Kittay v. Korff (In Re Palermo)
549 F. App'x 38
2d Cir.2014Background
- Plaintiff David R. Kittay, bankruptcy trustee for Douglas Palermo, sued to void transfers to Joseph Korff as fraudulent under New York Debtor & Creditor Law (DCL) §§ 273–276 and federal avoidance/enforcement statutes.
- Korff moved to withdraw the bankruptcy reference; the case was tried in the Southern District of New York and submitted to a jury, which returned a verdict for Kittay.
- Korff challenged the sufficiency of the evidence supporting findings of constructive fraud (§§ 273–275) and actual fraudulent intent (§ 276), arguing fair consideration and repayment of antecedent debt.
- Korff also raised claims of errors in the jury charge: failing to instruct on attorney’s fees and refusing a DCL § 278(a) partial-consideration instruction.
- The district court denied Rule 50 motions; the Second Circuit affirmed the verdict and rejected Korff’s challenges to the sufficiency of the evidence and the asserted jury-charge errors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for constructive fraud (DCL §§ 273–275) | Kittay: Transfers lacked fair consideration and met insolvency/creditor-harm elements | Korff: Payment was repayment of antecedent debt — fair consideration established | Held: Jury had sufficient evidence to find lack of fair consideration; verdict affirmed |
| Sufficiency of evidence for actual intent (DCL § 276) | Kittay: Evidence supported finding Palermo’s actual intent to defraud creditors | Korff: No proof of actual fraudulent intent | Held: Sufficient evidence supported jury’s finding of actual intent |
| Jury instruction on attorney’s fees (DCL § 276‑a) | Kittay: Attorney’s fees determination rests with the judge after jury’s factual finding | Korff: Court should have submitted instruction to jury on fees | Held: No error — awarding fees is judicial; jury found actual intent required for fees; any error was harmless |
| Instruction on partial consideration (DCL § 278(a)) | Kittay: § 278 applies only to those without actual intent; jury already found intent | Korff: Court erred by refusing instruction allowing retention as security for repayment | Held: If error, it was harmless because the jury found actual intent and § 278 therefore did not apply |
Key Cases Cited
- Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135 (2d Cir.) (standard for reviewing JMOL—de novo review and view evidence for nonmovant)
- AMW Materials Testing, Inc. v. Town of Babylon, 584 F.3d 436 (2d Cir.) (Rule 50 standard when jury returned a verdict)
- Cross v. N.Y.C. Transit Auth., 417 F.3d 241 (2d Cir.) (JMOL standard language quoted)
- Sharp Int’l Corp. v. State St. Bank & Trust Co. (In re Sharp Int’l Corp.), 403 F.3d 43 (2d Cir.) (construction of DCL fraud provisions)
- Carey v. Crescenzi, 923 F.2d 18 (2d Cir.) (attorney’s fees under DCL § 276‑a require actual intent finding)
- United States v. Downing, 297 F.3d 52 (2d Cir.) (presumption that juries follow court instructions)