Cahaly v. Benistar Property Exchange Trust Co.

In this appeal we principally consider two questions: first, whether a Superior Court judge properly granted judgment notwithstanding the verdict (judgment n.o.v.) to a defendant on the ground of an “evidentiary gap” in the plaintiffs’ claims, and second, whether she then properly vacated the judgment n.o.v. and allowed the plaintiffs’ motions for a new trial based on “newly discovered evidence” that might close that gap. See Mass. R. Civ. P. 50 (a), 365 Mass. 814 (1974) (judgment n.o.v.), and Mass. R. Civ. P. 60 (b) (2), 365 Mass. 828 (1974) (postjudgment relief on ground of newly discovered evidence).3 We affirm.

1. Procedural background. The plaintiffs in these consolidated *345actions contracted with the defendant Benistar Property Exchange Trust Company, Inc. (Benistar Trust) to hold their funds in escrow while they engaged in tax-advantaged “like-kind” property exchanges in accordance with Internal Revenue Code, 26 U.S.C. § 1031 (2006) (§ 1031).4 Rather than safeguarding the plaintiffs’ funds in escrow accounts — as its fiduciary and contractual duties to the plaintiffs required — Benistar Trust deposited the funds in margin accounts at Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch), and later at UBS PaineWebber Inc. (PaineWebber), and used the funds to engage in high-risk uncovered option trading. Benistar Trust ultimately lost more than $8 million of the plaintiffs’ funds.5

Beginning in January, 2001, the plaintiffs filed actions against Benistar Trust, Daniel Carpenter (its owner), Molly Carpenter (its managing director and treasurer; Daniel is her husband), Martin Paley (its president), a series of entities affiliated with Benistar Trust that were also controlled by Daniel and Molly Carpenter,6 Merrill Lynch, and PaineWebber. The plaintiffs asserted claims against all of the defendants, including breach of contract, conversion, breach of fiduciary duty, intentional misrepresentation, and violation of G. L. c. 93A. In addition, the plaintiffs alleged that Merrill Lynch and PaineWebber aided and abetted Benistar Trust’s conversion and breach of fiduciary *346duty and violated the Connecticut Unfair Trade Practices Act and the New York Consumer Protection Act.7

In March, 2002, the trial judge, who presided over nearly the entirety of this litigation in the business litigation session of the Superior Court, allowed the plaintiffs’ motion for summary judgment on their claims against Benistar Trust for breach of contract and conversion. In July, 2002, the judge allowed Paine-Webber’s motion for summary judgment on the plaintiffs’ claims against it. See note 11, infra. After fourteen days of trial on the remaining claims, during November and December, 2002, and having heard testimony from more than a dozen witnesses, a jury found Benistar Trust, Carpenter, Molly Carpenter,8 and Paley liable on all of the plaintiffs’ common-law claims. They found Merrill Lynch liable for aiding and abetting conversion, aiding and abetting breach of fiduciary duty, and for violating the New York and Connecticut consumer protection statutes.9

However, in February, 2003, the judge allowed Merrill Lynch’s motion for judgment n.o.v. on the ground that the plaintiffs had failed, as a matter of law, to present sufficient evidence that Merrill Lynch either had “actual knowledge” of the Benistar defendants’ wrongful acts or provided “substantial assistance” to Benistar’s wrongdoing, as required under New York law, which controlled the claims.10 See, e.g., S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-848 (2d Cir. 1987) (defining ele*347ments of aiding and abetting claim under New York law). See also infra.

In a posttrial motion, the plaintiffs brought forward evidence that they asserted was “newly discovered” and would address the deficiencies the judge had identified in granting judgment n.o.v. to Merrill Lynch. The judge allowed the plaintiffs’ motion for a new trial under rule 60 (b) (2), based on the new evidence. She reported her decision, along with her previous decision to grant judgment n.o.v. to Merrill Lynch, to the Appeals Court, under Mass. R. Civ. P. 64, as amended, 423 Mass. 1410 (1996), see Lyons v. Globe Newspaper Co., 415 Mass. 258, 261 n.4 (1993). She also entered a final judgment against the Benistar defendants under Mass. R. Civ. P. 54 (b), 365 Mass. 820 (1974), from which the Benistar defendants appealed. The Appeals Court considered all issues together, and affirmed. Cahaly v. Benistar Prop. Exch. Trust Co., 68 Mass. App. Ct. 668 (2007). Merrill Lynch and the Benistar defendants each filed an application for further appellate review; the plaintiffs filed an opposition. We granted further appellate review.11

2. Factual background..12 The jury could have found the following: Benistar Trust was a registered Delaware corporation with a principal place of business in Massachusetts. It was one of a number of business entities set up and controlled by Carpenter, a tax attorney and Connecticut resident. Carpenter was *348the chairman and sole shareholder of Benistar Trust. His wife, Molly Carpenter, was its managing director and treasurer, and Paley, a Massachusetts resident, was its president.13

