Ehrlich v Hambrecht

[*1] Ehrlich v Hambrecht 2005 NY Slip Op 50155(U) Decided on January 4, 2005 Supreme Court, New York County Bransten, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 4, 2005
Supreme Court, New York County

HAROLD B. EHRLICH, Plaintiff

against

GEORGE A. HAMBRECHT and BARLOW PARTNERS, INC., Defendants



600708/03

Eileen Bransten, J.

After a three-week jury trial, defendants George A. Hambrecht ("Hambrecht") and Barlow Partners, Inc. ("Barlow") (collectively "Defendants") move, pursuant to CPLR 4404(a), for judgment as a matter of law on the conversion and punitive damages claims asserted by plaintiff Harold B. Ehrlich ("Ehrlich"). Defendants alternatively request a new trial on these claims, arguing that the jury's verdict was against the weight of the evidence based on improper speculative expert witness testimony and that a new trial is warranted because of allegedly inflammatory prejudicial statements made by plaintiff's counsel at trial. Defendants also move for a new trial on Ehrlich's breach of contract claim, urging that speculative and improperly admitted evidence on the tort claims confused the jury and prejudicially tainted its deliberations.

Ehrlich opposes Defendants' motion and cross-moves for entry of judgment for the principal amount of the jury's verdict with interest, costs, disbursements, an additional statutory allowance of $3,000 for a "difficult case" pursuant to CPLR 8303(a)(2) and seeks other relief.

Background

In approximately March 1995, Ehrlich and Hambrecht co-founded the Fundamental Managers Fund, L.P. ("Fund"), a fund of funds.[FN1] See, Affirmation of Camille Gear Rich and Exhibits in Support of Defendants' Post-Trial Motion ("Rich Aff."), Ex. 4, at 1-2. They also formed EB Capital Advisors, Inc. ("EBCA"), a Delaware corporation, which served as the Fund's general partner and contributed 1% of the capital of the Fund. Rich Aff., Ex.1, at ¶ 6; Plaintiff's Memorandum of Law (i) in Opposition to Defendants' Motion for Judgment as a Matter of Law or a New Trial and (ii) in Support of Plaintiff's Cross-Motion for Entry of Judgment With Interest, Costs, Disbursements, an Additional Allowance and Other Relief ("Plaintiff Mem."), at 6.

The Fund's limited partnership agreement identifies Barlow Partners, Inc. ("Barlow")a registered investment advisor to institutional clients interested in hedge fund investments whose [*2]president and founder is Hambrechtas the "Fund Manager." Rich Aff., Ex. 4, at 2.

In December 1996, Ehrlich and Hambrecht entered into an agreement ("December 1996 Agreement") that superseded prior agreements into which they had entered. Hambrecht, who agreed to contribute the full amount necessary to maintain EBCA's capital account in the Fund at 1% of assets, to a maximum of $500,000, was to own 99% of EBCA and Ehrlich was to own 1%. Ehrlich maintained an option to reacquire 50% ownership. The revenue sharing arrangement provided that for as long as Ehrlich "actively work[ed]" for EBCA, he would receive from Barlow 50% of the Management Fee (net of expenses ) paid by the Fund to Barlow." Rich Aff., Ex. 2. The December 1996 Agreement also provided that as "sole shareholders of shares in [EBCA], we agree to vote all of our shares in favor of maintaining both of us (and only us) as directors and advisors of the company." Id.[FN2]

Subsequently, there were some modifications to the December 1996 Agreement. Ehrlich agreed that due to the increased administrative functions performed by Barlow, 20% of the one-percent management fee would be paid to Barlow. Rich Aff., Ex. 1, at ¶ 12, Ex. 8, ¶ 12. Additionally, due to the increased role that Hambrecht assumed in administering the Fund, Ehrlich's share of the management fee (net of expenses) was reduced to 32%. Id. According to Ehrlich, he and Hambrecht "did not modify their agreement to maintain themselves * * * as directors and advisors to EBCA and, therefore, as the sole advisors to the Fund." Rich Aff., Ex. 8, at ¶ 13.

In January 2001, Hambrecht hired Elizabeth Hilpman as an investment advisor for Barlow to provide investment-advice services to, among others, the Fund. Rich Aff., Ex. 4. On April 1, 2001, Hambrecht added Barlow as a general partner of the Fund and designated Barlow as the Managing General Partner and Fund Manager. A majority of the Fund's limited partners ratified the arrangement. Id.

