3685 San Fernando Lenders, LLC v. Compass USA SPE LLC (802 F. Supp. 2d 1147, 2011)

FINAL JUDGMENT AND ORDER AWARDING DECLARATORY RELIEF, DAMAGES, ATTORNEYS’ FEES, AND PREJUDGMENT INTEREST, AND DENYING DEFENDANTS’ POST-TRIAL MOTIONS FOR JUDGMENT AS A MATTER OF LAW AND A NEW TRIAL

ROBERT C. JONES, District Judge.

The Court issues its Final Judgment And Order Awarding Declaratory Relief, Damages, Attorneys’ Fees, And Prejudgment Interest, And Denying Defendants’ Post-Trial Motions For Judgment As A Matter Of Law And A New Trial, as follows:

I.

BACKGROUND

USA Commercial Mortgage Company (“USA Commercial”) was a licensed Nevada mortgage broker and loan servicer that filed for bankruptcy protection in April 2006. At an auction held in the USA Commercial bankruptcy proceedings, Compass Partners, LLC and Compass USA SPE, LLC (collectively, “Compass”) purchased USA Commercial’s interest in thousands of Loan Servicing Agreements (“LSAs”). Those LSAs were contracts between USA Commercial and fractional beneficial interest holders (the “Direct Lenders”) in various commercial mortgage investment loans secured by deeds of trust (the “Loans”) that were originated and originally serviced by USA Commercial on behalf of the Direct Lenders.

Silar Advisors, LP and Silar Special Opportunities Fund, LP (collectively, “Silar”) financed Compass’s acquisition of the LSAs, as well as certain fractional beneficial interests in the Loans (the “Purchased Assets”). Silar financed Compass’s acquisition of the Purchased Assets pursuant to a certain Master Repurchase Agreement (“MRA”) and other related instruments. Silar subsequently assigned its interests in, and obligations under, the Purchased Assets to Asset Resolution LLC (“Asset Resolution”), an entity created and owned by Silar for this purpose. Asset Resolution thereafter foreclosed on Compass’s interests in the Purchased Assets and purported to assume all the rights and obligations attendant to owning the Purchased Assets.

Certain Direct Lenders formed limited liability companies (“LLCs”) and commenced this action against Compass, Silar, and two principals of Compass, seeking declaratory relief in connection with the interpretation of the LSAs and the Loans, as well as damages. After Silar formed and assigned its interests in the Purchased Assets to Asset Resolution, the Court acknowledged but did not approve that assignment, and allowed Asset Resolution to appear and assert counterclaims for declaratory relief and damages against approximately 65 individual Direct Lenders (20 of whom were already named as individual plaintiffs). The Court later allowed another 32 of those individual Direct Lenders to be added as named plaintiffs in this case, permitted all those 52 plaintiffs to add Asset Resolution as a defendant, determined that the LLCs lacked standing to pursue their claims, and denied the request of all the former individual members of the LLCs to be substituted for the LLCs as named plaintiffs.

On October 14, 2009, Asset Resolution filed for bankruptcy protection under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. On November 24, 2009, that court transferred the bankruptcy case to this District. This Court subsequently withdrew the reference to the bankruptcy case and converted it to chapter 7, putting Asset Resolution’s estate under the exclusive control of an appointed trustee.

On December 14, 2010, a nine-person jury found Silar and/or Asset Resolution liable for breach of contract, breaches of the implied covenant of good faith and fair dealing in contract and in tort, breaches of fiduciary duties, conversion, and civil conspiracy in connection with their servicing of certain Loans pursuant to the LSAs. As a result of the foregoing and the Court’s pretrial determination that Compass, Boris Piskun (“Piskun”), and David Blatt (“Blatt”) (collectively, the “Compass Defendants”) were in default and, thus, liable as a matter of law, the jury awarded plaintiffs a total of approximately $79,000 in compensatory damages, excluding attorneys’ fees and prejudgment interest, and a total of $5.1 million in punitive damages.

On June 9, 2011, the Court heard oral argument on plaintiffs’ motions for attorneys’ fees and prejudgment interest, and defendants’ post-trial motions for judgment as a matter of law and a new trial.

II.

DECLARATORY JUDGMENT

The Court now incorporates by reference its prior summary judgment decisions (Doc. ##1489, 1819, 1820, 1855) and makes the following declarations in connection with the LSAs and the Loans:

A. The Compensation Owed To Defendants As The Loan Servicers

Section 5 of the predominant LSAs describes the compensation owed to the loan servicers in the following way:

Lender authorizes USA [Commercial] to retain monthly, as compensation for services performed hereunder, (a) one-twelfth (l/12th) of its annual servicing fee, which shall not exceed one percent (1%) per annum of the maximum principal amount of each of the Loans, (b) any late charges collected from the Borrower pursuant to the terms of the Note, and (c) any default interest collected from the Borrower pursuant to the terms of the Note.

(Doc. # 2056, Ex. A, § 5) Therefore, under the LSAs, the loan servicers are entitled to be paid default interest and late charges as loan servicing compensation only if the Direct Lenders are first repaid the principal amount of the Loans and all due and owing accrued regular interest in full. That is because the loan servicers have not “collected from the Borrower,” and thus cannot “retain,” sufficient sums to pay themselves any loan servicing compensation to which they would otherwise be entitled under the LSAs. Further, because the LSAs dictate the compensation to which the loan servicers would otherwise be entitled, where the Direct Lenders have not been repaid the principal amount of the Loans and all due and owing accrued regular interest in full, allocation-of-payment provisions in the promissory notes for the Loans are irrelevant, especially where 51% of the Direct Lenders in the Loans (calculated by the total beneficial interest in the Loans) have specified a different allocation.

Moreover, because the LSAs permit the loan servicers to “retain monthly” a servicing fee, as well as default interest and/or late charges “collected from the Borrower,” the loan servicers are not entitled under the LSAs to collect servicing fees, default interest, or late charges directly from the Direct Lenders, but only from funds collected from the Borrower.

Finally, for defaulted Loans, the loan servicers are entitled to be paid only one accrued annual servicing fee under the LSAs, based on the amount ultimately collected on any given Loan, not based on the principal amount of the Loan. That is because the LSAs provide that the loan servicers are entitled to “retain monthly” only an “annual servicing fee,” and almost all the Loans were for an original term of only one year.

B. Defendants Were Obligated To Comply With Nevada Law Applicable To Mortgage Brokers, Including The Power Of Attorney Requirement.

Prior to investing with USA Commercial, each Direct Lender executed one LSA with USA Commercial that governed their relationship, irrespective of the number of Loans in which the Direct Lender ultimately invested. The LSAs were expressly governed by Nevada law and binding on Defendants as successors in interest to USA Commercial, and state unambiguously that “USA [Commercial] is a mort gage broker and loan servicer in Clark County, Nevada.” (Emphasis added.)