The plaintiffs are individuals and entities who in 2000 entered into written agreements with Benistar Trust in order to secure for themselves the tax benefits of § 1031 in connection with sales and purchases of real estate.14 See note 4, supra. These agreements, in essence, obligated Benistar Trust (1) to hold the funds that each plaintiff derived from the sale of real property in a Merrill Lynch “escrow custodial account” in the form of either a six per cent “investment account” or a three per cent money market account, at each plaintiff’s election; (2) to transfer a plaintiff’s escrow funds to any seller of “replacement property,” designated by the plaintiff at such time and in such manner as the plaintiff specified, see note 4, supra; and (3) if the plaintiff failed to locate a suitable replacement property within the time permitted under § 1031, to return the escrow funds, with the applicable interest, to the plaintiff.

In October, 1998, Carpenter opened accounts at Merrill Lynch for various of his enterprises, including four accounts for Beni-star Trust. These were corporate working capital accounts, and not custodial, depository, or escrow accounts. His account advi-sors for all of the Benistar accounts were Gary Stem and Gerald Levine, financial advisors with Merrill Lynch’s private client group. In setting up the accounts, Carpenter forwarded to Merrill Lynch Benistar Tmst’s certificate and articles of incorporation, bylaws, and corporate resolutions authorizing the opening of the accounts. None of these documents identified the nature of Benistar Tmst’s business as a § 1031 qualified intermediary.15 Carpenter signed written representations that the money in the *349Benistar Trust accounts belonged to Benistar Trust. Additionally, Carpenter identified his investment objective as “income” and his “account risk factor” as “aggressive.” He requested and received permission from Merrill Lynch to engage in uncovered option trading16 in one of the Benistar Trust accounts, after signing a document acknowledging his understanding that uncovered options posed “special risks . . . [for] potentially significant losses.”17

Carpenter was, as he stated on the account form, an “aggressive” investor. As soon as the accounts were opened, he engaged in high-volume, high-risk uncovered trading in puts and calls, concentrating almost exclusively in the then-booming technology sector. Carpenter often spent one hour or more each day on the telephone with Levine or Stem discussing possible trades, consuming far more of their time than their other clients. However, Benistar’s trades were “totally unsolicited,” meaning that Carpenter himself controlled all investment decisions.18 He paid little heed to Stern’s and Levine’s repeated admonitions to temper his trading style by broadening his portfolio into other sectors and choosing some safer investments.

Carpenter’s investment strategy at first yielded profitable returns, but by the spring of 2000, as the “dot-com boom” of the late 1990’s began to flatten out, his accounts sustained *350heavy losses.19 Merrill Lynch administrative manager Thomas Rasmussen, branch manager Hassan Tabbah, and members of Merrill Lynch’s compliance department were concerned about these losses. On September 20, 2000, Rasmussen directed Levine to inform Carpenter that Merrill Lynch would no longer permit Carpenter to open uncovered positions in the Benistar Trust account. On Stern’s recommendation, Carpenter moved his accounts to Paine Webber in October, 2000, where, in less than three weeks, Benistar Trust lost between $1.2 and $1.3 million. By the end of December, 2000, Paine Webber began closing out positions in the Benistar account.

We turn now to the decision of the judge to grant Merrill Lynch’s motion for judgment n.o.v.

• 3. Judgment notwithstanding the verdict, a. Standard of review. Because the jury are a pillar of our justice system, nullifying a jury verdict is a matter for the utmost judicial circumspection. The touchstone is reasonableness. We ask whether, construing the evidence most favorably to the plaintiff, and “without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, the jury reasonably could have returned a verdict for the plaintiff. ... To be reasonable, the inference [or conclusion] ‘must be based on probabilities rather than possibilities and cannot be the result of mere speculation and conjecture.’ ” Phelan v. May Dep’t Stores Co., 443 Mass. 52, 55 (2004), quoting Tosti v. Ayik, 394 Mass. 482, 494 (1985), and McEvoy Travel Bur., Inc. v. Norton Co., 408 Mass. 704, 706 n.3 (1990). See Tennant v. Peoria & P.U. Ry., 321 U.S. 29, 35 (1944). “[We] consider whether ‘anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn’ in favor of the nonmoving party.” Phelan v. May Dep’t Stores Co., supra, quoting McEvoy Travel Bur., Inc. v. Norton Co., supra. With these principles in mind, we turn now to the merits.

