united states district court district of massachusetts

Case 1:09-cv-11708-GAO Document 212 Filed 08/28/12 Page 1 of 82

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

CORNWELL ENTERTAINMENT, INC. (f/k/a CEI ENTERPRISES, INC. and CORNWELL ENTERPRISES, INC.), PATRICIA D. CORNWELL, and STACI GRUBER, Ph.D., Plaintiffs, v. ANCHIN, BLOCK & ANCHIN LLP, and EVAN H. SNAPPER, Defendants.

Civil Action No. 09-11708-GAO

THE PARTIES’ AMENDED JOINT PRE-TRIAL MEMORANDUM Plaintiffs Cornwell Entertainment, Inc., f/k/a CEI Enterprises, Inc. and Cornwell Enterprises, Inc. (“CEI”), its sole shareholder Patricia D. Cornwell (“Ms. Cornwell”), and Staci Gruber, Ph.D. (“Dr. Gruber”) (collectively “Plaintiffs”), and Anchin, Block & Anchin LLP (“Anchin”) and Evan H. Snapper (collectively “Defendants”) (and, together with Plaintiffs, the “Parties”), respectfully submit this Joint Pre-Trial Memorandum in accordance with L.R. 16.5(D) and this Court’s Pretrial Order (as modified). I.

SUMMARY OF THE EVIDENCE A.

Plaintiffs’ Position

In 1991, Ms. Cornwell’s first best-selling novel was published. For a young woman of limited financial means and a difficult early life and emotional history, the changes were dramatic and difficult to assimilate. In an effort to cope with the changed circumstances and her own deficiencies in dealing with business and chaos, Ms. Cornwell hired a staff, comprised largely of friends and acquaintances, to assist with the new demands with which she could not -131729103_2


deal herself, including managing CEI’s vendors, assisting with fan mail, and, most importantly, ensuring that Ms. Cornwell had an appropriate location in which to write her books without distraction.1 This aggregation of staff developed into a “family office” that attended to Ms. Cornwell’s business and personal needs over the next several years. Because the personnel in this office could not handle tasks that required special licensures or certifications, e.g., accounting and investment advising, consultants were brought in to assist in such areas. In this way, Yohalem Gillman, & Co. (“Yohalem Gillman”) first became involved with Patricia Cornwell at some point in the 1990s. The initial roles as investment adviser and backup accountant, managed by Stanley Gillman, grew slowly but steadily over the ensuing years; and the principals and partners of Yohalem Gillman became well acquainted with Ms. Cornwell’s deficiencies and needs. In 2002, Stanley Gillman passed away; and Ira Yohalem, with gradually increasing involvement of Evan Snapper, became Plaintiffs’ principal liaison with Yohalem Gillman. By the late summer of 2004, Ms. Cornwell wished to relocate from Florida, where her family office was located, to the northeast for personal reasons, thereby necessitating either relocating, or replacing, her staff. Yohalem Gillman made a proposal to replace Ms. Cornwell’s family office, at that point staffed by approximately five employees, with their own services as self-described “concierge business managers.” Yohalem Gillman suggested, in writing, that they could continue with their existing accounting and investment advice roles and assume the functions of CEI’s employees, all for the more economical estimated rate of $40,000 per month. In late November or early December of 2004, Ms. Cornwell accepted the proposal. Over the

1

A mood disorder of which Ms. Cornwell was first made aware by her medical doctor in 1993 and for which she has been intermittently treated since that time interferes with her ability to function in chaotic (i.e., noisy and distracting) situations.

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holidays, Yohalem Gillman terminated Ms. Cornwell’s staff and assumed responsibility for all aspects of CEI’s and Ms. Cornwell’s affairs that had previously been handled by the staff. These responsibilities included all aspects of CEI’s business affairs and Ms. Cornwell’s personal business, exclusive of publishing-related matters which were handled by industry professionals. In January of 2005, Yohalem Gillman consummated a merger with regional accounting firm Anchin Block & Anchin LLP (“Anchin”), the pendency of which had not been disclosed to Ms. Cornwell at the time of the engagement in late November of 2004 although it was apparently already in the negotiation phase. The previous Yohalem Gillman office remained intact, providing Anchin with a new business management unit. While the first year of the relationship was relatively uneventful, 2006 (the year in which Mr. Snapper persuaded Dr. Gruber to engage Anchin’s services as well) was a year of chaos for Ms. Cornwell. Anchin failed to step into the role that was a primary function of the family office staff, i.e., to ensure that locations were arranged where Ms. Cornwell could write without distraction. Ms. Cornwell’s and Dr. Gruber’s residence was in the midst of a reconstruction process that rendered the location unsuitable for that purpose, and Mr. Snapper failed to step up to the responsibility of locating and arranging a suitable substitute work location. For the only time in her career, Ms. Cornwell missed her book deadline in the summer of 2006, and suffered the economic consequences in the spring of 2007. Significant problems in the relationship between Plaintiffs and Defendants developed in 2007, as Plaintiffs, dealing with the impact of the missed deadline, pressed to see copies of Anchin’s internal, self-paid invoices over the preceding two years. When the 2006 and early 2007 invoices were finally produced in the summer of 2007, Plaintiffs were shocked to learn the extent to which the invoices had exceeded the $40,000 per month estimate, without notice to

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them. Tensions became pronounced, and Plaintiffs’ dissatisfaction grew. In 2008, Plaintiffs insisted upon a revised billing arrangement, with a fixed monthly fee of $40,000 and any extras requiring advance approval. The situation did not improve, and Plaintiffs requested that Laurie Fasinski replace Mr. Snapper as their liaison at the end of 2008. In the early summer of 2009, concerned about the state of their investments after the market crash and with the tremendous liability that their intended principal residence had become as a result of mismanagement of the renovation process, Plaintiffs requested current and complete financial data from Anchin. When presented with draft financial statements, prepared on a modified cash basis that misleadingly carried the residence as an eight-figure asset, Plaintiffs noted that Ms. Cornwell’s and CEI’s net worth and cash positions had not improved (and had declined if a more appropriate accounting method had been employed), despite the fact that Ms. Cornwell had earned eight-figure income in each of the intervening years. Upset and distraught as to how this could have occurred, Plaintiffs notified Defendants that they were terminated effective September 1. In September of 2009, after several requests from Plaintiffs, Anchin turned over 80+ boxes of poorly organized hard copy records to Plaintiffs, but no electronic files and no bank records reflecting monetary transactions. Review of the hard-copy files revealed a number of concerns, including in particular a copy of a $5000 check to cash, authorized by Mr. Snapper and indicating congratulations to Mr. Snapper’s daughter upon the occasion of her Bat Mitzvah. Plaintiffs had neither attended the Bat Mitzvah nor authorized the check. The next month, Plaintiffs filed a suit for an accounting, as well as for negligence, breach of contract, breach of fiduciary duty, violation of M.G.L. c. 93A, and equitable forfeiture. As evidence of actual events gradually unfolded and evolved, including the receipt of most (but still not all) bank

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records from the bank in which Defendants had placed Plaintiffs’ funds, and as Ms. Cornwell learned, in quite traumatic fashion, that Defendants had blamed her for an illegal campaign financing scheme designed, orchestrated, and executed by Mr. Snapper, Plaintiffs amended the Complaint to flesh out the allegations of breach of fiduciary duty, violation of c. 93A, and equitable forfeiture, and to eliminate the moot request for an accounting. When the evidence was amassed and the pleadings correspondingly finalized, the claims focused upon repeated breaches of fiduciary duty, including without limitation: (1) an unsuccessful plot to cause the Department of Justice to indict Ms. Cornwell for Mr. Snapper’s federal campaign financing violations, clandestinely undertaken by Defendants in response to the filing of this lawsuit;2 (2) a pattern of seeking (and often obtaining) personal benefit or profit at Plaintiffs’ expense in transactions supposedly undertaken for the benefit of Plaintiffs, and while charging Plaintiffs exorbitant and generally undisclosed fees; (3) intentionally and recklessly disregarding Plaintiffs’ best interests in virtually every aspect of their lives, including their investments, finances, real and personal property holdings, fractional jet ownership, and accounting needs; (4) using Plaintiffs’ bank accounts (which were controlled and maintained by Defendants) as personal expense accounts; (5) generating internal inflated invoices for their services and expenses, paying those invoices without advance approval of, or for the most part concurrent notice to, Plaintiffs, via internal account transfers; and 2

At Defendants’ persistent urging (undertaken without notice to Plaintiffs, the Department of Justice convened a Grand Jury. If Ms. Cornwell was the target (which the Department denied to Ms. Cornwell’s counsel), she was no-billed, i.e., no indictment was returned. Instead, Mr. Snapper ended up pleading guilty to a felony count in connection with the scheme.

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(6) moving Plaintiffs’ money so frequently and among so many different accounts at a single bank with which Defendants maintained a close relationship, while desktop publishing checks with extraordinary void rates, that tracking the money is rendered virtually impossible; (7) causing the allocation of Plaintiffs’ investments to be made without regard to their investment objectives or risk tolerances, and without adequately attending to the state of such investments; (8) diverting Dr. Gruber’s consulting fees, paid by CEI and/or Ms. Cornwell, into investment and possibly other accounts, and carrying such funds as loans to Dr. Gruber, all without knowledge or approval from either Ms. Cornwell or Dr. Gruber. The heart of this case is Defendants’ bad faith and breaches of fiduciary duty. It is not, as Defendants repeatedly contend, “primarily a business dispute arising out of Anchin’s work as accountants and business managers” to CEI Enterprises, Inc. and Patricia Cornwell. For four years and eight months, Defendants exercised virtually complete control over Plaintiffs’ affairs. During that same period they engaged in a multitude of intentional misconduct, gross negligence, and wanton disregard for their clients’ rights, as more fully described below. 1.

Defendants’ Improper Handling of Ms. Cornwell’s Political Contributions, and Damages Relating Thereto

Defendant Snapper orchestrated a scheme for approximately twenty-two “donors,” including Ira Yohalem and several other Anchin employees, to purchase tickets to an Elton John benefit concert for Hillary Clinton’s Presidential campaign, and then to be reimbursed from Ms. Cornwell’s and CEI’s bank accounts. Snapper hid the scheme through the use of false bookkeeping entries, and failed to inform Ms. Cornwell either that the reimbursements were unlawful or that he was purchasing tickets with her money for individuals other than her own family and close friends, i.e., for several Anchin employees. After Plaintiffs filed this lawsuit, -631729103_2


Defendants secretly went to the FBI and the Department of Justice, seeking to have Ms. Cornwell indicted and prosecuted for the illegal scheme. A Grand Jury was convened but no indictment handed down. Ms. Cornwell was not asked to testify. Mr. Snapper pled guilty to a felony in connection with his covering up of the reimbursements. Plea Agreement, United States v. Snapper, No. 1:10-cr-00325-PLF (D.D.C., Jan. 3, 2011). This effectively concedes Plaintiffs’ civil allegations, i.e., that Mr. Snapper inappropriately handled Ms. Cornwell’s contributions by engaging in improper bundling, followed by an affirmative cover-up. In the proceedings that ultimately led up to Mr. Snapper’s own plea and conviction, Defendants falsely reported Ms. Cornwell to the federal authorities as if she, rather than Mr. Snapper, had engaged in this illegal scheme.3 Even at his sentencing, Mr. Snapper attempted to place the blame on Ms. Cornwell, which the Court obviously did not accept. (Indeed, the Court required the redaction of Ms. Cornwell’s name from Mr. Snapper’s Sentencing Memorandum.) Ms. Cornwell’s legal fees and costs directly attributable to Defendants’ false campaign allegations have amounted to at least $242,235.81.4 Her damages in this regard are far more attributable to extreme anguish and injury to reputation than those fees and costs. As a crime writer, Ms. Cornwell requires, and has carefully cultivated, contacts in the law enforcement community to assist with direct and “atmospheric” research. These contacts historically included the FBI, whom Defendants specifically included in their clandestine scheme. Her compensable anguish and reputational damages are for the jury to determine, but she assesses these damages in the millions of dollars.

3

Circumstantial evidence suggests that this was likely a litigation strategy on Anchin’s part, notwithstanding its protestations that it was acting as a good corporate citizen.

4

Such fees will be sought directly in this litigation if Stephen Braga’s testimony is permitted, and otherwise will be sought pursuant to the M.G.L. c. 93A fee petition, to be decided by the Court as part of the overall fee petition at the conclusion of the case.

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2.

Equitable Forfeiture, and Damages Relating Thereto

As concierge or full-service business managers, investment advisers, and holders of powers of attorney, Defendants owed Plaintiffs a fiduciary duty or duties. Defendants’ intentional and/or reckless performance of their responsibilities, including without limitation blaming Ms. Cornwell for Defendants’ own unlawful conduct in order to gain leverage in this litigation, seeking and deriving personal benefit to Plaintiffs’ detriment, disregarding Plaintiffs’ best interests, and ignoring key aspects of their responsibilities or performing them in a haphazard and thoughtless manner. Under New York’s faithless fiduciary doctrine, Anchin must disgorge all fees that Plaintiffs paid for these unacceptable services performed in dereliction of their duties. In this instance, everything or virtually everything that Anchin touched was performed in a faithless fashion and in dereliction of Anchin’s fiduciary duties, such that all fees should be disgorged. Indeed, each of the instances of wrongdoing noted in this memorandum justifies such disgorgement, including without limitation each of the matters listed below. On this subject, Mr. Snapper and/or others at Anchin: 

sought a split commission tantamount to a kickback from Florida broker Anthony Gallo;



volunteered a condominium deposit of $200,000 to Marilyn Levin, a seller’s broker, when only $100,000 was requested, and subsequently caused Plaintiffs to forfeit the entire deposit on the basis of careless and flawed reasoning. Ms. Levin testified that she was “shocked” by Mr. Snapper’s offer, which she had never seen before, nor has ever seen since;



caused a $5,000 check to be written to cash against Ms. Cornwell’s account and delivered by subordinates to him, purportedly as a Bat Mitzvah gift to his daughter;5



diverted vendor gifts intended for Plaintiffs, and availed himself of vendor perks that were given because he was an “influencer” with regard to the business of Plaintiffs;

5

When this allegation was initially made, Mr. Snapper informed Anchin’s Chairman that the check was a reimbursement for a Hillary Clinton contribution. Later, apparently realizing that the timing of the check in 2007 made a reimbursement for a 2008 contribution impossible, Mr. Snapper claimed that the check was a reimbursement for a contribution to James Gilmore. Plaintiffs believe that both explanations are false, and that Mr. Snapper retained the funds personally.

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

used Ms. Cornwell’s funds without her knowledge to purchase a table at a Development Corporation for Israel dinner honoring Ira Yohalem;



reimbursed American Express payments with Ms. Cornwell’s funds for personal expenditures without backup, and often for improper personal expenses, including a limo service for his family on a vacation trip, monthly credit card service and/or late fees, and hotel stays in New York City;



recorded time entries for large time blocks (i.e., 2+ hours) with minimal or no description of services, such that activities could not be verified;



treated Powers of Attorney (“PoA’s”) in a cavalier and careless fashion, such that activities were undertaken without properly executed PoA’s, or pursuant to PoA’s that were not properly notarized or signed;



set up as many as ten to twelve separate bank accounts for Plaintiffs at a single bank with which Anchin had a close relationship, exercised control over all such accounts to the actual or functional exclusion of Plaintiffs, desktop printed the vast majority of checks drawn on such accounts, voided excessive numbers of checks for no apparent reason and in extraordinarily high amounts and occasionally using duplicate check numbers by overriding the desktop printing’s software restrictions, and moving large sums of money so frequently between and among the accounts as to render tracking unacceptably difficult, if not impossible, while charging Plaintiffs on an hourly basis for all such banking services;



invested Dr. Gruber’s consulting fees, without her knowledge or approval, and treated such funds as loans to Dr. Gruber without the knowledge or approval of either Dr. Gruber or Ms. Cornwell.

Anchin and Mr. Snapper, as faithless fiduciaries, have forfeited the right to any compensation they received from Plaintiffs and are required to make restitution of all sums paid as compensation during the period of their disloyalty. Defendants must return the $3,331,483.23 that Plaintiffs paid for Anchin’s and Mr. Snapper’s services between March 28, 2005 and Sept. 1, 2009, and an additional $1,000,000 must be paid as the approximate value of the diverted, misappropriated, or mismanaged items described above. 3.