Under Chapter 645B of the Nevada Revised Statutes, a “mortgage broker” is required to obtain a separate valid power of attorney from an investor for each loan for which it purports to act for that investor. See Nev.Rev.Stat. § 645B.330(1). A power of attorney that fails to comply with the statute is void and unenforceable. See id. Because the LSAs are investor-specific, not loan-specific, the LSAs failed to grant either USA Commercial or defendants a valid power of attorney, as required by Nevada law applicable to “mortgage brokers.”

Moreover, even if USA Commercial and defendants were not acting as a “mortgage broker” with respect to the Direct Lenders in the colloquial sense of the phrase, but only as a “loan servicer,” their activities in that capacity were equally covered by the legal definition of “mortgage broker” under the statute. Under Chapter 645B, a “mortgage broker” includes not only those who serve as agents to assist others in obtaining loans, which is the most common colloquial usage of the phrase, but also, inter alia, those who “[h]old[ ] [themselves] out for hire to serve as an agent for any person who has money to lend, if the loan is or will be secured by a lien on real property.” Nev.Rev.Stat. § 645B.0127(l)(b). The LSAs indicate that this is precisely the capacity in which USA Commercial was hired by the Direct Lenders:

B. Lender lends, or wishes to lend, money to various borrowers ... from time to time, which loans are arranged by USA [Commercial] and are secured by interests in real and/or personal property.

C. Lender wishes to retain the services of USA [Commercial] in connection with making and servicing a loan or Loans....

1. Services in Connection with Arranging the Loans. USA [Commercial] will perform the following services in connection with arranging each loan:

(a) Obtain a promissory note or notes secured by the trust deed....

Accordingly, the loan servicers in this case were “mortgage brokers” under Nevada law that required a separate valid power of attorney for each Loan, not only for each Direct Lender. See Nev.Rev. Stat. § 645B.330. Defendants lacked such powers of attorney and, therefore, were purporting to act on behalf of the Direct Lenders without legal authority to do so.

C. Defendants Acquired Only Those Loan Servicing Rights That USA Commercial Had To Sell.

In its Confirmation Order related to USA Commercial’s chapter 11 plan, the Bankruptcy Court approved the transfer of USA Commercial’s loan servicing rights under the LSAs to Compass without modification. That is, whatever loan servicing rights were afforded to USA Commercial by the terms of the LSAs is what defendants acquired from USA Commercial. As a corollary, USA Commercial could not sell, and the Bankruptcy Court could not approve the sale of, any property interests that USA Commercial did not own or were owned by the Direct Lenders.

Thus, for example, although the Confirmation Order addressed the propriety of the transfers of the powers of attorney within the LSAs and found that they were validly assigned to Compass, those powers of attorney were insufficient under Nevada law to allow defendants to act as the loan servicers for the Direct Lenders. In other words, the valid transfer of an instrument that is itself legally insufficient in some way does not cure the underlying defect. Defendants had whatever rights via the powers of attorney that USA Commercial had, and USA Commercial’s powers of attorney within the LSAs were insufficient for a mortgage broker, which USA Commercial was under the relevant statutes.

D. Under Nevada Law, Because Defendants Owed Fiduciary Duties And Duties Of Good Faith And Fair Dealing To The Direct Lenders, Defendants Could Not Place Their Financial Interests Above Those Of The Direct Lenders.

The LSAs (as well as the documentation concerning the Loans) were expressly governed by Nevada law. Thus, defendants were obligated to comply with Nevada law pertaining to the servicing of the Loans. Nevada law precluded defendants from placing their financial interests above those of the Direct Lenders, for whom defendants were servicing the Loans pursuant to the LSAs.

The LSAs did not create a general fiduciary duty for the loan servicers; rather, the LSAs created a duty to exercise reasonable business judgment. The LSAs do not describe the relationship between the parties as fiduciary in nature, but instead incorporate a reasonable business person standard. Where a borrower defaults in making payments under a promissory note, the LSAs provide:

In the event the Borrower fails to make payment to USA [Commercial] as required by the terms of the note, USA [Commercial] will take steps to collect the payment including, but not limited to delivering default notices, commencing and pursuing foreclosure procedures, and obtaining representation for Lender in litigation and bankruptcy proceedings as deemed necessary or appropriate by USA [Commercial] in its business judgment to fully protect the interests of the Lender, and of all Lenders in the loan.

Where, as here, a loan servicer is obligated to perform under a contract using its reasonable business judgment, a fiduciary duty is not created. See First Citizens Fed. Sav. & Loan Ass’n v. Worth-en Bank & Trust Co., 919 F.2d 510, 514 (9th Cir.1990) (no fiduciary duty where parties are obligated to make decisions “in good faith and in a reasonable manner” because “these provisions are more indicative of a typical business relationship among equally sophisticated entities dealing at arm’s length than of a fiduciary relationship”). An agent must expressly assume fiduciary obligations and such an assumption must be the intent of the parties. See So. Pac. Thrift & Loan Ass’n v. Sav. Ass’n Mortgage Co., 70 Cal.App.4th 684, 82 Cal.Rptr.2d 874 (Cal.Ct.App.1999) (holding that the loan servicer did not act as fiduciary to lenders except where it expressly agreed to assume fiduciary duties to lenders). Thus, because the parties did not express their mutual intent for the loan servicers to assume fiduciary duties, the LSAs imposed on the loan servicers only an agency responsibility to exercise reasonable business judgment on behalf of the Direct Lenders in connection with their servicing of the Loans.

Notwithstanding the foregoing, however, under Nevada law defendants were agents of, and therefore owed fiduciary obligations to, the Direct Lenders when handling funds and taking title to real property received on account of the Direct Lenders. See, e.g., Young v. Nev. Title Co., 103 Nev. 436, 744 P.2d 902, 903 (1987) (affirming determinations that mortgage broker who failed to give lenders the payoffs from individual borrowers’ loans was an agent); LeMon v. Landers, 81 Nev. 329, 402 P.2d 648, 649 (1965) (“An agent ... owes to the principal the highest duty of fidelity, loyalty and honesty in the performance of the duties by the agent on behalf of the principal.”); Jory v. Ben- night, 91 Nev. 763, 542 P.2d 1400, 1403 (1975) (“[H]is fiduciary duties ... include obligations of the utmost good faith, diligence, loyalty, fair dealing, and disclosure of material facts.”). Indeed, under sections 645A.020 and 645A.041 of the Nevada Revised Statutes, defendants and their contracted sub-servicers were escrow agents under Nevada law that were required to be licensed and bonded thereunder to collect payments on the Loans for the benefit of the Direct Lenders.

