Butler v. Ross
Filing
126
OPINION AND ORDER: This diversity action arises from a dispute between plaintiff Susan Butler (Butler) and her fiduciary, defendant Norman Ross (Ross). Following a bench trial, it is determined that Butler is entitled to restitution in the amount of $350,200 from Ross with prejudgment interest.....Butler is entitled to $380,000 from Ross, based on the maturity value of the securities listed in the Lebenthal account summary from March 2006, with prejudgment interest at a rate of nine percent, calculated from the date of maturity of the respective securities, less $29,800. (Signed by Judge Denise L. Cote on 10/3/2017) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
SUSAN BUTLER,
:
Plaintiff,
:
:
-v:
:
NORMAN ROSS,
:
:
Defendant.
:
:
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16cv1282 (DLC)
OPINION AND ORDER
APPEARANCES:
For the Plaintiff:
Barry R Fisher
The Barry Fischer Law Firm LLC
555 Fifth Avenue
Suite 1700
New York, NY 10036
For the Defendant:
Martin Druyan
Martin Druyan and Associates
405 7th Avenue
New York, NY 10123
DENISE COTE, District Judge:
This diversity action arises from a dispute between
plaintiff Susan Butler (“Butler”) and her fiduciary, defendant
Norman Ross (“Ross”).
Following a bench trial, it is determined
that Butler is entitled to restitution in the amount of $350,200
from Ross with prejudgment interest.
PROCEDURAL HISTORY
Butler filed this lawsuit on February 19, 2016.
Butler is
an Australian citizen and a resident of Montreal, Canada.
complaint pleads only one count seeking an accounting.
to dismiss was denied on June 14, 2016.
3264134 (S.D.N.Y June 14, 2016).
The
A motion
Butler v. Ross, 2016 WL
On July 11, 2017, Butler’s
motion for summary judgment was granted in part.
Ross, 2017 WL 2963497 (S.D.N.Y. July 11, 2017).
Butler v.
The Opinion
held that Butler was entitled to an accounting, but the request
for an immediate money judgment was denied.
Id. at *8.
A bench trial was held October 26, 2017 to determine the
amount of restitution to which Butler is entitled.
Without
prior objection from the parties, the trial was conducted in
accordance with the Court’s customary practices for non-jury
proceedings, which includes taking direct testimony from
witnesses through affidavits submitted with the parties’
pretrial order submissions.1
Butler submitted her own affidavit
and the affidavit from handwriting expert Patricia Siegel.
submitted his own affidavit.
Ross
The parties also served copies of
exhibits that they intended to offer as evidence in chief at
trial.
At trial, defense counsel requested for the first time that the
plaintiff and the defendant be required to present their direct
testimony live. The untimely request was denied.
1
2
At trial, the plaintiff called two witnesses: Susan Butler
and Patricia Siegel.
They both swore to the truth of their
previously submitted affidavits and were cross-examined.
Ross’s
affidavit was received as his direct testimony; he was not cross
examined.
The trial record reflects which documents were
offered as trial evidence and received as such.
This Opinion presents the Court's findings of fact and
conclusions of law.
The findings of fact appear principally in
the following Background section, but also appear later in the
Opinion.
The issue of the defendant’s competency is addressed
at the end of the Opinion.
BACKGROUND
Susan Butler was born in Montreal, Canada, received a
doctorate from the University of London in England, and spent
She became a Professor at the
her career working in Australia.
University of Sydney.
She retired in 1996.
During that time,
Butler also worked as a clinical psychologist in private
practice.
She earned what she characterizes as “considerable
income” from a self-published workbook series for learning
disabled children entitled RATPACK.
Beginning in roughly 1986, and continuing until 1998,
Butler gave some of her earnings to Ross to invest on her
behalf.
Butler has not offered at this trial any
3
contemporaneously created documents, such as checks or wire
transfer records, that record those transfers to Ross.
Instead,
she has relied almost exclusively upon fragmentary financial
records and documents in Ross’s handwriting that reflect his
receipt of various amounts from Butler.
Of particular
importance, Ross gave Butler a handwritten list of the amounts
he received from her.