Mishandling of NetJets Contracts, and Damages Relating Thereto

In the context of Plaintiffs’ faithless fiduciary/breach of fiduciary duty claims, one particular item bears special emphasis because the loss that it created for Plaintiffs is so substantial. Mr. Snapper’s close relationship with Plaintiffs’ Marquis Jets/NetJets client liaison Lisa Senters (McDermott) and/or the personal benefits he derived as a NetJets “influencer” (an -931729103_2


improper status to attain on the backs of Anchin’s clients), apparently prevented him from engaging in the negotiations and discussions with NetJets in which a customer would typically engage. Instead, Mr. Snapper simply accepted the terms that were presented to him and did nothing to determine whether accommodations or enhancements were available. Nor did he inquire as to whether the Citation X, among the largest and costliest craft in the NetJets fleet, was the appropriate selection where so few of Plaintiffs’ flights were lengthy enough to make the faster speed economically worthwhile. Dr. Gruber will testify that upon taking over the negotiations post Anchin, NetJets explained to Plaintiffs that the Citation XLS was preferable for their needs; and she negotiated enhancements quantified at $313,000, reduced annual operating costs of $232,000, and an $18,800 cash-back credit for transitioning from the X to the XLS. This amounts to added value to Plaintiffs of $563,800 on a single five year contract. During Anchin’s tenure, Mr. Snapper actually “negotiated” a combination of several contracts covering 63 months. Extrapolating for the extra three months, the loss to Plaintiffs associated with Mr. Snapper’s failure to negotiate these contracts or to determine and educate Plaintiffs as to the appropriate aircraft was therefore approximately $592,000. 4.

Mishandled Rental Properties/Missed Book Deadline, and Damages Relating Thereto

When Defendants proposed to take over the responsibilities of Ms. Cornwell’s and CEI’s staff, comprised at the time of approximately five employees, Defendants expressly acknowledged that this included Plaintiffs’ real estate needs. Having worked with Ms. Cornwell for several years before this proposal, Defendants were well aware that identifying and arranging for appropriate locations for Ms. Cornwell to write without distraction were among the staff’s key functions. Defendants were also aware of Plaintiff’s unique need for distraction-free work environments. On several occasions, Mr. Snapper simply failed to accord this responsibility the - 10 31729103_2


attention that it required, either leaving Ms. Cornwell to her own devices or arranging for writing locales in a haphazard manner without performing appropriate (if any) due diligence. This dereliction of responsibilities was particularly problematic throughout 2006, when Ms. Cornwell missed her Scarpetta book deadline because of a series of rental fiascos. These rentals occurred against the backdrop of the ill-fated Garfield property, which became unacceptable as a writing locus for reasons described below. The unavailability of a suitable writing locale was a substantial contributing factor to Ms. Cornwell’s missed Scarpetta deadline for one annual, irretrievable, installment of the franchise. Because of the missed deadline, Ms. Cornwell forfeited approximately $15,000,000 of nonrecoverable advances and commissions under the contract,6 with lost contract payments beginning in the Spring of 2007. This was the only occasion in Ms. Cornwell’s career in which she has missed a deadline. In addition, the multi-book contract with the publisher was negotiated when the publisher was already aware that Ms. Cornwell would not meet at least the initial 2006 book deadline, thereby reducing the commissions that the publisher was prepared to include in the new contract. Thus, Ms. Cornwell lost an additional several million dollars because of the missed 2006 deadline. 5.

Plaintiffs’ Property at 355 Garfield Road, Concord MA, and Damages Relating Thereto

As noted above, Defendants assumed contractual responsibility for Plaintiffs’ real estate affairs. When Plaintiffs determined that they were interested in purchasing a property in the Concord, Massachusetts area, Mr. Snapper brought in contracting consultant Ziggy Rutan,7 who, 6

As Ms. Cornwell explained at her deposition, the Scarpetta novels come out once a year on a set deadline permitting release in the Fall in time for the holiday season. When the deadline was missed, the book was pushed into the next year, rather than two books being published in closer time proximity. She thereby lost both the $12,000,000 advance and the international royalties. 7

Apparently, Mr. Rutan frequently consulted for the clients of Anchin’s Business Management Unit.

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along with Mr. Snapper, accompanied Plaintiffs on visits to several properties in the area. Mr. Rutan was particularly taken with the property on Garfield Road that Plaintiffs were then renting, and, despite the apparent signs of wear, assured Plaintiffs that no significant renovations would be required for several years. Plaintiffs proceeded with the costly purchase of the property for $5,257,075, and were, unfortunately, confronted with the need for material repairs rather promptly after the purchase. Mr. Snapper failed to provide appropriate oversight for the renovation project, paid invoices without adequate challenge or review, brought in his handselected Project Manager Mr. Rutan with poor results, allowed the project to proceed without adequate plans or budget controls, and failed to ensure that appropriate contractor professional liability insurance was in place. With an unwieldy basis of $8,672,424, and significant costs still required to return the house to a habitable state, Plaintiffs were forced to sell the property for $3,000,000, thereby incurring damages of at least $5,672,425 as a result of Defendants’ negligent performance of their professional services at Garfield Road. 6.

The Purchase of the Monument Street Property, and Damages Relating Thereto

Unable to work in the midst of construction, or in the various New York rental properties secured by Mr. Snapper without adequate diligence, Ms. Cornwell attempted to find another property where she could write and temporarily reside. After Plaintiffs identified the Monument Street property, Mr. Snapper assumed responsibility for the acquisition. Unfortunately, Mr. Snapper made no effort to review the relevant zoning provisions, even when the law firm that he retained specifically informed him (but not Plaintiffs) that it had not conducted a zoning review. As it turned out, when Plaintiffs attempted to obtain permits to proceed with renovations of the

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carriage house to allow for a CEI office and for Security Staff accommodations, they learned that the applicable zoning prohibited such a use. After the filing of a state lawsuit against the brokers, the seller, and Anchin, the Town of Concord worked cooperatively with Plaintiffs to attempt to mitigate, although not eliminate, Plaintiffs’ damages by allowing limited family and staff presence in the carriage house. Plaintiffs incurred legal fees and costs in the approximate amount of $$225,000 to get to that point.8 In addition, the carriage house cannot be used for the expansive purposes represented to Plaintiffs, and factoring into their purchase price. In addition, Plaintiffs delayed putting the Monument property on the market until this resolution was reached, even though they had relocated to a waterfront property elsewhere. Quite apart from the substantial legal fees and costs (approximately $225,000) incurred to arrive at that point, Plaintiffs were forced to delay putting the property on the market until the compromise with the Town was reached, by which point the Concord area was in the midst of a significant market downturn. Although the Plaintiffs relocated some time ago to a waterfront property in another community, they have been unsuccessful in selling the Monument property. After purchasing the house for a little under $5,000,000, Plaintiffs now have it on the market for under $3,500,000. 7.

Defendants’ Inappropriate Use of Loans , and Damages Relating Thereto

On several occasions, Anchin, through Mr. Snapper, caused loans to be taken out for major acquisitions (i.e., real estate and helicopters), even though Ms. Cornwell and CEI had sufficient funds to pay with cash. Mr. Snapper acknowledges that he was betting that Plaintiffs’

8

Such fees will be sought as part of Plaintiffs’ c. 93A fee petition as and when appropriate.

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investments would experience a higher rate of return than the interest rates on the loans.9 Remarkably, all but one of the loans occurred in or after August of 2006, by which time the increasing likelihood of an impending market correction certainly should have been factored into the funding decisions. As a result of Mr. Snapper’s unilateral decision to take out these loans, CEI and Ms. Cornwell incurred unnecessary interest and fees. The individual loan accounts listed below represent the significant loans opened between February 2005 and September 2009 at First Republic Bank (“FRB”) by Defendants on behalf of Ms. Cornwell and CEI. The table also illustrates the resulting loan interest and loans fees incurred by Ms. Cornwell and CEI. Loan Interest & Loan Fees Paid by Ms Cornwell & CEI Related Loan Account 355 Garfield Property Mortgage Loan # 22-076521-4 1437 Monument Street Mortgage Loan # 22-411861-8 1437 Monument Street Mortgage Loan # 22-451373-5 2006 Helicopter Secured Loan # 21-411408-8 2008 Helicopter Secured Loan # 21-425684-8 Unsecured Line of Credit # 71-410391-7 Total Interest and Fees Paid on First Republic Bank Loans

Amount of Interest and Fees $735,761.46 $586,257.83 $11,593.13 $349,490.50 $178,125.00 $172,902.78 $2,034,130.70

This analysis does not take into account any payments to or from accounts not held at First Republic Bank. 8.

Damages Resulting From Defendants’ Accounting Errors

After the merger of Anchin and Yohalem Gillman, Anchin assumed all responsibility for the preparation of CEI’s and Ms. Cornwell’s tax returns. In some instances, Anchin filed the returns without Ms. Cornwell’s actual signature, and in all instances without review by her

9

Mr. Snapper claims that he acted on the advice of Plaintiffs’ purported “investment advisor” Neil Mitchell, in proceeding in this fashion. However, Mr. Mitchell denies giving this advice, or any advice on the topic of funding acquisitions. [Mitchell Dep. Tr. at 104:5 – 105:9 (Aug. 15, 2011)].

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because she was relying on Anchin. In several instances, Anchin filed returns that had to be amended by CBIZ Tofias, the accounting firm that Plaintiffs retained after terminating Anchin’s services. Among other deficiencies, Anchin failed to claim charitable contributions correctly or, in at least one instance, at all. The fees and costs Plaintiffs have incurred from CBIZ Tofias to date relating to corrected income tax filings is just under $250,000. The amended filings were a direct result of Defendants’ errors and omissions. In addition, Plaintiffs have incurred $69,923.75 in legal fees and costs to correct Defendants’ failure to take deductions for both monetary and non-monetary charitable contributions. 9.

Defendants’ Inappropriate Handling of the Sale of CEI’s Helicopter, and Damages Relating Thereto

In late 2007, CEI decided to sell its Bell helicopter, in large part because Mr. Snapper incorrectly contended that the value of the craft was depreciating rapidly and constituted an unacceptable cash drain. (In fact, Bell helicopters were holding their value extraordinarily well and virtually sold themselves during that time period because there was a shortage of new craft.) Although CEI’s pilot Paul Gingrich suggested avoiding a broker’s commission10 by listing the craft in a popular pilot’s publication, Mr. Snapper refused to heed that advice and insisted on using a broker. Mr. Snapper selected Tony Alcedo, who listed the helicopter in a pilot’s publication, where it promptly sold at or about its original purchase price. Mr. Snapper informed Mr. Alcedo that CEI was looking to net $3.9 million for itself, and that he could keep any amount in excess of that amount. When CEI’s aviation attorney Ron Rapp objected to the commission that resulted from that arrangement, Mr. Alcedo agreed to reduce it. Nonetheless, CEI paid a $140,000 commission that was not necessary. 10

Mr. Snapper falsely testified that Mr. Gingrich was seeking to obtain the commission himself. He was not.

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10.

Defendants’ Mismanagement of Plaintiffs’ Investments, and Damages Relating Thereto (a)

Ms. Cornwell’s and CEI’s Investments

Ms. Cornwell’s (and therefore CEI’s) investment instructions to Stanley Gillman were (a) that her investment objective was to preserve her wealth, and (b) that her risk tolerance was low. She never withdrew or modified these instructions after Mr. Gillman’s death. Further, she understood that Anchin was functioning as her investment adviser during the period that it served as her Business Manager, just as Yohalem Gillman had been in the period before the merger. Only in this litigation did she learn that Anchin identified her investment adviser to be Neil Mitchell,11 and that Mr. Snapper caused her funds to be invested in moderate to aggressive growth vehicles that were inconsistent with her investment objectives and beyond her risk tolerance. While the investments fared acceptably, in part because they were moved into reasonable investment vehicles before the bubble completely burst, the process was handled without regard to her objectives and risk tolerance. In addition, Mr. Snapper orchestrated a number of short term “investments” in connection with capital transactions and loans in a fashion that obfuscated whether the clients’ best interests were actually served. As far as the record reflects, Mr. Snapper undertook no analysis of relative costs and benefits with regard to short term investments and loans. (b)

Dr. Gruber’s Investment Losses

At Mr. Snapper’s persistent urging, Dr. Gruber transferred responsibility for her own investments to Anchin. Defendants assumed control of her funds without ever determining, or

11

Mr. Mitchell only considered himself to be the Investment Adviser with regard to Lehman Brothers and Lehman Brothers vetted funds, and he believed that Anchin was responsible for knowing, and communicating to him, the clients’ investment objectives and risk tolerance.

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even asking, her investment objectives and risk tolerance.12 Dr. Gruber now understands that Defendants delegated the oversight of her investments to Neil Mitchell of Lehman Brothers, without notice to or approval by her. Dr. Gruber also now understands that Mr. Snapper caused $276,000 to be invested in Lehman Brothers in Dr. Gruber’s name with funds that came from Ms. Cornwell’s and CEI’s accounts and were recorded on the books as loans to her, without her knowledge or consent, or that of Ms. Cornwell and CEI. Mr. Snapper did not hold a power of attorney from Dr. Gruber permitting him to “accept” such loans on her behalf. Dr. Gruber is, in any event, due these payments as consulting fees. Dr. Gruber did not fare well: the total loss of Dr. Gruber’s principal as a result of Defendants’ failure to provide prudent investment advisory and management services equates to $279,656.35, or approximately 42% of all Dr. Gruber’s funds initially invested in her accounts. 11.

Non-Payment of Dr. Gruber’s Consulting Fees, and Damages Relating Thereto

By contract, Dr. Gruber was entitled to receive substantial and well-earned consulting fees at various levels during Anchin’s tenure. While she received a stipend each month, she never received the lion’s share of the fees, and, indeed, had no idea what happened to those fees until she learned in this litigation that they had been funneled into investment accounts that had not fared well, and that they were carried on the CEI books as loans. CEI never agreed to make such loans, and Dr. Gruber never agreed to accept them in lieu of her fees. After the termination of Anchin, CEI was required to pay the sums due to Dr. Gruber, and to gross them up for taxes. The approximate amount of that gross-up was $200,000.

12

Defendants’ failure to determine Dr. Gruber’s investment objectives and risk tolerance, which were respectively relatively conservative and relatively low, constituted violations of the “know-yourcustomer” rules of FINRA Rule 2310 and Incorporated NYSE Rule 405.

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12.

Defendants’ Mishandling of Employee Matters, and Damages Relating Thereto

After Anchin became CEI’s Business Manager, it assumed responsibility for the hiring and firing of CEI personnel, and for the oversight of all employee benefits. It did so in such a careless fashion, and occasionally in such a hurtful fashion, that CEI has incurred ongoing costs in order to treat its former employees in accordance with the law and basic fairness. The careless conduct included Anchin’s mishandling of the communications with employees about, and apparent misinterpretation of, CEI’s 401(k) Plan. This has resulted in legal fees and costs in an effort to rectify the problem, as well as the payment of additional lump sum payments to adjust for improper underpayments overseen by Anchin as Plan Manager. To date, CEI’s damages, exclusive of attorneys’ fees arising from Anchin’s mishandling of the 401(k) payments is approximately $50,000. In addition, Mr. Snapper caused at least two employees to be terminated by misrepresenting their statements and behavior, such that they appeared to be unfit employees. The expected cost for rectifying the injuries to these improperly maligned employees will be in the vicinity of $175,000 to $200,000. In addition, Mr. Snapper’s treatment of compensation to another consultant in addition to Dr. Gruber as “loans” has required correction by Anchin’s current accountants, and a gross up of the compensation, all at a loss to CEI. 13.