b. Aiding and abetting liability. The claims against Merrill Lynch for aiding and abetting breach of fiduciary duty and aid*351ing and abetting conversion arise under New York common law, where it is well settled that the plaintiff must show “(i) the existence of a violation by the primary wrongdoer; (ii) knowledge of this violation by the aider and abettor; and (iii) proof that the aider and abettor substantially assisted in the primary wrong.” Ryan vs. Hunton & Williams, U.S. Dist. Ct., No. 99-CV-5938 (JG) (E.D.N.Y. Sept. 20, 2000). S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-848 (2d Cir. 1987); Mazzaro de Abreu v. Bank of Am. Corp., 525 F. Supp. 2d 381, 387 (S.D.N.Y. 2007); A.I.A. Holdings, S.A. vs. Lehman Bros., U.S. Dist. Ct., No. 97 Civ. 4978 (LMM) (S.D.N.Y. Jan. 23, 2002); Cromer Fin. Ltd. v. Berger, 137 F. Supp. 2d 452, 470 (S.D.N.Y. 2001); Nigerian Nat’l Petroleum Corp. vs. Citibank, N.A., U.S. Dist. Ct., No. 98 Civ. 4960 (MBM) (S.D.N.Y. July 30, 1999); Williams vs. Bank Leumi Trust Co., U.S. Dist. Ct., No. 96 Civ. 6695 (LMM) (S.D.N.Y. May 30, 1997); Kolbeck v. LIT Am., Inc., 939 F. Supp. 240, 245 (S.D.N.Y. 1996), aff’d, 152 F.3d 918 (2d Cir. 1998). See also Restatement (Second) of Torts § 876 (b) (1977) (“For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he . . . knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other . . .”). The plaintiffs have cleared the first hurdle of the evidentiary requirements: establishing that the Benistar defendants both breached their fiduciary duties to them and wrongfully converted their funds. The question is whether they provided evidence sufficient for the jury reasonably to conclude that Merrill Lynch had “knowledge of” and “substantially assisted” the Benistar defendants. Ryan vs. Hunton & Williams, supra. The plaintiffs concede that the lengthy trial did not yield direct evidence of knowledge or substantial assistance. They argue, however, that the “indirect, circumstantial evidence” of these two elements was “overwhelming.” No jury reasoning from the evidence, however, would have been overwhelmed.

c. Knowledge of a violation. We first consider whether, viewing the evidence in its light most favorable to the plaintiffs, the jury reasonably could have inferred that Merrill Lynch “knew” of the primary wrongs committed by the Benistar defendants. The knowledge requirement of a New York aiding and abetting *352claim demands a showing of “actual knowledge” of the underlying wrongdoing. See Kolbeck v. LIT Am., Inc., supra at 246, and cases cited. That the aiding and abetting defendant has been proven to have had notice or “constructive knowledge” of the underlying wrong will not suffice. See, e.g., Ryan vs. Hunton & Williams, supra (on motion to dismiss, allegations that defendant suspected underlying fraud insufficient to aver “actual knowledge”). See also Kolbeck v. LIT Am., Inc., supra at 248 (absent fiduciary duty to plaintiff, defendants’ knowledge of accusations of fraud against primary wrongdoer insufficient to impute requisite “actual knowledge” for purposes of aiding and abetting liability).20 The plaintiffs are not required to produce a “smoking gun,” however. Actual knowledge “may be implied from a strong inference of fraudulent intent,” Mazzaro de Abreu v. Bank of Am. Corp., supra at 388.

On appeal the plaintiffs set out six “categories of evidence” that they argue form the basis of a reasonable inference that Merrill Lynch had “actual knowledge” of the Benistar defendants’ underlying wrongdoing. They also argue that the jury could reasonably have inferred actual knowledge from disbelief of the Merrill Lynch defendants’ testimony. On both points, we disagree.

As to evidence, the plaintiffs rely strongly on a September 22, 2000, letter Carpenter wrote to Rasmussen, protesting Merrill Lynch’s decision to prohibit opening new positions in the Benistar Trust account.21 In the letter Carpenter stated, among other things: “We have chosen Merrill [Lynch] as our deposi*353tory for our clients so we cannot move the funds elsewhere. If we cannot trade at Merrill [Lynch], we cannot trade anywhere, and you will have doomed us to our losses in a volatile market that we were perfectly positioned to profit from.” To the plaintiffs, the words “depository” and “clients” were sufficient to inform Merrill Lynch that the Benistar Trust account contained third-party funds and that Carpenter was appropriating those funds for his own use in violation of his fiduciary duty to the third parties.22,23 The link posited by the plaintiffs requires many intermediate conclusions for which there was no evidence: for instance, that the funds in the Benistar Property account were third-party funds contractually required to be held in escrow and that Benistar Trust’s agreements with the third parties did not permit using the funds for speculative trading. Even assuming, arguendo, that the letter signified that Benistar Trust had some unspecified fiduciary duty to third-party clients relevant to the corporate accounts, the “relevant ‘knowledge’ for liability to attach in a fiduciary’s breach of duty is knowledge as to the primary violator’s status as a fiduciary and knowledge that the primary’s conduct contravenes a fiduciary duty” (emphasis added). A.I.A. Holdings, S.A. vs. Lehman Bros., supra, quoting *354Diduck v. Kaszycki & Sons Contrs., 974 F.2d 270, 282-283 (2d Cir. 1992). It takes a leap in speculation, an impermissible leap for a jury, to tie the September 22 letter to Merrill Lynch’s “actual knowledge” of the underlying tortious behavior. See Sheehan v. Goriansky, 317 Mass. 10, 17 (1944), quoting Davis v. Boston Elevated Ry., 222 Mass. 475, 479 (1916) (jury’s conclusion must be “the result of logical reasoning from established facts”).

