Chorches v. Ogden (In Re Bolin & Co.)

MEMORANDUM OF DECISION

This case arises from the bankruptcy of Bolin & Company, LLC (“Bolin”), a jewelry retailer in Greenwich, Connecticut. It concerns actions the defendant, Sally Ogden, took during the week of July 30, 2004 that the plaintiff claims to have precipitated Bolin’s bankruptcy. The United States Bankruptcy Court for the District of Connecticut previously had jurisdiction over this case pursuant to 28 U.S.C. § 157(b), which permits bankruptcy courts to exercise jurisdiction over “all core proceedings” under the Bankruptcy Code, including matters affecting the liquidation of the assets of the bankrupt estate. This court has jurisdiction under 28 U.S.C. § 1334(b), which grants district courts original jurisdiction over civil actions arising in or related to bankruptcy proceedings.

On April 30, 2007, the plaintiff, the Chapter 7 bankruptcy trustee for Bolin’s estate 1 commenced this lawsuit in the United States Bankruptcy Court for the District of Connecticut as an adversary proceeding against Ogden and Shannon Howey, a former Bolin employee. On November 24, 2008, I withdrew reference to the bankruptcy court of the plaintiffs claims against Howey, and on December 19, 2008, I consolidated the proceedings against Howey and Ogden in this court. Howey was then dismissed as a defendant on August 6, 2009. A bench trial began on September 29, 2009 and ended on October 8, 2009. 2

My findings of fact and conclusions of law are set forth below. I proceed in two parts. First, I discuss the facts and law relevant to Ogden’s liability. I then turn to the damages that Ogden owes.

I. Ogden’s Liability

A. Findings of fact

The relevant history of Bolin from its inception until the week of its closing can be divided into three parts. First, there are the facts of Bohn’s history before the week of July 26, 2004; second, there are the facts leading to the closing of Bolin on July 30, 2004; and, finally, the aftermath of Bolin’s demise.

1. Bolin’s history before July 26, 2004

a. Bolin’s origins

Andrea Ulanoff and her partner, Noah Citrin, opened Bolin in 2000 as a retail shop for antique, custom, and unusual or niche pieces of jewelry. Ulanoff, a former advertising and marketing professional, was to be responsible for the business and *737 management sides of the store, and Citrin, a jeweler by trade, was to be responsible for the design and repair of the store’s jewelry. In August 2000, Andrea Ulanoff registered Bolin as a Connecticut limited liability company in which she was the only principal. Citrin was not designated a principal because he had recently closed his own jewelry store and declared bankruptcy; in addition, Ulanoffs mother, Sylvia Ulanoff, loaned start-up money to help Bolin on the condition that Citrin not be a principal in the venture. Ulanoff and Cit-rin both signed Bolin’s lease on Bolin’s behalf, however; the landlord was never notified that Citrin was not a principal in the LLC. 3

Bolin borrowed $500,000 from several sources to finance its start-up costs. Bolin borrowed $100,000 from Ulanoff and another $400,000 from her mother, Sylvia Ulanoff. Sylvia Ulanoff lent the $400,000 in two installments: in November 2000, she lent Bolin $150,000, and in January 2001, she lent another $250,000. Sylvia Ulanoff and Bolin entered promissory notes and security agreements for both of those loans, but the security agreement for the first loan of $150,000 was never properly filed as a UCC-1 agreement with the Connecticut Secretary of State. That fact was discovered only after Bolin declared bankruptcy.

Bolin opened its store in December 2000 at 356 Greenwich Avenue, where it would continue to operate until closing on July 30, 2004. Business hours were Tuesday through Saturday, from 9 to 5, a schedule that Bolin maintained until it shuttered. Bolin sold jewelry that it owned and that it held on consignment. Under a consignment agreement, Bolin sold jewelry on loan from a vendor and would collect a fee from the vendor on each completed sale; if Bolin was unable to sell a consigned piece, the store would return it to the vendor. Bolin usually held more consigned jewelry than owned jewelry in its inventory; several witnesses testified that, at the time of the store’s closing, one-third of Bolin’s inventory consisted of owned items, while the remaining two-thirds were consigned pieces. Bolin also repaired jewelry for customers and would sometimes sell customers’ jewelry on consignment. Ulanoff and Citrin were Bolin’s only employees in the store’s early days. They worked in the store during business hours and conducted themselves as the store’s managers, together buying insurance and installing a security system. Ulanoff received between $100,000 and $150,000, and Citrin *738 received approximately $60,000, in annual compensation.

