By Joseph Ax
NEW YORK, Jan 29 (Reuters) - A former hedge fund executive
should be awarded damages after his former partner withheld
profits from him, an appeals court ruled Tuesday, the latest
twist in a dispute that also includes allegations that one party
deliberately set a forged document on fire to avoid getting
The Appellate Division, First Department, unanimously found
in favor of James Melcher, who ran hedge fund Apollo Medical
Partners with Brandon Fradd and claimed Fradd had denied him his
proper share of profits.
The court ruled that the jury erred in finding Melcher could
not collect damages from Apollo, even after concluding that
Fradd had breached a profit-sharing agreement, because Melcher
never complained about his pay while he was still employed.
"We find that no rational interpretation of the evidence
supports" the jury's conclusion that Melcher is precluded from
claiming breach of contract, Justice Rosalyn Richter wrote for
the five-judge panel.
The court rejected Melcher's bid to hold Fradd individually
liable for allegedly taking money that belonged to Melcher. That
could make it harder for Melcher to collect the approximately $6
million he is owed, since Apollo is now defunct, according to
his lawyers, Stephen Younger and Jeffrey Jannuzzo.
The court also called for an evidentiary hearing to
determine whether Fradd forged an amendment to the profit
agreement in an effort to undermine Melcher's claim and then
burned the amendment to prevent Melcher's ink expert from
testing it for forgery.
Fradd said the amendment, which changed the arrangement to
cut Melcher's pay, was legitimate and that he accidentally
burned it while making tea, according to court filings.
That assertion led Jannuzzo to file a lawsuit against
Apollo's former lawyer, Leslie Corwin of Greenberg Traurig,
claiming Corwin knew the document was fake but told Jannuzzo it
The lawsuit was thrown out two weeks ago by a divided First
Department panel that found it was filed after the statute of
limitations had expired. Jannuzzo has said he will appeal.
Greenberg has denied the allegations.
In Tuesday's ruling, the First Department said it was
"troubled" by the purported forgery and burning of the document.
"If Melcher's allegations are proven, the court should
impose a monetary sanction," Richter wrote.
Lawyers for Apollo did not immediately comment on the
"We're quite pleased that the court entered judgment against
Apollo Partners," Stephen Younger said. "We're also pleased that
the court recognized that the actions by the defendant, Mr.
Fradd, are such that can rise to a sanctionable event. This is
something that casts a pall upon the whole justice system."
The panel also included Presiding Justice Luis Gonzalez and
Justices Karla Moskowitz, Dianne Renwick and John Sweeny.
The case is Melcher v. Apollo Medical Fund Management,
Appellate Division, First Department, No. 4764.
For Melcher: Stephen Younger, Sarah Zgliniec and Anthony
DeCinque of Patterson Belknap Webb & Tyler; Jeffrey Jannuzzo.
For Apollo: Scott Matthews and James Tracy of Windels Marx
Lane & Mittendorf.
Follow us on Twitter @ReutersLegal | Like us on Facebook