In a February 4, 2003 letter, Hambrecht informed Ehrlich that he was "merely an advisor to EBCA, not to Barlow or the Fund. [He] further stated that [Ehrlich] was not authorized to meet with any investment managers on behalf of the Fund, since this was the sole responsibility of Barlow. He concluded by stating that [Ehrlich] should not interfere with Barlow's investment activities, and should not represent to anyone that he is responsible for Barlow's investment decisions." Rich Aff., Ex. 4.

Allegedly, in November 2002 Hambrechtwithout Ehrlich's knowledge executed a "Ratification of Fund Management Agreement" ("Ratification") purportedly on behalf of Barlow and EBCA. Rich Aff., Ex. 8, at ¶ 43. The Ratification supposedly transferred to Barlow irrevocable control over the management fee that had been payable by the Fund to EBCA. Id. According to Ehrlich, Hambrecht backdated the ratification to May 1, 2001, to make it appear as if it had been executed at the same time as other amendments to the Fund. Id., at ¶ 44. Ehrlich maintains that the Ratification was executed "to remove control over the management fee from [his] reach at a time when [he and Hambrecht] were negotiating a restructure of their relationship." Id., at ¶ 45. He further asserts that Hambrecht's "breaches of fiduciary duty were intended to leave EBCA an empty corporate shell without management control of the Fund, without assets and without any value at all, rendering [his] shareholding interest in EBCA worthless." Id., at ¶ 46. [*3]

On January 1, 2003, Ehrlich exercised his option to re-acquire 50% ownership in EBCA. Rich Aff., Ex. 14.

Ehrlich commenced this commercial action in March 2003, asserting claims of breach of contract, conversion, unjust enrichment and breach of fiduciary duty. He sought damages, a constructive trust and an accounting. Rich Aff., Ex. 1. Ehrlich alleged, among other things, that Defendants breached the December 1996 Agreement.

In a Decision and Order dated July 9, 2003, Justice Charles E. Ramos dismissed Ehrlich's breach of fiduciary duty, conversion and unjust enrichment claims as they were deemed duplicative of the breach of contract claim. Rich Aff., Ex. 4.

The note of issue was filed on April 2, 2004.

Months later in June 2004, only days before the trial was to begin, Ehrlich sought to amend his complaint to add, among other things, a cause of action for conversion. The proposed claim was denominated "Conversion of Corporate Asset." Ehrlich alleged that Defendants "converted the management fee payable by the Fund to EBCA," that the purported conversion "damaged [Ehrlich] by reducing the value of his shareholdings in EBCA" and that Defendants' "willful misconduct was so wanton as to demonstrate a criminal indifference to civil obligations for which they should be held liable for punitive damages." Rich Aff., Ex. 8, at ¶¶ 50-53.

On June 29, 2004, the day before the trial was to start, the Court heard argument on the motion to amend. Pressed for time, the following day, the Court granted the motion, explaining that the proposed tort claims were "so similar" to the breach of contract claim justifying the amendment "truly on the heels of choosing a jury." Rich Aff., Ex. 20, sub ex. 4.

The trial began on June 30, 2004.

On July 16, 2004, the parties attended a charge conference. The following discussion took place on the record:

The Court: "Now, next is Conversion, PJI 3:10, which has to do with conversion or wrongful taking. It reads: A person who without authority intentionally exercises control over the property of another person and thereby interferes with the other person's right of possession has committed a conversion and is liable for the value of the property."Then the proposed charge is that, in order to find for Dr. Ehrlich on his claims, you must find that, one, Dr. Ehrlich had rightful possession of the property in disputehere, his share of the management feetwo, that Hambrecht and Barlow intended to assert control and right of ownership over Ehrlich's share of the management fee, and, three, that Hambrecht and Barlow interfered with Ehrlich's control of the management fee to the exclusion of Dr. Ehrlich's rights."Dr. Ehrlich must prove these three elements by the preponderance of the evidence. If you find that Dr. Ehrlich has not proven these elements, your verdict should be for Hambrecht and Barlow. That is what the proposal is."

* * * [*4]

Plaintiff's Counsel: "Your Honor, the language here that talks about Hambrecht and Barlow asserting control over Dr. Ehrlich's share of the management fee is not what the conversion claim is about. That was the third cause of action that was dismissed from the lawsuit by Justice Ramos. We are only talking about the seventh cause of action and what was converted there, and I thought this was clear from the amended pleading that we prepared and supporting papers in support of that motion, is that we're not talking about conversion of his fee. We're talking about conversion of EBCA's contract right to control the entire fee" (emphasis added).

