Roditi v. New River Invs.

1

MANUEL RODITI and VENICE BEJARANO, Plaintiffs v. NEW RIVER INVESTMENTS INC., et al., Defendants

No. 3:20-cv-01908-RBM-MSB

United States District Court, S.D. California

July 30, 2024

ORDER DENYING DEFENDANTS' MOTION FOR (1) JUDGEMENT AS A MATTER OF LAW AND (2) NEW TRIAL

[DOC. 210]

HON RUTH BERMUDEZ MONTENEGRO, UNITED STATES DISTRICT JUDGE

Pending before the Court is Defendant New River Investments, Inc. Alberto Roditi, and Guillermo Roditi Dominguez's (collectively, “Defendants”) Post-Trial Motion for (1) Judgment as a Matter of Law and (2) New Trial (“Motion”). (Doc. 210.) Plaintiffs Manuel Roditi and Venice Bejarano (collectively, “Plaintiffs”) filed an Opposition to Defendants' Motion (“Opposition”). (Doc. 212.) Defendants filed a Reply in support of their Motion (“Reply”). (Doc 215.)

The Court finds this matter suitable for determination without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth below, Defendants' Motion is DENIED.

I. BACKGROUND

On January 30, 2024, shortly before trial, Plaintiffs filed a Third Amended Complaint (“TAC”), asserting claims for (1) violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act (“Exchange Act”), (2) violations of Section 20(a) of the Exchange Act, (3) breaches of fiduciary duty, and (4) breach of contract.^[1] (Doc. 156.) Plaintiffs' allegations primarily related to Defendants' mismanagement of Plaintiffs' Interactive Brokers (“IB”) account and the losses sustained therein. (Id. ¶¶ 13-20.)

During a week-long jury trial, Plaintiffs' expert Lisa Roth opined that an appropriate investment mix for the IB account given Plaintiffs' risk tolerance was a portfolio that combined two indices: the NASDAQ index and the Russell 1000 index. (Doc. 192 at 766:23-767:8.) Roth then provided this opinion to Plaintiffs' damages expert, Brian Bergmark, who used this mix for his damages analysis:

Q. And what kind of information did you obtain from Ms. Roth?

A. Well, as I said, I'm not an investment advisor. And so one of the claims that the plaintiffs have in the case is that the account, beginning in 2018, was -- was handled in a different way than it had been, and not consistent with what they expected to have -- have -- how the trading would have performed. So what I'm trying to do is compare, if that trading would have been performed consistent with their expectations, what would the account -account balance have been. And so I asked Ms. Roth, who was investment advisor, how their money would have been -- how it would have been invested and what types of investment it would have been in. And then I used that information to quantify what the -- the -- the returns on the account would have been, had they been in those investments that Ms. Roth's identified, compared to what actually occurred.

(Doc. 186 at 938:17-939:8.) Bergmark then testified that he began his damage analysis on January 1, 2018 because Roth had opined that there was a change in the management of the IB account at this time. (Id. at 943:6-16.) Bergmark also testified that Roth recommended a mix of 70% invested in the NASDAQ Composite index and 30% in the Russell 1000 index. (Id. at 947:2-7.) Mr. Bergmark concluded that if the $1,288,959 that existed in this IB account on January 1, 2018 were invested 70% in the NASDAQ Composite index and 30% in the Russell 1000 index, the balance on December 15, 2023 would have been $2,926,741.^[2] (Id. at 957:5-959:12.)

On February 9, 2024, the jury returned a verdict for Plaintiffs on all counts. (Doc. 197.) The jury awarded Plaintiffs $1,050,000 for breach of fiduciary duty, $525,000 for breach of contract, and $525,000 for violations of Section 10(b) and Rule 10b-5 of the Exchange Act. (Id. at 2-4.) The jury also found Defendant Guillermo Roditi Dominguez liable pursuant to Section 20(a) of the Exchange Act. (Id. at 5.)

Following the jury's verdict, Plaintiffs' counsel immediately raised an issue regarding the jury's damages award. Plaintiffs' counsel stated, “I'm a little worried that there's-the verdict is a little vague in terms of damages. So, in other words, I don't know if they're intending the total damages be [two] million or 1,050,000. And as opposed to potentially having post trial motions on that issue, I think we just ask them now what's your total damages award?” (Doc. 199 at 125:25-126:5.) Defendants' counsel responded, “That's fine, Your Honor.” (Id. at 126:6.) The Court stated, “[w]ell, one of the things that I can do is ... I can write here, ‘[w]hat is the total amount of damages?'” (Id. at 126:24127:1.) Plaintiffs' counsel responded, “I think that's a good idea[,]” and Defendants' counsel responded, “[t]hat's fine, Your Honor.” (Id. at 127:2-6.)