The plaintiffs’ second category of evidence is similarly unpersuasive. This category of evidence is comprised of Rule 405 of the Rules of the New York Stock Exchange, Rule 3210 of the Rules of the National Association of Securities Dealers, and Merrill Lynch compliance policies that, in summary, require a broker or financial adviser to use “due diligence” to “know the client” when opening and managing the client’s investment accounts. The plaintiffs argue that, because Stem and Levine both testified that they complied with the “know your client” roles, the jury reasonably could conclude that Stern and Levine, and thus Merrill Lynch, knew about the nature of Benistar Trust’s business24 and also the nature of its wrongdoing.25 The jury might have believed Stem’s and Levine’s testimony that they followed the “know your client” roles, in which case the jury reasonably could infer that Stem and Levine knew the nature of Benistar Trust’s services. Or the jury might have disbelieved the brokers, in which case they reasonably could infer that Stern and Levine failed to follow the “know your client” rules. Neither alternative translates to affirmative evidence that Merrill Lynch had actual knowledge that the Benistar Trust account contained third-party funds, and that Carpenter’s high-risk options trading in the Benistar Trust account was in breach of its fiduciary duties.

*355Third, the plaintiffs laid before the jury voluminous documentary evidence of wire transfer authorizations and wire transfer confirmations for the Benistar Trust account that indicated that substantial sums flowed constantly between Benistar Trust and various third-party bank accounts, attorney trust accounts, and other accounts of an evidently custodial nature.26 A jury may well have agreed with the plaintiffs that Merrill Lynch’s apparent indifference to the large volume of wire transfers was in derogation of its own written policies for detecting “con games” and “scams”27 (although, as the judge noted, the heavy traffic in wire transfers in the Benistar Trust account was consistent with Carpenter’s alleged representations to Merrill Lynch that Benistar Trust bought and sold real estate). At most, this conclusion leads reasonably to the inference that Merrill Lynch “should have been aware” of possible wrongdoings in the account. However, constructive knowledge is not “actual knowledge.” See, e.g., Mazzaro de Abreu v. Bank of Am. Corp., 525 F. Supp. 2d 381, 388 (S.D.N.Y. 2007) (knowledge of nature of transfers from bank account and large sums of money in account do not imply “actual knowledge of the underlying fraud”); Ryan vs. Hunton & Williams, U.S. Dist. Ct., No. 99-CV-5938 (JG) (E.D.N.Y. Sept. 20, 2000) (bank officer’s authorization of large volume of transfers between primary defendant’s account and subaccounts does “not create an inference of knowledge of” fraudulent scheme). See also Nigerian Nat’l Petroleum Corp. vs. Citibank, N.A., U.S. Dist. Ct., No. 98 Civ. 4960 (MBM) (S.D.N.Y. July 30, 1999) (allegations of knowing or reckless disregard of irregularities in wire transfers and other “badges of fraud” do not give rise to inference, “let alone a ‘strong inference’ ” of underlying fraud).

Fourth, the jury heard testimony concerning a telephone conference call on December 19, 2000, among Stem, PaineWebber *356compliance manager Lori Enright, Mitchell Rock (Stern’s close friend and Benistar’s broker at Paine Webber),28 and Steven Feit (the PaineWebber branch manager) in response to Paine Web-ber’s concern about losses in the Benistar account. Enright took notes of the conference. Both Feit’s testimony (in deposition) and Enright’s testimony and notes reflect that Stern told them that Benistar Trust acted “as a third party liaison for real estate transactions.”29 From what we have said above, it is clear that Stem’s information is insufficient to prove actual knowledge of Benistar Tmst’s fraudulent schemes.

We need not discuss at length the plaintiffs’ two remaining categories of evidence. Testimony from several Merrill Lynch employees that they viewed the Benistar Web site homepage (which did not contain a description of Benistar Trust’s business) and a linked page that had nothing to do with § 1031 like-kind exchanges has no probative value in establishing Merrill Lynch’s knowledge of the primary wrongdoing.30 That Levine and Stem chose to respond to a memorandum from their compliance department requesting more information about Ben-istar Tmst by ignoring the request and praising Carpenter as an individual cannot be converted into affirmative evidence of the underlying fraud, even if, as the plaintiffs maintain, Levine and Stem responded obliquely in order to continue reaping substantial commissions from Benistar. See Mazzaro de Abreu v. Bank of Am. Corp., supra at 388-389 (allegations of “profit motive” — garnering of “substantial” transaction fees — insufficient of itself to support inference of actual knowledge of underlying fraud generating fees).