Defense Counsel: "I agree with that, your Honor, We, in fact, have rewritten that language."

* * *

The Court: "This reads: Plaintiff has also sued Defendants for conversion. A person who without authority intentionally exercises control over the property of another person and thereby interferes with the other person's right of possession has committed a conversion and is liable for the value of the property. Plaintiff claims that by executing certain documents relating to the fund, Defendant converted his right to possess the management contract."

Plaintiff's Counsel: "And that statement is the statement that is fundamentally incorrect. It is not his, Plaintiff's right to possess the management contract. It is EBCA's right to control the management contract and the fees paid under it" (emphasis added).

The Court: "Here is the problem that you have under that; okay? You have a major problem. You don't have an action brought by EBCA."

Plaintiff's Counsel: "Your Honor, that was the subject of a couple of robing room arguments on motions that [Defense Counsel] made that you denied, including the motion to amend the pleading. [Defense Counsel] has been arguing that this can only be maintained as a derivative action [*5]on behalf of EBCA. And we have argued to you, and the Court has ruled in our favor, that under the law of Delaware and New York, you look beyondthe law looks beyond whether the asset is the asset of the corporation or of a shareholder. It looks to which party has been injured."

The Court: "I agree with you. But what you just stated for the record, and it has just been recorded * * * actually nullifies everything you stated in all your arguments that you go beyond. You just contradicted yourself. And that's the problem."

After additional discussion, the Court set forth a proposed instruction for conversion.

The Court: "Plaintiff claims that by executing certain documents relating to the fund, Defendant converted EB Capital Advisors' right to possess the management contract. In order to find for Plaintiff on this claim, plaintiff must prove by a preponderance of the credible evidence that Plaintiff had an unconditional rightful possession of the property in dispute; that Defendants intentionally asserted control and ownership right over that property to the exclusion of Plaintiff's rights."

Plaintiff's Counsel: "And I would object to the first numbered clause. It should be reworked along the lines that EB Capital had unconditional and rightful control over the management contract. And the rest of it would read just fine" (emphasis added).

Defense Counsel: "Again, your Honor, obviously it is not EB Capital that's bringing the claim. It is Plaintiff."And it's also possession, not control."

Plaintiff's Counsel: "It was Plaintiff that was injured by removing EB Capital's control, and that's the Tooley case that we discussed, and it's the Liebert case that we discussed."That plaintiff is not required to bring a derivative action if he's the party that's been injured. And he clearly is.[*6]"It is not EB Capital that was injured because EB Capital was not an operating company."

The Court: "That's the problem."

Plaintiff's Counsel: "It is not a problem. I mean, that's the law. And the fact that a pattern jury instruction that is written to cover conversion claims for every conceivable fact pattern has to be modified to apply to the facts of this case is not a problem."

The Court: "How about this: "Plaintiff claims that by executing certain documents relating to the fund, defendant converted the managementthe rights under the management contract."

Plaintiff's Counsel: "I will accept that."

Rich Aff., Ex. 20, sub. ex. 22, at 1936-1943.

The jury was charged as follows with respect to the conversion claim: "Plaintiff Harold Ehrlich claims that by executing certain documents relating to the fund, defendants, George A. Hambrecht and/or Barlow Partners, Incorporated, converted plaintiff's ownership interest in EB Capital Advisors Incorporated. In order to find for the plaintiff on this claim, you have to find by the preponderance of the credible evidence three elements."Number one, that the plaintiff, Harold B. Ehrlich, had an unconditional and rightful possession of his ownership interest in EB Capital Advisors Incorporated; two, that the defendants, George A. Hambrecht and/or Barlow Partners, Incorporated, intentionally asserted control and ownership rights over the plaintiff's ownership interests in EB Capital Advisors Incorporated; three, that the defendants George A. Hambrecht and/or Barlow Partners Incorporated, interfered with the plaintiff's ownership interest in EB Capital Advisors Incorporated to the exclusion of the plaintiff's rights."Conversion has been defined as an unauthorized assumption and exercise of the right of ownership over goods or things belonging to another to the exclusion of the owner's rights.[*7]"As stated above, an intentional act involves a state of mind with which an act is done. * * * if a person or an entity acts voluntarily, with a desire to bring about a result, that person or entity is said to have intended that result. If, on the other hand, that person or entity does not act voluntarily with a desire to bring about that result, the person or entity is said not to have intended the result."The degree of intent in a conversion is the intent to exercise such control over the property as to interfere with the plaintiff's use or enjoyment of it. If you find that defendants, George A. Hambrecht and/or Barlow Partners, Incorporated, converted property belonging to the plaintiff, Harold B. Ehrlich, then you must determine whether the plaintiff was damaged by the conversion by determining if the plaintiff lost any value in the property taken at the time of the taking of the property to the present."