The 26 entries on that list, which range
in dates from February 17, 1986 to May 20, 1998, reflect a total
transfer to Ross of $212,248.93 (“Summary Accounting”).2
Many of
the entries on the Summary Accounting include a check number for
checks issued from Butler’s account at the National Australian
Bank (“NAB”).
In addition to checks issued by NAB, the Summary Accounting
reflects 2 transfers in a total amount of $4,100 from Dominion
Securities; 1 transfer in a total amount of $4,500 from Butler’s
friend, Helen Findlay; 1 transfer from a traveler’s check for
$300; and 1 transfer of $7,131.74, although the method of that
transfer is unclear.
Butler explains that the Dominion
Securities account was an account that her father had created
for her in Montreal.
Butler testified that the $7,131.74
Butler’s typed version of Ross’s handwritten list omits one
entry from the handwritten list, a $602.69 transfer from January
24, 1995. The correct total amount from Ross’s list is
$212,248.93, not $211,646.24.
2
4
transfer came from the disposition of household items from her
mother’s house.
In four handwritten documents, which bear dates between
1988 and 1993, Ross acknowledges that he has received money from
Butler, intends to invest or otherwise manage it for her, and
will eventually return it to her.
In the event he dies before
it has been returned, he explains that he has instructed the
executors of his will to return the money to her.
I. The Letters
a. August 1, 1988
Ross wrote Butler a handwritten letter on August 1, 1988.
It lists three executors for his estate “to assist you and
answer any question about the whereabouts of your assets that I
am handling for you.”
b. September 8, 1989
On September 8, 1989, Ross wrote Butler a handwritten
letter describing four “items of your property paid for with
your personal funds that I am holding for you.”
They are: (1)
$21,000 in “stripped U.S. bonds, called CATS and TIGR" bought by
Ross for Butler in 1987 and 1988; (2) “$10,500 in U.S. funds
plus $50 additional totaling $10,550;” (3) “$56,00 in Australian
funds which is worth $4,172 . . . in U.S. Funds;” (4) “A $6,000
bank check in U.S. funds.”
The letter concludes, “therefore,
the total of U.S. funds belonging to you that I am holding for
5
you at this date is $10,550 plus $4,172 + $6,000, totaling
$20,722 U.S.”
c. April 9, 1991
In an April 9, 1991 handwritten document (“1991 Letter”)
Ross states that he is “holding” $11,380.66 belonging to Butler.
The document reads in pertinent part:
$11,380.66 . . . is to be returned to her out of my estate.
[I]n the event that it has not been returned to her or for
expenses or otherwise put it a security in her name at or
by time of my death. If it is in a security in her name
that I am holding in amount above or so. It is (the
security) is to be given [to] her after my death, from my
vault, together with any other securities (2) in her name
in my vault.
It is signed Norman Ross in several places.
The 1991 Letter is
particularly important to this litigation since Ross produced a
duplicate of this letter from his own files during discovery.
d. October 24, 1993
In an October 24, 1993 handwritten letter, Ross
acknowledged that as of that date he was holding $29,760 of
Butler’s property.
Echoing language from the 1991 Letter, Ross
writes:
It is to be returned to her out of my estate in the event
that it has not been returned or used for her expenses or
otherwise put in a security in her name at or by the time
of my death. If it is in a security in her name it is to
be given to her if it is not already in her possession.
Ms. Butler now possess 4 Bonds in her name.
6
II. The Bonds
Sometime after 1998 but before Butler permanently moved to
Canada in 2007, Ross gave her a one page handwritten document
listing five securities that he was holding for her, and
photocopies of the five bonds.
They are: (1) “Zero Coupon
Principal TIGR 000009,” (2) “CATS 1107923,” (3) “CATS 1107432,”
(4) “TIGR Rr5156,” (5) “Zero Coupon Treasury Obligation Int.”
It appears that items one through four on this handwritten
document refer to the bonds referenced in Ross’s September 8,
1989 letter to Butler.
Based on the information contained in
Ross’s handwritten list and the incomplete photocopies of the
bonds, the evidence indicates the following:
(1) Zero Coupon Principal TIGR: Purchased November 7, 1985.
Paid $11,817.50. Maturity date of May 15, 2004 at $50,000.
(2) CATS 1107923: Unclear when purchased. Unclear what amount
paid. Maturity date of May 14, 2004 at $50,000.