Unfair or Deceptive Acts or Practices, and Damages Relating Thereto

Massachusetts General Laws c. 93A, §§ 9 and 11 provide private causes of action for the use of unfair or deceptive acts or practices in a consumer or business context respectively. Anchin’s conduct as alleged in the Fifth Amended and Supplemented Complaint and as described above occurred in trade or commerce—to wit, in its capacity as concierge business manager to Plaintiffs—and constituted unfair or deceptive acts or practices. Where such conduct

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is knowing or willful, the Court is required to enter multiple damages. Specifically, § 11 provides in relevant part: “If the court finds for the petitioner, recovery shall be in the amount of actual damages; or up to three, but not less than two, times such amount if the court finds that the use or employment of the method of competition or the act or practice was a willful or knowing violation of said section two.” Chapter 93A also mandates recovery of reasonable attorneys’ fees. B

Defendants’ Position Anchin, Block & Anchin, Evan Snapper, Laurie Fasinski and the other employees

assigned to their account, worked tirelessly for 4 1/2 years to carry out the instructions dictated by Patricia Cornwell and Staci Gruber regarding their personal affairs and the business affairs of Cornwell Enterprises, Inc. Fully involved and engaged in every aspect of their business and personal lives, Ms. Cornwell and Dr. Gruber required that their instructions as to all things (small and large; important and trivial) be followed to the letter, without delay and without question. As demonstrated by the dismissal of almost every employee, consultant and advisor with whom they worked, the failure to follow any order issued by Ms. Cornwell and Dr. Gruber was neither tolerated nor acceptable. Anything perceived, imagined or made up that deviated from their wishes and desires resulted in vilification and dismissal. After 4 1/2 years of dedicated service to Ms. Cornwell, Dr. Gruber and CEI, Anchin, Mr. Snapper, Ms. Fasinski and the other employees met the same fate as so many that came before and after them. During those 4 1/2 years, Ms. Cornwell and Dr. Gruber directed every aspect of their personal and business affairs and were in constant communication with Anchin by way emails and telephone calls. Although Ms. Cornwell made a substantial amount of money, she and Dr. Gruber spent even more money than they earned. They directed real estate transactions

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that resulted in financial losses (a practice in which Ms. Cornwell engaged long before her involvement with Anchin.) Ms. Cornwell and Dr. Gruber purchased multiple luxury cars, bought and sold helicopters, made (and frequently retracted) charitable contributions, rented, leased and purchased vacation homes (many of which were never or infrequently occupied), flew on private jets (refusing to ever fly "commercial"), and otherwise led a lifestyle that bordered on spending every after tax dollar. Consistent with the all aspects of the way in which they dealt with employees and business associates, Ms. Cornwell and Dr. Gruber would not accept being told "no" and chose to live their extravagant and wasteful lifestyle without regard to the consequences of doing so. As with so many other things, Ms. Cornwell and Dr. Gruber refuse to accept responsibility for their actions, conduct and decisions, and this lawsuit is about their effort to blame Anchin and its employees for the consequences of their chosen lifestyle. Unfortunately, in his effort to serve Ms. Cornwell, to carry out her orders, and to avoid the inevitable consequence for failing to do as she directed, Mr. Snapper agreed to a campaign bundling scheme regarding contributions to the Hillary Clinton campaign. Ms. Cornwell suggested the scheme and knew full well that it was illegal. Mr. Snapper self reported his conduct to the Department of Justice and took responsibility for his part in the scheme. To date, Ms. Cornwell has refused to do so. As for damages, Anchin handled approximately $100M in funds over the 4 1/2 years of service to Ms. Cornwell and Ms. Gruber. Anchin accounted for every single penny of that money and not one cent was misappropriated or missing from the plaintiffs' funds. The plaintiffs were in no way damaged by anything that Anchin and its employees did. In fact, the net worth of Plaintiffs increased during the 4 and 1/2 years of their dealings with Anchin.

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On the other hand, Anchin is owed over $500K in unpaid fees for services. Anchin provided every service in good faith pursuant to Ms. Cornwell and Dr. Gruber’s numerous requests, and all charges stemming from these services were fair and reasonable. In addition, Ms. Cornwell libeled Anchin following the filing of the lawsuit comparing Anchin to Bernie Madoff and stating that Anchin was engaged in a Ponzi scheme. Anchin is entitled to damages for those comments. Anchin refers the court to the following sections of the Pretrial Memo for its position on various evidence issues. Suffice to say that virtually all elements of every count of the complaint and all available defenses to those counts are in dispute. II.

FACTS ESTABLISHED BY PLEADINGS OR BY STIPULATION OR ADMISSION OF COUNSEL Based on the pleadings and discussions between the Parties (which are expected to

continue) concerning facts that are conclusively established or are not in dispute, the Parties stipulate to the following: A.

Complaint, Answers and Answer to Counterclaims

1. Plaintiff CEI is a corporation with its principal place of business in eastern Massachusetts. Anchin’s Ans. to Fifth Am. Compl. at ¶ 1 [Doc. 79] (July 22, 2011) (hereafter “Anchin’s Ans.”); Snapper’s Ans. to Fifth Am. Compl. at ¶ 2 [Doc. 80] (July 22, 2011) (hereafter “Snapper’s Ans.). 2. Plaintiff Ms. Cornwell is an author whose principal residence and offices are located in eastern Massachusetts. Ms. Cornwell is the sole owner of CEI. Anchin’s Ans. at ¶ 2; Snapper’s Ans. at ¶ 2. 3. Plaintiff Dr. Gruber, Ms. Cornwell’s spouse, is a Harvard neuroscientist whose principal residence and place of business are located in eastern Massachusetts. Anchin’s Ans. at ¶ 3; Snapper’s Ans. at ¶ 3. 4. Defendant Anchin is a limited liability partnership that provides accounting and traditional and non-traditional advisory services to privately held corporations and high net worth individuals. Anchin’s principal place of business is in New York City. Anchin’s Ans. at ¶ 4; Snapper’s Ans. at ¶ 4. - 21 31729103_2


5. Anchin does not maintain an office or assets in Massachusetts, but transacted business with Plaintiffs in Massachusetts, and contracted to supply services to the Plaintiffs in Massachusetts. Anchin’s Ans. at ¶ 5; Snapper’s Ans. at ¶ 5. 6. Mr. Snapper is a former principal of Anchin whose principal residence is in Connecticut and whose principal place of business was in New York throughout the relevant period of January 2005 through August 2009. Anchin’s Ans. at ¶ 6; Snapper’s Ans. at ¶ 6. 7. Mr. Snapper occasionally transacted business with Plaintiffs in the Commonwealth of Massachusetts. Anchin’s Ans. at ¶ 7; Snapper’s Ans. at ¶ 7. 8. On or about April 5, 2002, Stanley Gillman passed away and thereafter Ira Yohalem informed Plaintiffs CEI and Ms. Cornwell that he would take over responsibility for providing services on their behalf. Anchin’s Ans. at ¶ 10; Snapper’s Ans. at ¶ 10. 9. Anchin is a full service firm that serves privately held businesses and high net worth individuals with a wide range of traditional and non-traditional advisory services, including financial statement preparation; tax planning and compliance services; litigation support, forensic accounting and valuation services; merger acquisition services; and wealth management. Anchin’s Ans. at ¶ 11; Snapper’s Ans. at ¶ 11. 10. In or about January 2005 Yohalem Gillman consolidated with Anchin. Anchin’s Ans. at ¶ 12; Snapper’s Ans. at ¶ 12. 11. Ms. Cornwell openly acknowledged having been diagnosed with a mood disorder and that at a certain point during their professional relationship Anchin became aware of Ms. Cornwell’s purported disorder. Anchin’s Ans. at ¶ 13; Snapper’s Ans. at ¶ 13. 12. Over the course of the several months following the January 2005 merger with Yohalem Gillman, the tasks undertaken by Anchin on behalf of Plaintiffs CEI and Ms. Cornwell grew in scope. Anchin’s Ans. at ¶ 14; Snapper’s Ans. at ¶ 14. 13. Mr. Snapper held a limited power of attorney for Ms. Cornwell. Anchin and Mr. Snapper determined into what bank accounts revenues would be placed, and transferred funds as deemed appropriate amongst Plaintiffs’ accounts. In March 2009, Ms. Cornwell insisted that her investments be transferred to bonds. Additionally, Anchin determined where Ms. Cornwell’s and CEI’s automobiles, Ms. Cornwell’s and Dr. Gruber’s motorcycles, and helicopters maintained for CEI’s business purposes would be registered; and Anchin signed and filed the 2007 income tax return for CEI. Anchin’s Ans. at ¶ 15; Snapper’s Ans. at ¶ 15. 14. Ms. Cornwell terminated the relationship with Anchin effective August 31, 2009, except for the requirement that Anchin complete the 2008 income tax returns. Anchin’s Ans. at ¶ 23; Snapper’s Ans. at ¶ 23. 15. For the majority of the relevant period, Anchin agreed to charge CEI and Ms. Cornwell on an hourly basis, and paid itself internally. Anchin’s Ans. at ¶ 26; Snapper’s Ans. at ¶ 26. - 22 31729103_2


16. The original complaint in this action was filed on October 13, 2009. Compl. [Doc. 1] (Oct. 13, 2009). 17. Two days later, on October 15, 2009, Anchin sent an invoice to CEI for $561,430 for purported services rendered between October 1, 2008 and September 30, 2009. Anchin’s Ans. at ¶ 28; Snapper’s Ans. at ¶ 28. 18. After January 1, 2005, Plaintiffs CEI and Ms. Cornwell retained Anchin to provide certain professional services and at some point thereafter Dr. Gruber retained Anchin to provide certain professional services. Anchin’s Ans. at ¶ 33; Snapper’s Ans. at ¶ 33. 19. Mr. Snapper and Mr. Yohalem acted as trustees and officers of various affiliated entities and held limited powers of attorney to handle Ms. Cornwell’s affairs. Anchin’s Ans. at ¶ 39; Snapper’s Ans. at ¶ 39. 20. After January 1, 2005, CEI and Ms. Cornwell retained Anchin to provide certain professional services, and a contractual relationship existed between Anchin on the one hand, and, individually, Plaintiffs CEI, Ms. Cornwell, and Dr. Gruber, on the other. The contractual relationship was oral in part and written in part, and included email modifications over time. Anchin’s Ans. at ¶ 44; Snapper’s Ans. at ¶ 44. 21. CEI and Ms. Cornwell possessed title and ownership to all funds belonging to them. Anchin’s Ans. at ¶ 50; Snapper’s Ans. at ¶ 50. 22. Anchin neither maintains a place of business nor keeps assets within the Commonwealth. Anchin’s Ans. at ¶ 60; Snapper’s Ans. at ¶ 60. 23. Anchin acts as a business manager, accountant, and investment advisor for privately held companies like CEI and for high net worth individuals like Ms. Cornwell and Dr. Gruber. Anchin’s Ans. at ¶ 67; Snapper’s Ans. at ¶ 67. 24. Anchin’s fees were paid directly from CEI bank accounts managed by Anchin. Anchin’s Ans. at ¶ 71; Snapper’s Ans. at ¶ 71. 25. At 5:55 p.m. on October 15, 2009, an Anchin employee named Jeffrey Vorchheimer emailed an invoice to CEI’s counsel stating that Anchin’s charges for the period October 1, 2008 through September 30, 2009 were $971,430, that the agreed upon $40,000 monthly payments were simply “on account,” and that the total amount due for this period was therefore $561,430. Mr. Vorchheimer further stated that another invoice would be issued in the future for “October’s services.” Anchin’s Ans. at ¶ 73; Snapper’s Ans. at ¶ 73. 26. CEI and Ms. Cornwell responded, through counsel, on Friday October 16, 2009, requesting supporting documentation including time records for services and receipts for expenses, so that CEI could “proceed in a prudent and reasonable manner in determining

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whether payment of the invoice is warranted in whole or in part.” Anchin’s Ans. at ¶ 74; Snapper’s Ans. at ¶ 74. 27. On Monday, October 19, 2009, Mr. Vorchheimer acknowledge on behalf of Anchin receipt of the request, and stated that he had “begun work to collect the information you requested, and hope to have something back to you by week’s end” (i.e., by Friday, October 23, 2009). CEI’s counsel immediately responded, “thank you. We’ll look forward to receiving the information.” Anchin’s Ans. at ¶ 75; Snapper’s Ans. at ¶ 75. 28. Anchin’s attorney Thomas Manisero spoke with a reporter for Daily Finance on or about October 23, 2009. Anchin’s Ans. at ¶ 76; Snapper’s Ans. at ¶ 76. 29. In the course of its business management services Anchin’s feed were paid directly from CEI Enterprises, Inc. bank accounts managed by Anchin. Anchin’s Ans. at ¶ 78; Snapper’s Ans. at ¶ 78. B.

Summary Judgment: Statements of Undisputed Fact and Responses 1.

General Matters

1. Plaintiffs filed this lawsuit on October 13, 2009. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 1 [Doc. 132] (June 26, 2012). 2. CEI is wholly owned by Ms. Cornwell and is the company she uses for her work as an author. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 6 [Doc. 132] (June 26, 2012). 3. Ms. Cornwell is an author who currently lives in Massachusetts. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 7 [Doc. 132] (June 26, 2012). 4. Dr. Gruber is Ms. Cornwell’s spouse. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 8 [Doc. 132] (June 26, 2012). 5. Dr. Gruber is a neuroscientist at McLean Hospital in Belmont, Massachusetts, a Harvard Medical School affiliate. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 9 [Doc. 132] (June 26, 2012). 6. Anchin is an accounting firm located in New York City. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 10 [Doc. 132] (June 26, 2012). 7. In 2004, based upon the recommendation of her attorney Michael Rudell, Esq., Ms. Cornwell engaged Yohalem Gillman to perform business management services for her and CEI. - 24 31729103_2


Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 13 [Doc. 132] (June 26, 2012). 8. The services that Yohalem Gillman proposed to perform for Ms. Cornwell and CEI are set forth in a letter, dated November 22, 2004 that Yohalem Gillman sent to Ms. Cornwell’s and CEI’s attorney, Michael Rudell, Esq. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 14 [Doc. 132] (June 26, 2012). 9. Effective January 1, 2005, Yohalem Gillman and Anchin combined, and Anchin assumed performance of the business management services Yohalem Gillman had been engaged to perform for Ms. Cornwell and CEI. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 16 [Doc. 132] (June 26, 2012). 2.

Plaintiffs’ Defamation Claim

1. On October 23, 2009, Defendants’ attorney, Thomas R. Manisero, was quoted in an article published online in connection with the website “The Daily Finance.” Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 58 [Doc. 132] (June 26, 2012). 3.

Plaintiffs’ N.Y. Consumer Protection Act Claim

1. Ms. Cornwell is a successful author of long standing and Dr. Gruber is a neuroscientist holding a Ph.D. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 60 [Doc. 132] (June 26, 2012). 4.

Plaintiffs’ Investment Losses

1. On December 8, 2004, Ms. Cornwell signed a durable Power of Attorney to allow Ira Yohalem and Evan Snapper to handle her business matters. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 63 [Doc. 132] (June 26, 2012). 2. Mr. Snapper was a registered investment adviser in 2005. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 64 [Doc. 132] (June 26, 2012). 3. In 2005, Anchin retained Neil Mitchell, a registered investment adviser at Lehman Brothers, to assist in investing Ms. Cornwell’s finances. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 65 [Doc. 132] (June 26, 2012). 4. In or around October 2005, approximately $500,000 was invested on her behalf at Gilder Gagnon. Pls.’ Resp. to Defs.’ Omnibus Stmt. of Uncontested Material Facts for All Mot. Seeking Partial Summ. J., Submitted Pursuant to L.R. 56.1. at ¶ 70 [Doc. 132] (June 26, 2012). - 25 31729103_2


5.

Anchin’s Contract and Quantum Meruit Counterclaims for Fees

1. Beginning in the mid-1990s, CEI and Ms. Cornwell retained Yohalem Gillman and Co. LLP (“Yohalem Gillman,” n/k/a Anchin, Block & Anchin LLP (“Anchin”)) a CPA firm. CEI’s employees otherwise handled Ms. Cornwell’s and CEI’s other business needs. Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶ 1 [Doc. 126] (June 26, 2012). 2. In November 2004, Yohalem Gillman offered to provide CEI and Ms. Cornwell business management services, including by not limited to bookkeeping services, tax services, review of insurance, and oversight of Plaintiffs’ investment accounts. Yohalem Gillman estimated that the full cost of these services would be approximately $40,000 per month. Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶ 2 [Doc. 126] (June 26, 2012). 3. Yohalem Gillman offered that “[e]ach month, we will send you an itemized bill breaking down the hours and rates which you should feel free to review with us at any time. If you prefer, we will be pleased to send a copy of the bills to your attorney for a second review.” Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶ 3 [Doc. 126] (June 26, 2012). 4. On January 1, 2005, Yohalem Gillman combined with Anchin pursuant to an asset purchase agreement. Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶ 6 [Doc. 126] (June 26, 2012). 5. Laurie Fasinski is a 30(b)(6) designee with respect to “Anchin’s contract terms with Plaintiffs, including fee arrangements and billing terms, and any documentation of same, from January 1, 2005 through Labor Day, 2009.” Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶ 14 [Doc. 126] (June 26, 2012). 6. All of the purported additional fees are enumerated in a spreadsheet, and in that spreadsheet the column “BM” means business management. Anchin did not provide an advance cost estimate for services in the “BM,” “Tax,” or “Special” columns of that spreadsheet. Defs.’ Resp. to Pls.’ R. 56.1 Statement at ¶¶ 39, 40, 42 [Doc. 126] (June 26, 2012). III.