Business was slow at the outset — by opening in December 2000, Bolin was too late to capitalize on the holiday shopping season, which had started weeks earlier— and the store reported a loss for the 2000 fiscal year. (Ex. 92.) But Bolin proceeded to grow in 2001. Between 2000 and 2001, Bolin held on average 150 pieces of jewelry worth, in sum, $500,000 at cost; the average price for an item was $2,500. By the end of 2001, Ulanoff claims, the store held $1 million in inventory. That year, as the store grew, Bolin hired three part-time employees: Kathleen Raby, Joan Goss, and Elaine Tracy. Raby was paid between $18 and $20 an hour, and Goss received less than $20,000 a year. Tracy’s salary was never stated at trial but, according to Ulanoff, it was not significant.

From 2001 to 2002, Bolin’s sales traced the arc of the national economy: business ground to a near halt following September 11, 2001 — the store reported a net loss for 2001 (Ex. 91) — and rebounded as the market recovered. Despite increasing sales in 2002, however, Bolin faced significant management problems. Ulanoff had trouble establishing relationships with jewelry vendors and adjusting to the business practices of the jewelry industry. Ulanoff also struggled to keep adequate records of the items she was receiving in inventory and the sales that Bolin was making. Although Bolin had an electronic inventory system for its jewelry, Ulanoff failed to update it consistently.

Finally, Bolin had significant cash-flow difficulties. Ulanoff often bought jewelry with a series of post-dated checks, each reflecting partial payment, for vendors to deposit over time once each check’s date had passed. In effect, Ulanoff was buying jewelry on credit, and would pay vendors in installments after receiving their jewelry. Ulanoffs post-dated checks bounced frequently, however. Indeed, Bolin’s habit of bouncing checks continued until it went out of business in 2004; Bolin bounced 660 checks, including paychecks to its employees, between April 2003 and July 2004, amassing more than $12,000 in overdraft fees. (Ex. 309.) Bolin also had problems paying vendors for jewelry it sold on consignment. The store had a reputation for being very slow to repay vendors for the consigned pieces it sold. It took Bolin an average of 122 days to pay its accounts payable. (Ex. 1031.) That was well above the time it took other comparable retail shops to make similar payments.

Several parties won judgments for unpaid debts against Bolin between 2002 and 2004. The New York Times Company won a judgment of $6,400 against Bolin on October 18, 2002 (Ex. 134); Walter Bernd won a judgment of $3,535 against the store on October 21, 2003 (Ex. 133); Albert Tsang Jewelry Design Ltd. won a judgment of $18,112.39 against the store on June 28, 2004 (Ex. 317); and Wartski, Ltd. won a judgment of $13,092.44 on August 16, 2004 (Ex. 132). Besides those judgments, it was common for vendors to call Bolin to complain about not being paid. Joan Goss, another Bolin part-time worker, testified that she quit her job in February 2004 because she felt constantly harassed by phone calls from unhappy and unpaid vendors.

b. Sally Ogden’s involvement in Bolin

Because of those problems, Ulanoff became interested in finding another principal for Bolin. That potential partner was Sally Ogden, the defendant in this case. Ogden, a Greenwich homemaker, had been a frequent customer at Bolin beginning in 2001. Ulanoff knew her from her visits to the store and from conversations they had while Ogden was shopping; the two developed a friendship based on their interac *739 tions in the store. Ulanoff believed that Ogden would be a strong addition to Bolin because she had worked previously in a retail couture business. She also thought that Ogden, who had contacts with other potential jewelry consumers, could attract more customers to the store. Ulanoff was prepared to offer Ogden a 50 percent stake in the store and shared management responsibilities.

Ogden loaned $270,000 to Bolin in July 2002. That loan was to help Bolin with its business; Ogden did not intend it as an equity investment in Bolin. Several months later, in November 2002, Ogden submitted an application for “key man” insurance in which Bolin was the beneficiary. (Ex. 457.) This required her to meet with Bolin’s insurance agent, have blood tests performed, and give information about her health and medical history. The application was accepted, and Bolin was responsible for paying the premium. The key man insurance is the only evidence that conclusively points toward some intent by Ogden to become a principal in Bolin. Evidence of Ogden’s subsequent activity, however, shows that, although Ulanoff wanted her to become an owner and manager of the business, Ogden never assumed those roles.