The indirect, circumstantial evidence amassed at trial may suggest that Merrill Lynch knew the nature of Benistar Tmst’s *357business. But it does not erase the evidentiary lacunae between Merrill Lynch’s knowledge of Benistar Trust’s services and knowledge that Benistar Trust was violating its fiduciary agreements to clients and converting client funds by trading in the Benistar Trust corporate account. Crucially, no evidence of Merrill Lynch’s actual knowledge of Benistar’s agreements with its clients was presented at trial. Cf. Cronin vs. Executive House Realty, U.S. Dist. Ct., No. 80 Civ. 7254 (S.D.N.Y. May 5, 1982) (judgment n.o.v. not appropriate on claim for aiding and abetting under New York law where bank official was informed by one business partner that offering memorandum on which “loan write-up” was based misrepresented another partner’s financial status).

Because the six categories of evidence do not support a permissible inference of actual knowledge, the plaintiffs gain nothing by claiming that their evidence acquires “independent, confirmatory force” when considered in light of the jury’s presumed disbelief of the “implausible,” “self-serving” and “after-the-fact” testimony of Merrill Lynch witnesses on key points. Nor can a jury’s disbelief of the Merrill Lynch testimony reasonably be viewed as independent affirmative evidence supporting a conclusion that Merrill Lynch had the requisite actual knowledge of the Benistar defendants’ wrongful actions. None of the cases the plaintiffs rely on helps their cause.31 There was no error.

d. Substantial assistance of the wrongful conduct. The judge *358also concluded that the plaintiffs had failed to prove the third prong of a New York aiding and abetting claim: that Merrill Lynch substantially assisted in furthering the Benistar defendants’ wrongful conduct. See Ryan vs. Hunton & Williams, supra. Our conclusion that the plaintiffs have not met their burden of showing that Merrill Lynch had actual knowledge of the Benistar defendants’ underlying tortious conduct on the evidence adduced at trial, and our affirmance of the judge’s order allowing a motion for a new trial on the claims against Merrill Lynch, make it unnecessary to address the issue of substantial assistance.32

We consider now whether the judge properly ordered a new trial on the claims against Merrill Lynch.

4. New trial under Mass. R. Civ. P. 60 (b) (2). In a posttrial motion, the plaintiffs brought forward evidence that they argued addressed the specific deficiencies in their case that led the judge to allow Merrill Lynch’s motion for judgment n.o.v. We conclude that the judge did not abuse her discretion in granting the plaintiffs a new trial based on this evidence.

a. Discovery. The plaintiffs’ request for posttrial relief must be situated in the context of the contentious discovery disputes which marred this litigation, and in which Merrill Lynch repeatedly and over a considerable period before, right up to and during the trial failed to meet its discovery obligations despite multiple and focused discovery requests of the plaintiffs.

Merrill Lynch produced a limited, initial set of documents in *359March, 2001, in response to two subpoenas duces tecum from the plaintiffs.33 However, Merrill Lynch then refused to answer the plaintiffs’ interrogatories and document requests for the six months from October, 2001, until a motion to compel was allowed in March, 2002, first arguing that it was not subject to interrogatories or document requests because it was not yet a party defendant, and later arguing that it was not subject to such requests because “by the time Merrill Lynch was made a party ... the deadline for discovery had already clearly passed.”34

The judge allowed the plaintiffs’ motion to compel Merrill Lynch to respond to written discovery in March, 2002.35 This was not the end of the matter, however. Merrill Lynch’s refusal to produce certain other documents, in particular its policy and procedure manuals, led to additional rounds of increasingly specific motions to compel production.36 Numerous documents *360responsive to the plaintiffs’ requests for Merrill Lynch’s records concerning the Benistar account were not produced by Merrill Lynch until much later — in some cases, until the middle of the trial. Meanwhile, Merrill Lynch fought a separate battle on the issue of depositions.37

On the eve of trial in late November, 2002, Merrill Lynch produced additional relevant documents concerning its internal review of the Benistar account.38 On the second day of trial, Merrill Lynch disclosed information about the expected testimony of one of its witnesses, Rasmussen, the Merrill Lynch employee who had made the decision to shut down the Benistar account, and whom the plaintiffs had unsuccessfully attempted to depose in advance of trial. This information led the plaintiffs to suspect that Rasmussen’s files, which should have included documents concerning Merrill Lynch’s supervision of the Benistar account, had not been produced to the plaintiffs. The plaintiffs therefore moved for the immediate production of those documents, along with those of another witness.