CONTESTED ISSUES OF FACT A. Plaintiffs’ Position Defendants have made numerous representations in their summary judgment briefings

and accompanying L.R. 56.1 Statement that suggest that numerous other factual issues beyond those identified in Section II supra are not in dispute. Furthermore, certain extrinsic facts are not in dispute, such as Mr. Snapper’s guilty plea, see United States v. Snapper, No. 1:10-cr-00325PLF (D.D.C., Jan. 3, 2011), and Mr. Snapper’s agreement that he “had a fiduciary relationship with” Plaintiffs that “aggravate[d]” the wrongful nature of the conduct to which he admitted and - 26 31729103_2


for which he was disbarred, see Resp.’s Am. Ans. to Pet. for Disc. and Stip., BBO File No. C1 11 0137, at 2 (Jan. 17, 2012). B. Defendants’ Position Issues of fact are prevalent throughout this case. Indeed, this is an intensively fact specific case in all regards. Plaintiffs have alleged that most everything that went wrong in their lives between 2005 and 2009 is in some way attributable to Defendants. Defendants maintain, however, that they provided exceptional business management services to Plaintiffs. Nonetheless, significant disputed issues of fact are identified below: Patricia Cornwell’s Control and Knowledge Plaintiffs Ms. Cornwell and Dr. Gruber claim that throughout the course of their engagement of Defendants, they did not have much, if any, knowledge as to how Defendants handled their financial and business matters. Plaintiffs claim that they had no input as to how their business was run, and that they only discovered later, after the relationship terminated, that numerous aspects of their business, which Defendants handled, were allegedly mismanaged. In short, Plaintiffs supposedly turned over every aspect of control over their personal and professional livelihood to Defendants, despite being highly successful, intelligent and accomplished professionals. Defendants maintain, however, that Plaintiffs had and exercised absolute control over even minute details of their personal and business matters, they directed Anchin to execute various business transactions, and Defendants kept Plaintiffs fully apprised of important developments throughout their relationship The Scope of Anchin’s Business Services Anchin does not dispute that it is a full service provider of business management services. In particular, Anchin’s business management department, in which Plaintiffs were

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clients, provides many specific services depending on a particular client’s needs. Defendants maintain that their services are offered on “an as-needed basis”; however, just because a particular service is offered, it does not mean that Anchin assumes full responsibility for every aspect of a client’s business and professional needs. Defendants submit that, in this case, they provided all of the services that Plaintiffs requested of them, but that at all times the ultimate decision makers were the Plaintiffs themselves. Plaintiffs, meanwhile, contend that because of Ms. Cornwell’s supposed need to focus on her writing, she intended to and did delegate to Anchin complete control of all her financial and personal decision-making. Billing and Cost of Professional Services Ms. Cornwell retained Yohalem Gillman as her accounting firm prior to its merger with Anchin Block & Anchin in the beginning of 2005. Throughout that time up until the 2008 time frame, Yohalem Gillman and Anchin charged Ms. Cornwell, CEI, and later Dr. Gruber, an hourly rate for services rendered. In the 2008 time frame, there was a shift in the fee structure whereby Defendants agreed to Plaintiffs’ proposal of $40,000 per month payment for services rendered. Plaintiffs dispute whether the $40,000 per month (later reduced to $25,000 per month) was a flat fee for all services rendered, or whether the monthly payment was a retainer for accounting and financial services only. In any event, over $560,000 remains unpaid for services rendered in 2008 and 2009 and is the basis of two of Defendants’ counterclaims against Plaintiffs. Patricia Cornwell’s Knowledge of Political Contribution Illegality It is not disputed that Mr. Snapper pleaded guilty to one felony count of providing false statements in connection with his involvement with bundling campaign contributions for an Elton John fundraising concert for Hillary Clinton in April 2008. Mr. Snapper has accepted full

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responsibility for his role in orchestrating reimbursements to various people, including members of Ms. Cornwell’s family and friends, in exchange for them agreeing to pay $2,300 dollars per ticket to attend the concert. What is in dispute, however, is Ms. Cornwell’s knowledge and involvement throughout this process. Ms. Cornwell pleads ignorance as to Mr. Snapper’s plan, or, in the alternative, she claims she was unaware of the illegality of the reimbursements. Mr. Snapper, on the other hand, asserts that Ms. Cornwell was not only aware of the activity, but she also directed him to make the reimbursements. The jury will have to determine, based on the evidence presented, whether Ms. Cornwell was or was not complicit with this activity. Equitable Forfeiture Claims Plaintiffs continually shift the focus of their case as it becomes more apparent that their claims are not supported by the facts. The latest twist is their attempt to portray this case as a “bad faith and breaches of fiduciary duty” despite the fact that their original complaint demanded an accounting of Plaintiffs’ finances. Having found no misappropriation of funds, Plaintiffs then shifted to primarily a professional negligence claim by their Fifth Amended Complaint. Subsequent to the various motions that have been filed in this case and realizing, perhaps, that none of their six experts could cite to relevant, reliable, and applicable standards of care governing Defendants’ role as business managers, Plaintiffs now rest their case on a bad faith claim. Yet, the evidence will show that at all times, Defendants acted in a manner that was in furtherance of Plaintiffs’ interests. a. Florida Condominium Defendants were tasked with purchasing an ocean-front condominium in Florida for Plaintiffs in 2006. A deposit was made before Plaintiffs ultimately decided not to go forward with the purchase. As a result, Plaintiffs lost a $200,000 deposit that Mr. Snapper had put on the

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condominium. The deposit was greater than usual because, as Mr. Snapper’s undisputed testimony establishes, it was necessary to pay an increased deposit to get the sellers to agree to remove a specific performance clause in the purchase and sale contract, which would have compelled Plaintiffs to purchase the property even if they determined not to go forward with the deal. This is particularly significant because in 2006, the Florida market faced, and continues to face, a declining real estate market. Under a breach of fiduciary standard, Plaintiffs would have to prove that Defendants somehow caused Plaintiffs to walk away from the deal. Ultimately, the evidence will reveal convincingly that Plaintiffs made the ultimate decision not to purchase the condominium. When the deal was cancelled, Plaintiffs claim that Defendants breached their fiduciary duty to Plaintiffs by requesting a split commission tantamount to a kickback from the buyer’s broker. Mr. Snapper denies this. In any event, no money was ever exchanged and therefore, Plaintiffs have no damages claim in furtherance of this issue. b. $5,000 Check It is not disputed that Ms. Cornwell supported many political causes. Particularly, she is good friends with James Gilmore, the former governor of Virginia and one time presidential/senatorial candidate. Ms. Cornwell has supported Mr. Gilmore financially in the past, including a one million dollar donation to his foundation. In 2006/2007, Ms. Cornwell endeavored to donate money to Mr. Gilmore’s presidential and senatorial campaigns, but did not want to do so publicly because of Mr. Gilmore’s campaign stance against same-sex marriage. Ms. Cornwell disputes the fact that she directed Mr. Snapper to donate money to Mr. Gilmore’s campaign and that she authorized him to reimburse himself from her account. Common sense dictates that there was no reason for Mr. Snapper, who has no relationship with Mr. Gilmore, to

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make the maximum allowable donation to his campaign. Indeed, he did it twice. The only logical explanation is that Ms. Cornwell told him to do so. In any event, Mr. Snapper asserts that the $5,000 dollar check was a reimbursement for the donation he made to James Gilmore’s campaign on behalf of Ms. Cornwell. Mr. Snapper maintains that the subject line, “Happy Bat Mitzvah, Lydia!” was because the check was issued in close temporal proximity to his daughter’s Bat Mitzvah, and he did not want the general ledger to reflect that it was a reimbursement. As such, Snapper cannot be said to have breached a fiduciary duty to Plaintiffs by doing exactly what was asked of him. c. NetJets-Related Issues Ms. Cornwell/CEI was, and continues to be, a customer of NetJets, a private aviation company. Mr. Snapper recommended the company after he discovered it was more cost effective than Ms. Cornwell’s previous travel arrangements. NetJets routinely provided gifts to people like Mr. Snapper, who are in a position to refer clients to the company. Plaintiffs claim that Mr. Snapper misappropriated NetJets gifts that were intended for them because, much like all CEI mail, the gifts were mailed to Anchin’s office in New York. Meanwhile, Defendants assert, and the undisputed evidence shows, that the gifts were never intended for Plaintiffs. Plaintiffs cannot claim that they were damaged by virtue of them not receiving gifts that were never intended for them. Moreover, Plaintiffs claim that Mr. Snapper was not diligent in negotiating the best contracts for CEI. Their claim is premised on an alleged extra-marital affair that Mr. Snapper had with a NetJets representative. Not only do Plaintiffs have no evidence that any inappropriate relationship existed between Mr. Snapper and the NetJets representative, but they also continue to assert this baseless accusation in an attempt to smear Mr. Snapper’s character. The

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fundamental premise of a breach of fiduciary duty claim is whether the defendant acted in a manner that put his/her interests ahead of the clients’. Even assuming Plaintiffs’ position to be true, Mr. Snapper had absolutely nothing to gain personally by not negotiating in good faith. This issue is currently the subject of a motion in limine before the Court as it is baseless and only used to harass and embarrass Mr. Snapper. Plaintiffs’ claim is also premised on the fact that Dr. Gruber supposedly was able to negotiate more favorable rates after Plaintiffs and Defendants ended their relationship in 2009. Plaintiffs, however, never produced any documents to support this contention during the course of discovery. Thus, they will have difficulty proving their contention. Nonetheless, Defendants assert that Mr. Snapper negotiated contracts with due care, and, further, if Dr. Gruber was able to secure “better” terms it was due at least in part to shifts in the private aviation industry after the financial crisis of 2008/2009. Plaintiffs couch this claim under a breach of fiduciary duty. In order to support this claim, they will have to show that not only did Defendants owe a fiduciary duty to Plaintiffs in negotiating private aviation contracts, but Plaintiffs will also have to show that Mr. Snapper breached that duty by, at the very least, paying the market rate for private aviation services. In addition, Plaintiffs would have to demonstrate that they suffered damages as a result of purchasing private aviation services at the going market rate. d. Development Corporation for Israel In 2006, Ira Yohalem was being honored at an event by the Development Corporation for Israel. Several Anchin personnel attended the event and a table was purchased using funds from Ms. Cornwell’s account. Ms. Cornwell does not recall authorizing the purchase of the table. However, Defendants maintain that Ms. Cornwell authorized the $2400 purchase.

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e. American Express Card Defendants do not dispute that on occasion, Mr. Snapper used his personal American Express credit card to make purchases on behalf of CEI. Defendants also do not dispute that Mr. Snapper used his personal credit card statement as a receipt for reimbursement from CEI’s operating account. Plaintiffs claim that they had no knowledge that Mr. Snapper was using his personal credit card, and that his doing so constituted a breach of his duties to Plaintiffs. Plaintiffs also accuse Mr. Snapper of reimbursing himself with CEI funds for personal expenditures. Mr. Snapper categorically denies this allegation. Plaintiffs have not proffered any evidence to establish this fact other than baseless accusations. Whether under a negligence, breach of duty, or breach of contract claim, Plaintiffs cannot demonstrate that they have suffered any damages as a result of Mr. Snapper using his personal American Express card. To the extent that some finance charges were improperly allocated to CEI’s account, the amount is negligible compared to the vast demand in this case. f. Misappropriated Funds Plaintiffs initiated this lawsuit in October 2009 with a claim for an accounting. Five amended complaints later, that claim has since been abandoned. Yet, Plaintiffs maintain that Defendants somehow misappropriated their funds because Ms. Cornwell’s net worth did not increase in line with her earnings. This claim is despite the fact that Plaintiffs’ current accounting firm, which has a forensic accounting function, could not conclude that any money was missing. Instead, Plaintiffs’ expert claims that the various transfers from the different bank accounts made it difficult for Plaintiffs to track the full flow of funds. Defendants argue, however, that not only are all of Plaintiffs’ funds accounted for, but also that Ms. Cornwell’s net worth is tied to her spending habits and general investment performance. Whether under a claim

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of negligence, breach of fiduciary duty, or breach of contract, a showing of damages is required. Plaintiffs have no evidence whatsoever to support this claim. The Missed Book Deadline The Parties do not dispute that Ms. Cornwell did not meet her deadline in 2006 for delivering the manuscript for Scarpetta #15: “Book of the Dead.” Indeed, Ms. Cornwell made it clear in a July 9, 2006 email that she would not finish the manuscript for the book by the extended deadline. However, the Parties dispute the reasons underlying Ms. Cornwell’s inability to meet the book deadline. Plaintiffs claim that Ms. Cornwell was distracted by the construction at Garfield Road in which Defendants bore complete responsibility even though it is undisputed that Plaintiffs themselves hired the contractor involved. Moreover, Plaintiffs claim that Defendants failed to do proper due diligence with respect to various New York apartments, thereby depriving her of a quiet place to write. In stark contrast, Defendants maintain that not only did they perform adequate due diligence, but also that if Ms. Cornwell wanted a quiet place to write, she could have chosen any one of her various properties in Massachusetts, South Carolina, and Florida to do so. The jury will have to determine whether Defendants’ somehow caused her to miss her book deadline, or whether Ms. Cornwell had other reasons for missing the deadline. Significantly, Plaintiffs now attempt to argue that Ms. Cornwell suffered damages related to the missed book deadline in the Spring of 2007 when she finally turned in the manuscript for this book. This is clearly an attempt to circumvent the three year statutes of limitations under both New York and Massachusetts law for negligence, breach of fiduciary duty, or breach of contract claims. In accordance with her literary contract, though, Ms. Cornwell was due to receive an advance when she submitted the first draft of her manuscript. In her July 9, 2006

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email, Ms. Cornwell enumerated, in her own words, a myriad of reasons why her deadline could not be met, not once blaming Anchin or her lack of a New York writing space. Ms. Cornwell knew that, under her contract, that if she failed to submit a manuscript by her 2006 deadline, she would not be paid. It is therefore disingenuous, if not an outright fabrication, that Plaintiffs claim that Ms. Cornwell missed her book deadline because Anchin and Mr. Snapper failed to conduct due diligence on the three New York City apartments. Plaintiffs will not only have a difficult time overcoming the statute of limitations, but they also will have a difficult time proving that Defendants somehow caused Ms. Cornwell to miss her book deadline given the myriad of factors that were prevalent. Garfield Property Ms. Cornwell and Dr. Gruber first rented the Garfield Road property in Concord, MA, starting in October 2004, and later purchased the property in April 2005. The 14,000 square feet, 40+ acre spectacular river-front property was meant to be their permanent home. Defendants assisted in the rental and purchase of the property. Sometime in late 2005, Plaintiffs engaged the services of a local contractor, Bernie Osgood, to fix a water leak in the roof. After fixing the leak, Mr. Osgood continued to do some other renovation and repair work on the property. The work then evolved into numerous different renovation and repair projects. In or around October 2006, Defendants engaged the services of Ziggy Rutan, an experienced construction “Owner’s Representative,” to assist in managing the project. In or around July 2007, Plaintiffs decided to stop construction on the property. The property was sold sometime in 2009. Just about every aspect of the construction project, its progress, and the Parties’ respective roles are in dispute. Overall, Plaintiffs claim that Defendants assumed responsibility for overseeing every aspect of the construction. In stark contrast, Defendants maintain that they

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were only responsible for the accounting aspect of the project, as well as engaging other professionals, like Mr. Rutan, when necessary. Defendants also assert that Plaintiffs had full control and directed how the construction should be handled, including providing input as to the design and materials used in the project. It is also disputed whether Messrs. Osgood and Rutan were somehow negligent in performing their duties. Plaintiffs claim that they suffered damages in the form of worthless renovation costs and diminution in the value of the property. Plaintiffs, however, have not provided any evidence to establish that either Mr. Osgood or Mr. Rutan was negligent. This issue is germane because Plaintiffs plead that Defendants were responsible for ensuring that Mr. Osgood had sufficient professional liability insurance in case of negligent work. Mr. Snapper had purchased additional personal injury insurance for Mr. Osgood to protect Plaintiffs, but did not purchase professional liability insurance. Without any proof of negligence, it follows that one cannot collect under a professional malpractice insurance policy. Indeed, there is evidence that Plaintiffs tried to pursue legal action against Ms. Osgood, but no suit was ever brought against him, seemingly because counsel determined that Mr. Osgood was not insured. Either under a claim for negligence or breach of fiduciary duty, Plaintiffs must show that not only did they suffer actual damages, but they must also prove that Defendants caused those damages. Plaintiffs have not set forth any evidence–expert or otherwise—that Defendants somehow caused any damages to the Garfield property. Significantly, none of Plaintiffs’ proposed experts even considered the fact that Plaintiffs purchased Garfield near the height of the real estate bubble in 2005, and sold it near the bottom in 2009 after undergoing extensive renovations that were never completed because Plaintiffs ordered work to be stopped. In other

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words, Plaintiffs attribute the entire cost of the property to Defendants without taking into any consideration other causes, including the relevant market conditions and unfinished construction. Monument Street It is not disputed that the relevant zoning provision at the Monument Street property did not allow for an office space or guest quarters to be constructed in the carriage house. What is disputed is whether Defendants were somehow liable for not discovering that fact, despite the fact that an attorney handled the closing and the selling broker provided misleading information. Aside from the extensive legal fees that Plaintiffs spent litigating with the sellers and the brokers and to challenge the zoning, they cannot prove that they suffered any measurable damages. In any event, the issue could have been resolved by requesting a variance (which is ultimately what happened) from the town of Concord instead of resorting to costly litigation that was spearheaded by Plaintiffs’ current legal counsel. Use of Loans Plaintiffs assert that Mr. Snapper and Anchin inappropriately used loans to finance Plaintiffs’ major acquisitions such as homes and helicopters, and thus, incurred unnecessary interest and fees for Ms. Cornwell and CEI. Defendants remain steadfast in their position that the loans were appropriate and reasonable at the time and under the circumstances given the robust financial markets and the need to preserve investment growth and cash flow for Ms. Cornwell and CEI. Furthermore, the existence of these loans and their cost and purpose were fully disclosed on the financial reports that Defendants provided to Plaintiffs over the years. Finally, Ms. Cornwell used loans to finance various real property purchases even before her engagement of the Defendants.