Moreover, because defendants had a fiduciary relationship with the Direct Lenders when handling funds and taking title to real property received on account of the Direct Lenders, Nevada law precluded defendants from engaging in grievous and perfidious misconduct pursuant to the implied covenant of good faith and fair dealing in the LSAs. See Allstate Ins. Co. v. Miller, 212 P.3d 318, 324-26 (Nev.2009) (“A violation of the covenant [the implied covenant of good faith and fair dealing] gives rise to a bad-faith tort claim [against insurers].... This duty to adequately inform an insured arises from the special relationship between the insured and the insurer, which is similar to a fiduciary relationship. Although this court has refused to adopt a standard where an insurance company must place the insured’s interests over the company’s interests, the nature of the relationship requires that the insurer adequately protect the insured’s interest. Thus, at a minimum, an insurer must equally consider the insured’s interests and its own.”) (internal citations omitted); Ins. Co. of the W. v. Gibson Tile Co., 122 Nev. 455, 134 P.3d 698, 702-03 (2006) (“Although every contract contains an implied covenant of good faith and fair dealing, an action in tort for breach of the covenant arises only ‘in rare and exceptional cases’ when there is a special relationship between the victim and tortfeasor. A special relationship is ‘characterized by elements of public interest, adhesion, and fiduciary responsibility.’ ... We have recognized that in these situations involving an element of reliance, there is a need to ‘protect the weak from the insults of the stronger’ that is not adequately met by ordinary contract damages. In addition, we have extended the tort remedy to certain situations in which one party holds ‘vastly superior bargaining power.’ The insurer-insured relationship is fiduciary in nature, and a jury’s finding of a breach of fiduciary duty may support the finding of bad faith. Misrepresenting or concealing facts to gain an advantage over the insured constitutes a breach of fiduciary responsibility.”) (internal citations omitted); LeMon, 402 P.2d at 649 (“The object of the agency is to ensure the transaction of the business of the principal to his best advantage. An agent will not be permitted to pervert his authority to his own personal gain in severe hostility to the interests of his principal.”).

Thus, Nevada law precluded defendants from elevating their interests above the interests of the Direct Lenders for whom defendants were servicing the Loans pursuant to the LSAs. Accordingly, defendants could not seek to retain default interest and late charges as loan servicing compensation from collected funds in derogation of the right of the Direct Lenders to be repaid first their principal and all accrued regular interest due and owing under the Loans.

E. Pursuant To The “51% Rule,” The Direct Lenders Had An Absolute Right To Terminate Defendants As Their Loan Servicers And To Exercise Management Control Over Their Loans.

Pursuant to the “51% Rule” set forth in Nevada Administrative Code section 645B.073 and Nevada Revised Statutes section 645B.340(1), the Direct Lenders had an absolute right to replace defendants as their loan servicers for any Loans, provided that 51% of the Direct Lenders in any Loans made the decision to do so. Nevada Administrative Code section 645B.073 requires — and did so long before Nevada Revised Statutes section 645B .340(1) passed — that any document related to a mortgage loan must contain a provision to allow the holder of 51% or more of the beneficial interests in the loan to act on behalf of all the remaining beneficial interest holders in that loan.

The 51% Rule recognizes that 51% or more of the fractional beneficial interest holders in a loan are entitled to exercise management control over that loan, including designating their loan servicer and deciding whether to foreclose on a loan, to sell foreclosure property, and to agree with borrowers to modify the terms of the loan documents. See Nev.Rev.Stat. § 645B.340(1). The 51% Rule is premised on the fact that the fractional beneficial interest holders are the owners of their loans. See id. Because Nevada Revised Statutes section 645B .340(1) expressly provides that the 51% Rule operates “regardless of the date the interests were created,” it applies to the Loans in which the Direct Lenders invested. See id.

Moreover, because the 51% Rule recognizes that the Direct Lenders are entitled to exercise management control over their Loans, they were entitled to instruct defendants whether or not to foreclose on the Loans, to sell foreclosure property, or to agree with borrowers to modify the terms of the Loans. See id. The Direct Lenders were also entitled to engage in communications amongst themselves and with defendants as their loan servicers pursuant to their right to exercise management control over the Loans. Thus, defendants wrongly asserted that the Direct Lenders’ exercise of management control over their Loans constituted impermissible interference with defendants’ servicing of the Loans.

Further, because defendants’ fractional beneficial interests in the Loans are subject to the decisions of 51% or more of the Direct Lenders in any Loans, defendants’ additional capacity as the loan servicers of any Loans in which they held some fractional beneficial interests works no magic upon the general principle that the owners of 51% of the beneficial interest in a given loan may control the loan. Thus, the Direct Lenders cannot be held liable for allegedly taking actions in connection with the Loans that affected defendants’ fractional beneficial interests in the Loans any more than one Direct Lender could be held liable to another Direct Lender simply because the former voted with the majority to change the loan servicer against the latter’s vote not to make the change.

F. Pursuant To The MRA, Silar Was The Direct Lenders’ Actual Loan Servicer And Compass Was Silar’s Agent In Connection With The Servicing Of The Loans.

1. Repurchase agreements and agency.

A repurchase agreement involves two separate but related transactions: (1) a sale of assets by the “repo seller” in exchange for cash; and (2) an agreement by the repo seller to repurchase them or their equivalent for a specified price in the future. See Granite Partners, L.P. v. Bear, Stearns & Co., 17 F.Supp.2d 275, 298 (S.D.N.Y.1998). A repurchase agreement differs from a loan because, “[u]nlike a lender taking collateral for a secured loan, a repo buyer ‘take[s] title to the securities received and can trade, sell or pledge them.’ ” See id. (quoting SEC v. Drysdale Sec. Corp., 785 F.2d 38, 41 (2d Cir.1986)). In other words, a repurchase agreement is “critically different” from a secured loan because the assets subject to the repurchase agreement are held by the repo buyer and are “assets available for satisfaction of its debts and thus could be seized by [its] creditors.” See Drysdale Sec. Corp., 785 F.2d at 41-42 (noting that a secured lender “holds pledged collateral for security and may not sell it in the absence of a default,” whereas a repo buyer takes title to and “is free to deal the ‘collateral.’ ”).

Under New York law (which expressly governs the MRA), the objective intention of the parties, as reflected in their contract language, dictates whether a repurchase agreement is a purchase-and-sale transaction or a collateralized loan. See Granite Partners, L.P., 17 F.Supp.2d at 300. “The mere presence of secured loan characteristics in repo and reverse repo agreements is not enough to negate the parties’ voluntary decision to structure the transactions as purchases and sales.” See id. at 302 (citation omitted). Moreover, when the repurchase agreement expressly states that the parties’ intent is to consummate a purchase and sale transaction, but nevertheless grants a contingent security interest in the event that the parties’ agreement is later construed to be a collateralized loan, such a contingent security interest does not transform the sale into a loan. See Am. Home Mortgage Inv. Corp. v. Lehman Bros. Inc. (In re Am. Home Mortgage Holdings, Inc.), 388 B.R. 69, 90 (Bankr.D.Del.2008) (“[T]he Court finds that the MRA is a purchase and sale agreement and not a loan. Therefore, this ‘contingent’ security interests [sic] does not arise in this case, and Article 9 does not apply. Furthermore, the MRA cannot be simultaneously a purchase and sale agreement and an agreement which creates a security interest. Therefore, the simple existence of a ‘contingent’ security interest, whether or not the contingency ever occurs, also does not give rise to Article 9 applicability.”).