The Court then informed the jury, “[i]n reviewing the verdict form, there needs to be some clarification. So I will be giving this [verdict] form back to you, and you need to insert what is the total amount of damages. All right? So there will be a signature line for you to insert the number and then a place for the presiding juror to sign again.” (Id. at 127:19-23.) The jury returned a verdict for a total of $2,100,000 in damages. (Id. at 128:12-13.)

Accordingly, on February 20, 2024, this Court entered judgment in favor of Plaintiff and against Defendants for $2.1 million broken down as follows:

For Breach of Fiduciary Duty: $1,050,000.00 against Defendants New River Investments Inc., Alberto Roditi, and Guillermo Roditi Dominguez.

For Breach of Contract: $525,000.00 against Defendant New River Investments Inc.

For Violations of Section 10(b) of the Exchange Act and Rule 10(b)(5): $525,000.00 against Defendants New River Investments Inc., Alberto Roditi, and Guillermo Roditi Dominguez.

(Doc. 205.)

A. Defendants' Motion

In their Motion, Defendants request that the Court enter judgment as a matter of law for Defendants and against Plaintiffs as to their claims for violations of the Exchange Act. (Doc. 210-1 at 5.) Defendants argue that Plaintiffs failed to establish all of the elements of a 10b-5 claim: (1) a material misrepresentation, (2) in connection with the purchase or sale of a security, (3) with scienter, (4) by means of interstate commerce. (Id. at 7.) Specifically, Defendants argue that they never represented that they would take the investor policy statement “seriously” and that Plaintiffs could not have reasonably relied on misrepresentations in the investment advisory contract (“IAC”) because it was not found until January 9, 2024. (Id. at 8-9.) Defendants also argue that they did not act with the requisite scienter because Defendants' allegedly reckless conduct was not an extreme departure from the relevant standard of care. (Id. at 9-10.) Lastly, Defendants argue that Plaintiffs did not establish the use of an instrumentality of interstate commerce because Plaintiffs resided in Mexico. (Id. at 10.)

Defendants also request that that the Court vacate the judgment as to all counts and set a new trial because (1) the jury's verdict constitutes impermissible double recovery and (2) Plaintiffs' counsel's misconduct at trial substantially prejudiced Defendants. (Id. at 5.) First, Defendants argue that the jury impermissibly awarded duplicative damages by aggregating three separate awards based on the same facts and resulting in the same harm. (Id. at 9-15.) In support of this position, Defendants cite both federal and California state case law interchangeably. (Id.) Defendants conclude that the Court should order a new trial or reduce the judgment to $525,000.^[3] (Id. at 15.) Second, Defendants argue Plaintiffs' counsel's misconduct warrants a new trial. (Id. at 15-22.) Specifically, Defendants argue that Plaintiffs' counsel impermissibly shifted the burden of proof in his opening and closing statements by noting that Defendants did not have an expert witness. (Id. at 16-18.) Defendants also argue that Plaintiffs misstated the burden of proof when making an analogy to the scale of justice and improperly inserted his own beliefs and opinions throughout his closing argument. (Id. at 18-21.)

B. Plaintiffs' Opposition

In their Opposition, Plaintiffs first assert that they established each element of their 10b-5 claim. (Doc. 212 at 6-12.) Specifically, Plaintiffs argue that they established various omissions of material fact, namely that Defendants never informed Plaintiffs of the incredible risks taken in their IB account or that the entire account could be lost. (Id. at 78.) Plaintiffs then argue that they established recklessness through fact witness testimony that Defendants misplaced Plaintiffs' IAC for more than a decade and expert testimony that Defendants' conduct was “extremely reckless and contrary to the standard of care.” (Id. at 9-10.) Plaintiffs argue that they established use of instrumentalities of interstate commerce through extensive testimony regarding the parties' use of postal mail, telephone, WhatsApp, and the internet. (Id. at 10-12.) Second, Plaintiffs assert that the awarded damages are not excessive or duplicative because they are supported by ample evidence. (Id. at 12-15 (citing Schutzky Distribs., Inc. v. Kelly, 643 F.Supp. 57, 59 (N.D. Cal. 1986)).)

Finally, Plaintiffs argue that Plaintiffs' counsel did not impermissibly shift the burden of proof because civil attorneys are permitted to comment on a party's failure to call an expert witness. (Id. at 15-16.) Plaintiffs also argue that counsel is permitted to state his or her own views as to what the evidence shows during closing arguments. (Id. at 16.) Plaintiffs conclude that any alleged prejudice was cured by the Court's jury instructions. (Id. at 16-17.)

C. Defendants' Reply

In their Reply, Defendants argue that Plaintiffs did not establish scienter in connection...