Rich Aff., Ex. 20, sub. ex. 25, at 2189-2191.

On July 20, 2004, the jury reached a verdict. The jury found that Hambrecht breached the December 1996 Agreement, and awarded $689,882.40 on that claim. The jury further found that Hambrecht breached a fiduciary duty owed to Ehrlich but that he did not cause any damages. The jury found that Hambrecht did not fraudulently induce plaintiff to agree to an 8% reduction in share of the management fee. It concluded that Hambrecht defrauded Ehrlich, but that he did not cause any damages. The jury found that both Hambrecht and Barlow converted Ehrlich's ownership interest in EBCA but concluded that only Barlow caused $3,378,414 of damage to Ehrlich. The jury further concluded that Barlow and not Hambrecht failed to account accurately for expenses charged against him, awarding $3,105.92 on the claim. Finally, the jury concluded that Barlow was liable to Ehrlich for $1 million in punitive damages.

Analysis

CPLR 4404(a) provides that after a jury trial "the court may set aside a verdict * * * and direct that judgment be entered in favor of a party entitled to judgment as a matter of law." Because, as a matter of law, Ehrlich failed to establish that Defendants converted his property causing him to actually sustain damage, the verdict as to conversion and its accompanying damages awards must be set aside.

Conversion

Defendants argue that they are entitled to judgment as a matter of law on Ehrlich's conversion claim. They contend that Ehrlich failed to plead or prove facts establishing that property he personally owned or possessed was the subject of their wrongful actions. Memorandum of Law in Support of Defendants' Motions For Judgment as a Matter of Law or a New Trial ("Def. Mem."), at 6-7. Specifically, Defendants urge that there is no allegation in the complaint that any property belonging to Ehrlich was converted. The management fee was a corporate asset that belonged to EBCA, not Ehrlich. They additionally argue that there was absolutely no evidence that Defendants interfered with or altered Ehrlich's ownership interest in EBCA. Defendants further assert that Ehrlich failed to establish that he actually suffered damages as a result of the alleged conversion. They contend that expert testimony, computing the value of the management fee in June 2004 assuming that a buyer wanted to purchase the asset at that time, is speculative. Defendants further assert that to the extent there could be a claim for conversion, it is a derivative claim belonging to [*8]EBCA.

In response to Defendants' arguments, Ehrlich strenuously argues that the conversion claim is not derivative. He maintains that under the "special injury test" and the Tooley standard, see, Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004), he can sue individually to recover "damages for Defendant Hambrecht having transferred control of the management fee, the sole asset of EBCA away from EBCA, the corporation owned by Plaintiff and Defendant Hambrecht, to Barlow, Defendant Hambrecht's corporation, for no consideration." Plaintiff Mem., at 8 (emphasis added). Ehrlich contends that the injury to him was special because he was injured unlike any other shareholder since the only other shareholder, Hambrecht, benefitted from the transfer. Tooley, Ehrlich continues, further supports individual recovery because "EBCA kept no part of the fee, and the party injured by transferring control of the fee to Barlow, the company owned by Defendant Hambrecht, was not Barlow or Defendant Hambrecht, but Plaintiff Ehrlich." Id. Ehrlich further contends that the law of the case doctrine precludes Defendants' argument that there can be no recovery for conversion because the argument was made several timesin opposition to the motion to amend the complaint, in a motion in limine to limit Ehrlich's damages claim, and in a motion to strike expert testimonyand was rejected. Plaintiff Mem., at 5. Ehrlich asserts that the "law of this case has been established repeatedly that Plaintiff has a claim for conversion of his ownership interest in EBCA and Defendants should be estopped from rearguing the point." Id.

Ehrlich also vigorously disputes Defendants' argument that valuation of damages evidence was improper. See, Plaintiff Mem., at 14-20.