On Sunday, December 1, 2002, at around 8 p.m., after pretrial motions and the first five days of trial, and with testimony set to resume the next morning after a Thanksgiving hiatus, Merrill Lynch transmitted additional documents by facsimile to the plaintiffs. These documents, and more that Merrill Lynch produced the next morning as the trial resumed, included documents related to Merrill Lynch’s supervision of the Benistar account that Merrill Lynch admitted it previously had not *361produced.39,40 The plaintiffs argued that these documents, which contained “many new names” the plaintiffs previously had not seen, and some of which concerned Merrill Lynch’s internal compliance review of the Benistar account, fell within not only the plaintiffs’ discovery requests dating back to 2001, but also multiple motions to compel production that the judge had allowed.

It is undisputed that even after this additional extraordinarily late round of document production, Merrill Lynch at no time produced the documents described below, which became the subject of the plaintiffs’ rule 60 (b) (2) motion for a new trial.

b. Mass. R. Civ. P. 60 (b) (2). The purpose of rule 60, which governs posttrial relief, is “to strike a proper balance between the conflicting principles that litigation must be brought to an end and that justice should be done.” 11 C.A. Wright, A.R. Miller, & M.K. Kane, Federal Practice and Procedure § 2851 (2d ed. 1995). A party seeking postjudgment relief on grounds of “newly discovered evidence” invokes rule 60 (b) (2), and must satisfy four requirements: “(1) the evidence has been discovered since the trial; (2) the evidence could not by due diligence have been discovered earlier by the movant; (3) the evidence is not merely cumulative or impeaching; and (4) the evidence is of such a nature that it would probably change the result were a new trial to be granted.” United States Steel v. M. DeMatteo Constr. Co., 315 F.3d 43, 52 (1st Cir. 2002), citing Mitchell v. United States, 141 F.3d 8, 18 (1st Cir. 1998).41

The trial judge “typically has an intimate, first-hand know*362ledge of the case, and, thus, is best positioned to determine whether the justification proffered in support of a [rjule 60 (b) motion should serve to override the opposing party’s rights and the law’s institutional interest in finality.” Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir. 2002). “Consequently, we defer broadly to the [judge’s] informed discretion in granting or denying relief from judgment, and we review [the] ruling solely for abuse of that discretion.” Id. This deferential standard is particularly appropriate where, as here, the judge who ruled on the rule 60 (b) (2) motion is not only the same judge who presided over the trial, but also the same judge who presided over the discovery phase of the litigation and so was intimately familiar with the parties’ discovery conduct.

c. Newly discovered evidence: Patterson. The newly discovered evidence submitted by the plaintiffs was twofold: an affidavit and accompanying exhibits submitted by a Massachusetts attorney not affiliated with the litigation and an affidavit submitted by the defendant Paley. The more significant of these was the affidavit and accompanying exhibits provided by attorney David Patterson of Newton. In 1998, Patterson represented an individual who sought to effectuate a § 1031 transaction, and who retained Benistar as the qualified intermediary for the property exchange.42 According to findings of fact of the judge, between October 21 and 23, 1998, Patterson communicated several times by telephone and in writing with Merrill Lynch’s Levine in order, in Patterson’s words, to “make sure specifically that Merrill Lynch understood that these were escrow funds, and that [Merrill Lynch had] a general understanding of how this transaction was meant to work.”43 Levine was not a mere passive recipient of information from Patterson. He actively sought to respond to Patterson’s concerns. On October 22, Le*363vine responded to a request from Patterson by transmitting to him some account forms by facsimile. The next day, Patterson sent Levine, both by mail and by facsimile transmission, a copy of the escrow agreement that his client had signed with Benistar regarding the funds to be kept at Merrill Lynch, and a copy of the exchange agreement that his client had signed with Benistar and the seller of the property she was purchasing through the § 1031 transaction, along with a cover letter. The escrow agreement, which is titled “Escrow Agreement” in bold capital letters, explains in some detail that Patterson’s client, in order to effectuate a § 1031 property exchange, “will be depositing with Benistar an amount of funds to be deposited in the Beni-star accounts at Merrill Lynch,” and that these funds are to be held in an “escrow custodial account” at Merrill Lynch for the benefit of Patterson’s client. The exchange agreement makes abundantly clear the nature of the § 1031 transaction and Beni-star’s role as an intermediary.44

Years after Patterson’s client’s transaction was completed, Patterson saw a newspaper article in the Boston Globe about the trial and subsequent proceedings in this case and, with his client’s permission, contacted the plaintiffs’ counsel. In March, 2004, he provided an affidavit attesting to his communications with Levine, along with copies of the written communications and telephone and billing records indicating the relevant telephone calls and corroborating the dates of the facsimiles.