An agency relationship “results from the manifestation of consent of one person to allow another to act on his or her behalf and subject to his or her control, and consent by the other so to act.” See Samba Enters., LLC v. iMesh, Inc., No. 06 Civ. 7660(DC), 2009 WL 705537, at *7 (S.D.N.Y. Mar. 19, 2009) (internal quotation marks and citation omitted) (discussing the requirement that the agent is subject to the principal’s “direction and control” as an “essential characteristic of an agency relationship”); Mouawad Nat’l Co. v. Lazare Kaplan Int’l, Inc., 476 F.Supp.2d 414, 422 (S.D.N.Y.2007) (“The essence of control in an agency sense is in the necessity of the consent of the principal on a given matter.”) (emphasis in original) (internal quotation marks and citation omitted). A party can be a principal’s agent with respect to certain transactions, but not as to others. See Lumbermens Mut. Cas. Co. v. Franey Muha Alliant Ins. Servs., 388 F.Supp.2d 292, 302 (S.D.N.Y.2005). An agent’s authorized, as well as unauthorized but ratified, acts are imputed to its principal. See News Am. Mktg., Inc. v. LePage Bakeries, Inc., 16 A.D.3d 146, 791 N.Y.S.2d 80, 82 (N.Y.App.Div.2005) (“Generally, principals are liable for the acts of their agents performing within the scope of their apparent authority.”).

2. The MRA constitutes a purchase- and-sale transaction, not a collateralized loan.

It was the intention of Compass and Silar that the MRA would effectuate a purchase and sale transaction, not a collateralized loan. Specifically, the MRA’s provisions (as well as their contemporaneous “Omnibus Assignment” and “Subservicing Agreement”) demonstrate that Silar financed Compass’s acquisition of the Purchased Assets in exchange for obtaining legal title to those Purchased Assets pending Compass’s future repurchase of them from Silar.

First, Silar was denominated as the “Buyer,” and Compass was denominated as the “Seller.” Second, the parties stated that “Seller [Compass] and Buyer [Silar] intend that the Transactions hereunder be sales to Buyer [Silar] of the Purchased Assets and not loans from Buyer [Silar] to Seller [Compass] secured by the Purchased Assets,” which were defined to include any assets that Compass acquired from USA Commercial, including the LSAs, and “sold” to Silar. Third, the “Transactions” and MRA were expressly intended to be a “repurchase agreement” and a “master netting agreement” as defined in 11 U.S.C. § 101, and a “securities contract” as defined in 11 U.S.C. § 741. Fourth, Compass was expressly granted the right to “repurchase” the Purchased Assets on the “Repurchase Date” for the “Repurchase Price.” Fifth, as a condition precedent to the MRA, Compass assigned to Silar “all of Seller’s [Compass’s] rights, title and interests in, to and under each of the [Purchased Assets].... ” Sixth, Compass could not assign, transfer, dispose or pledge, hypothecate, or otherwise encumber any of the Purchased Assets or the “Program Documents,” but Silar in its sole discretion could engage in repurchase transactions or otherwise assign, transfer, pledge, hypothecate, or convey the Purchased Assets subject to its “obligation to reconvey the Purchased Assets (and not substitutes therefor) on the Repurchase Date,” as well as assign its rights and obligations under the MRA and the other Program Documents. Seventh, all principal and interest collected on the Loans, all loan servicer compensation due under the LSAs, and all sale proceeds in connection with the Loans were deemed to be “the property of the Buyer [Silar].” Eighth, pursuant to the Subservicing Agreement, Compass Financial Partners, LLC was: (1) notified and acknowledged that Silar owned the “Servicing Rights;” (2) required to deliver the “Servicing Rights” to Silar; and (3) obligated, upon the termination of the Subservicing Agreement, to deliver the “Records” to Silar, and cooperate and assist with the transfer of the “Servicing Responsibilities” to Silar and Silar’s third-party designee.

Based on the plain meaning of such contract language, under New York law, the parties’ “repurchase agreement constituted a purchase and sale transaction, rather than a collateralized loan, as a matter of law.” See Granite Partners, 17 F.Supp.2d at 302 (finding that because the repurchase agreements explicitly stated that the parties “intend that all Transactions hereunder be sales and purchases and not loans, that intention must be honored” and, thus, they “are to be treated as a matter of law as purchase and sale agreements and not secured loans subject to Article 9 of the UCC”) (citations omitted); In re Am. Home Mortgage Holdings, Inc., 388 B.R. at 91 (concluding as a matter of (New York) law that the parties intended to create a purchase and sale transaction, rather than a collateralized loan, based on the four corners of their repurchase agreement, because the parties expressed their intent “ ‘that all Transactions hereunder be sales and purchases and not loans,’ ” the parties were denominated as “Buyer” and “Seller” rather than lender and borrower or secured creditor and debtor, the Seller agreed to transfer to the Buyer “Purchased Securities” against the transfer of funds by the Buyer, the transfer of the Purchased Securities by the Seller to the Buyer occurred on the “Purchase Date” for the “Purchase Price,” and the transfer of the Purchased Securities by the Buyer to the Seller was to occur in the future on the “Repurchase Date” at the “Repurchase Price”).

Moreover, because the MRA grants Silar a contingent perfected security interest in the Purchased Assets only “in the event that a court or other forum recharacterizes the Transactions hereunder as other than sales” (emphases added), such contract language does not create an ambiguity regarding whether Silar and Compass intended the MRA to be a purchase and sale transaction. See In re Am. Home Mortgage Holdings, Inc., 388 B.R. at 91 (because the repurchase agreement stated that “in the event any such Transactions are deemed to be loans, Seller shall be deemed ... to have granted to Buyer a security interest in all of the Purchased Securities with respect to all Transactions hereunder and all Income thereon and other proceeds thereof,” the Seller granted the Buyer a security interest in the securities only if the court determined the repurchase agreement was a loan, which the court refused to do in light of “the stated intent of the parties and the operative provisions of the MRA”). Thus, as a matter of law, the MRA constitutes a purchase-and-sale transaction, rather than a collateralized loan, between Silar and Compass.

3. Silar was the title owner of the Purchased Assets, including the loan servicing rights, and Compass was Silar’s loan servicing agent.