(3) CATS 1107432: Purchased May 5, 1987. Paid $10,524.
Maturity date of May 15, 2009 at $25,000.
(4) TIGR Rr5156: Purchased November 7, 1984. Paid $11,817.50.
Maturity date of May 15, 2004 at $50,000.
(5) Zero Coupon Treasury Obligation Interest: Unclear when
purchased. Paid $10,000. Maturity date of May 5, 2000 at
$20,000.
The decipherable serial numbers found on the photocopies of the
bonds match the serial numbers in the handwritten list of bonds.
While much of the precise details of the bonds remain unclear,
the evidence indicates that there existed five bonds, apparently
purchased in or before 1987, all in Susan Butler’s name, which
had a total value of $195,000 upon maturity.
7
III. Handwriting Analysis
The Summary Accounting and these other documents were all
written by Ross.
This is confirmed in several different ways.
One, a copy of the 1991 Letter was produced in discovery from
Ross’s files.
The writing on this document is entirely
consistent with the writing on the Summary Accounting and the
other documents described above.
This similarity extends to
Ross’s signature on the 1991 Letter and on the 1988, 1989, and
1993 letters.
Moreover, both the 1993 and 1991 letters make
reference to past communications written by Ross to Butler.3
The
similarity in handwriting is apparent to the untutored eye, but
is confirmed by testimony from plaintiff’s handwriting expert.
In her expert report, Patricia Siegel states “with a reasonable
degree of certainty” that Ross wrote the letters dated August 2,
1988, September 9, 1989, and October 24, 1993.
She explains
that this level of certainty is a “definite conclusion of
identity.”
To make this determination, she used the 1991
Letter, printed in various levels of darkness, as a known
exemplar.
At trial, the defendant did not cross—examine Siegel
regarding her determinations.
From the October 24, 1993 letter: “The above statement cancels
and supersedes any and all previous statements written or oral,
of moneys I am holding for or owe to Dr. Butler.” From the
April 9, 1991 letter: “The above statement cancels and
supersedes any previous statements written or oral of moneys I
am holding for or owe to Dr. Susan R. Butler.”
3
8
IV. Lebenthal Account
At some point, Ross opened an investment account in
Butler’s name at Lebenthal.
Ross.
The account was “in care of” Norman
An incomplete account statement for the period January
through March 2006 reflects that the account held $380,000 in
fixed income securities for Butler’s benefit.
The securities
were transferred out of the account on March 11, and the account
value was “0” as of March 31, 2006.
reproduced here:
9
The account summary is
Date
Account
Type
Transaction Quantity
11Mar Cash
ASSET TRF
($82,000.00)
11Mar Cash
ASSET TRF
($75,000.00)
11Mar Cash
ASSET TRF
($50,000.00)
11Mar Cash
ASSET TRF
($58,000.00)
11Mar Cash
ASSET TRF
($41,000.00)
11Mar Cash
ASSET TRF
($39,000.00)
11Mar Cash
ASSET TRF
($35,000.00)
10
Description
Cert Accrual Ser Q
05/07
Treas Secs Int Pmt
CPN o.ooo% Due
05/15/07
CUSIP 156884VS4
ACCT# 970503
Cert Accrual Ser Q
05/09
Treas Secs Int Pmt
CPN o.ooo% Due
05/15/09
CUSIP 156884VW5
ACCT# 970503
US Treas Strips 11/11
Interest PMT
Due 11/15/11
DTD 11/15/85
CUSIP 912833JX9
ACCT# 970503
US Treas Strips
11/15/08
Interest PMT
Due 11/15/08
DTD 11/15/84
CUSIP 912833GD8
ACCT# 970503
US Treas Strips 11/12
Interest PMT
Due 11/15/12
DTD 11/15/85
CUSIP 912833JZ4
ACCT# 970503
US Treas Strips 11/10
Interest PMT
Due 11/15/10
CUSIP 912833JV3
ACCT# 970503
US Treas Strips 08/13
Interest PMT
Due 08/15/13
CUSIP 912833DE7
ACCT# 970503
The trial record contains no documentary evidence regarding the
disposition of these assets worth $380,000.
But, with the
exception of $28,000, Ross never provided these funds or
securities to Butler.
Indeed, Butler never knew the account’s
existence until this litigation.
