United Realty Advisors, LP v. Verschleiser

Background

United Realty Advisors, LP, Jacob Frydman, and Prime United Holdings, LLC brought consolidated cases against multiple defendants arising from a dispute between Frydman and his former business partner, Eli Verschleiser. After a jury trial, the jury found Verschleiser liable for violating and conspiring to violate the Racketeer Influenced and Corrupt Organizations Act, violating the Computer Fraud and Abuse Act, violating the Stored Communications Act, misappropriating trade secrets, breaching a contract, tortiously interfering with existing and prospective business relationships, and conversion. The jury awarded $2,133,005 in damages, including $1.4 million for trade-secret misappropriation, $33,000 for computer-hacking violations, nominal damages on several claims, and $700,000 in punitive damages.

On November 25, 2022, the court entered final judgment against Verschleiser for $3,234,906.04. That amount included the jury’s damages, trebled nominal damages under the RICO statute, punitive damages, and $1,101,899.04 in prejudgment interest on the successful state-law claims. The court had previously ruled that New York law required prejudgment interest at 9% per year, calculated from February 10, 2014, through November 7, 2022.

Postjudgment Motion

Verschleiser sought relief under Federal Rules of Civil Procedure 50, 59, and 60. Rule 50 allows judgment as a matter of law when no reasonable jury could reach the verdict. Rule 59 permits a new trial when the verdict is seriously erroneous or would result in a miscarriage of justice. Rule 60 permits relief from a final judgment in specified circumstances, including certain mistakes, newly discovered evidence, or other exceptional reasons.

The motion did not challenge the sufficiency of the evidence supporting the jury’s liability findings. Instead, Verschleiser challenged damages and related issues. He argued that the $1.4 million trade-secret damages award and the $33,000 computer-hacking damages award duplicated the nominal RICO damages; that the jury instructions and verdict sheet allowed duplicative recovery; that the compensatory damages were speculative; that the punitive damages were excessive and unsupported; that the prejudgment interest was improper; and that Federal Rule of Civil Procedure 68 required the plaintiffs to bear certain costs because they allegedly rejected a $2.5 million settlement offer.

Court’s Analysis

The court rejected the duplicative-damages argument. It explained that the RICO claims were based on alleged mail-fraud and wire-fraud acts, not on the separate computer-hacking and trade-secret claims. The claims had different elements, and the jury could have relied on mail- or wire-fraud evidence that did not establish hacking or trade-secret misappropriation. The court also noted that its instructions and verdict sheet told the jury to avoid awarding damages twice for the same injury. The court concluded that the verdict did not show any inconsistency or duplicative recovery.

The court also found adequate evidence for the compensatory damages. Testimony supported the $1.4 million trade-secret award by showing that the misappropriation caused the loss of a favorable sublease and required the plaintiffs to incur $1.4 million in additional expenses for a replacement lease. Testimony from Frydman supported the $33,000 computer-hacking award through identified costs for evaluating and repairing computer damage. The court concluded that each award compensated a distinct injury and was not based on speculation.

The court upheld the $700,000 punitive-damages award. It reasoned that the jury found Verschleiser liable on claims for which punitive damages had been requested and that the trial evidence could support a finding that he acted maliciously or wantonly. The court cited evidence including statements attributed to Verschleiser expressing hostility toward Frydman and threatening to make Frydman’s life difficult and destroy him and the companies. The court also found the amount reasonable because it was less than half of the compensatory damages and was supported by the seriousness of the conduct.

The court rejected Verschleiser’s challenge to prejudgment interest. It relied on its earlier ruling that New York law required interest on the compensatory damages for trade-secret misappropriation and the nominal damages for breach of contract, conversion, and tortious interference. The court also rejected arguments that the interest period was too long or that the plaintiffs lacked actual damages, noting that the trial evidence supported actual damages for trade-secret misappropriation.

Finally, the court rejected the Rule 68 argument. Verschleiser provided no evidence of the alleged $2.5 million offer, and the plaintiffs’ lawyers submitted sworn declarations stating that they had no knowledge of such an offer. In addition, the court held that the relevant comparison included prejudgment interest. Because the final judgment was $3,234,906.04—more than the alleged $2.5 million offer—the court concluded that Rule 68 did not apply.

Disposition

Judge John G. Koeltl denied Verschleiser’s postjudgment motion for relief under Rules 50, 59, and 60 in full and directed the clerk to close the motion docket entry. The judgment against Verschleiser therefore remained in place.