A federal judge has dismissed several of the claims by best-selling crime novelist Patricia Cornwell and set aside a jury verdict last year that awarded her $50.9 million in a lawsuit against her former accounting firm, Anchin Block & Anchin LLP, while granting the firm a new trial.

U.S. District Judge George A. O’Toole, Jr., issued an order Tuesday dismissing a number of the claims against Anchin, while setting aside the multimillion dollar verdict that was entered against the firm and its former principal, Evan Snapper, on Feb. 19, 2013 (see Novelist Patricia Cornwell Wins $50.9M Judgment against Accounting Firm). The original verdict came after a seven-week jury trial before Judge O’Toole that addressed various claims brought by Cornwell, along with her company Cornwell Entertainment, Inc. and her partner, McLean Hospital neuroscientist Dr. Staci Gruber.

In his order, O’Toole ruled that a number of the plaintiffs’ core claims, including “the largest single element of the various claims of damage,” were barred as a matter of law and that those dismissed claims tainted the jury’s entire verdict. As a result, O’Toole also granted Anchin’s motion for a new trial on the remaining claims.

“We are deeply gratified by the court’s ruling setting aside the jury’s verdict and granting our motion for a new trial,” said Anchin managing partner Frank Schettino. “Moreover, we look forward to the opportunity to demonstrate that the remaining claims brought by plaintiffs are equally devoid of merit.”

Cornwell had sued the firm and Snapper, blaming them for bad financial advice, unsuccessful real estate deals and an overly aggressive investment strategy that cost the novelist a sizable amount of her fortune (see Novelist Patricia Cornwell Blames Accountants for High Spending). The lawsuit accused the firm of acting negligently and in breach of its fiduciary duties in managing the financial affairs of Cornwell and Gruber.

Cornwell accused the firm of improperly investing $89 million of her fortune and making illegal campaign contributions that attracted scrutiny from the FBI. She claimed the firm engaged in high-risk investment strategies without her approval.

Cornwell paid the firm $40,000 per month to manage her finances, renovate her Concord, Mass., estate and lease an apartment in Trump Tower in Manhattan for her. The firm blamed her financial losses on the economic downturn along with an extravagant lifestyle, including private jets, helicopters and expensive sports cars.

She sued the firm for negligence and breach of contract, claiming that her net worth had dropped to under $13 million even though she had earned eight figures each of the prior four years. She also blamed the firm for causing her to miss a book deadline for the very first time, leading to the loss of $16 million in book advances and commissions, when Anchin was unable to find her a quiet place to write during a lengthy renovation of her estate.

Anchin was also accused of excessive and unauthorized billing, failing to put the clients' interests ahead of its own, and gross mismanagement of Cornwell’s and Gruber’s money over four and a half years, which resulted in the loss of millions of dollars.

Last year, the jury awarded the plaintiffs a total of $50.9 million, including $22.4 million in punitive damages. The remaining counts of the complaint were either dismissed or resolved by order of the court in the defendants’ favor.

The judge admitted that he had erred in his instructions to the jury and that the statute of limitations on the book precluded that claim as well.

He noted that the jury was instructed to apply a three-year statute of limitations on the negligence and breach of contract claims, and the jury was also informed that the statute of limitations in question does not affect the claim for breach of fiduciary duty.

However, O'Toole admitted he  had been wrong. “Upon reexamination of the New York Civil Practice Laws and Rules and the relevant case law, I conclude that my instruction regarding the limitations period for the breach of fiduciary duty count (and claims) was erroneous,” he wrote. “After reconsideration, I conclude that the applicable statute of limitations is also three years as to the plaintiffs’ claims for breach of fiduciary duty. New York law is not pellucid on this point, but it appears to be the correct rule that 'the statute of limitations for a breach of fiduciary duty cause of action depends on the substantive remedy which the plaintiff seeks.'” He noted that because Cornwell was seeking only monetary relief, the breach of fiduciary duty claims has a three-year limitations period.

In terms of the missed book deadline for Cornwell's novel, “Book of the Dead,” the judge pointed out that Cornwell's argument was that Anchin failed at the task of securing an appropriate place where she could write. The missed book deadline claim was therefore grounded in the count for negligence.

“The plaintiffs contend that the defendants’ failure to find a suitable place for her to concentrate on her writing caused Ms. Cornwell to miss her book deadline, preventing her from receiving her expected August 2006 advance until the following year,” wrote O'Toole. “The plaintiffs’ claim involving Ms. Cornwell’s missed book deadline accrued, at the latest, when she failed to submit her manuscript in August 2006.”

When she turned in the manuscript in 2007, the book went from being a 2006 release into a 2007 release and her 2006 advance “morphed” into a 2007 advance. However, O'Toole pointed out that this argument ignores the fact that she lost her entitlement to the advance when the scheduled time for payment, August 2006, came and went without her having satisfied the condition for payment, the submission of her manuscript. She also continued to rely on the firm and Snapper to find her a new home beyond October 2006.

“For the foregoing reasons, the defendants are entitled to judgment as a matter of law as to any claims involving the 2006 missed book deadline,” wrote the judge. “This is not insignificant. The plaintiffs’ witnesses ascribed a loss of some $16 million to this claim, the largest single element of the various claims of damage, and the size of the jury award suggests that the jury found in the plaintiff’s favor on this time-barred claim, though given the generality of the verdict questions this cannot be surely determined.”

The judge also admitted that the jury had wrongly considered evidence that Snapper had reported possible campaign finance violations by Cornwell to the Justice Department, even though she was never charged with such violations, but Snapper had pleaded guilty to them.

Anchin was pleased by the judge's decision but acknowledged that there could still be another trial based on the limited number of remaining claims. Despite the huge verdict last year, members of the firm remained together. None of the 350 members of the firm, including the partners and staff, have left since the verdict over a year ago, and Anchin's revenues have also increased over the past year.

Koltin Consulting Group CEO Allan Koltin, who has watched the firm closely over the years, was impressed by how the members stayed together. “The day this verdict came out, I and the rest of the profession were shaking their heads,” he said. “Anchin did not get a fair deal here. It sent shock waves to anyone who was in advisory services or any type of consulting services because if it’s this easy to lose a case, we'd better all go back to the basic knitting of compliance work. To hear that the judge threw out the verdict makes 100 percent sense to me. In my book, they were completely innocent. I also knew something about the backbone of Anchin and they bleed integrity and honesty. To see that the verdict not only got thrown out, but it’s getting limited in terms of things they can go after moving forward, I think it has to be not just a huge sigh of relief for Anchin, I think it's a sigh of relief for the whole profession. It's a testament to Anchin, that group of partners and staff really stuck together. I don’t know of one person who left that firm.”

The date for a new trial is uncertain, but Judge O'Toole is expected to be kept busy overseeing another important case, of the Boston Marathon bombing defendant Dzhokhar Tsarnaev, which is expected to take precedence over the Cornwell case.

Cornwell's attorney, Joan Lukey, of Ropes & Gray of Boston, told the Boston Globe that she and Cornwell are still committed to the case.

“Patricia brought this action because she wanted to vindicate a principal that financial institutions have to treat their clients appropriately,” Lukey told the Globe. “As far as we’re concerned, the jury spoke loud and clear on that subject. It’s unfortunate the judge didn’t see that the same way, but [Cornwell] intends to vindicate what the jury did for her, so she will take all the appropriate steps to vindicate the jury’s verdict.”

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