Business Manager Denied New Trial In Malmsteen Case

The U.S. District Court for the Southern District of New York refused to grant a judgment as a matter of law or for a new trial for the former business manager of musician Yngwie Malmsteen in a suit by the musician over missing income. Malmsteen v. Berdon LLP, 05 Civ. 00958 (RJH). Manager James Lewis and business manager Michael Mitnick had represented Malmsteen from the mid-1990s until 2000. Malmsteen alleged Mitnick and Berdon LLP, the firm for which Mitnick worked, made Lewis' embezzlement of large sums of the artist's money possible. The district court then decided that Malmsteen's suit wasn't barred by a three-year statute of limitations for malpractice for traditional accounting services. See, Malmsteen v. Berdon LLP, 477 F.Supp.2d 655 (S.D.N.Y. 2007).

An expert witness for Malmsteen testified that music-industry business managers are “customarily responsible for ' maintain[ing] awareness of all professional and personal income earned by [a] client and [ensuring] the collection of this income” and “generally ' do everything the client would do for himself if the client had the time and was not working.” After a trial, the jury ruled for the plaintiff on breach of contract and breach of fiduciary obligation claims. (The judge ruled for the defendants as a matter of law on Malmsteen's fraud claim.) Of the breach claim, the district judge subsequently noted: “[t]here was sufficient evidence from which a reasonable jury could have found that Mitnick, acting as a business manager, agreed to monitor plaintiffs' income and verify that payments to plaintiff were properly accounted for.” Mitnick argued there could be no breach because the jury awarded no damages on that claim, but the court explained: “The jury's failure to award damages on plaintiff's breach of contract claim was likely its attempt to comply with the [c]ourt's instruction that they could not award 'actual damages more than once for the same loss' if they found for plaintiff on both the breach of contract and breach of fiduciary duty claims.” The jury awarded Malmsteen $450,000 on the fiduciary-breach claim.

On breach of fiduciary obligation, the district judge noted: “[T]he jury was entitled to credit plaintiff's testimony that Mitnick agreed to make sure that all of plaintiff's income was 'collected and accounted for and looked at and put in the right spot.' ' A reasonable jury could have concluded that defendants acted contrary to plaintiff's interests by failing to take reasonable steps as plaintiff's business agent to monitor plaintiff's income that was being deposited into a bank account maintained by Lewis. ' A reasonable jury could also have concluded that defendants' failure to discover and/or prevent such embezzlement played a substantial part in causing the loss resulting from the embezzlement and that, if defendants had performed their duties, the embezzlement would not have occurred.”

The U.S. District Court for the Southern District of New York refused to grant a judgment as a matter of law or for a new trial for the former business manager of musician Yngwie Malmsteen in a suit by the musician over missing income. Malmsteen v. Berdon LLP, 05 Civ. 00958 (RJH). Manager James Lewis and business manager Michael Mitnick had represented Malmsteen from the mid-1990s until 2000. Malmsteen alleged Mitnick and Berdon LLP, the firm for which Mitnick worked, made Lewis' embezzlement of large sums of the artist's money possible. The district court then decided that Malmsteen's suit wasn't barred by a three-year statute of limitations for malpractice for traditional accounting services. See , Malmsteen v. Berdon LLP , 477 F.Supp.2d 655 (S.D.N.Y. 2007).

An expert witness for Malmsteen testified that music-industry business managers are “customarily responsible for ' maintain[ing] awareness of all professional and personal income earned by [a] client and [ensuring] the collection of this income” and “generally ' do everything the client would do for himself if the client had the time and was not working.” After a trial, the jury ruled for the plaintiff on breach of contract and breach of fiduciary obligation claims. (The judge ruled for the defendants as a matter of law on Malmsteen's fraud claim.) Of the breach claim, the district judge subsequently noted: “[t]here was sufficient evidence from which a reasonable jury could have found that Mitnick, acting as a business manager, agreed to monitor plaintiffs' income and verify that payments to plaintiff were properly accounted for.” Mitnick argued there could be no breach because the jury awarded no damages on that claim, but the court explained: “The jury's failure to award damages on plaintiff's breach of contract claim was likely its attempt to comply with the [c]ourt's instruction that they could not award 'actual damages more than once for the same loss' if they found for plaintiff on both the breach of contract and breach of fiduciary duty claims.” The jury awarded Malmsteen $450,000 on the fiduciary-breach claim.

On breach of fiduciary obligation, the district judge noted: “[T]he jury was entitled to credit plaintiff's testimony that Mitnick agreed to make sure that all of plaintiff's income was 'collected and accounted for and looked at and put in the right spot.' ' A reasonable jury could have concluded that defendants acted contrary to plaintiff's interests by failing to take reasonable steps as plaintiff's business agent to monitor plaintiff's income that was being deposited into a bank account maintained by Lewis. ' A reasonable jury could also have concluded that defendants' failure to discover and/or prevent such embezzlement played a substantial part in causing the loss resulting from the embezzlement and that, if defendants had performed their duties, the embezzlement would not have occurred.”