The import of this evidence is readily apparent. Far from being merely cumulative or impeaching, it cuts to the heart of Merrill Lynch’s argument in its successful motion for judgment n.o.v. that Merrill Lynch had no “actual knowledge” of the nature of Benistar Trust’s business or the nature of its misdeeds. In a May, 2002, pretrial affidavit in support of Merrill Lynch’s motion for summary judgment, and again at trial, Levine denied knowing any of these facts about Benistar Trust’s business during the relevant period; Levine also pointedly denied having any contact with any of Benistar Trust’s clients in *364Massachusetts.45 Moreover, Levine testified at trial that, if he had been aware that the Benistar Trust account held third-party or client funds, Merrill Lynch would not have permitted Benistar Trust to open corporate accounts or to engage in option trading with the funds. In light of subsequent developments, it would be reasonable for a jury not to credit this testimony.46 In allowing Merrill Lynch’s motion for judgment n.o.v., the judge found that there was “no dispute” that “no one at Merrill Lynch ever saw any of the written agreements” that would have revealed that the funds were being held in escrow for the benefit of the plaintiffs, to whom Benistar Trust owed a fiduciary duty as an intermediary, a conclusion that cannot be sustained in the face of the Patterson evidence.47

The Patterson evidence, if believed, shows what Merrill Lynch knew about Benistar Trust’s business, its arrangements with its clients, and its misdeeds, allowing a jury to find, in the judge’s words, that Merrill Lynch “knew one or more of the other defendants was or were breaching fiduciary duties owed to clients, converting client funds, or both.” The judge found the Patterson evidence credible and persuasive. In light of that, she made specific findings that Merrill Lynch was in direct com*365munication with the Massachusetts representative of at least one Benistar client, and that in the course of this communication, that representative (Patterson) sent Merrill Lynch multiple copies of the legal agreements specifying Benistar’s role as an intermediary holding third-party funds in escrow in its account at Merrill Lynch. In addition, the judge found that, notwithstanding Levine’s amended affidavit testimony to the contrary, see note 47, supra, in fact Patterson did explain to Levine, in a telephone conversation, both the nature of a § 1031 exchange and the fact that Patterson’s client’s funds would be held in escrow at Merrill Lynch in the Benistar account. She concluded that such evidence satisfied the requirements of rule 60 (b) (2). It “is not merely cumulative or impeaching” and “is of such a nature that it would probably change the result were a new trial to be granted,” satisfying the third and fourth requirements of the rule. United States Steel v. M. DeMatteo Constr. Co., 315 F.3d 43, 52 (1st Cir. 2002).

We reject Merrill Lynch’s contention that the Patterson evidence was not, in fact, “discovered since the trial” or, in the alternative, that it could “by due diligence have been discovered earlier by the movant.” Id. The basis for both of these claims is the undisputed fact that the cover letter from Patterson to Levine was in the plaintiffs’ possession before trial. It was not Merrill Lynch that produced this document, or any other record of Levine’s communications with Patterson. A copy of the cover letter sent by Patterson to Levine was produced by Paley in response to the plaintiffs’ pretrial document request.48 In any event, as the judge noted, the cover letter, by itself, would not establish “actual knowledge” on the part of Merrill Lynch.49 It is Patterson’s affidavit, which details his oral and written communications with Merrill Lynch, that gives the document Paley *366produced in discovery its meaning and force. It is undisputed that the Patterson affidavit itself, along with the escrow agreement, the § 1031 property exchange agreement, and the records of telephone conversations and facsimiles that together comprise the Patterson evidence, have all been discovered “since the trial.” Merrill Lynch’s sweeping statement that “the ‘newly’ discovered Patterson documents had been produced to and were in possession of plaintiffs’ counsel” before trial is far from accurate.50

We also agree with the judge that the plaintiffs met their burden of showing that the Patterson evidence could not by due diligence have been discovered earlier by the movant. Parties to litigation are required to exercise due diligence in the search for relevant information, but the degree of diligence required to satisfy the strictures of rule 60 (b) (2) is not unlimited. See Kettenbach v. Demoulas, 901 F. Supp. 486, 495 (D. Mass. 1995) (“failure to pursue discovery to the utmost limit does not preclude a successful Rule 60 [b] [2] motion”), citing Krock v. Electric Motor & Repair Co., 339 F.2d 73, 74-75 (1st Cir.), cert. denied, 377 U.S. 934 (1964) (failing to make full use of discovery does not require finding of lack of due diligence).

This is not a case where the movant under rule 60 (b) (2) failed to make the discovery requests of the nonmoving party that would have yielded the evidence before trial. See, e.g., Zurich N. Am. v. Matrix Serv., Inc., 426 F.3d 1281, 1290 (10th Cir. 2005) (documents not newly discovered when plaintiff knew documentation was missing “almost a year prior to the start of trial,” made “no attempt to explicitly include it” in the discovery process, and abandoned its requests for the documents for over one year). This is not a case where the movant failed to exercise due diligence by failing to call an important witness of whom the moving party was aware before trial, see Parilla-Lopez v. United States, 841 F.2d 16, 19 (1st Cir. 1988) (“the appellant himself admits that he was aware, before trial, *367of the policeman’s identity and knowledge concerning the accident”); or making a strategic choice not to pursue the evidence, see Knott v. Racicot, 442 Mass. 314, 325 (2004), or failing to exercise “even minimal diligence.” Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir. 2002) (moving party “fails to explain why this evidence could not have been found, well before the entry of judgment, in the exercise of even minimal diligence”). Here the plaintiffs’ repeated efforts at increasingly tailored discovery were impeded at nearly every turn by Merrill Lynch.