After careful review of both the evidence and the parties' arguments, it is clear that Ehrlich failed to establish that his property was converted. Thus, the verdict with regard to conversion, including the punitive damages award, must be set aside.

"Conversion is an unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." Peters Griffin Woodward, Inc. v. WCSC, Inc., 88 AD2d 883 (1st Dep't 1982). There is simply no allegation that Barlow assumed the right of ownership over property belonging to Ehrlich. The amended complaint reveals that the only property allegedly converted was "the management fee payable by the Fund to EBCA." Rich Aff., Ex. 8, at ¶ 51 (emphasis added). The fee was, by plaintiff's own allegation, a "corporate asset." Id. (emphasis added).

It has not been alleged or established, moreover, that Barlow improperly assumed possession of Ehrlich's shares in EBCA or that Ehrlich's interest in the corporation was actually transferred or "converted." Rather, Ehrlich contends that through conversion of a corporate asset (not his own asset), the value of his interest in the corporation declined. Ehrlich thus maintains that EBCA's property was converted and that he suffered a special personal injury in the process. While such an injury may be compensable (perhaps even through a direct action), it is not through an action for conversion. The fundamental elements of conversion have simply not been satisfied.

Allowing recovery for conversion under circumstances such as these, would authorize direct tort recovery to shareholders for impropriety that reduced the value of their interest in a corporation under a theory that their property was "converted." Ehrlich has not demonstrated any precedent authorizing recovery for conversion based on the decrease in value of shares owned as a result of an improper transfer of a corporate asset. Nor has he shown actual financial damages that he personally sustained as a result of Barlow's alleged conversion of the corporate asset. See, McCall v. Leader, [*9]268 AD2d 208 (1st Dep't 2000) (no recovery for conversion because plaintiff failed to adduce evidence of damages attributable to the alleged conversion).

Ehrlich's argument that the law of the case doctrine prohibits this Court from setting aside the verdict is wholly unavailing. At the outset, this Court never found that Defendants converted Ehrlich's property. In the posture of an eve-of-trial motion to amend, the Court simply allowed the claim to forward. No findings were ever made. Similarly, on July 20, 2004, defense counsel moved for a directed verdict. Among other things, he argued that "it's quite clear now from the record evidence that there was no property of Dr. Ehrlich that was converted." Rich Aff., Ex. 20, sub. ex. 28, at 2262. The Court responded that it would send the matter to the jury "of course, with the caveat that the court is never going to preclude a motion after the verdict." Id., at 2266 (emphasis added). The motion was made, and based on its merit, is granted. Finally, the law of the case doctrine does not preclude the Court from reconsidering its prior rulings. Matter of Budihas v. Board of Educ., 285 AD2d 549 (1st Dep't 2001).

Defendants also argue that because the conversion verdict must be set aside, the punitive damages award must be set aside as well. See, Johnson v. Spence, 305 AD2d 464 (2d Dep't 2003) (punitive damages award vacated after appellate determination that plaintiff had no viable claim for conversion). Plaintiff does not argue to the contrary and the punitive damages award is set aside.[FN3]

In the end, the Courthaving had an opportunity to thoroughly consider the allegations, the parties' arguments and the evidence adduced at trialis not satisfied that plaintiff has established that his property was converted. It is now abundantly clear that the difficulty in formulating the conversion jury charge was a result of an inability to meet the tort's simple and straightforward elements. The Court always had difficulty, in fact, it had a "major problem," in understanding Ehrlich's convoluted theory of conversion but gave him the benefit of the doubt and submitted the matter to the jury. Based on the difficulties in formulating the conversion jury charge, however, andmore significantlybased on plaintiff's response to Defendants' CPLR 4404(a) motion (which focuses on inapposite issues that presuppose the viability of a conversion claim under these circumstances), it has become clear that a conversion theory just does not fit. Therefore, the verdict as to the conversion claim and the punitive damages award is set aside in its entirety.