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Accounting Errors Although Plaintiffs argue that Defendants committed accounting errors – both in preparing tax returns and failing to deduct a charitable contribution – they point to no evidence of damages as a result of such errors other than fees that Plaintiffs incurred to confirm that there were no damages. Anchin ultimately corrected the charitable deduction error. Under any negligence claim, a reasonable standard of care for accountants does not demand perfection but rather, provides for occasional, correctable errors. At no point can Plaintiffs identify that they suffered any damages because of any accounting errors that were eventually corrected by Defendants. Helicopter Sale and Commission Plaintiffs claim that Mr. Snapper negligently used a broker to sell Ms. Cornwell’s Bell 427 helicopter, thereby incurring unnecessary commission fees. However, Plaintiffs fail to mention that the initial offer they received to purchase the helicopter was for only $3.2 million. At the recommendation of Plaintiffs’ aviation attorney, Ron Rapp, Mr. Snapper retained renowned aviation broker, Tony Alcedo. Mr. Alcedo stated in his deposition that he never intended to conduct the helicopter sale for “$100k or even $50k” but only made that offer in hopes of securing an exclusive listing from Mr. Snapper. Mr. Alcedo sold the helicopter for $4.1 million (above the original purchase price) and ultimately received a $140,000 commission for his invaluable services. The $140,000 commission was actually a $60,000 reduction from the originally requested $200,000 commission after Mr. Snapper negotiated a lower commission fee. The disputed issue of fact is whether Mr. Alcedo actually agreed to a $50,000 commission. In any event, Mr. Alcedo managed to sell the helicopter for almost $1 million more than the initial offer, and Plaintiffs will have to prove that they suffered some measurable damages in order to

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support a claim for negligence. In addition, Plaintiffs would also have to prove that using a broker to sell a helicopter is somehow a breach of any standard of care. Patricia Cornwell and Staci Gruber’s Investments Among Defendants’ responsibilities was to oversee Plaintiffs’ investments. Between 2005 and 2007, Plaintiffs’ investments enjoyed substantial market gains. In 2008, the equities market came to an abrupt crash as the financial world nearly collapsed. Ms. Cornwell’s and CEI’s investments had been converted out of equities in 2008 ahead of the crash so, even though she lost some unrealized gains in her investments, the impact on her portfolio was not severe. Dr. Gruber had money invested in a hedge fund, which she directed be withdrawn in March 2009, virtually at the bottom of the equities market; she lost approximately 42% of her principal. Plaintiffs now claim that Defendants did not adhere to a conservative investment strategy that was consistent with their risk tolerances. Moreover, Plaintiffs claim that they did not have knowledge that their investments were not managed at Anchin, but rather, by outside investment firms. Defendants argue that Plaintiffs were well aware their funds were managed by outside firms and that they kept Plaintiffs apprised of the investment performance as necessary. Finally, Defendants also assert that the asset allocation was consistent with Plaintiffs’ investment objectives and that any losses are attributable to the general decline in the economy or poor market timing. Whether under a negligence of breach of duty claim, Plaintiffs have to demonstrate that they suffered some measurable damages and that Defendants were the proximate causation of those damages. With respect to Ms. Cornwell, Plaintiffs concede that her investments fared acceptably in light of the greatest economic recession since the Great Depression.

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Defendants concede that Dr. Gruber suffered some investment losses. However, Dr. Gruber’s investment losses were not inconsistent with the general market decline in 2008 and 2009. Investments are inherently risky and Dr. Gruber’s account was no exception. Plaintiffs argue that Dr. Gruber did not fare well in her investments because Mr. Snapper and Anchin did not order that they be removed in time. Yet, the same argument can be made that Dr. Gruber divested her accounts too early, while the market was at its bottom. Had her investments remained in place, her investments would have, and did, experience a tremendous market rebound that followed. Hindsight is 20/20 and Defendants did not have the benefit of a crystal ball; rather, they made a reasoned decision to leave Dr. Gruber’s investments in place to await the inevitable market rebound in large part, because she has a different investment profile than Ms. Cornwell given her relative youth and the fact that she did not need ready access to those assets to cover her living needs. Nonetheless, Mr. Snapper and Anchin were ordered to divest the account and as a result, Dr. Gruber suffered some losses. Dr. Gruber’s Consulting Fees Dr. Gruber, who is married to Ms. Cornwell, was paid as a CEI consultant at a wage that increased over time. However, she pleads ignorance as to how Anchin set up this arrangement. Particularly, it is not disputed that Defendants took a large portion of Dr. Gruber’s $200,000 per year consulting fee towards the latter part of their relationship, and invested the money in the Horizon Management hedge fund. While Defendants maintain that Dr. Gruber was well aware of their actions and they acted at the direction of Plaintiffs, Dr. Gruber claims that she did not receive her consulting fees and was unaware of what Defendants were doing. Accordingly, the finder of fact would have to resolve this issue.

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Employee Matters Plaintiffs claim that CEI carelessly under-contributed to two employees’ 401k accounts. Assuming this claim to be true, which it is not, Defendants fail to see how an underpayment of 401k contributions amounts to damages when the appropriate response is to make up for the underpayment. Regardless, any applicable standard of care does not demand perfection. Plaintiffs also claim that Mr. Snapper caused two employees to be terminated because they appeared to be unfit. Notwithstanding the fact that this claim makes no sense, and assuming the remote truth of this claim, Defendants fail to see how this claim amounts to any damages to Plaintiffs. Nonetheless, Ms. Cornwell had a clear pattern of letting CEI employees go based on her own opinion of them, which, during Anchin’s and Yohalem Gillman’s business management days, included the staff of her Florida office, Patrick O’Connell, Sue Courtney, Linda Evangelista, Paul Gingrich and Jim Keaton. Plaintiffs’ Defamation Claim It is not disputed that a Daily Finance article was published with a quote from defense counsel, who opined that the present law suit was a “preemptive” move to avoid paying fees. Plaintiffs claim that the quote caused damages and was intentionally malicious. Defendants maintain that the quote was a matter of opinion concerning ongoing litigation and was not malicious. In any event, Plaintiffs cannot prove that the comment was made with “actual malice” to support a claim of defamation against Ms. Cornwell, or that it caused Plaintiffs to suffer any damages. Access to Bank Accounts Plaintiffs claim, among many things, that they were unaware of their finances and particularly, that they did not have access to the various bank accounts that Defendants set up for

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them. However, Defendants maintain that Plaintiffs had access to their bank accounts at all times, and, moreover, if they needed to access accounts and could not, Defendants would have arranged for that to happen. Again, whether under a claim of negligence of breach of fiduciary duty, Plaintiffs have to prove that they suffered measurable damages by supposedly not having access to their bank accounts. This claim is meritless and cannot be substantiated. Defendants’ Counter Claims a.

Breach of Contract

Defendants counterclaimed that Plaintiffs have breached their contractual obligations with Defendants by refusing to pay the $561,430 in outstanding fees incurred as a result of Defendants services to Plaintiffs between 2008 and 2009. b.

Quantum Meruit

As a result of Plaintiffs’ refusal to pay the outstanding fees, Plaintiffs have been unjustly enriched by Defendants’ performance of professional services on their behalf. c.

Defamation

Defendants maintain that Ms. Cornwell made defamatory statements concerning Defendants in a November 13, 2009 Courier Mail article, as well as a November 16, 2009 article containing an interview of Ms. Cornwell in the Telegraph. Both statements are false, defamatory, and Defendants have suffered harm as a result. Affirmative Defenses Defendants set forth their affirmative defenses, incorporated herein, including: (a) The damages incurred by Plaintiffs, if any, have been caused by their own actions or inaction, or the actions or inactions of their other agents. Accordingly, Plaintiffs are barred from recovery on the basis of comparative fault;

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(b) Plaintiffs’ claims are barred by the doctrine of estoppels; (c) Plaintiffs’ claims are barred in whole or in part by the applicable statute of limitations; (d) Plaintiffs’ recovery is barred by the doctrine of laches; and (e) Plaintiffs recovery is barred by the doctrine of unclean hands. IV.

JURISDICTIONAL ISSUES Defendants do not dispute that this Court has personal jurisdiction over the parties and

subject matter jurisdiction over the dispute.

V.

QUESTIONS RAISED BY PENDING MOTIONS A. Plaintiffs’ Motions At the outset, Plaintiffs note that Defendants have filed, and continue to file, several

independent motions where one or far fewer would suffice and may indeed be required as a matter of law. In addition, a number of these motions appear to be unsupportable at this pre-trial stage, e.g., eleven motions in limine that require credibility determinations. Plaintiffs believe that Defendants are engaged in a strategy to drive up Plaintiffs’ fees. For example, Defendants filed seven motions for partial summary judgment with supporting memoranda totaling well over 60 pages, in apparent disregard for the Court’s 20-page limit. Approximately five of these motions would not resolve any claim but were instead addressed to a single element of damages or would eliminate one example of the challenged conduct. Plaintiffs’ motion to strike the seven motions as improperly circumventing the 20-page rule [Doc. 116] (June 1, 2012) is pending before the Court. Plaintiffs’ other outstanding motions include: 

Pls.’ Mot. for Summ. J. on Anchin’s Counterclaims (for defamation and additional fees) [Doc. 99] (May 29, 2012);

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

Pls.’ Daubert Mot. In Limine to Exclude the Expert Report and Testimony of Vincent J. Love [Doc. 170] (Aug. 13, 2012);



Pls.’ Mot. to Seal Pls.’ Mot. In Limine to Exclude Reference to Specific Topics for which Prejudice Outweighs Probative Value [Filed Under Seal] (Aug. 13, 2012); and

Pls.’ Mot. In Limine to Exclude Reference to Specific Topics for which Prejudice Outweighs Probative Value [Filed Under Seal] (Aug. 13, 2012). B. Defendants’ Motions Defendants filed motions for partial summary judgment on seven distinct issues in this case primarily to assist the court in streamlining the plethora of issues that permeate this case. It is worth repeating that this is a fact-intensive case. Defendants were engaged in a number of different responsibilities for Plaintiffs as their business manager over a four year period. As such, Defendants believed it would be helpful to the Court to address the separate yet distinct issues set forth in Plaintiffs’ extensive and convoluted complaint. Each claim asserted by Plaintiffs could, by itself, be a separate trial. To the extent that Plaintiffs believe that the various motions are unnecessary, the fact of the matter is that Plaintiffs opposed all but one motion. Nevertheless, the motions and their respective arguments are set forth below:

Summary Judgment Motions Missed Book Claim Ms. Cornwell has claimed that Anchin and Mr. Snapper were the cause of her being unable to complete the 15th book in the Scarpetta series by the original March 1, 2006 deadline and then by the extended August 1, 2006 deadline, resulting in the loss of a year’s worth of royalty advances. In their motion for partial summary judgment dismissing this aspect of the case, Defendants argue that this claim falls outside of the three year statute of limitations under both Massachusetts and New York law. Second, Plaintiffs cannot establish a causal link between their claim and Anchin’s and Mr. Snapper’s actions. Third, Plaintiffs’ ostensible damages are

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completely speculative. The only expert testimony supporting Plaintiffs damages claim comes from Ms. Cornwell’s own literary agent of many years. As defendants’ motion demonstrates, there is no evidence to support this claim. Indeed, the most telling evidence is the July 9, 2006 email, which Ms. Cornwell sent to her agent, publishers and lawyers announcing that she would not meet the deadline. In her own hand Ms. Cornwell enumerated a myriad of reasons why her deadline could not be met, not once blaming Anchin or her lack of a New York writing space – in her own words, she was fatigued and needed to change the book character. Tax Audits The question with respect to this motion for partial summary judgment is whether Anchin’s use of its New York address as CEI’s mailing address and helicopter registration caused the New York State taxing authorities to audit Ms. Cornwell’s personal income tax returns. Defendants argue in their motion that Plaintiffs have proffered no evidence – neither expert nor fact testimony – that links Anchin’s conduct to either the audits or the sales and use tax assessment. Indeed, Plaintiffs have filed no opposition to this motion. Professional Liability Insurance Coverage for Plaintiffs’ General Contractor The question in this motion is whether Defendants were required to purchase liability insurance for Mr. Osgood – the contractor used in the Garfield property. Plaintiffs claim that Anchin’s and Mr. Snapper’s failure to procure professional liability insurance on behalf of the general contractor that Plaintiffs’ hired (Bernie Osgood), caused Plaintiffs to suffer millions of dollars in unrecoverable losses. Defendants’ argue that in order to sustain this claim, plaintiffs must prove, amongst other things, that Mr. Osgood was negligent in the renovation of the Garfield home. Plaintiffs have proffered no evidence – expert or otherwise – to establish that

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Mr. Osgood was negligent in any way. As a matter of law, plaintiffs are unable to prove their “case within the case,” thus this claim must be dismissed. MGL 93A and New York Consumer Protection Act Defendants have also moved for partial summary judgment dismissing Plaintiffs’ Massachusetts Consumer Protection Act claim, arguing that (1) the acts underlying their claim did not principally take place in Massachusetts, a prerequisite for stating a valid M.G.L. 93A claim, (2) plaintiffs failed to comply with the demand letter requirement under M.G.L. 93A, and (3) plaintiffs fail to allege any egregious wrong on the part of the defendants, but instead simply repackage their negligence, breach of contract and breach of fiduciary duty claims, setting forth no new allegations at all. Defendants’ separate but related motion essentially argues that the New York Consumer Protection Act was not intended to apply to this type of private, contractual relationship involving sophisticated parties and large sums of money. Any mistakes that were made during the course of their relationship were inadvertent mistakes. As such, they fall woefully short of the deceptive consumer practices envisioned by these statutes. Mismanagement of Investments The critical issue in this motion is whether Plaintiffs have established that 1) Ms. Cornwell suffered any damages when she lost unrealized gains; and 2) whether Defendants’ actions proximately caused such losses. Ms. Cornwell claims that Anchin and Mr. Snapper mismanaged her investments by (1) not informing her that her investments were managed at Lehman Brothers, and (2) placing them in investment vehicles that were not reflective of her “conservative investment objectives.” However, Defendants argue that Ms. Cornwell suffered no measurable damages, and, moreover, Ms. Cornwell was in fact aware of her investments

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throughout the time defendants were overseeing them. Indeed, Plaintiffs did not complain about her conservative investment objective when her investments were enjoying substantial returns during 2006, 2007, and parts of 2008. Plaintiffs, along with every investor, were subject to the same economic factors that precipitated the global economic meltdown in the 2008-2009 timeframe. It is important to note that although Plaintiffs now claim that Defendants did not invest conservatively enough on their behalf, Plaintiffs’ expert argues that Defendants did not do enough to maximize her investment gains. Without the tremendous investment gains that Plaintiffs enjoyed, Ms. Cornwell would not be in a position to complain about losing unrealized gains. She simply cannot have it both ways. The Defamation Claim Early in the litigation, Plaintiffs amended their complaint to include a defamation claim against Anchin based on statements made to the press in connection with the lawsuit. Specifically, the news article quoted defense counsel as saying that this lawsuit was a preemptive attempt to avoid paying Anchin’s fees. Defendants’ motion for partial summary judgment argues that 1) the statement was clearly opinion about ongoing litigation and cannot be defamatory; 2) Plaintiffs cannot prove that the comment was made maliciously; and 3) Plaintiffs do not proffer any evidence of economic loss stemming from this comment. Motions in Limine Defendants also filed eleven separate motions in limine. The topics and their underlying reasons for exclusion are briefly described below: Government Investigation Plaintiffs claim that the Department of Justice’s decision not to prosecute Ms. Cornwell is an indication that Ms. Cornwell was innocent, wrongly investigated, and forced to spend large

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sums of money to defend against the investigation. Defendants filed a motion in limine to preclude Plaintiffs from introducing any evidence concerning the investigation because (1) it is irrelevant and prejudicial; and (2) Plaintiffs cannot introduce evidence of the government ceasing its investigation as proof that Ms. Cornwell was completely innocent. Supplemental Witnesses On July 26, 2012, Plaintiffs served their first supplement to initial disclosures pursuant to Fed. R. Civ. P. 26 (a)(1), listing several potential new witnesses who were never deposed. Those disclosures were withdrawn, but reinstated after a joint telephone conference with the Court on August 10, 2012. Defendants move to preclude these witnesses on the basis of their late disclosure. In addition, three of the proposed witnesses, including Plaintiffs’ counsel’s law partner, are intended to address the government investigation of Ms. Cornwell concerning the campaign bundling incident. As noted above, evidence of the government investigation and subsequent decision to not to prosecute Ms. Cornwell cannot be used to establish that she was innocent and therefore, entitled to damages. Additionally, one witness is purportedly an expert witness who was not timely disclosed. Finally, one proposed witness – Peter Pakevich – purports to testify about the effects of the government investigation on Dr. Gruber, which is irrelevant to this case. SEC Investigation During deposition, Plaintiffs’ counsel questioned several Anchin personnel pertaining to Ira Yohalem’s unrelated SEC investigation and suspension, in addition to a SEC investigation into Anchin for an undisclosed purpose. Defendants argue in their motion in limine that both the SEC investigations are irrelevant and prejudicial, and, in the case of the closed SEC investigation against Anchin, constitutes impermissible hearsay.

