmative defenses:

Conversely, to the extent the defense has said something to you which they claim is a reason why they should win, not just accusing them, not just saying the plaintiff has not proven its case, but also claiming its claim or any defense, if they don't prove it to you by a preponderance, then they have not met their standard of proof[6]

         After we finished our charge, we invited counsel to sidebar to preserve any objection to our charge. Defendants objected to the preponderance of evidence instruction on their defenses, to the extent they raised any. But when we asked Defendants if they wanted us to provide a curative instruction, they declined:

[The Court:] Is there anything that counsel would like to see me at sidebar on any issue?
Mr. Dugan: No.
Mr. Winterhalter: The preponderance charge, you had added a contrary instruction that was not in here. There's a counterclaim in this case and you said that if the - you said if T. Levy Associates failed to meet its burden of proof, find in favor of the defendant. If the defendant did not present evidence to establish defenses, then you are held to the same standard. I believe that this case -
The Court: You have no defenses.
Mr. Winterhalter: I do have defenses, but if they don't produce any evidence of the claim then they lose.
The Court: Sure, I think I said that.
Mr. Winterhalter: You did say that, but then you also said if the Defendants don't meet their burden of the preponderance of the evidence, then they lose.
The Court: What I meant is -1 think what I said was the defense does not - the defense does not - you can't accept their defense if they have not met the preponderance of the evidence. I thought you were raising defenses.
Mr. Winterhalter: I certainly am rising [sic] defenses. There is not an issue with that.
The Court: I can read the sentence again. I don't really care.
Mr. Winterhalter: I don't think it's necessary.
The Court: Your objection is noted.
Mr. Winterhalter: I think I am fine.[7]

         The jury rendered a verdict against Defendants on all but one of the Company's remaining claims.[8] For example, the jury found Mr. Kaplan did not misappropriate trade secrets, but both he and BLC Beauty, Inc. tortiously interfered with the Company's contractual relationships.[9] The jury awarded damages totaling $1, 044, 175, approximately $600, 000 less than the damages calculated by Defendants' damages expert.[10] On June 30, 2017, we entered judgment against Mr. Kaplan, Mrs. Kaplan, and BLC Beauty, Inc. in the amounts of $966, 262.50, $583, 132.00, and $583, 130.50, respectively.[11]

         II. ...

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