V. Butler’s Return to Canada
Sometime around 2006, Butler left Australia and moved to
what has become her permanent residence in Montreal, Canada.
In
2006, she purchased a home in Montreal for approximately 600,000
CAD.
Before leaving Australia for Canada, she copied the
Summary Accounting and other documents she had received from
Ross.
Ross made two payments to Butler in 2011.
He paid her
$18,000 on May 31, 2011 from his personal Merrill Lynch account,
and he paid her another $10,000 in August 2011.
At trial,
Ross’s counsel produced eighteen traveler’s checks in the amount
of $100 each which Butler had previously given to Ross.
Butler
agreed to accept these checks and to offset the amount of
restitution she seeks with the total $1,800.
DISCUSSION
After summary judgment, the issues remaining to be tried
were the amount owed to the plaintiff and the defendant’s
affirmative defenses of laches and unclean hands.
11
Butler v.
Ross, 2017 WL 2963497, at *8 (S.D.N.Y. July 11, 2017).
Those
issues are addressed below and in that order.
I. The Accounting
Under New York law,4 a party seeking an accounting must
establish four conditions:
(1) relations of a mutual and confidential nature;
(2) money or property entrusted to the defendant imposing
upon him a burden of accounting;
(3) that there is no adequate legal remedy; and
(4) in some cases, a demand for an accounting and a
refusal.
Butler, 2017 WL 2963497, at *4 (citation omitted).
The right to
an accounting is “premised upon the existence of a confidential
or fiduciary relationship and a breach of the duty imposed by
the relationship respecting property in which the party seeking
the accounting has an interest.”
Dee v. Rakower, 976 N.Y.S.2d
470, 478 (2d Dep’t 2013) (citation omitted).
At the summary
judgment stage, the Court held that Butler is entitled to an
accounting.
Butler, 2017 WL 2963497, at *8.
Butler’s claim for an accounting under New York law is an
equitable claim.
When a party bringing an accounting claim
primarily seeks monetary damages, “[t]he accounting is merely a
method to determine the amount of the monetary damages.
The
New York law applies to this claim. See Butler v. Ross,
16cv1282 (DLC), 2017 WL 2963497, at *4 (S.D.N.Y July 11, 2017);
Butler v. Ross, 16cv1282 (DLC), 2016 WL 3264134, at *2 (S.D.N.Y.
June 14, 2016).
4
12
action therefore sounds in law and not in equity.”
Arrow
Commc’n Labs., Inc. v. Pico Prods., Inc., 632 N.Y.S.2d 903, 905
(App. Div. 1995) (citation omitted).
Where, however, the action
seeks “not to impose personal liability on the defendant, but to
restore to the plaintiff particular funds or property in the
defendant's possession,” such action is an equitable claim for
restitution.
Pereira v. Farace, 413 F.3d 330, 340 (2d Cir.
2005)
In an accounting proceeding, “the party submitting the
account has the burden of proving that he or she has fully
accounted for all the assets.”
In re Digiovanna 48 N.Y.S.3d
508, 509 (App. Div. 2017) (citation omitted).
“This evidentiary
burden does not change in the event the account is contested.”
Matter of Estate of Schnare, 594 N.Y.S.2d 827, 828 (App. Div.
1993).
“While the party submitting objections bears the burden
of coming forward with evidence to establish that the account is
inaccurate or incomplete, upon satisfaction of that showing the
accounting party must prove, by a fair preponderance of the
evidence, that his or her account is accurate and complete.”
Id.
Ross has failed to submit a formal accounting to Butler.
Ross never responded to Butler’s September 24, 2015 demand for
an accounting.
Butler, 2017 WL 2963497, at *5.
13
Nor has Ross
provided Butler with an accounting since this Court held that
Butler is entitled to one.
“Ordinarily the fiduciary's failure to satisfy his or her
burden of proving the accuracy or completeness of the account
results in that individual being surcharged with the amount of
the inaccuracies.”
829.
Matter of Estate of Schnare, 584 N.Y.S.2d at
But the court has “broad discretion to make such order or
decree as justice shall require.”
Id.
Here, both the plaintiff
and the defendant’s accounts are incomplete and inaccurate.
Both parties have failed to keep reliable records.
have a history of hostility.