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Improper Relationship During deposition, Plaintiffs’ counsel insinuated that Mr. Snapper had engaged in extramarital activity with a NetJets representative, despite no concrete evidence establishing this fact. Defendants argue that not only does this constitute impermissible character evidence, but it is also irrelevant and highly prejudicial. NetJets-Related Activities Plaintiffs assert that Defendants, in particular Mr. Snapper, were repeatedly disloyal to Plaintiffs. In particular, Plaintiffs argue that Mr. Snapper improperly gained the status as a NetJets “influencer” by referring clients to that company, took a flight aboard Plaintiffs’ private aircraft without permission, and destroyed a model airplane before returning it to Plaintiffs. Defendants argue that these issues lack probative value, are highly prejudicial, and introduction of such evidence would cause undue delay. Florida Condominium Defendants also moved to exclude testimony or evidence concerning the Florida condominium deposit and Mr. Snapper’s alleged request for a split commission. Mr. Snapper provided an undisputed, logical explanation as to why he submitted a $200,000 deposit for the condominium. Moreover, the allegation that Mr. Snapper asked the real estate broker for a split of his commission is uncorroborated, and the broker also testified that he did not share his commission with Mr. Snapper. Furthermore, not only did Mr. Snapper deny asking for a split of the commission, he also testified that had he received any commission, he would have paid it

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over to his client. The broker’s testimony constitutes nothing more than impermissible character evidence that should be excluded. Such evidence also would be unfairly prejudicial.

Ms. Cornwell’s Bipolar Disorder It is not disputed that Ms. Cornwell claims she has bi-polar disorder. Defendants, however, move to exclude any evidence on this matter because her disorder does not bear upon the question of whether professional services were rendered in accordance with applicable standards of care. Moreover, evidence of this nature would be unfairly prejudicial and would confuse the issues. Anchin’s Other Clients Anchin is well-known as a business management firm with several high-profile celebrities. Defendants argue that any reference to Anchin’s other clients is irrelevant and unfairly prejudicial. In addition, Defendants are not at liberty to disclose confidential client information. Helicopter Sale Mr. Snapper has no experience selling helicopters, but that was exactly what he had to do for Plaintiffs. Because of his lack of knowledge, Mr. Snapper employed a broker who had been recommended by a competent aviation counsel. Plaintiffs claim Mr. Snapper paid too much in commission. Defendants argue that by using the broker, Mr. Snapper was able to sell the helicopter for almost $1 million more than had been originally offered before the broker was employed. Nonetheless, this evidence is excludable because it is irrelevant, prejudicial, and causes undue delay and confuses the jury. April 9, 2009 email

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In an April 9, 2009 email, Mr. Snapper used the phrase, “f’n nuts” to describe Ms. Cornwell’s decision to liquidate her investments in March 2009. Defendants argue that the email constitutes inflammatory language that should be excluded on the basis of its irrelevancy (it was beyond the time frame of most, if not all, of the events underlying Plaintiffs’ claims), and because it is highly prejudicial. Exclude Defendants’ Counsel, Thomas Manisero, as a Trial Witness On July 26, 2012, Plaintiffs disclosed for the very first time their intent to call Mr. Manisero as a witness and demanded a stipulation in exchange for not calling him as a witness. Mr. Manisero’s purported testimony would address Plaintiffs’ defamation claim. However, as Defendants have set forth in their motion for summary judgment on the issue, Plaintiffs’ claim is legally insufficient because they cannot prove “actual malice” on the part of Mr. Manisero. Moreover, Defendants object to Mr. Manisero as a witness because Plaintiffs’ defamation claim lacks merit, is irrelevant, and its probative value is outweighed by its prejudicial effect. In addition, Mr. Manisero’s testimony should be precluded on the basis of attorney-client privilege. Daubert Motions Defendants also filed Daubert motions with respect to each of Plaintiffs’ six proposed experts. The particular motions are briefly addressed below: Carl Jenkins Mr. Jenkins is a managing director of CBIZ Tofias, Plaintiffs’ current accounting and business management firm. He is purportedly an expert in business management. Defendants seek to exclude Mr. Jenkins as an expert witness because he is admittedly unfamiliar with any applicable professional standards of care. Moreover, Mr. Jenkins essentially substitutes his own hindsight judgment with the benefit of a backward looking analysis to opine that Defendants

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should have handled Plaintiffs’ investments differently. Finally, Defendants submit that Mr. Jenkins improperly opines about fiduciary duty and breaches of fiduciary duty, which are legal matters about which he is not qualified to testify. Esther Newberg Ms. Newberg has been Ms. Cornwell’s literary agent for the last twenty years. She purports to be an expert in the publishing industry and opines as to the extent of Plaintiffs’ damages. Defendants argue that Ms. Newberg not only provides no analysis as to her damages opinion, but her proposed expert testimony is limited to her own ipse dixit. Defendants also argue her status as an expert witness fails to comply with Fed.R.Civ.P. Rule 26. Bernard Kaplan Mr. Kaplan’s expertise is in the administration of 401K plans. Defendants primarily argue that Mr. Kaplan’s expert report and testimony rests on an unreliable foundation as his report was based on incomplete yet readily attainable information. Moreover, Mr. Kaplan’s purported expert analysis lacks any verifiable methodology or analysis, he fails to identify a relevant standard of professional care, and his “opinions” constitute nothing more than unsupported conclusions. C. Peter Erickson Mr. Erickson is an expert on construction management. Defendants challenge Mr. Erickson’s report on the basis that he applies the incorrect standard of care. Defendants are accountants and business managers who have not held themselves out to be construction managers. Yet, Mr. Erickson applies the standard of care set forth by the American Institute of Architects (“AIA”) in concluding that Defendants were in breach of a standard of care that applies to architects, construction managers and owners’ representatives. Additionally, Mr.

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Erickson’s damages analysis lacks any verifiable methodology, and he improperly draws a legal conclusion regarding supposed breaches of fiduciary duties.

David Macknin Mr. Macknin’s expertise is in insurance. Defendants argue that Mr. Macknin fails to identify a relevant professional standard of care that Defendants supposedly breached by not procuring professional malpractice insurance covering Mr. Osgood. In essence, Mr. Macknin’s standard of care is his conclusion. Finally, Mr. Macknin’s damages analysis fails to utilize any verifiable methodology, as he blankly assumes that Defendants, by not procuring such professional liability insurance, is somehow responsible for the maximum limit on the policy minus the projected premium. Kenneth Nolan Mr. Nolan’s expertise is purportedly on family office or concierge business management. Defendants argue that Mr. Nolan, who is admittedly unfamiliar with the applicable standard of care, draws conclusions completely lacking analysis, and he improperly opines on a legal conclusion, which he is not qualified to do so. Furthermore, Mr. Nolan’s opinion is based on his assumption of certain factual scenarios about which he made no effort to verify. VI.

ISSUES OF LAW, INCLUDING EVIDENTIARY QUESTIONS In addition to the issues raised by way of motions in limine and Daubert motions, the

parties expect that the following evidentiary or other issues might arise in the course of the trial of this matter.

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A.

Plaintiffs 1.

Mr. Snapper is bound by his admission that he had a fiduciary relationship with Plaintiffs.

At every turn, Defendants argue that they were just plain accountants owing no fiduciary duty to Plaintiffs. Typical of this phenomenon is Defendants’ oft-repeated claim that the only “relevant standard of care” is that “governing certified public accountants.” See, e.g., Defs.’ Mot. and Mem. in Supp. of Mot. to Exclude C. Peter Erickson at 2-3 [Doc. 157] (Aug. 13, 2012). This statement is made with total disregard for the much more stringent demands placed on fiduciaries. Defendants should not be permitted to maintain this position at trial. In disciplinary proceedings before the Board of Bar Overseers following his felony plea, Mr. Snapper admitted under oath that he “had a fiduciary relationship with” Plaintiffs and this “aggravate[ed]” the wrongful nature of the conduct to which he admitted and for which he was disbarred. Resp.’s Am. Ans. to Pet. for Disc. and Stip., BBO File No. C1-11-0137, at 2 (Jan. 17, 2012) (emphasis added). Mr. Snapper and Anchin are legally bound by this admission, which involved misconduct he committed while a Principal at Anchin. Therefore, neither Mr. Snapper nor Anchin should be permitted to argue that their obligations to Plaintiffs were limited to those contained in the CPA standards. 2.

The N.Y. Faithless Fiduciary/Equitable Forfeiture Doctrine applies to Anchin’s conduct.

Plaintiffs assert that, while Massachusetts law generally governs this matter, New York law governs Plaintiffs’ faithless fiduciary or faithless servant claims.13 It is well-settled that not every claim related to a transaction or occurrence must be adjudicated according to the 13

The common law breach of fiduciary duty claims are largely the same in Massachusetts and New York. However, the faithless servant or faithless fiduciary claim (also known as equitable forfeiture) under New York law is a subset of the general breach of fiduciary cause of action in Massachusetts. The equitable forfeiture or faithless fiduciary claims in Massachusetts and New York respectively are similar, but the remedies are broader in NY where all or most of the fees must be forfeited. In Massachusetts, the forfeited fees are those tied directly to each act of wrongdoing by the fiduciary.

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substantive law of a single state. Each claim should be subjected to an individualized choice of law analysis. Where, as here, that choice of law analysis calls for the application of one state’s law to certain claims and another state’s law to other claims, both states’ law should be used as required. See Rest. 2d. Conflict of Laws § 145 (“The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties. . .”) (emphasis added); see also Value Partners, S.A. v. Bain & Co., Inc., 245 F. Supp. 2d 269, 274 (D. Mass. 2003) (“A plaintiff may bring claims under Massachusetts law even where other claims in the same case are governed by the law of a different jurisdiction”). A properly-conducted choice of law analysis shows that New York law should apply to Plaintiffs’ breach of fiduciary duty claims. A Federal District Court sitting in diversity jurisdiction must apply the substantive choice of law rules of the forum state. See generally Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941). Thus, Massachusetts conflicts law applies. Massachusetts considers choice of law issues by assessing various “functional” choiceinfluencing considerations, including those provided in the Restatement of Conflict of Laws and those suggested by various commentators. Cosme v. Whitin Mach. Works, Inc., 632 N.E.2d 832 (Mass. 1994). These functional choice of law factors are numerous—analyzing, for example, where the parties reside, where the tortuous conduct occurred, and the policy rationale for each states’ law—but each of the factors fundamentally inquires into which state has the greatest interest in having its substantive law applied to the issue at hand. See generally Value Partners, 245 F. Supp. 2d at 276; Rest. 2d. Conflict of Laws § 145 (“The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with

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respect to that issue, has the most significant relationship to the occurrence and the parties. . .”), § 6 (giving the 7 factors which should underlie all choice of law analysis), and 188. Here, New York has a far greater interest in applying its substantive breach of fiduciary duty law because the fiduciaries generally engaged in their activities in New York where Anchin has its principal place of business. The purpose of New York breach of fiduciary duty law is to severely punish New York fiduciaries who break trust, thereby deterring future breaches in the state. The Massachusetts Supreme Judicial Court has explicitly acknowledged this policy rationale. See Astra v. Bildman, 914 N.E.2d 36, 51-52 (Mass. 2009) (Recognizing New York’s strong interest in deterring its fiduciaries from breaking trust and noting that “[f]or New York . . . the harshness of [its breach of fiduciary duty law] is precisely the point”). Such a policy is hardly surprising given the large number and international importance of the fiduciaries operating in New York. And while New York has a strong, explicitly enumerated interest in applying its substantive law to this issue—to stop breaches of fiduciary duty among New York domiciliaries such as Anchin—Massachusetts has much less interest in applying its substantive breach of fiduciary duty law. 3.

M.G.L. c. 93A governs in this case.

Although this does not appear to be in dispute, M.G.L. c. 93A is the applicable consumer protection statute in this case because the Ms. Cornwell, CEI, and Dr. Gruber are all resident here and suffered the damages attendant upon Anchin’s unfair business practices here. 4.

This Court should not permit Defendants to call Plaintiffs’ lead trial counsel as a witness.

Less than an hour before filing their Witness list, and without any prior notice or inclusion of any disclosure, Defendants purported to add Plaintiffs’ lead trial counsel, Joan Lukey, as a witness. No indication is given as to what the purported subject of her testimony - 56 31729103_2


would be, and Attorney Lukey has engaged in no conduct and made not statements to interject herself as a witness in this case. By contrast, Defendants’ second chair counsel injected himself into this action by giving statements to the press regarding Plaintiffs’ motivation for filing this litigation, and the nature of the fee agreement between Plaintiffs and Defendant Anchin. While Defendants have admitted that “Anchin’s attorney Thomas Manisero spoke with a reporter for Daily Finance on or about October 23, 2009,” Anchin’s Ans. at ¶ 76; Snapper’s Ans. at ¶ 76, they have repeatedly declined Plaintiffs’ request that they stipulate that (a) Mr. Manisero made the statements contained in the Daily Finance article, and (b) he did so as an agent of Anchin. Plaintiffs supplemented their Initial Disclosure to identify Mr. Manisero on July 26, 2012 and notified Defendants well in advance of filing their witness list that his name would have to be included on the Witness List without the requested stipulation. While trial counsel is not generally permitted to act as an advocate if she is a “necessary witness,” see Mass. Rule of Professional Conduct 3.7, the Rule recognizes and prevents an opponent from nefarious strategic use of this rule. An attorney-advocate may also act as a witness where “disqualification of the lawyer would work substantial hardship on the client.” Mass. R. Prof. C. 3.7(b). The District of Massachusetts has adopted Rule 3.7 in its entirety in Local Rule 83.6(4)(B). Courts take the “necessary” and “substantial hardship on the client” facets of this rule seriously. See Bogosian v. Woloohojian Realty Corp., 323 F. 3d 55, 66 (1st Cir. 2003) (upholding quashed subpoena to opposing counsel because “[a]lthough not strictly forbidden, the procurement of trial testimony from opposing counsel is generally disfavored”). A Court considering the issue should look to factors such as whether (i) the subpoena was issued primarily for purposes of harassment, (ii) there are other viable means to obtain the same

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evidence, and (iii) to what extent the information sought is relevant, nonprivileged, and crucial to the moving party’s case.” Id. The central theme in all of these cases is whether or not the testimony is material and unobtainable elsewhere. Carta ex rel. Estate of Carta v. Lumbermens Mut. Cas. Co., 419 F. Supp. 2d 23, 29 (D. Mass. 2006) (“The party moving for disqualification of a lawyer under Rule 3.7 has the burden of showing that the lawyer ‘is likely to be a necessary witness’ by demonstrating that the lawyer’s testimony is relevant to disputed, material questions of fact and that there is no other evidence available to prove those facts.”) (internal citations omitted). Defendants have never included Plaintiffs’ counsel in any disclosure of persons with knowledge of any facts in this matter, despite the fact that this case has been pending for three years. Notwithstanding the inclusion of counsel’s name on a witness list, no indication whatsoever has been given of what the subject of her testimony would purportedly be. As such, less than two weeks before the originally scheduled trial date, Defendants placed counsel’s name in play with no indication whatsoever as to why counsel is a necessary witness, and why other sources of the evidence are not otherwise available. B. Defendants’ Position Choice of Law Issue Defendants contend that New York law should apply to all claims in this case. The choice of law analysis in Massachusetts starts with a determination of whether substantive laws conflict. Millipore Corp. v. Travelers Indem. Co., 115 F.3d 21, 29 (1st Cir. 1997). Here, the choice is between Massachusetts and New York law. Though most of the common law claims (e.g. negligence, breach of fiduciary duty, breach of contract) are similar in both states, Plaintiffs claim that Defendants violated both M.G.L. ch. 93A and the New York Consumer Protection