In late 2002, Ogden’s $270,000 loan to Bolin was memorialized in a promissory note and secured by a security agreement. 4 The terms of the promissory note and security agreement differ in several ways. Most significantly for the purposes of this case are their terms concerning default and Ogden’s rights to repayment. The promissory note permits Ogden to make a demand for repayment for the full sum whenever she wants. (Ex. 416.) The note grants Bolin five days to repay; it is only after the five-day period has expired that Bolin defaults. (Id.) The promissory note includes no prescription about how Ogden, as creditor, is to recover collateral in the event of Bolin’s default. The security agreement, on the other hand, affords Ogden much greater rights with respect to demanding payment and remedying a default. First, the security agreement’s definition of default is more inclusive than the promissory note. Under the promissory note’s terms, default only occurs when Bo-lin, the debtor, fails to meet Ogden’s demand for payment. But section 8 of the security agreement defines a default as occurring because of, inter alia, any of the following conditions;

[FJailure of any Obligor ... to pay when due (whether by acceleration or otherwise), any amount payable on any of the obligations, ... loss, theft, substantial damage, destruction, sale, or encumbrance to or of any of the Collateral, or the making of any levy, seizure, or attachment thereof or thereon ... the entry of a judgment against any Obligor ... [or] the dissolution, incompetence, consolidation, or reorganization of any obligor.

(Ex. 3 ¶ 8.)

Section 9 of the security agreement then explains what Ogden, as the secured *740 creditor, is entitled to do “[u]pon the occurrence of any such default” and, even in absence of an actual default by Bolin, “whenever Secured Party feels insecure for any reason whatsoever.” (Id.) In either of these events, the security agreement empowers Ogden to “declare all Obligations of each Debtor to Secured Party immediately due and payable without demand or notice of any kind.” (Id.) If a default occurs, Ogden has “the remedies of a secured party under the Uniform Commercial Code of Connecticut and any and all rights and remedies available to it under any other applicable law,” and Bolin must, if Ogden so requests, “assemble the Collateral and made [sic] it available to Secured Party at a convenient place acceptable to Secured party.” (Id.)

Finally, section 9 of the security agreement states that “[i]n connection with the exercise of any rights available upon default, Secured Party or its agent may enter upon the premises of Debtor and Debtor expressly waives any and all claims for damage, trespass, or other injury occasioned thereby.” (Id.) As the secured creditor, Ogden is only obligated to give reasonable notice if she were to sell or otherwise dispose of the collateral she repossessed. (Id.) The security agreement imposed no duty on Ogden to notify Bolin before repossessing collateral.

In July 2002, shortly after Ogden made her loan to Bolin, Ogden, Ulanoff, and Nick Dubiago, Ogden’s personal accountant, met to discuss the possibility of Ogden joining Bolin as a principal. Dubiago informed Ulanoff and Ogden that he could not recommend whether Ogden should join without a better understanding of the store’s financial shape, which was not possible at the time of the meeting because Bolin’s financial records were incomplete and disorganized. On Ogden’s advice, Ulanoff retained Dubiago to analyze Bo-lin’s inventory and sales records, as well as the store’s bank accounts. Dubiago referred Peter Santiago, a bookkeeper, to Ulanoff to organize Bolin’s financial records. Ulanoff hired Santiago, and he worked part-time for Bolin from August 2002 until February 2003. Principally, Santiago was responsible for ordering Bo-lin’s existing records, installing an electronic bookkeeping system, and entering all of the store’s records from Bolin’s opening to the then-present time into that newly installed bookkeeping system.

The electronic bookkeeping system that Dubiago installed and updated was different than the electronic jewelry inventory system that Bolin had installed when the store first opened. The inventory system accounted for what jewels were in the store, what jewels had been sold or loaned out of the store, and whether the jewelry in the store was owned by Bolin or was held on consignment. It also included price information: namely, the jewelry’s at-cost value and its desired retail value. 5 By contrast, the bookkeeping system that Santiago installed accounted for moneys Bolin received and had in its bank accounts, as well as moneys the store owed to others. Ideally, the data in the inventory and bookkeeping systems should correspond to each other, and the inventory held in the store should be reflected in Bolin’s accounting books. But that did not occur when Santiago finished installing and updating Bolin’s bookkeeping program.