The parties
To accurately reconstruct the
account’s activities over a confused two-decade history is
impossible.
Nevertheless, there is overwhelming evidence that Ross
controlled certain amounts of Butler’s assets for her benefit.
The Lebenthal account is particularly telling.
Ross controlled
this account; it held securities in Butler’s name; and on a
single day in 2006, at least $380,000 was liquidated from the
account.
Given the reliability of the account statement, even
if incomplete, Butler is owed at least the present value of the
assets listed on the third page of the Lebenthal statement minus
any repayments that have been given to her since 2006.
Butler is seeking $759,734.05 in restitution from Ross.
Although it is clear that Ross controlled part of Butler’s
14
finances, there is not enough evidence to justify this amount.
She urges the Court to add together the sums found in the
letters, the handwritten Summary Accounting, the value of the
bonds, and the amount missing from the Lebenthal account.
This
number takes into account the $18,000 Butler acknowledges having
received from Ross, as well as the $1,800 in checks presented at
trial.
But Butler has no way of showing that there is no
overlap between the amounts discussed in the letters, the
Summary Accounting, the bonds purchased in or before 1987, and
the Lebenthal account bonds from 2006.
The evidentiary record
does not allow this Court to decipher whether the documents are
accounting for the same sums.
The Lebenthal account is the most
current and most reliable submission.
It definitively shows
that there were securities in Butler’s name in an account
controlled by Ross and that the total value of that account was
liquidated in 2006.
At trial, Ross offered no evidence to dispute that the
bonds held in the Lebenthal account represented investments he
made with Butler’s money and for her benefit.
Instead, he
argued that Butler may have received some or all of this money
when she purchased her Montreal home in 2006, that she is not
entitled to receive any money from him until he dies, and that
he is too incompetent to proceed with a defense in this action.
15
None of these arguments has merit.
As noted, the issue of the
defendant’s competency is addressed at the end of this Opinion.
There is no evidence at all that Ross ever repaid Butler
any funds that she gave to him to invest for her other than
$28,000, and at trial another $1,800 in travelers checks.
Ross
has offered no evidence that Butler used any other money
returned by Ross to purchase her Canadian home.
Ross simply
asserts that the purchase of Butler’s Montreal home necessarily
proves that any money she had given him was repaid.
Butler
explained credibly at trial the sources of the down payment for
the home and there is no reason to doubt her testimony.
The
trial record establishes therefore that Butler purchased the
property by using other funds.
Second, Ross has offered no evidence to support his theory
that he and Butler had agreed that he could hold her money until
he died and that she would only be entitled to recover her
assets upon his death.
contrary.
The trial evidence is entirely to the
As the letters of 1991 and 1993 reflect, Ross assured
Butler that in the event her money had not been returned before
his death, he had taken steps to ensure it would be returned
after he died.
This is not, therefore, a dispute about
entitlement to recovery under a will.
Ross also attempted at trial to revisit an issue that was
decided at summary judgment: his status as Butler’s fiduciary.
16
At summary judgment, the Court held that Ross was a fiduciary
and that Butler was entitled to an accounting.
The purpose of
the trial was to determine the amount of restitution damages
Butler is entitled to.
Nevertheless, Ross attempted to refute
this finding at trial.
He was, however, unsuccessful.
Indeed,
Ross only helped to reinforce the determination of his status as
fiduciary: by arguing that he was holding on to money for
Butler, but only to be recovered upon his death, Ross
essentially conceded that he held and controlled her finances.
Ross also argued, in the alternative, that while he may have
received money from Butler, any money given to him was given as
a gift.
The evidence belies this theory.
Ross’s letter to
Butler indicate that he was investing her money for her benefit.
Moreover, Ross opened accounts and bought bonds in Butler’s
name, something he would not have done had the money been a gift
for him to keep as his own.
II. Prejudgment Interest
At trial, the Court noted that any award to Butler would be
calculated with a prejudgment interest rate of nine percent, the
New York statutory interest rate, see N.Y. C.P.L.R § 5004
(McKinney 2017).
The Court instructed the parties that they
could raise objections to the application of this rate through
written submissions.
Ross has objected, arguing that the Court
should use its discretion to either deny any prejudgment
17
interest at all, or to deviate from the rate of nine percent.