Because Silar financed Compass’s acquisition of the Purchased Assets pursuant to a purchase-and-sale transaction under the MRA, Silar, not Compass, was the title owner of the LSAs and the loan servicing rights thereunder as a matter of law. The LSAs and the loan servicing rights thereunder were included amongst the Purchased Assets subject to the MRA, the Omnibus Assignment, and the Subservicing Agreement. Specifically, the MRA required Compass to: (1) cause Compass Financial Partners, as subservicer, to service the outstanding Loans; (2) deliver to Silar the LSAs purchased by Silar from Compass; and (3) obtain Silar’s approval of any subsequent servicer, subservicer, or form of servicing agreement.

The MRA also recognized that Compass was Silar’s agent by obligating Compass to: (1) defend Silar’s “right, title and interest” in the Purchased Assets; (2) obtain Silar’s prior written consent to “waive any term or condition of, or settle or compromise any claim in respect of, any item of the Purchased Assets, any related rights or any of the Program Documents;” (3) “do all things necessary to preserve the Purchased Assets,” and “not allow any default to occur for which Seller [Compass] is responsible under any Purchased Assets or any Program Documents;” and (4) hold all books and records related to the Purchased Assets “in trust” for Silar until Silar no longer had any interest, or lien on, any of the Purchased Assets. Such obligations demonstrate the measure of control conferred onto Silar in connection with the servicing of the outstanding Loans originated by USA Commercial. See Samba Enters., 2009 WL 705537, at *7, Mouawad Nat’l Co., 476 F.Supp.2d at 422.

In addition, Compass assigned its rights, title, and interests in the Purchased Assets to Silar pursuant to the Omnibus Assignment. See also Enright v. Mintz, 116 Misc.2d 1084, 457 N.Y.S.2d 180, 181 (N.Y.Civ.Ct.1982) (“It is hornbook law that an assignee steps into the shoes of the assignor.”). Further, the Subservicing Agreement required Compass Financial Partners to acknowledge that Silar owned the “Servicing Rights,” to reflect in its servicing records that Silar was the owner of those Servicing Rights, and to deliver the servicing records to Silar upon the termination of Compass Financial Partners as the subservicer. Thus, Silar was the title owner of the LSAs and the loan servicing rights thereunder, and Compass and Compass Financial Partners were Silar’s servicing agents with respect to the outstanding Loans originated by USA Commercial.

4. Under the LSAs, Silar is responsible for the loan servicing actions taken or not taken by Compass within the scope of their agency relationship.

Pursuant to the terms of the predominant LSAs, Silar is responsible for the loan servicing actions taken or not taken by Compass:

USA [Commercial’s] Right to Delegate. Notwithstanding anything contained herein, USA [Commercial] may in its sole discretion delegate specific loan arranging and servicing obligations to credit bureaus, real estate tax service companies, real estate brokers or agents, appraisers, attorneys, trustees, or others, provided that USA [Commercial] shall remain responsible for all action taken or not taken by such companies, agents, representatives, and others throughout the term of this Agreement.

(Emphasis added.) In addition, under the LSAs, Silar was the successor in interest to USA Commercial and, therefore, bound by the terms of the LSAs. However, Silar is responsible for only the acts of Compass within the scope of its agency relationship with Silar, not for alleged tort claims unrelated to the Direct Lenders’ contractual rights under the LSAs.

G. The Direct Lenders Are Entitled To Elect Whether To Apply Collected Funds To Principal Or Accrued Regular Interest Under Certain Promissory Notes Related To The Loans.

A majority of the outstanding Loans have a promissory note that enables the Direct Lenders to elect whether to apply collected funds to principal or accrued regular interest. The Direct Lenders’ election of application to principal may be implied. In addition, the Direct Lenders were not required to elect the option before payments were applied or forever lose their right to complain about the application. When collected funds are insufficient to cover both accrued regular interest and principal, the Direct Lenders have an ongoing right to elect that the loan payments go first to principal rather than to interest within a reasonable time period after a payment or final principal payment is received.

III.

DEFENDANTS’ RENEWED MOTIONS FOR JUDGMENT AS A MATTER OF LAW

A. Relevant Legal Standard

In reviewing a renewed motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), the Court “may not make credibility determinations or weigh the evidence,” but “must view the evidence in the light most favorable to the nonmoving party ... and draw all reasonable inferences in that party’s favor.” See E.E.O.C. v. Go Daddy Soft ware, Inc., 581 F.3d 951, 961 (9th Cir.2009) (internal quotations and citations omitted). “The test applied is whether the evidence permits only one reasonable conclusion, and that conclusion is contrary to the jury’s verdict.” See id. (internal quotations and citation omitted). The Court must review the jury’s verdict for substantial evidence and uphold it if “evidence adequate to support the jury’s conclusion [exists], even if it is also possible to draw a contrary conclusion.” See id. at 961, 963 (internal quotations and citation omitted).

A renewed motion for judgment as a matter of law under Rule 50(b) “is limited to the grounds asserted in the predeliberation Rule 50(a) motion.” See id. at 961. Thus, a Rule 50(b) motion cannot properly raise arguments that were not raised in the pre-verdict Rule 50(a) motion. See id.; see also Tortu v. Las Vegas Metro. Police Dep't, 556 F.3d 1075, 1082 (9th Cir.2009) (“[W]e strictly construe the procedural requirement of filing a Rule 50(a) motion before filing a Rule 50(b) motion.”) (precluding review of Rule 50(b) motion due to party’s failure to file a Rule 50(a) motion; noting trial brief and motion for summary judgment were insufficient to constitute a proper Rule 50(a) motion).

Nevertheless, the Court may review a jury’s verdict based on arguments made in a Rule 50(b) motion that were not previously raised in a Rule 50(a) motion for plain error. See E.E.O.C., 581 F.3d at 961. In that event, reversal is warranted “only if such plain error would result in a manifest miscarriage of justice.” See id. (internal quotations and citations omitted). Plain error review “permits only extraordinarily deferential review that is limited to whether there was any evidence to support the jury’s verdict.” See id. at 961-62 (internal quotations and citations omitted; emphasis in original).

B. Substantial Evidence Supports Defendants’ Liability For Conversion.

Under Nevada law, conversion occurs “when a tortfeasor takes possession, sells the property, and pockets the proceeds of the sale,” or makes an unjustified claim of title to property that causes actual interference with the owner’s rights of possession therein. See Scaffidi v. United Nissan, 425 F.Supp.2d 1159, 1168 (D.Nev.2005). Moreover, “conversion is an act of general intent, which does not require wrongful intent and is not excused by care, good faith, or lack of knowledge.” See Evans v. Dean Witter Reynolds, Inc., 116 Nev. 598, 5 P.3d 1043, 1048 (2000). Thus, the mere return of converted property does not eliminate one’s liability for conversion. See id. at 1049.

