Maurice Kanbar v. Henry Kaufman , 372 F. App'x 694 ( 2010 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAR 10 2010
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
MAURICE KANBAR, an individual; et No. 09-15556
al.,
D.C. No. 3:07-cv-02123-VRW
Plaintiffs - Appellants,
v. MEMORANDUM *
HENRY KAUFMAN, an individual,
Defendant - Appellee.
Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, Chief District Judge, Presiding
Argued and Submitted February 11, 2010
San Francisco, California
Before: NOONAN, BERZON and IKUTA, Circuit Judges.
Maurice Kanbar is an inventor, entrepreneur, and philanthropist. Henry
Kaufman is a retired bond trader and investment banker. Kaufman and Kanbar met
around 1962, when Kaufman underwrote a public offering for Kanbar’s company,
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
the Spandex Corporation. They became friends at that time and spoke
occasionally. In 2001, Kanbar sought Kaufman’s advice in a financial problem
regarding Kanbar’s charitable foundation. Kaufman came to San Francisco and
moved into an apartment building owned by Kanbar. He helped Kanbar to realize
about $10 million in tax savings by converting his charitable foundation to a
charitable trust.
While Kaufman was in San Francisco, it became clear that Kanbar would
receive $320 million from the sale of Skyy Vodka. Kanbar asked Kaufman if he
would stay and help Kanbar to manage this money with the intent of distributing it
to charity. Kaufman agreed to stay. Kaufman was eventually responsible for
investing all of the money that Kanbar received from the sale of Skyy, and he had
signing authority over Kanbar’s bank accounts. Kaufman was not compensated
formally for his services. Kaufman had little specific direction from Kanbar;
however, he was aware of one specific Kanbar policy: Kanbar did not believe in
paying bonuses.
Kaufman’s investments for Kanbar included about $108 million for twenty-
one commercial buildings in downtown Tulsa, Oklahoma, which he began
purchasing around June 2005, and finished purchasing by December 31 of that
year.
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In making the Tulsa investments, Kaufman enlisted the help of Raymond
Feldman, a local lawyer, to help with the real estate closings. Feldman charged a
fee of approximately $500,000, or roughly $25,000 per building. Feldman and his
wife were also very active in Tulsa social circles, and helped to find tenants for the
buildings that Kaufman was buying on Kanbar’s behalf. In the midst of the
purchasing spree, Kaufman paid Feldman an unrequested consulting fee of
$200,000 for extraordinary services. The district court found that he did not
sufficiently apprise Kanbar of the payment of the bonus.
In the process of due diligence for the Tulsa investments, Kaufman also
consulted with John Snyder, a Tulsa construction manager. Snyder and his wife
Tori owned six buildings near those that Kaufman was purchasing for Kanbar.
Like Feldman, the Snyders were well connected in Tulsa. They helped to secure
discounts on the prices of buildings on Kaufman’s behalf. At the same time as the
bonus to Feldman, Kaufman paid an unrequested $400,000 consulting fee to Tori
Snyder. In addition to the cash payment, Kaufman provided the Snyders with a
$250,000 interest free five month loan with Kanbar’s funds. Again, Kaufman did
not sufficiently apprise Kanbar of the payment of the bonus or the loan. The loan
was repaid sometime before trial.
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Over the course of 2006, the Kanbar-Kaufman relationship disintegrated.
By May or June of 2006, Kaufman had returned to New York and had no further
involvement with Kanbar’s finances.
On March 16, 2007, Kanbar filed suit against Kaufman in San Francisco
Superior Court alleging negligence, fraud, and breach of fiduciary duty. Kaufman
removed the case to federal court on diversity grounds. The district court
dismissed the fraud claim on Kaufman’s motion. Kanbar filed an amended
complaint alleging only breach of fiduciary duty and negligence and seeking
damages of not less than $20 million.
The district court, Chief Judge Vaughn Walker presiding, held a bench trial
in which, with the agreement of the parties, Kaufman and Kanbar were the only
two witnesses. The court held for Kaufman on most of Kanbar’s claims. Kanbar
prevailed, however, on certain of his claims that Kaufman owed him a duty of
candor, and that Kaufman breached that duty when he paid consulting fees to
Feldman and the Snyders and when he made the interest free loan to the Snyders
without properly informing Kanbar.
Having found that Kaufman breached his duty, the district court proceeded
as though Kanbar bore the burden of showing that he was damaged by the
payments, and held that he had failed to establish that he was damaged by the
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payment of the consulting fees to Feldman and to the Snyders. The court found
that the fees were paid in November of 2005, that they secured the services of
Feldman and the Snyders for future purchases through the end of 2005, that those
services were likely worth a substantial amount, and that Kanbar was therefore not
damaged by the payment of the bonuses. As to the loan, the court ruled that
Kanbar had shown that he was damaged by the loss of the use of the $250,000 for
the duration of the loan. Judge Walker awarded Kanbar $11,222.60 in lost interest
on the loan money.
Kanbar appeals and challenges only the district court’s rulings with respect
to damages from the two bonus payments. He claims that the district court erred as
a matter of California law in assigning to him the burden of showing damages for
Kaufman’s breaches of the duty of candor, or alternatively that the district court
erred in its factual finding that Kanbar received adequate consideration for the
consulting fees paid to the Snyders and to Feldman.
Kanbar cites St. James Armenian Church of Los Angeles v. Kurkjian, 47
Cal. App. 3d 547, 551 (Cal. Ct. App. 1975) for the proposition that there is a
presumption of damages where a fiduciary fails to disclose to his principal a
payment made to a third party. But Kanbar never cited St. James or made any
argument about a presumption of damages before the district court. The time to
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raise this legal point was before the district court, which could have ruled on it and
changed the proceedings in the trial accordingly. See Castaneda v. United States,
546 F.3d 682, 700 (9th Cir. 2008) (“[I]n order for an argument to be considered on
appeal, the argument must have been raised sufficiently for the trial court to rule on
it.”) (internal quotation marks omitted). We decline to consider Kanbar’s belated
argument.
As for Kanbar’s contention that the district court erred in its factual findings,
we will not disturb a district court’s findings of fact in a bench trial unless they are
clearly erroneous. Bertelsen v. Harris, 537 F.3d 1047, 1056 (9th Cir. 2008). The
district court’s findings here had sufficient support in the record at trial.
The judgment of the district court is AFFIRMED.
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