Ross notes that Butler did not specifically request prejudgment
interest.
Under New York law, interest “shall be recovered upon a sum
awarded because of a breach of performance of a contract, or
because of an act or omission depriving or otherwise interfering
with title to, or possession or enjoyment of, property, except
that in an action of an equitable nature, interest and the rate
and date from which it shall be computed shall be in the court's
discretion.”
N.Y. C.P.L.R. § 5001(a) (McKinney 2017).
Under
this section, prejudgment interest is recoverable as a matter of
right, with the exception that an award of interest on an
equitable claim is discretionary.
Id.
Butler’s claim of
accounting is an equitable claim, Butler, 2017 WL 296349 at *4.
Here, prejudgment interest is not mandatory but the Court,
in the exercise of its discretion, determines that prejudgment
interest at the rate of nine percent is appropriate.
The Court
may impose this rate regardless of whether Butler specifically
requested it.
Malls v. Bankers Trust Co., 717 F.2d 683, 694 (2d
Cir. 1983) (“[A] plaintiff's failure to pursue his request for
prejudgment interest during the trial or even to demand such
interest in his complaint does not amount to a waiver of his
right to interest.”).
“[I]nterest shall be computed upon each
item from the date it was incurred or upon all of the damages
18
from a single reasonable intermediate date.”
5001(b) (McKinney 2017).
N.Y. C.P.L.R. §
Here, given that Butler’s recovery is
limited to the bonds listed in the Lebenthal account, the
interest calculation is straightforward: prejudgment interest on
each bond should be calculated from its respective date of
maturity.
III. Doctrine of Laches
Ross urges that Butler’s equitable accounting claim is
barred by the doctrine of laches.
Laches is defined as “such
neglect or omission to assert a right as, taken in conjunction
with the lapse of time, more or less great, and other
circumstances causing prejudice to an adverse party, operates as
a bar in a court of equity.”
Capruso v. Village of Kings Point,
23 N.Y.3d 631, 641 (2014) (citation omitted).
“The essential
element of this equitable defense is delay prejudicial to the
opposing party.”
Id. (citation omitted).
“[T]he doctrine of
laches has no application when plaintiffs allege a continuing
wrong.”
Id. at 642 (citation omitted).
The wrong alleged by
Butler was continuing until the moment of open repudiation.
Therefore, a laches analysis is not relevant until the time
after Ross’s repudiation of his fiduciary obligation in
September 2015.
See Butler, 2017 WL 2963497, at *6.
A
September 1, 2017 Order limited Ross’s laches argument to the
19
sixth month period between September 2015 and February 19, 2016,
when Butler filed her complaint.
There is no minimum elapse of time necessary for a finding
of laches.
“Because the effect of delay on the adverse party
may be crucial, delays of even under a year have been held
sufficient to establish laches.”
Matter of Schulz v. State of
New York, 81 N.Y.2d 336, 348 (1993).
prejudice suffered by defendant.
A court considers
“Prejudice may be established
by a showing of injury, change of position, loss of evidence, or
some other disadvantage resulting from the delay.”
Skrodelis v.
Norbergs, 707 N.Y.S.2d 197, 198 (App. Div. 2000).
Ross has not shown that the six-month delay between Ross’s
repudiation and Butler’s filing of her complaint prejudiced him.
Ross’s main contentions with respect to this defense are that he
is old and infirm and that documents have disappeared over the
decades.
Ross argues that his injury was suffered because of a
lengthy delay of ten, twenty, or even more, years in filing the
action.
This assertion is beyond the scope of the six-month
laches analysis.
While Ross may be in ill health and his memory
is fading, he has not shown that those conditions worsened, to
the extent that he would be prejudiced, during the relevant
period of time.
There is nothing to show that Ross was
prejudiced by Butler’s (at most six month) delay in commencing
this action.
Butler is not guilty of laches.
20
IV. Doctrine of Unclean Hands
Ross argues that Butler’s equitable accounting claim is
barred by the doctrine of unclean hands.
The doctrine of
unclean hands applies only “when the complaining party shows
that the offending party is guilty of immoral, unconscionable
conduct and even then only when the conduct relied on is
directly related to the subject matter in litigation and the
party seeking to invoke the doctrine was injured by such
conduct.”