Defendants contend that their retention of Loan proceeds that were later determined by the Court to be owed to the Direct Lenders, not defendants as the loan servicers, does not constitute conversion. Even assuming arguendo that defendants have properly characterized the trial evidence in this regard (which they have not, see infra section III.C.2), defendants’ contention is belied by Nevada law. See Evans, 5 P.3d at 1048-49. Nor is defendants’ contention supported by Wantz v. Redfield, 74 Nev. 196, 326 P.2d 413, 414 (1958), on which they rely. Contrary to their contention, Wantz does not stand for the proposition that conversion occurs only upon the taking of “specifically identifiable, hard currency.” Rather, Wantz confirms that “no clearer example” of conversion is when one retains the proceeds from the sale of another’s property. See id. That is precisely what plaintiffs, by substantial evidence, proved occurred in connection with the Anchor B, Bay Pompano, Shamrock, and Standard Property Loans. See infra section III.C.2, D, E, F.l.

The Court also rejects Piskun’s and Blatt’s contention that they cannot be held liable for conversion merely because they were not specifically named as defendants on that claim in the Second Amended Complaint. See Fed.R.Civ.P. 54(c) (“Every other final judgment [other than a default judgment] should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.”). As managing members of Compass, Piskun and Blatt are personally hable for engaging in the conversion that plaintiffs proved was committed by Compass. See Pocahontas First Corp. v. Venture Planning Group, Inc., 572 F.Supp. 503, 508 (D.Nev.1983) (“There is no doubt that an individual who commits a tort while acting in the capacity of a corporate officer may be held personally liable.”); Marino v. Cross Country Bank, No. C.A.02-65-GMS, 2003 WL 503257, at *7 (D.Del. Feb. 14, 2003) (“Corporate officers are liable for their tortious conduct even if they were acting officially for the corporation in committing the tort. A corporate officer can be held personally liable for the torts he commits and cannot shield himself behind a corporation when he is a participant.”) (applying Delaware law; internal quotations and citation omitted). Accordingly, the Court denies defendants’ Rule 50(b) motions with respect to plaintiffs’ conversion claim.

C. Substantial Evidence Supports Defendants’ Liability For Tortious Breach Of The Implied Covenant Of Good Faith And Fair Dealing.

Defendants argue that they are entitled to judgment as a matter of law on plaintiffs’ claim for tortious breach of the implied covenant of good faith and fair dealing because: (i) a required “special relationship” did not exist between the parties; and (ii) the “genuine dispute doctrine” applies to defendants’ actions. The Court concludes that defendants’ arguments are without merit.

1. A special relationship existed between the parties.

As previously indicated in the Court’s declaratory judgment, the LSAs give rise to an implied covenant of good faith and fair dealing in tort. See supra section II.D. That is because a special relationship existed between the parties, for the following two reasons: (i) although the loan servicing relationship between the parties generally gave rise to contractual duties, defendants also owed fiduciary duties to the Direct Lenders when handling funds or holding title to real property on their behalf; and (ii) because each of the Loans could have hundreds of different Direct Lenders as investors, defendants were the only ones who could preserve, protect, and collect the Direct Lenders’ interests in the Loans and the underlying collateral. See id. Thus, just as Nevada law recognizes that a special relationship exists between an insurer and an insured, so too does Nevada law provide that a special relationship existed between defendants, as mortgage brokers and loan servicers, and plaintiffs, as Direct Lenders. See id.; see also supra section II.B.

2. Defendants acted in bad faith.

The Court finds that plaintiffs presented substantial evidence that defendants’ actions in connection with the Anchor B, Bay Pompano, Shamrock, and Standard Property Loans were not reasonable, but undertaken in bad faith. Thus, notwithstanding defendants’ characterizations of the evidence as not supporting the jury’s verdict, the Court denies defendants’ Rule 50(b) motions with respect to plaintiffs’ claim for violation of the implied covenant of good faith and fair dealing in tort. See E.E.O.C., 581 F.3d at 961, 963; see also Albert H. Wohlers & Co. v. Bartgis, 114 Nev. 1249, 969 P.2d 949, 956-57 (1999) (affirming jury’s finding of bad faith because substantial evidence of bad faith was presented to the jury; concluding that the insurer’s “absurd interpretation” of the insurance contract was unreasonable and did not shelter it from bad faith liability),

a. The Anchor B, Bay Pompano, and Shamrock Loans.

Defendants argue that they acted reasonably in relying on the advice of counsel, USA Commercial’s chapter 11 plan and “Confirmation Order,” the language of the LSAs, and the lack of any challenge to their servicing fee calculations in taking millions of dollars as loan servicing compensation in connection with the Anchor B, Bay Pompano, and Shamrock Loans. Defendants’ arguments misstate the trial evidence on which the jury awarded damages to plaintiffs. Specifically:

• plaintiffs proved that Silar and Asset Resolution purported to take all the net sale proceeds from the sale of the Anchor B property as a “base servicing fee” less than two weeks after the Court issued its summary judgment order in which it ruled that the loan servicers under the LSAs could take only a small servicing fee from collected funds (Trial Tr. at 1151:5-1160:25; Trial Exs. 186,189,191);

• plaintiffs’ Shamrock damages claim was based on the $2.3 million in net sale proceeds — which amount was derived by first deducting the servicing fees and servicer advances actually taken by Compass and Silar — that were not properly accounted for and paid to the Direct Lenders, including plaintiffs (Trial Tr. at 367:10-370:16; Trial Exs. 171, 302A, 2759); and

• plaintiffs’ Bay Pompano damages claim was based on Compass’s failure, in early April 2007, to disclose to the Direct Lenders, including plaintiffs, and accept the borrower’s proposal to repay the unpaid principal balance and all due and owing accrued regular interest because that offer waived the repayment of substantial default interest and late fees, as a result of which plaintiffs were damaged in the amount of their fractional share of the servicing fee and servicer advances that Compass thereafter purported to accrue (Trial Tr. at 728:15-751:18; Trial Exs. 85, 94,149,168, 286, 287).

Thus, the Court finds that plaintiffs presented substantial evidence of defendants’ bad faith in taking the Anchor B and Shamrock sale proceeds, and in not resolving the Bay Pompano Loan in April 2007.

b. The Standard Property Loan.