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Act. Since Plaintiffs’ Complaint asserts claims under both states’ consumer protection acts, and both cannot apply in this case, a conflict of law exists in this instance. Massachusetts applies a functional choice of law approach in determining the application of particular state law. Reicher v. Berkshire Life Ins. Co. of America, 360 F.3d 1, 5 (1st Cir. 2004). Massachusetts courts consider, among other factors, (1) the relevant policies of the forum state; (2) the relevant policies and interests of the other states involved; and (3) the need for certainty, predictability and uniformity of result. Id. Here, New York has an overwhelming policy favoring the adjudication of cases arising from that forum. In particular, Anchin is a New York firm with its principal place of business, headquarters and, indeed, its only office located in New York. Most, if not all of the professional services that Defendants performed for Plaintiffs occurred in Anchin’s New York office. As such, given New York’s robust financial economy and its strong governing interest in maintaining the uniform application of law in its forum state, it is submitted that New York law should apply in all respects. M.G.L. 93A As set forth in Defendants’ motion for partial summary judgment, Defendants challenge the applicability of the Massachusetts Consumer Protection Act because (1) the acts underlying their claim did not principally take place in Massachusetts, a prerequisite for stating a valid M.G.L. 93A claim, (2) plaintiffs failed to comply with the demand letter requirement under M.G.L. 93A, and (3) plaintiffs fail to allege any egregious wrong on the part of the defendants, but instead simply repackage their negligence, breach of contract and breach of fiduciary duty claims, setting forth no new allegations at all. Breach of Fiduciary Duty

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An important question of law that is in need of resolution is whether Defendants owed Plaintiffs a fiduciary duty across all spectrums of their representation. Plaintiffs argue that Defendants owed Plaintiffs a fiduciary duty in every respect and that they are bound by an admission by Mr. Snapper that he owed Plaintiffs a fiduciary duty. This admission stemmed from Mr. Snapper’s Bar disciplinary proceedings. In stark contrast, Defendants assert that a fiduciary duty, if it does arise, only applies to a limited scope depending on the tasks and responsibilities. The law in New York, where Anchin and Mr. Snapper kept their offices, is clear that the accountant client relationship rarely rises to the level of fiduciary. Fund of Funds, Ltd. v. Andersen & Co., 545 F. Supp. 1314, 1356, (S.D.N.Y. 1982); see DG Liquidation, Inc., v. Anchin, Block & Anchin, LLP, 750 N.Y.S.2d 753, 2002 N.Y. Slip Op. 9110 (1st Dep’t 2002) citing Nate B. & Frances Spingold Found. v. Wallin, Simon, Black & Co., 184 A.D.2d 464, 465, 585 N.Y.S.2d 416, (1st Dep’t 1992). Indeed, as the Appellate Division noted in the DG Liquidation case, the circumstances in which such a duty might arise are “limited.” Id. 750 N.Y.S.2d at 753. Moreover, the Restatement (Second) of Torts provides that “one standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of duty imposed by that relation.” Restatement (Second) Torts § 874, cmt. a. Thus, liability for an alleged breach of fiduciary duty is limited to the circumstances in which the fiduciary duty arises and does not extend generally to the entire relationship. See Press v. Chemical Investment Services Corp., 166 F.3d 529, 536 (2d Cir. 1999). Accordingly, to the extent that Mr. Snapper may have admitted to a fiduciary duty arising in connection with his involvement with Ms. Cornwell’s illegal campaign contributions or in his capacity as an officer of CEI, that does not mean that Defendants admitted to a fiduciary duty across the entire spectrum of services provided to Plaintiffs.

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Thus, Plaintiffs’ contention that a fiduciary duty exists across the entire spectrum of a relationship that must by definition include a fiduciary duty is bootstrapping and nothing more when applied to this case where a fiduciary duty does not exist as a matter of law and plaintiff has yet to prove the existence, scope or contours of the fiduciary duty alleged in this case. Moreover, the New York courts that have addressed the fiduciary duty arising under agency have limited the fiduciary duty to the specific scope of the agency. See Press v. Chemical Investment Services Corp., 166 F.3d 529, 536 (2d Cir. 1999); Steinbeck v. McIntosh & Otis, Inc., 2009 U.S. Dist. LEXIS 35607 (S.D.N.Y. 2009); EBC 1 v. Goldman Sachs & Co., 5 N.Y.3d 11, 20 (2005). Bissell v. Merril Lynch & Co., 937 F.Supp 237, 246 (S.D.N.Y. 1996); Rush v. Oppenheimer & Co., 681 F.Supp. 1045, 1055 (S.D.N.Y. 1988). In Steinbeck v. McIntosh & Otis, Inc., the Court found that an agreement to limit the responsibilities under a power of attorney limits the party’s fiduciary duty to those responsibilities. 2009 U.S. Dist. LEXIS 35607 (S.D.N.Y. 2009). There, the court found that an agreement outlining the duties associated with the power of attorney limited the fiduciary relationship to those duties. Id. at *29. In the agreement, plaintiff appointed defendant to execute all of his rights of renewal and rights to terminate pertaining to the works of John Steinbeck (plaintiff’s relative) under U.S. Copyright Law. Id. The court found that the fiduciary duty claims “must fail because the scope of any fiduciary duty allegedly owed to him is not so broad as to include a duty to explain the legal consequences of his termination and trademark rights where plaintiffs were represented by independent counsel.” Id. In EBC I, the New York Court of Appeals found that the defendant had a fiduciary duty to its customers when serving as an underwriter to a stock offering. EBC I v. Goldman Sachs & Co., 5 N.Y.3d 11, 20 (2005). However, the court stated that it would only recognize Goldman

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Sachs’ fiduciary duty to that “limited extent.” Id. The Court of Appeals limited the scope of Goldman Sachs’ fiduciary duty to the nature of the relationship. The Court stressed that the fiduciary duty is limited to the underwriter’s role as advisor and not any other roles the underwriter may have undertaken. The Court noted that they “do not suggest that underwriters are fiduciaries when they are engaged in activities other than rendering expert advice.” Id. Accordingly, there simply is no legal support for the proposition that Ms. Snapper’s limited acknowledgment of a fiduciary duty extend to the entire relationship. Since Plaintiffs have plead a negligence case that is far broader than the breach of fiduciary duty claim set forth in their most recent pleading, and the law seems clear that (1) the accountant-client relationship generally is not fiduciary in nature, (2) Plaintiffs have the burden of proving any fiduciary duty that exists, and (3) the fiduciary duty will only apply to the extent it is proven in connection with each claim advanced, Mr. Love’s proposed testimony on the negligence standard of care is clearly relevant to this case. Finally, Plaintiffs’ experts opine to varying degrees, about Defendants’ alleged breach of fiduciary duty to Plaintiffs. To the extent plaintiffs assert that Defendants’ expert, Vincent Love, should, or even could, offer an opinion concerning a fiduciary duty of care, they are simply wrong. See Vera Muller-Paisner v. TIAA, 2012 U.S. Dist. LEXIS 111785. *29 (S.D.N.Y. Aug. 9, 2012) Testimony of a proffered expert concerning “fiduciary standards of care” must be excluded because it goes to an ultimately legal issue. Muller-Paisner, 2012 U.S. Dist. LEXIS at *29. In Muller-Paisner, the excluded expert attempted to opine that defendants owed a fiduciary duty and that the duty was breached. The court found the expert’s affidavit inadmissible because, “while an expert may opine on an issue of fact within the jury’s province, an expert may not give testimony stating ultimate legal conclusions based on those facts.” Id. The Court found that the

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expert’s report and declaration was inadmissible as it stated an opinion regarding the ultimate issue: “whether the facts show that [defendant] owed [plaintiff] a fiduciary duty and whether it breached that duty.” It has also been held that the definitions of legal terms and duties, including the term “fiduciary” and the duties therein, are matters that belong to the court such that an expert opinion purporting to define these terms would be excluded. Untied States v. Hawley, 562 F. Supp. 2d 1017 (N.D. Iowa 2008). Accordingly, as Mr. Love repeatedly, and correctly, stated at his deposition, the existence and breach of a fiduciary duty is not an appropriate issue for him, or any of Plaintiffs’ experts, to opine upon. Equitable Forfeiture Plaintiffs argue that Massachusetts law should apply in all respects except as to the issue of “equitable forfeiture.” Obviously this is because Massachusetts forfeiture law is more lenient toward the breaching fiduciary than New York law with respect to the degree of potential forfeiture. Astra USA v. Bildman, 455 Mass. 116 (2009) (applying New York law and addressing inconsistency in dicta). However, even the less lenient New York law is not as Draconian as Plaintiffs would have the Court believe. Although early decisions by the New York Court of Appeals suggest that New York’s law of forfeiture requires disloyal agents to forfeit all compensation without limitation, more recent decisions by lower New York courts and federal courts have endorsed the principle that faithless servant forfeitures can be limited in specified circumstances. See, e.g., Lamdin v. Broadway Surface Advertising Corporation, 272 N.Y. 133 (1936) (early Court of Appeals decision indicating forfeiture of “any right” to compensation). In Phansalkar v. Andersen Weinroth & Co., L.P., the Court of Appeals for the Second Circuit found that New York’s faithless service doctrine should be interpreted to require

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forfeiture of all compensation after the date his disloyalty began. 344 F.3d 184, 199-200 (2d Cir. 2003). This principle was refined by that same Court in Design Strategy, Inc. v. Davis, 469 F.3d 284 (2d Cir. 2006), holding that “New York law requires ‘forfeiture of salary earned during a period of disloyalty, but not during periods of loyal employment that may follow the period of disloyalty.”). In Design Strategy, only one month of a 13-year employment was deemed forfeitable. Id. Other cases applying New York law hold that forfeiture of compensation may be limited to the time period of the disloyalty. It is also possible to limit compensation during the period of disloyalty under what is known as the “transaction-by-transaction” approach. See Sequa Corp. v. GBJ Corp., 156 F.3d 136 (2d Cir. 1998); Musico v. Champion Credit Corp., 764 F.2d 102 (2d Cir. 1985); Phansalkar, 344 F.3d at 205. The standard limits forfeiture where: (1) [T]he parties had agreed that the agent will be paid on a task-by-task basis (e.g., a commission on each sale arranged by an agent), (2) the agent engaged in no misconduct at all with respect to certain tasks, and (3) the agent’s disloyalty with respect to other tasks neither tainted nor interfered with the completion of the tasks as to which the agent was loyal.” Musico, 764 F.2d 102. If these three criteria are met, a disloyal employee forfeits only compensation earned in connection with the specific tasks as to which he was disloyal and retains compensation earned in connection with specific tasks as to which he was loyal. Phansalkar, 344 F.3d at 205. Although the New York Court of Appeals has not expressly limited forfeiture, several lower New York courts have. See, e.g., GRG Group v. Ravenal, 247 A.D.2d 201 (1st Dep’t 1998) (affirming partial summary judgment for defendants on their counterclaims for fraud and

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breach of fiduciary duty and approving forfeiture of $500,000 in management fees and brokerage commissions for the years 1991-1993, where “the evidence demonstrated disloyalty during those years and there is no basis in the record for apportionment”); Royal Carbo Corp. v. Flameguard, Inc., 229 A.D.2d 430 (2d Dep’t 1996) (employees who “surreptitiously organized a competing organization” while in plaintiff’s employ “forfeited right to compensation for services rendered from July 1, 1991, until their termination on December 5, 1991”). Thus, while Defendants steadfastly maintain that Plaintiffs cannot establish that they were in any fashion faithless in their services to Plaintiffs, they also respectfully submit that Plaintiffs contention that they must forfeit all compensation they ever received from Plaintiffs is legally incorrect. Liability as to Edward “Ziggy” Rutan Defendants contend that they cannot be held liable for the actions or inactions of Ziggy Rutan because he never was, and never has been, an employee of Anchin. It is well-established that an employer is not liable for the negligent actions of an independent contractor absent any indication of control. Herbert A. Sullivan, Inc. v. Utica Mutual Insurance Co., 439 Mass. 387, 408 (2003 Rosenberg v. Equitable Life Assurance Society of the United States, 79 N.Y.2d 663, 668 (1992); Goodwin v. Comcast Corporation, 42 A.D.3d 322 (1st Dep’t 2007) (employer not liable for acts of independent contractor where employer did not control the work being performed and where owner retained nothing more than general supervisory powers).. Restatement (Second) of Torts § 414 comment c (1965) outlines the level of control necessary to impose liability on an employer for any negligence committed by the independent contractor: In order for the rule stated in [§ 414] to apply, the employer must have retained at least some degree of control over the manner in which the work is done. It is not enough that he has merely a general right to order the work stopped or resumed, to inspect its progress, or to receive reports, to make suggestions or - 65 31729103_2


recommendations which need not necessarily be followed, or to prescribe alterations and deviations. Such a general right is usually reserved to employers, but it does not mean that the contractor is controlled as to his methods of work, or as to operative detail. There must be such a retention of a right of supervision that the contractor is not entirely free to do the work in his own way. Moreover, the SJC has held that the principal “who has used due care in selecting and agreeing with an independent contractor to do lawful work, is not responsible to third persons for the negligence of such contractor or his servants in the performance of the contract, unless the nature of the work is such that a nuisance will be created or wrongful consequences be brought to pass unless guarded against.’” Todd v. Wernick, 334 Mass. 624, 626 (1956) (citing Pickett v. Waldorf System, Inc., 241 Mass. 569, 570 (1922) (emphasis added)). Similarly, under New York law, in order to make out a negligence claim against an employer for hiring a negligent independent contractor a plaintiff must show that the employer failed to exercise reasonable care in the selection of the contractor or had knowledge of the contractor’s insufficiency. See Waite v. American Airlines, Inc., 73 F.Supp.2d 349 (S.D.N.Y. 1999); Sanchez v. United Rental Equip. Co., 667 N.Y.S.2d 410, 412 (2d Dep’t 1997) (denying liability since record devoid of any evidence that the defendants knew, or should have known that the independent contractor was unqualified). Mr. Rutan is a highly accomplished construction professional with a long list of prominent clients. Defendants cannot be held liable for the selection of Mr. Rutan because Mr. Snapper exercised due care in selecting Mr. Rutan based on his reputation. Wernick, 334 Mass. at 626; Sanchez, 667 N.Y.S.2d at 412 As such, Defendants cannot be held responsible for any representations that Mr. Rutan made, assuming these representations to be true. In addition, Defendants did not exercise any control over Mr. Rutan in the performance of his duties other than paying his invoices. Defendants have never held themselves out to be experts in - 66 31729103_2


construction management. In fact, that is the reason why Mr. Rutan was engaged to oversee the Garfield project. Absent a showing of control between Defendants and Mr. Rutan, it follows that Defendants cannot be held liable for any actions by Mr. Rutan. Comparative Fault Defendants assert as an affirmative defense that Plaintiffs are barred from recovery on the basis of comparative fault. The extent of recovery by Plaintiffs, if any, is largely dependent on which law this Court ultimately applies to this case. See supra, Choice of Law Issue Section. Under New York law, the courts apply a pure comparative fault standard, which apportions loss in direct proportion to the degree of fault. See e.g. Central Hudson Gas & Elec. Corp. v. The Tug M/V Scott Turecamo, 496 F.Supp. 2d 331, 351 (S.D.N.Y. 2007). Under Massachusetts law, the courts apply a modified comparative negligence standard whereby the plaintiff is barred from recovery if found to be more than 50% negligent. See e.g. Coca-Cola Bottling Co. of Cape Cod v. Weston & Sampson Engineers, Inc., 45 Mass. App. Ct. 120, 130 (1998). Evidentiary Issues Some, but not all, of the evidentiary issues are set forth in Defendants’ various motions in limine. However, Defendants reserve the right to raise objections to topics and evidence at trial that have not yet been anticipated. VII.

REQUESTED AMENDMENTS TO THE PLEADINGS There are no requested amendments to the Pleadings at this time, but Plaintiffs and

Defendants respectfully reserve this right as the need arises. VIII. ADDITIONAL MATTERS TO AID IN THE DISPOSITION OF THE ACTION In accordance with this Court’s Amended Pretrial Order (as modified), the Parties have exchanged (i) exhibit lists and objections thereto, and (ii) deposition designations and objections

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and counter designations. Counsel for Plaintiffs and Defendants will meet and confer in an attempt to resolve their numerous objections and differences, and will promptly inform the Court of any issue requiring a ruling by the Court. The Court’s rulings on the parties’ in limine motions will serve to guide those discussions. IX.

ANTICIPATED LENGTH AND TIMING OF TRIAL A.

Plaintiffs’ Position

Plaintiffs maintain that this trial should take three weeks, but certainly no more than four weeks. Defendants may disagree in an attempt to make it more difficult to schedule this trial. However, this Court should be mindful that delay is in Defendants’ interest—its effect is to run up Plaintiffs’ already substantial legal fees and prolong this dispute. Though the Court has set trial to begin on January 7, 2013, Plaintiffs remain ready to commence trial at the Court’s convenience before that date (with the exception of December, when Plaintiffs’ trial counsel has a confirmed unrelated trial, delayed in June because the Judge’s illness necessitated a mistrial). B.

Defendants’ Position

Plaintiffs claim that Defendants are deliberately delaying the trial date in order to run up legal fees and to prolong the dispute. This comment is unnecessary, unhelpful, and is belied by the size and scope of this case. First, the Court has indicated that it is unavailable for the original September 10, 2012 trial date. In addition, Defendants have provided to the Court the upcoming trial schedule of James M. Campbell, Defendants’ lead trial counsel, in order to demonstrate that Defendants’ will not be available until the scheduled January 7, 2013 date.