Filan v. Dellaria, 43 N.Y.S.3d 353, 359 (App. Div.
2016) (citation omitted).
In his pleadings, Ross contends that Butler demonstrated
immoral and unconscionable conduct through direct and indirect
“death threats.”
At trial, Ross did not introduce any evidence
or argument with respect to his proposed unclean hands defense.
He therefore abandoned this defense.
V. Incompetence
Ross is aged and in ill health.
He attended the trial in a
wheelchair, assisted by two aids.
Ross complained at times that
he was ill and wanted to go home.
Defense counsel declined the
option of letting Ross be taken home.
While Ross sat quietly at
times, at other times he coughed loudly, spat into tissues held
by an aid, and asked to be taken out of his wheelchair and moved
into a chair at counsel’s table.
21
Due to his disruptive
behavior, midway through the trial the Court directed that he be
removed from the courtroom and taken to a witness room.
While Ross’s counsel raised the issue of Ross’s old age and
ill health throughout motion practice with respect to the
defense of laches, it was not until the eve of trial that Ross
raised the issue of his competency to stand for trial.
In a
September 25 letter, Ross requested a competency hearing, that
the case be dismissed, or that a mistrial be declared due to
Ross’ illness.
The Court denied this request and proceeded with
the trial.
Federal Rule 17(c) reads:
(c) Minor or Incompetent Person.
(1) With a Representative. The following
representatives may sue or defend on behalf of a minor
or an incompetent person:
(A) a general guardian;
(B) a committee;
(C) a conservator; or
(D) a like fiduciary.
(2) Without a Representative. A minor or an
incompetent person who does not have a duly appointed
representative may sue by a next friend or by a
guardian ad litem. The court must appoint a guardian
ad litem -- or issue another appropriate order -- to
protect a minor or incompetent person who is
unrepresented in an action.
Fed. R. Civ. P. 17(c).
At trial, the Court invited Ross’s
counsel to, by the end of the week, provide evidence concerning
Ross’s alleged incompetency.
Such evidence could be
from an appropriate court of record or a relevant public
agency indicating that the party had been adjudicated
incompetent, or . . . verifiable evidence from a mental
22
health professional demonstrating that the party is being
or has been treated for mental illness of the type that
would render him or her legally incompetent.
Ferrelli v. River Manor Health Care Center, 323 F.3d 196, 201
(2d Cir. 2003).
Ross has failed to produce any such evidence.
Based on the Court’s observations of Ross’s demeanor at trial
and the lack of evidence to support any claim of incompetency,
the Court finds that Rule 17(c) does not apply.5
In any event, even if Rule 17(c) did apply, a dismissal or
mistrial would not be the appropriate remedy. The Rule
instructs a court to appoint a guardian for an unrepresented
party deemed to be incompetent. Mr. Ross is represented by
counsel, and an attorney is considered a “representative.”
Berrios v. New Yrok City Housing Auth., 564 F.3d 130, 132 (2d
Cir. 2009). See also Cheung v. Youth Orchestra Foundation of
Buffalo, Inc, 906 F.2d 59, 61 (2d. Cir. 1990) (“It goes without
saying that it is not in the interests of minors or incompetents
that they be represented by non-attorneys.”). The Fifth and
Sixth Circuits have made a distinction between legal
representation and representation for the purposes of Fed. R.
Civ. P 17. See Zaro v. Strauss, 167 F.2d 218, 220 (5th Cir.
1948) (Under federal rule requiring appointment of guardian ad
litem for incompetent person “not otherwise represented,”
representation by counsel is insufficient.); Noe v. True, 507
F.2d 9, 12 (6th Cir. 1974) (“While it would not be at all
improper for the court, upon consideration, to appoint the
child's attorney as her guardian ad litem, the mere presence of
an attorney representing her in the action is insufficient of
itself to protect her personal interests in the action.”) The
Second Circuit has not followed suit.
5
23
CONCLUSION
Butler is entitled to $380,000 from Ross, based on the
maturity value of the securities listed in the Lebenthal account
summary from March 2006, with prejudgment interest at a rate of
nine percent, calculated from the date of maturity of the
respective securities, less $29,800.
Dated:
New York, New York
October 3, 2017
__________________________________
DENISE COTE
United States District Judge
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