Defendants maintain that they acted reasonably in taking over $870,000 as default interest and late fees from the borrower’s payoff of the Standard Property Loan because: (i) the Court did not decide until trial that all due and owing accrued regular interest (as well as the unpaid principal balance) had to be repaid first before defendants could collect default interest and late fees; and (ii) Compass and Silar relied on the advice of counsel in taking default interest and late fees in priority to the repayment of the Direct Lenders’ unpaid principal balance and due and owing accrued regular interest. Plaintiffs, however, proved at trial that defendants failed to disclose to plaintiffs that:

• the Standard Property borrower was initially willing to repay 100% of the unpaid principal balance of the Loan, even though Compass sought the Direct Lenders’ consent to accept a discounted payoff of only 90% of the unpaid principal balance;

• the Standard Property borrower later agreed to repay 100% of the unpaid principal balance of the Loan, plus an additional $870,000 in purported default interest and late fees; and

• the Standard Property borrower would pay an additional $870,000 to resolve the Loan, even though Compass agreed as a Standard Property Direct Lender to accept repayment of only 100% of the unpaid principal balance and to waive repayment of any due and owing regular accrued interest.

(Trial Tr. at 1232:6-1267:25, 1283:7-1286:8, 1312:21-1315:6, 1649:2-1653:2; Trial Exs. 42, 70, 73, 76, 77,145, 160, 232)

Plaintiffs also proved at trial that Compass and Silar acted contrary to the terms of the Standard Property promissory note, which first required the repayment of all due and owing accrued regular interest absent the Direct Lenders’ informed consent to allocate the borrower’s payments to the unpaid principal balance. (Trial Tr. at 1218:15-1219:15, 1448:6-1449:4; Trial Ex. 27) See also supra section II.A. Thus, plaintiffs presented substantial evidence of defendants’ bad faith failure to disclose material information to plaintiffs in connection with the Standard Property Loan. It is, therefore, irrelevant whether defendants otherwise purported to act reasonably in taking default interest and late fees in priority to the repayment of due and owing accrued regular interest in March 2007. Accordingly, the Court denies defendants’ Rule 50(b) motions with respect to plaintiffs’ claim for tortious breach of the implied covenant of good faith and fair dealing.

D. Substantial Evidence Supports Defendants’ Liability For Breaching Their Fiduciary Duties.

The Court rejects defendants’ contention that they are entitled to judgment as a matter of law on plaintiffs’ breach of fiduciary duty claim based on their purported good faith in taking certain Loan proceeds as default interest, late fees, and servicing fees. As previously discussed, plaintiffs presented substantial evidence of defendants’ failure to make material disclosures and proper accountings to the Direct Lenders in connection with the Anchor B, Bay Pompano, Shamrock, and Standard Property Loans. See supra section III.C.2. The Court finds that those failures were not a “good faith allocation of amounts collected from a borrower,” as defendants improperly contend. Rather, as the jury was justifiably permitted to conclude, they constituted reprehensible breaches of fiduciary duties by defendants. See LeMon, 402 P.2d at 649 (“An agent ... owes to the principal the highest duty of fidelity, loyalty and honesty in the performance of the duties by the agent on behalf of the principal.”); Jory, 542 P.2d at 1403 (“[H]is fiduciary duties ... include obligations of the utmost good faith, diligence, loyalty, fair dealing, and disclosure of material facts.”).

The Court also rejects Piskun’s and Blatt’s contention that they are entitled to judgment as a matter of law on plaintiffs’ breach of fiduciary duty claim because plaintiffs purportedly failed to prove that Piskun and Blatt misappropriated Loan proceeds in their individual capacities, as opposed to in their capacities as agents for Compass. As previously indicated, Piskun and Blatt, as managing members of Compass, are personally liable for engaging in Compass’s breaches of fiduciary duties, regardless of whether they actually realized any personal gain from their misconduct. See Jory, 542 P.2d at 1403 (“He remained a real estate broker, although licensed to serve clients on behalf of a corporation. Like any broker, Jory had fiduciary duties to those he had undertaken to serve in a professional capacity.... Therefore if Jory, through his own professional misconduct or neglect, breached fiduciary obligations owed to Bennight, he is personally responsible for consequent harm, and operating in the corporate form does not insulate him from such liability.”); Pocahontas First Corp., 572 F.Supp. at 508; Marino, 2003 WL 503257, at *7. The Court finds that plaintiffs presented substantial evidence of Piskun’s and Blatt’s involvement in Compass’s failure to: (i) account for and pay significant proceeds from the Shamrock and Standard Property Loans to plaintiffs; and (ii) disclose the Bay Pompano borrower’s settlement proposal in April 2007. (Trial Tr. at 367:10-370:16, 728:15-751:18, 1232:6-1267:25, 1283:7-1286:8, 1312:21-1315:6, 1649:2-1653:2, 2127:2-2129:7, 2661:2-2676:2, 2699:10-2670:12, 2937:2-23; Trial Exs. 42, 70, 73, 76, 77, 85, 94, 103, 145, 149, 160, 168, 171, 232, 286, 287, 302A, 2759, 2760) Indeed, the Compass Defendants do not dispute that such substantial evidence exists with respect to Compass’s breaches of fiduciary duties. (Doc. # 2045 at 9-14) Accordingly, the Court denies defendants’ Rule 50(b) motions with respect to plaintiffs’ breach of fiduciary duty claim.

E. Substantial Evidence Supports The Compass Defendants’ And Silar’s Liability For Civil Conspiracy.

The Court finds that plaintiffs presented substantial evidence of the Compass Defendants’ and Silar’s business plan, pursuant to which the jury was entitled to conclude that they engaged in a civil conspiracy to furthér their economic interests in connection with the Loans to the financial detriment of the Direct Lenders. Specifically, plaintiffs presented substantial evidence of the remarkable financial motivations that drove the Compass Defendants and Silar to conspire to place their interests in the proceeds from the Loans in priority to those of the Direct Lenders — i.e., Compass’s burden to repay significant interest to Silar, Piskun’s and Blatt’s profit participation compensation method, and Silar’s burden to repay considerable interest to its investors. (Trial Tr. at 2701:21-2710:22, 2729:21-2730:19, 2734:14-2741:1, 2745:17-2748:21, 2761:15-2763:20, 2765:5-2774:24, 2933:12-2936:24; Trial Exs. 63, 326, 327, 328, 329, 330) Under Nevada law, a conspiracy claim is cognizable when, as here, corporate employees or agents act as individuals for their individual advantage, not merely in their official capacities on behalf of the corporation. See Collins v. Union Fed. Sav. & LoanAss’n, 99 Nev. 284, 662 P.2d 610, 622 (1983); see also Pocahontas First Corp., 572 F.Supp. at 508; Jory, 542 P.2d at 1403; Marino, 2003 WL 503257, at *7. Accordingly, the Court denies the Compass Defendants’ and Silar’s Rule 50(b) motions with respect to plaintiffs’ civil conspiracy claim.