Entitlement to New Trial

Defendants argue that they are entitled to a new trial because "plaintiff's counsel's statements, viewed collectively, invited the jury to disregard the actual claims in the case and instead use their deliberations to value Dr. Ehrlich's interest in EBCA and force defendant Hambrecht to buy him out of the company." Def. Mem., at 21. Defendants argue that Ehrlich's attorney's statement in his opening that there "is nothing wrong in wanting to end a business relationship. That's fine. You just have to pay the fair share of the person you want to buy out[,]" evidences improper signaling to the jury that a "buyout through verdict" was Ehrlich's objective. Id. In arguing that a new trial is warranted, Defendants further rely on a line of questioning during plaintiff's cross-examination of Hambrechtwhich related to damages, the valuation standard and a prospective expert that might [*10]have been called to testify as to damagesthat was objected to by defense counsel and the objections were sustained. Defendants assert that a mistrial should have been granted instead of a general curative instruction that reminded the jury that no responses were given to the objectionable questions and that the law of damages would be the subject of a jury charge. Id., at 23.

Defendants point out that the jury specifically inquired whether "Dr. Ehrlich would be selling back his 50 percent share," which evidences that they were misdirected. Defendants urge that the "impropriety of the plaintiff's theme, to value Ehrlich's interest as if being sold, and the undeniable effect it had on the jury, compellingly demonstrates that a new trial is warranted if the court otherwise declines to direct a verdict in Barlow's favor." Plaintiff counters that curative instructions cured any purported prejudice and that Defendants have not demonstrated a sufficient basis for a new trial.

The Court agrees with Ehrlich.

On this record, the Court is unconvinced that "the entire verdict was tainted," or that the jury's inquiry signaled "its acceptance of plaintiff's misguided invitation to buy out Ehrlich's interest in EBCA." See, Reply Memorandum of Law in Support of Defendants' Motion for Judgment as a Matter of Law or a New Trial ("Def. Reply"), at 18-19.

In response to the jury's question about whether Dr. Ehrlich would be selling back his share in EBCA, this Court instructed that the question raised a legal issue about which the jury was not to speculate. This clear instruction protected the integrity of the verdict as the jury was explicitly informed that it should not consider the issue. The Court further sustained Defendants' objections to any improper questions and gave a curative instruction. There is absolutely no legal basis for setting aside the verdict in its entirety; thus, the Court will not do so.

Nuccio v. Chou, 183 AD2d 511 (1st Dep't 1992), lv. dismissed 81 NY2d 783 (1993), a case upon which Defendants rely, is readily distinguishable. In Nuccio, the Appellate Division ordered a new trial after plaintiff's counsel "made himself an unsworn witness and attempted to vouch for the credibility of his clients. * * * He also implied that defense counsel made up the defense raised by the defendants, injected racial overtones into the case, labeled the defendants' expert a hired gun and insinuated that the defense experts were unworthy of belief because they were being compensated." Id., at 514-515. Nothing remotely analogous to the misconduct in Nuccio is even alleged here. Plaintiff's counsel simply asked objectionable questions and Defendants' objections were sustained. Defendants have not demonstrated any basis for a new trial.

Breach of Contract

Defendants argue that they are entitled to a new trial on the breach of contract claim because once "leave to amend [the complaint to set forth a claims for, among other things, conversion, which is discussed supra] was granted, the jury was assaulted with a variety of evidence that simply had no bearing on the contract claim for lost compensation." Def. Mem., at 24. Defendants contend that "it is reasonable to conclude that the jury was so inflamed and distracted that it distorted its reasoned deliberation on the breach of contract claim." Id. This Court again disagrees. Defendants have not established entitlement to the extraordinary relief that they seek and the Court is not at all convinced that the attentive jury was confused or that the verdict is tainted. The breach of contract verdict is supported by the evidence and will be upheld. [*11]

Cross-Motion

Ehrlich cross-moves for judgment with interest on the principal amounts of damages from the earliest ascertainable date the causes of action arose, plus costs, disbursements an additional statutory allowance for a "difficult case" and for other relief. Plaintiff Mem., at 39.

Ehrlich first argues that he is entitled to $38,527.03 in interest on the $689,882.40 breach-of-contract award, representing nine percent interest from the dates at which the damages were incurred. See, Plaintiff Mem., at 40 (citing CPLR 5001, 5004). Next, Ehrlich seeks $973.24 interest on the $3,105.92 awarded on the accounting claim for double billing during the quarters ending December 31, 1997 and December 31, 2001. Id., at 41.[FN4] With regard to costs and disbursements, Ehrlich seeks a total of $986. Id., at 48 (citing CPLR 8101, 8201 and 8301). Due to the specialized knowledge required for this case involving hedge funds of funds and the three-week trial duration, Ehrlich also asks for an award of the maximum statutory allowance for a "difficult case"$3,000pursuant to CPLR 8303(a). Ehrlich asks that the judgment reflect that Defendants withdrew their counterclaims, which were dismissed with prejudice, and that the judgment discharge the $10,000 undertaking filed as part of the preliminary injunction order entered on August 5, 2003.

