Financial Services Expert Not Allowed to Opine on Breach of Fiduciary Duties

John Giordano feels that he received "far less" than he could have in his divorce proceedings, as he now claims. Giordano isn't happy with the results of his divorce proceedings, and the targets of his disappointment are the law firm and wealth managers who advised him and his ex-wife, as well as his wife's "very affluent family."

As a result, Giordano retained financial advisor expert, Jon-Eric Kronvall, whose report analyzes the conduct of Dean Hedeker and Hedeker Wealth, LLC (hereinafter, “Wealth Defendants”) as investment advisers and evaluates whether that conduct complied with the fiduciary duties of care and loyalty owed to clients in the investment advisory relationship.

Dean Hedeker is an attorney and financial advisor who provides legal and wealth management services to the Moukarzel family, including Giordano's ex-wife Yasmina Moukarzel.

Financial Services Expert Witness

Jon-Eric Lawrence Kronvall is a financial services professional with more than thirty-five years of experience in the investment advisory industry and currently serves as the owner of Esoteric Advisors and Chief Compliance Officer of a registered investment adviser firm.

Want to know more about the challenges Jon-Eric Kronvall has faced? Get the full details with our Challenge Study report.

Discussion by the Court

On October 24, 2018, Giordano and Moukarzel entered into a Wrap Fee Investment Advisory Agreement (the "Wrap Fee Agreement") for Hedeker Wealth to serve as the couple's investment advisor.

On April 25, 2018, Moukarzel committed $5 million of her own money to invest in Equus Investment Partnership XI, L.P. ("EQUUS"). Months later, Moukarzel agreed to transfer the EQUUS investment from her living trust to her and Giordano, jointly. Giordano and Moukarzel also invested about $300,000 from their joint account into an investment called Dillon Inland Port I ("Dillon").

An EQUUS representative—not Hedeker, Hedeker Wealth, or Hedeker Law—sent Giordano and Moukarzel a transfer agreement and a new subscription agreement to sign, which they both did. Hedeker did not draft either agreement. In addition, Hedeker claims that he did not learn about the re-titling of this account into the couple's joint names until the divorce proceedings, and there is no evidence in the record to contradict that assertion. Moukarzel believed that distributions from the EQUUS investment would go into their joint account. However, Giordano believed that in addition to any profits, he was also entitled to the initial investment funds.

The only claim that Giordano can present to a jury is his breach of contract claim against the Hedeker Wealth Defendants based upon their alleged diversion of EQUUS distributions from a joint account to Moukarzel's personal account. In addition, the only quantifiable damages he has are the costs associated with having to seek relief from the divorce court to have the funds put back into the joint account.

First, Kronvall rendered an opinion as to whether the Hedeker Wealth Defendants breached a fiduciary duty to Giordano. But the gist of the action bars Giordano's fiduciary duty claim, which is grounded in the Wrap Fee Agreement. Thus, the question is whether the Hedeker Wealth Defendants breached the Wrap Fee Agreement, not whether they breached fiduciary duties.

Second, the only damages related to EQUUS that Giordano can establish without speculation are the costs he spent litigating a motion in the divorce proceedings to retrieve the diverted funds. But Kronvall did not opine as to those amounts. Thus, his testimony is irrelevant to the remaining issues in this case and would not assist the jury.

Held

The Court granted the Hedeker Wealth Defendants' motion to bar the testimony of Plaintiff's expert, Jon-Eric Kronvall.

Key Takeaway

To fit the case, expert testimony must be relevant and must assist the trier of fact. There must be a valid "connection to the pertinent inquiry as a precondition to admissibility." The Court will preclude Kronvall from testifying at trial because his opinions no longer "fit" the case.

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