F. Substantial Evidence Supports Defendants’ Liability For Punitive Damages.

1. Plaintiffs proved their entitlement to an award of punitive damages.

Under Nevada law, punitive damages may be awarded upon clear and convincing evidence of fraud, oppression, or malice, express or implied. See Nev.Rev.Stat. § 42.005(1). For punitive damages purposes, Nevada law defines: (i) “oppression” means despicable conduct that subjects a person to cruel and unjust hardship with conscious disregard of the rights of the person; (ii) “fraud” to be an intentional misrepresentation or concealment of a material fact with the intent to deprive another person of his or her rights or property; (iii) “malice, express or implied” to be despicable conduct which is engaged in with a conscious disregard of the rights or safety of others; and (iv) “conscious disregard” to mean knowledge of the probable harmful consequences of a wrongful act and a willful and deliberate failure to act to avoid those consequences. See Nev.Rev. Stat. § 42.001. Nevada law permits vicarious liability for punitive damages when a principal adopts or ratifies its agent’s wrongful act for which punitive damages are awarded, or is personally guilty of fraud, oppression, or malice, express or implied. See Nev.Rev.Stat. § 42.007(1); Smith’s Food & Drug Ctrs., Inc. v. Bellegarde, 114 Nev. 602, 958 P.2d 1208, 1214 (1998), overruled in part by Countrywide Home Loans, Inc. v. Thitchener, 192 P.3d 243, 252-58 (Nev.2008).

The Court finds that the jury was entitled to conclude that, by clear and convincing evidence, defendants were liable for punitive damages. Specifically, plaintiffs presented substantial evidence of defendants’ intentional misrepresentations and concealment of material information to deprive plaintiffs of their property, as well as their despicable conduct with conscious disregard of plaintiffs’ property rights. See Nev.Rev.Stat. §§ 42.001, 42.005(1). Among other clear and convincing evidence, plaintiffs proved that:

• with respect to the Standard Property Loan, Compass and Silar wrongly retained over $870,000 in Loan proceeds pursuant to a secret side deal with the borrower that they did not disclose to plaintiffs (Trial Tr. at 1256:11-1267:25, 1283:7-1286:8, 1312:21-1315:6, 1649:2-1653:2; Trial Exs. 73, 76, 77, 103);

• with respect to the Shamrock Loan, Compass (i) facilitated a “friendly” third party’s purchase of substantially discounted fractional beneficial loan interests even though Compass knew that the collateral securing the Loan was worth millions of dollars more than the Loan’s unpaid principal balance, (ii) initiated foreclosure proceedings on the other Tracy Suttles loans — Anchor B, Gess, and Gramercy — in an effort to acquire title to the valuable Shamrock property, and (iii) failed to account for and improperly retained millions of dollars in proceeds from the sale of the Shamrock property (Trial Tr. at 340:10-342:10, 348:22-357:20, 367:10-370:16, 405:22-414:15, 1315:16-1317:7, 2779:18-2791:25; Trial Exs. 81, 97, 103, 148, 171, 302 A, 314, 2759);

• with respect to Bay Pompano Loan, Compass failed, in early April 2007, to disclose to the Direct Lenders and accept the borrower’s proposal to repay the unpaid principal balance and all accrued regular interest because that offer waived the repayment of substantial default interest and late fees, causing plaintiffs to be damaged in the amount of their fractional share of the servicing fee and servicer advances that Compass thereafter purported to accrue (Trial Tr. at 728:15-751:18; Trial Exs. 85, 94, 149, 168, 286, 287); and

• with respect to the Anchor B Loan, Silar and Asset Resolution paid over $874,000 of the net sale proceeds to its litigation counsel, Greenberg Traurig, LLP, without disclosure to the Direct Lenders and less than two weeks after the Court issued its summary judgment order in which it ruled that the loan servicers under the LSAs were entitled to only a small servicing fee from collected funds (Trial Tr. at 1151:5-1164:20, 1202:9-24; Trial Exs. 180,186,189,191, 202).

Further, in addition to the evidence of defendants’ business plan pursuant to which the foregoing wrongful acts were undertaken, see supra section III.E, plaintiffs also proved that defendants specifically intended to deprive the Direct Lenders of their property:

• Abel Godines and Carol Kesler both testified about an overheard courthouse conversation between Piskun and Blatt in which they discussed those very intentions in quite vulgar terms (Trial Tr. at 181:16-183:8, 314:25-315:13);

• Ms. Kesler, Daniel Newman, Christina Knoles, and Ms. Cangelosi each testified regarding the repeated statements separately made to them by Len Mezei, the principal of Compass, including that he purchased “a bag of money” and “a stolen wallet,” that he was taking only a little money ($5,000-$10,000) from each of the Direct Lenders but it was substantial money to him because of the enormous number of Direct Lenders, and that he did not need to alter his perspective on what he was entitled to from the Loans because he had superior litigation funding and better lawyers and the Direct Lenders were unorganized and individually “weak” (Trial Tr. at 331:10-334:6, 1317:10-1320:20, 1623:6-1624:23,1924:8-1935:6); and

• Terry Helms testified that Robert Leeds, the principal of Silar, stated that he intended to spend millions of dollars to “bury” Ms. Cangelosi and her family and to put them “out on the street and homeless” because her efforts to organize the Direct Lenders had stopped him from realizing tens of millions of dollars from the Loans (Trial Tr. at 1489:17-1491:9, 1515:16-1516:10).

Thus, plaintiffs presented substantial evidence of defendants’ liability for punitive damages.

2. The jury verdict form was not plainly erroneous.

Defendants also raise in their Rule 50(b) motions the following two issues with respect to the jury verdict form: (i) plaintiffs “invited error” because the form purportedly “prepared by the Plaintiffs” included the Court’s directed verdicts that Silar and Asset Resolution engaged in “perfidious misconduct” with respect to the Anchor B and Standard Property Loans; and (ii) the jury’s punitive damages awards are unconstitutionally vague. Neither of those issues were raised by defendants in their Rule 50(a) motions or at trial. (Doc. ## 1982, 1983) Therefore, the Court reviews them for plain error resulting in a miscarriage of justice. See E.E.O.C., 581 F.3d at 961; see also Fed.R.Civ.P. 51(d).

a. The inclusion of the Court’s direct verdicts on the jury verdict form was not plainly erroneous.

The Court rejects defendants’ contention that plaintiffs “invited error” with respect to the jury verdict form because, contrary to that contention, the Court, not plaintiffs, prepared the jury verdict form, with input from counsel. (Trial Tr. at 2232:24-2233:5)

In addition, notwithstanding the Court’s inclusion of its directed verdicts on the jury verdict form, the jury separately found that Silar and/or Asset Resolution breached their fiduciary duties, engaged in a civil conspiracy, and converted plaintiffs’ property with respect to the Anchor B, Bay Pompano, Shamrock, and Standard Property Loans. (Doc. # 2010 at 3-4) Any of those findings were independently sufficient to support the jury’s further finding that defendants were liable for punitive damages. See Clark v. Lubritz, 113 Nev. 1089, 944 P.2d 861, 867 (1997) (“[W]e conclude that the breach o