It is unnecessary to decide whether Merrill Lynch deliberately withheld or destroyed the key documents that it did not produce. However, as the judge found, “it is at least fair to say that Merrill Lynch should have had these documents in its files, which would have led to their production”51 (emphasis in original). The plaintiffs made pretrial document requests that squarely covered the documents. A party “treads on thin ice when he argues that [the plaintiffs] could have uncovered [the evidence] had [the] [p]laintiffs been more persistent in pursuing depositions and document discovery when several [court] orders . . . were necessary to compel discovery to move forward.” Ketten-bach v. Demoulas, 901 F. Supp. 486, 495 (D. Mass. 1995). It would reward obstruction of the orderly process of litigation effectively to penalize the plaintiffs for failing to discover what Merrill Lynch, for whatever reason, failed to produce in a timely manner, or failed to produce at all. The conduct of the nonmov-ing party is relevant to the question whether the moving party in a rule 60 (b) (2) motion exercised due diligence. See, e.g., Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1536 (8th Cir. 1996); Kettenbach v. Demoulas, supra (rule 60 [b] [2] motion *368allowed as to newly discovered tape recording containing an incriminating conversation with person who was apparently coconspirator with defendant where plaintiff’s failure to depose coconspirator, whose identity was unknown before trial but might have been discovered, was due in part to defendant’s own discovery abuses). We conclude that the judge, who was, as we noted earlier, intimately familiar with both the plaintiffs’ attempts to obtain discovery and Merrill Lynch’s resistance to that discovery, did not abuse her discretion in finding no lack of due diligence on the part of the plaintiffs.

d. Newly discovered evidence: Paley. The plaintiffs also offered as newly discovered evidence a separate affidavit from Paley. At trial, Paley invoked his Fifth Amendment privilege against self-incrimination and refused to answer any questions. See note 13, supra. In his posttrial affidavit, Paley averred that in October, 1998, he had at least one very specific conversation with Levine in which he explained Benistar Trust’s business as an intermediary for § 1031 transactions, and explained that the funds in the Benistar Trust account at Merrill Lynch were third-party client funds. The judge found that the Paley evidence, if credible, would support the conclusion that Merrill Lynch had “actual knowledge” that the Benistar Trust account contained funds held in escrow for third-party clients, and provided “substantial assistance” to Benistar in misusing those funds. On the other hand, she also concluded that Paley’s credibility was “extremely questionable” because his sworn statement was given in return for the plaintiffs’ agreement to release Paley from damages “well in excess of $16 million.” Because the Patterson evidence alone was sufficient to warrant allowing the plaintiffs’ motion for posttrial relief under rule 60 (b) (2), we need not reach the question whether the Paley evidence alone would justify a new trial.52 The plaintiffs are free to attempt to introduce the Paley evidence at the new trial.

The plaintiffs argue that, rather than granting a new trial, the court should allow their motion to reinstate the jury verdict. We *369are mindful of the burden on all parties that a new trial represents. But the judge was correct in concluding that the plaintiffs’ preferred remedy would be inappropriate here. Even after the introduction of the newly discovered evidence, disputed issues of material fact remain; the credibility of the witnesses and documentary evidence must be weighed by the fact finder. As the plaintiffs would not be entitled to summary judgment, they are not entitled to reinstate the jury verdict.

5. Remaining claims. The judge denied the motion of Carpenter, Molly Carpenter, and Benistar Ltd. to dismiss the claims against them for lack of personal jurisdiction. The Benistar defendants argue on appeal that the judge lacked personal jurisdiction over any of the Benistar defendants with the exception of Benistar Trust. We have carefully considered their arguments in light of the evidence on the question. For essentially the reasons articulated by the judge and by the Appeals Court, we affirm. See Cahaly v. Benistar Prop. Exch. Trust Co., 68 Mass. App. Ct. 668, 676-677 (2007). The Benistar defendants also appeal from the judge’s denial of their motion for a new trial. Again, after careful consideration of the arguments, and for essentially the reasons articulated by the judge and by the Appeals Court, we affirm. See id. at 677-678. After careful consideration we likewise reject the remaining contentions of the Benistar defendants for essentially the reasons offered by the trial judge and the Appeals Court. See id. at 678-81.

6. Conclusion. For the reasons set forth above, we affirm the denial of the Benistar defendants’ motion for a new trial and the entry of judgment against the Benistar defendants. We affirm the decision to grant judgment n.o.v. to Merrill Lynch. We affirm the decision granting the plaintiffs a new trial of their claims against Merrill Lynch. We remand the consolidated cases to the Superior Court for further proceedings consistent with this opinion.

So ordered.