*741 Santiago faced problems collecting and entering data about Bolin’s past cash sales from the store’s receipts and account records. Although credit card transactions were well recorded, the cash transactions for jewelry often lacked documentation and did not correspond to credited and debited payments in the store’s electronic inventory system. Santiago entered the data into his bookkeeping system by assuming that cash deposits in Bolin’s accounts were payments from jewelry sales, and not loans. In the course of his investigation of Bolin’s financial records, Santiago found many records that were unmarked or unexplained; those numbers were collected in a “garbage account” that Santiago created in the course of reviewing and entering the store’s data. By the end of his accounting for 2003, there was well over $1 million in credited and debited entries in this garbage account. (Ex. 111.) Santiago also observed that the credited sales totals he identified were greater than the sales totals identified in the electronic inventory system that Bolin had reported in its tax returns for 2000 and 2001; in other words, Bohn’s accounting records revealed more cash coming into the store than did Bohn’s electronic inventory system. Finally, he noted that Bohn regularly bounced checks and had liquidity problems.

In order to address the inconsistencies between Bohn’s accounting and inventory data, Santiago recommended that Bohn take a physical inventory of its jewelry. In a fax sent to Ulanoff in November 2002, Santiago said that his bookkeeping would be “meaningless” without taking physical stock of the items in Bohn’s possession. (Ex. 115.) Santiago was never able to perform such an inventory, however. Ula-noff never made time for him to physically sort through the store’s jewelry. Although she never gave Santiago a reason for why she did not want Bohn’s jewelry to be properly inventoried, Santiago testified that she seemed reluctant to have a physical inventory taken.

After Santiago completed Bohn’s electronic inventory system, Dubiago reviewed Bohn’s financial records and produced Bo-hn’s sales tax returns. Santiago informed Dubiago that the quality of the data was suspect, but was sufficiently credible to serve as the basis for the store’s tax returns. In filing the tax returns, Dubiago, like Santiago, noticed glaring inconsistencies between Bohn’s electronic inventory system and the store’s accounting books. For instance, for the 2003 fiscal year, Du-biago found that there was $1,321,358.45 of debited store inventory in Bohn’s electronic inventory system, but only $721,236.98 for debited entries in the company’s accounting records. (Ex. 110.) Dubiago had to adjust the sales tax return by more than $600,000 in order to bridge this gap in the amount of the store’s claimed spending for the year. (Id.)

By producing Bohn’s tax returns, Dubia-go learned that the store was failing. On that basis, Dubiago recommended that Ogden reject Ulanoffis offer of membership in Bohn. Ogden took her accountant’s advice. She never joined Bohn as a partner or manager, and her name was never added to the company’s operating agreement. Furthermore, Ogden never exercised control over the store’s business — she never set employee schedules, approved the buying or selling of merchandise, or authorized payments to vendors or contractors. Rather, she participated in Bohn exclusively as a creditor.

Ogden did perform several informal tasks for Bohn, however. She made recommendations to Ulanoff about how to improve the store. For instance, Ogden suggested Dubiago as an accountant to Ulanoff, and recommended other service providers, such as window washers, for Bohn. There is no evidence, however, that *742 Ogden did anything more than refer these people and service providers to Bolin; she did not hire them on Bolin’s behalf or pay them to perform their work. Ogden also advised Ulanoff to renovate and redecorate the store to make it more elegant and appealing to wealthier clientele. Ulanoff agreed with Ogden and renovated the store accordingly in 2003; the store was shut down for six weeks during that time. But Ogden did not hire or contract with anyone on Bolin’s behalf or pay for the renovations and redecorating. The evidence only shows that she provided advice to Ulanoff about those store improvements.

Ogden sometimes worked Bolin’s sales floor, greeting and assisting customers. There is nothing indicating that she was ever paid for those services. Ogden also helped Ulanoff recruit new customers for the store, primarily by accompanying Ula-noff to offsite jewelry showings, some as far away as Nantucket, Massachusetts, and Fisher’s Island, New York. In several cases, Ogden organized jewelry shows for Bolin — in flyers for several of the events, she is billed as the show’s promoter (ex. 1007) — and for at least one jewelry show, Ulanoff was not present with Ogden. Nonetheless, all of the decisions whether and when to hold a show were left to Ulanoff. Ogden never had authority or approval to take jewelry or host an event for Bolin without first obtaining Ulanoffs permission.

Finally, Ogden referred her friend, Shannon Howey, to Ulanoff as a potential employee for the store. Ulanoff hired Howey between July 2002 and January 2003 — -Howey never testified and there are conflicting dates regarding her hiring — to be responsible for managing the store’s inventory. Her job was to keep track of what items were for sale in the store, what items had been sold or were loaned out on consignment, and , which items in Bolin’s possession were owned, on consignment, or in the shop for repairs. Bolin paid Howey $50,000 in annual salary.