Defendants

anticipate at least a 4-6 week trial given the plethora of witnesses and exhibits in this case. Defendants have close to 60 witnesses that may be called to testify, in addition to over 1700 - 68 31729103_2


exhibits. Given the fact-intensive nature of this case, and the 9:00am-1:00pm schedule that the Court has in place, Defendants estimate that a 4-6 week trial is the more appropriate time frame to adequately resolve the issues presented. X.

WITNESSES The Parties’ preliminary Witness Lists were filed with the Court on August 13, 2012, and

set forth the witnesses who the Parties expect will be called and state whether such testimony is intended to be presented by deposition. See Pls.’ Witness List [Doc. 172] (Aug. 13, 2012); Defs.’ Witness List [Doc. 166] (Aug. 13, 2012). A.

Plaintiffs

Plaintiffs intend to call the following witnesses: Witness Austin, Patricia Alcedo, Tony (by deposition)

Will Call

May Call X

X

X X

40 Percy Road Lexington, MA 02421

X

40 Percy Road Lexington, MA 02421

X

100 Powdermill Road, #301 Acton, MA 01720 114 Redbud Drive Brandon, MS 39047 56 High Street Newburyport, MA 01950 Anchin, Block & Anchin LLP 1375 Broadway, 21st Floor New York, NY 10018 1201 NE 26th Street Suite 111 Ft. Lauderdale, FL 33305

Coleman, Charla

Coleman, Philip Cornwell, Patricia X Daniels, Mary X Erickson, C. Peter X Fasinski, Laurie Gallo, Antonio (by video deposition)

X

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Telephone Number 617-839-3246

1724 Lacy Drive Forth Worth, TX 76052 One Metro Center 700 12th Street, NW, Suite 900 Washington, DC 20005

X Braga, Steve Brinkley, Christie

Contact Information

978-369-3999 978-771-9453 (Work) 617-293-8834 617-247-5526 (Work)

212-221-9096


Witness

Will Call X

May Call

Gingrich, Paul X Gruber, Staci X Jenkins, Carl X Kaplan, Bernie X Levin, Marilyn (by deposition) X Macknin, David X Manisero, Tom (only in absence of stipulation) X Mitchell, Neil (by deposition) X Newberg, Esther X Nolan, Ken X Pakevich, Peter X

Rudell, Michael Sadan, Ehud (possibly by deposition) Schettino, Frank (possibly by deposition) Senters McDermott, Lisa (by deposition)

X X X

Contact Information 1500 Riverfront Drive Little Rock, AR 72203 100 Powdermill Road, #301 Acton, MA 01720 CBIZ Tofias 350 Massachusetts Ave Cambridge, MA 02139 CBIZ Tofias 500 Boylston Street Boston, MA 02116 Renaissance on the Ocean 6051 North Ocean Drive Hollywood, FL 33019, Apt. 1206 Alper Services, LLC 60 W. Superior St. Chicago, IL 60654 Wilson, Elser, Moskowitz, Edelman & Dicker LLP 3 Gannett Drive White Plains, NY 10604 Morgan Stanley 522 Fifth Avenue, 14th Floor New York, NY 10036 International Creative Management 825 Eighth Ave. New York, NY 10019 9 Arlington Ave. Rockville Centre, NY 11570 115 Mill Street Belmont, MA 02478 Franklin, Weinrib, Rudell & Vassallo, P.C. 488 Madison Avenue New York, NY 10022 1375 Broadway New York, NY 10018 1375 Broadway New York, NY 10018 2327 Valley Brook Way Atlanta, GA 30319

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Telephone Number 843-302-6070

617-761-0549 (Work)

312-867-7300 (Work) 914-323-7000

212-296-0810

212-446-9782 (Work Direct)


Witness

Will Call X

Snapper, Evan Snapper, Michelle (by deposition)

May Call

Anchin, Block & Anchin LLP Partner 1375 Broadway, 21st Floor New York, NY 10018 X X

Stein, Russ Sullivan, Catherine (by deposition)

Contact Information

X X

57 Saxonwood Road Fairfield, CT 06825 Ruberto, Israel & Weiner, P.C. 255 State Street, 7th Floor Boston, MA 02109 1334 79th Street Brooklyn, NY 11228 CBIZ Tofias Managing Director 350 Massachusetts Avenue Cambridge, MA 02139

Webber, Jay X Yohalem, Ira (possibly by deposition) Vorchheimer, Jeffrey

B.

Anchin, Block & Anchin LLP 1375 Broadway, 21st Floor New York, NY 10018

X

Defendants

Defendants intend to call the following witnesses: Will Call Witnesses Evan Snapper 57 Saxonwood Rd. Fairfield, CT 06825 Laurie Fasinski Anchin, Block & Anchin LLP 1375 Broadway New York, NY 10018 Vincent Love (expert) 270 Madison Avenue, 18th Floor New York, New York 10016 Ross Tulman (expert) 761 Gatehouse Lane Columbus, Ohio, 43235 - 71 31729103_2

Telephone Number 212-863-1384 (Work) 212-840-3456 (Work) 212-221-9096

617-742-4200 (Work General)

617-761-0225 (Work Direct) 617-761-0600 (Work General) 212-221-9096


Defendants may call the following witnesses: May Call Witnesses Patricia Cornwell 100 Powdermill Road, #301, Acton, MA 01720 Staci Gruber 100 Powdermill Road, #301 Acton, MA 01720 Ehud Sadan Anchin, Block & Anchin LLP 1375 Broadway New York, NY 10018 Frank Schettino Anchin, Block & Anchin LLP 1375 Broadway New York, NY 10018 Dan Kohn Citrin Cooperman & Company, LLP 529 5th Avenue New York, NY 10017 Bernie Osgood 33 Dunelm Road Bedford, MA 01730 Charla Coleman Higgins Realty Group 271 Lincoln Street Lexington MA 02421 James Keaton 5 Adams Street Littleton, MA 01460 Ziggy Rutan Continental Group 66 Middlebush Road Wappingers Falls, NY 12590 Paul Gingrich 1179 Waterfront Dr. Mt. Pleasant, SC 29464

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Martin Miller Anchin, Block & Anchin LLP 1375 Broadway New York, NY 10018 Ira Yohalem Cagney Hill Road New Marlborough, MA 01230 Neil Mitchell Morgan Stanley Smith Barney 522 Fifth Avenue New York, NY 10036 Phil Coleman Turner Construction Two Seaport Lane, Suite 200 Boston, MA 02210 Michael Rudell Franklin, Weinrib, Rudell, & Vassallo, PC 488 Madison Avenue, New York, NY 10022 Joe Welch 4 Militia Drive, Suite 12 Lexington, MA 02421 Jim Daniels 114 Redbud Drive Brandon, Mississippi 39047 Mary Daniels 114 Redbud Drive Brandon, Mississippi 39047 Jeff Schwartz Anchin, Block & Anchin LLP 1375 Broadway New York, NY 10018 Lisa Senters NetJets, Inc. 230 Park Avenue, Suite 840 New York, NY 10169 Tony Alcedo Jet Exchange - 73 31729103_2


1724 Lacy Drive, Suite 108 FT. Worth, TX 76177 Holly Cratsley Nashawtuc Architects The Wright Tavern 2 Lexington Road Concord, MA 01742 Carl Oldenburg Oldenburg Architecture 1666 Massachusetts Avenue Suite 11 Lexington, MA 02420 Dave MacNeil 9 Nabnasset St., Westford, MA 01886 Russell Stein Ruberto, Israel & Weiner, P.C. 100 North Washington St., Boston, MA 02114 Steve Wegener ADDRESS UNKNOWN Tom Kennedy Sotheby's Realty 277 Dartmouth Street, Suite 2 Boston, MA 02116 James Gilmore Free Congress Foundation 1423 Powhatan Street Alexandria, VA 22314 John Minty Jr. Town of Concord 141 Keyes Road Second Floor Concord, MA Doug McNulty First Republic Bank 1230 Avenue of the Americas New York, NY 10020

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Ron Rapp, Esq. Vedder Price 222 North LaSalle Street Chicago, IL 60601 Paul D'Arelli, Esq. Florida Zoning Law Group Crossroads Office Park 8201 Peters Road Suite 1000 Plantation, Florida 33324 Isaac Chehebar 641 Fifth Avenue, Apt. 27A New York, NY, 10016 Elliott Chehebar 641 Fifth Avenue, Apt. 27A New York, NY, 10016 Dan Wasser, Esq. Franklin, Weinrib, Rudell, & Vassallo, PC 488 Madison Avenue New York, NY 10022 John Austin The Windermere Group, Inc., 625 Strawberry Hill Road Concord, MA 01742 Patricia Austin The Windermere Group, Inc., 625 Strawberry Hill Road Concord, MA 01742 Joe Prior Trump Towers One Central Park West New York, NY 10023 Irene Shulgen 266 Rio De Janeiro Ave. Cooper City, FL 33025 Kelly MacNeal 350 W 50th Street, 9-H New York, NY 10019 Lisa Evangelista 73 Hemenway Street, Apt. 106 - 75 31729103_2


Boston, MA 02115 Susan Courtney 11732 SW 59th Court Cooper City, FL 33330 Jarrett Hallcox 718 Curley Lane Seymour, Tennessee 37865 Jeremy Travis John Jay College of Criminal Justice 899 Tenth Avenue New York, NY 10019 Debra Gingrich Debra Gingrich Photographer 1179 Waterfront Drive Mount Pleasant, SC 29464 Michelle Keaton 454 Harrington Ave. Concord, MA 01742 Jill Keaton The Social Canine 369 Littleton Road Westford, MA 01886 Mark Larsen (formerly Digital Media One) Firstview Online 141 North Martinwood Road Knoxville, TN 37923 Brandon Ralph (Code and Theory) 575 Broadway, 5th Floor New York, NY 10012 Roxanne Gilmore Randolph-Macon College 202 Henry Street Ashland, VA 23005-5505 Lori Bruno (Gloria Apicella) Hex Old World Witchery 246 Essex Street Salem, MA

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Marilyn Daniels Apt. 2112 in the Magnolia Building Ardenwoods 2400 Appalachian Blvd. Arden, NC, 28704 Joan Lukey, Esq. Ropes and Gray Prudential Tower 800 Boylston Street Boston, MA 02199-3600

XI.

PROPOSED EXHIBITS The proposed exhibits are numerous and are set forth in a separate exhibit list and

incorporated by reference. See Pls.’ Exhibit List [Doc. 174]; Defs.’ Exhibit List [Doc. 151]. XII.

OTHER OBJECTIONS TO EVIDENCE IDENTIFIED IN PRE-TRIAL DISCLOSURES A.

Plaintiffs

Plaintiffs respectfully suggest that Defendants have not made a good faith effort to comply with the Court’s order to submit an exhibit list reflecting their current intent as to exhibits that they intend to submit. Indeed, they have reserved their right to object to exhibits on their own list, and they have included on that list exhibits that they are seeking to exclude by their motions in limine. Defs.’ Ex. List [Doc. 151] (Aug. 13, 2012). At this time, Plaintiffs are unable to review and itemize specific objections because many of the exhibits cannot even be identified, and appear not to have been previously produced. Plaintiffs recognize that additional exhibit lists may be filed by either party as overlapping exhibits are consolidated, or issues crystallize in the months before trial. But it is improper for Defendants to offer exhibits to which they do and may object. Plaintiffs further object to Defendants’ inclusion with less than an hour’s notice on their Witness List of Plaintiffs’ lead trial counsel, Joan Lukey. Attorney Lukey has never previously - 77 31729103_2


been included on an Initial Disclosure or Supplemental Disclosure, and not indication has been given of the testimony that would purportedly be elicited from her. This appears to have been a strategic ploy relating to Plaintiffs’ request that Defendants stipulate that their second chair counsel Thomas Manisero made the statements in the article referenced in Plaintiffs’ defamation claim, and that he was authorized to do so. The request was made on multiple occasions, and Defendants were informed repeatedly and in advance that Plaintiffs’ would have to call Mr. Manisero as a witness on these points if they did not so stipulate. Attorney Lukey possesses no comparable knowledge. B.

Defendants

At this time, Defendants respectfully object to all of Plaintiffs’ exhibits on the basis of Federal Rules of Evidence §§ 401; 403; 802; 901; 1002; 1003; and 1006. Plaintiffs have produced over 600 exhibits on their exhibit list. Given the limited ten day timeframe in which to lodge objections, Defendants cannot possibly anticipate how, and in what context, Plaintiffs intend to introduce the proposed exhibits. Defendants will make a good-faith effort to refine their list of objections. Defendants and Plaintiffs have agreed to meet and confer, on a yet to be determined schedule, for the purpose of identifying exhibits for which there is no objection and further narrow the disputed issues. Nonetheless, they are compelled to object to Plaintiffs’ list in its entirety until further review can be conducted. The parties are working on the objections to both the witness and exhibit lists consistent with the agreed-upon pre-trial schedule. However, Plaintiffs improperly suggest that Defendants did not act in good faith in submitting their exhibit list. First, though Plaintiffs accuse Defendants’ of producing not readily-identifiable documents in the exhibit list, Plaintiffs’ disclosure also includes a number of exhibits that are difficult, if not impossible, to identify. Therefore, it is disingenuous for Plaintiffs to accuse Defendants of the same practice in which - 78 31729103_2


they are engaged. Moreover, Defendants’ deliberately included those exhibits on their list that are subjects of their motions in limine because Plaintiffs oppose most, if not all, of Defendants’ motions. In the event the Court rules in favor of Plaintiffs, Defendants’ included those exhibits on their list. Defendants also deliberately included a comprehensive exhibit list because Plaintiffs’ claims are difficult to track given their constantly-changing position on various issues. To the extent Defendants fail to include a particular exhibit, Plaintiffs will no-doubt object to its subsequent inclusion. As such, despite Plaintiffs’ baseless accusations, Defendants’ maintain that they engaged in a good faith effort to produce the exhibit list consistent with the Court’s orders. To the extent that Plaintiffs object to Defendants’ inclusion of Plaintiffs’ lead counsel, Joan Lukey, Defendants firmly contend that Ms. Lukey has significant knowledge as to a number of issues in this case. First, Plaintiffs seek damages as to attorneys’ fees, particularly as it pertains to the Department of Justice investigation into Ms. Cornwell’s involvement with the campaign bundling incident. In addition, Plaintiffs seek to recoup attorneys’ fees for Defendants’ handling of the Monument Street purchase. Ms. Lukey was heavily involved in both those claims. As such, her testimony is required to address the necessity of legal services provided in furtherance of those damages claims. More importantly, Ms. Lukey’s testimony is necessary to explain why it was important for Mr. Osgood to be covered by professional liability insurance and how that factored into Plaintiffs’ decision not to pursue legal action against Mr. Osgood. Finally, Ms. Lukey also possesses facts as to why and how the business relationship terminated between Anchin and Plaintiffs. Plaintiffs also take issue with the general disclosure of Ms. Lukey as a witness. However, Plaintiffs did not name Tom Manisero as a witness until a recent supplemental

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disclosure. Not only did Plaintiffs’ name Mr. Manisero as a witness, but they also requested a stipulation as to his supposed testimony. Accordingly, given the relevance of Ms. Lukey’s testimony to this case, her testimony is warranted and Defendants are justified in disclosing her as a witness. XIII. STATUS OF SETTLEMENT DISCUSSIONS The parties have recently exchanged settlement offers and demands at a mediation session. From all parties’ perspective, settlement discussions have reached an impasse.

Respectfully submitted, PLAINTIFFS: CORNWELL ENTERTAINMENT, INC. PATRICIA D. CORNWELL STACI GRUBER, Ph.D.

DEFENDANTS: ANCHIN, BLOCK & ANCHIN LLP EVAN H. SNAPPER

By their attorneys,

By their attorneys,

/s/ Joan A. Lukey Joan A. Lukey (BBO # 307340) Dan Krockmalnic (BBO # 668054) ROPES & GRAY LLP Prudential Tower 800 Boylston Street Boston, Massachusetts 02199 (617) 951-717 [email protected] [email protected]

/s/ Joan A. Lukey (w/permission) Michele Carlucci (BBO# 655211) Thomas R. Manisero (Pro Hac Vice) Peter J. Larkin (Pro Hac Vice) Gregory J. Bautista (Pro Hac Vice) WILSON ELSER MOSKOWITZ EDELMAN & DICKER LLP 260 Franklin Street Boston, MA 02110 (617) 422-5300 [email protected] [email protected] [email protected] [email protected] James Campbell, Esq. (BBO# 541882) CAMPBELL, CAMPBELL, EDWARDS & CONROY PC One Constitution Center, 3rd Floor Boston, MA 02129 (617) 241-3000 - 80 -

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[email protected]

Dated: August 28, 2012

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CERTIFICATE OF SERVICE I, Dan Krockmalnic, hereby certify that a true and correct copy of the foregoing document was served upon all counsel of record via ECF electronic filing on August 28, 2012.

/s/ Dan Krockmalnic Dan Krockmalnic

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