Ehrlich additionally seeks continuance of the injunction prohibiting Defendants from terminating the Fund until the judgment is (i) no longer subject to appeal or challenge and (ii) fully paid. Ehrlich argues that the injunction was ordered at the beginning of the case and provides that Defendants may not take action to liquidate the Fund without due authorization in writing from EBCA and such limited partners as may be required by the Limited Partnership Agreement of the Fund. According to Ehrlich, there was evidence at trial that Hambrecht signed documents on behalf of EBCA without the authority of its Board of Directors. Plaintiff's Mem., at 50. Even after the trial, Ehrlich continues, Hambrecht executed documents on behalf of EBCA without his knowledge. Id. Ehrlich asks that "the current injunction should be continued, but modified to provide that Defendants cannot liquidate the Fund without due authorization in writing from Plaintiff and such limited partners as may be required by the Limited Partnership Agreement of the Fund."

Finally, Ehrlich asks that the judgment incorporate the provisions of paragraphs three and four of the parties' August 20, 2004 stipulation.

Defendants do not object to the interest calculations on the breach of contract and accounting awards. Nor do they contest that the counterclaims should be dismissed with prejudice and the undertaking be discharged. Nor do Defendants object to the calculations of costs set forth by Ehrlich.

Defendants do oppose continuation of the preliminary injunction , arguing that Ehrlich did not press his claim for a permanent injunction at trial; thus, there was no evidentiary showing of irreparable injury and the claim has been abandoned. Def. Reply, at 28. Defendants further argue that now that Ehrlich has obtained a money judgment, he cannot make a showing of irreparable injury. Id., at 29. Defendants assert that Ehrlich's request is too broad and could be interpreted as [*12]preventing Hambrecht from pursuing an action to terminate the Fund. Defendants also object to incorporation of the terms of the August 20, 2004 stipulation in the judgment (though they have no objection to issuance of an order endorsing the provisions). Id., at 29-30.

This Court will not continue the preliminary injunction. Defendants correctly point out that it was Ehrlich's burden to establish the necessity of an injunction post-dating adjudication of this matter and plaintiff failed to do so. To the extent that there is any violation of the law in connection with EBCA, Ehrlich is, of course, always free to commence another action.

Nor will this Court incorporate the parties' stipulation into the judgment, which is intended to resolve the matters that were tried. The Court will, however, enter an Order (after its settlement by the parties) continuing the terms of the August 20, 2004 stipulation. Ehrlich has not established that this Court must incorporate the stipulation into the judgment or given a reason why the Court should make the stipulation part of the judgment instead of simply issuing an order continuing the effect of the stipulation.

Accordingly, it is

ORDERED that Defendants' motion to set aside the verdict is granted in limited part to the extent that the verdict with regard to conversion and punitive damages is set aside and the Clerk is directed to enter judgment in favor of Defendants on the conversion cause of action. In all other regards the verdict is upheld and Defendants' motion is denied. It is further

ORDERED that Ehrlich's cross-motion is granted in limited part as follows: the judgment is to include interest on the breach-of-contract award in the amount of $38,527.03, interest on the accounting award in the amount of $973.24, costs of $986 and a $3,000 allowance for a "difficult case." The judgment is to indicate that the counterclaims have been dismissed with prejudice and is to discharge the $10,000 undertaking. The parties are to settle an Order incorporating the continuation of the August 20,2004 stipulation, which will be signed and will be in effect as an Order. It will not be part of the judgment. In all other respects the cross-motion is denied.

This constitutes the Decision and Order of the Court.

Dated: New York, New York

January 4, 2005

E N T E R

Hon. Eileen Bransten Footnotes

Footnote 1: "A fund of funds is an investment fund that invests in other investment funds." See, Rich Aff. Ex. 4, at 2.

Footnote 2: Ehrlich described his role in the Fund as a professional researcher who investigated the integrity of the companies in which the Fund might invest its assets.

Footnote 3: Punitive damages can only be awarded if there was a finding that a civil wrong had been committed such as conversion or fraud.

Footnote 4: Ehrlich also argues that he is entitled to pre-verdict interest on the conversion award. Because the Court is setting aside the verdict as to the conversion cause of action, plaintiff's argument need not be addressed.