Ulanoff promoted Howey to store manager in January 2004. Her responsibilities expanded from managing Bolin’s inventory to handling other tasks, such as overseeing the store during working hours and maintaining contact with the store’s vendors. Despite her promotion, she was not allowed to purchase merchandise for the store, agree to sell a piece of jewelry on consignment, or permit pieces of jewelry to be loaned out of the store or be returned to vendors. Only Ulanoff could decide those matters. When the store closed for extended periods — e.g., for renovations or vacation' — Howey was responsible for sending consignment items back to vendors, but acted only at the direction of Ulanoff.

c. Bolin’s pawning activity

Throughout its existence, Bolin had major problems with its cash flow. In order to increase Bolin’s liquidity and free enough cash for payments owed to jewelers, the store’s short-term expenses, and even their own compensation, Ulanoff and Citrin frequently pawned the store’s jewelry, including its pieces held on consignment. Ulanoff believed that pawning inventory was a common business practice in the jewelry business. Furthermore, she claims that a number of her vendors were aware that she pawned jewelry in Bolin’s possession in order to increase the store’s cash flow, and that those vendors acquiesced in this practice. There is no other evidence to support those contentions, however. Bolin’s pawning tended to increase in the summer, when sales were at their lowest; spikes in pawning activity also correlated with the periods when Ula-noff was unable to borrow funds from other sources.

*743 By July 2004, Bolin was pawning consigned jewelry two to three times every week. Their pawnbrokers of ,choice were the Provident Loan Society (“Provident”), 48th Street Pawnbrokers (“48th Street”), and G. Modell, Incorporated (“Modell”), of all of which were based in New York City. Each time Ulanoff and Citrin pawned a piece of jewelry, they received a receipt that stated the item that had been pawned, the terms and conditions of its redemption, and the amount of time that Bolin had to redeem the item before the pawnbroker auctioned it. Those receipts are referred to as “pawn tickets.” Shannon Howey was responsible for tracking and accounting for the jewels that were pawned and the cash that Bolin received as loans from pawnbrokers. Although Howey never testified at trial, the testimony of others, such as Nick Dubiago and Peter Santiago, suggests that Howey designated the cash loans as payments in the store’s accounts, and thus treated the pawned jewelry as if it had been sold and not put up as collateral for loans. But Howey did not remove the pawned jewelry from the store’s internal inventory system; according to Ulanoff, the inventory system did not include a field that permitted Howey to designate whether an item belonging to Bolin had been lent out of the store. That accounting explains why the credited payments in Santiago’s bookkeeping system reflected greater payments than represented in the inventory system — in Bolin’s accounting, the loans were treated as cash payments for pieces, while the electronic inventory system continued to treat the items as if they had not been sold but were in Bolin’s possession. As a result, Bolin’s accounts overstated the store’s sales and understated its liabilities, and Bolin’s inventories of the jewels in its possession were inaccurate.

The total amount of pawn debt that Bolin incurred is not known precisely. On Bolin’s bankruptcy filings, for instance, the secured loans held by Provident, 48th Street, and Modell are not reported. By the time of Bolin’s closing at the end of July 2004, Andrea Ulanoff estimates that she had pawned about $180,000 in jewels. John Kramer, Ogden’s valuation expert, calculated that Ulanoff owed $312,703.84 in pawn debt — $279,157.00 in principal and $56,178.60 in interest — on the basis of the pawn records that were recovered after Bolin’s closing and bankruptcy filing. (Ex. 1025.)

Sally Ogden eventually learned of Bo-lin’s pawning and met with her attorney, Brian O’Connor, on March 30, 2004, to discuss its implications for her. At that meeting, Ogden told O’Connor that she had lent $425,000 to Bolin; she did not remember whether she had a security agreement protecting any of the money she loaned. O’Connor offered to conduct a UCC search for her to see whether any note or agreement had been filed with the Connecticut Secretary of State securing her loan. O’Connor and Ogden also discussed the legality of Ulanoffs alleged pawning — O’Connor said that it was likely inappropriate for Ulanoff to pawn pieces that the store did not own, but also said that he had not researched the subject. He did not counsel Ogden to demand repayment of her loan or take any self-help steps. O’Connor submitted a UCC search request after the meeting and received the results the following day, March 31, 2004. (Ex. 148.) He found that Ogden and Sylvia Ulanoff both had made secured loans to Bolin. O’Connor did not speak with Ogden again or reveal the results of the UCC search until July 28, 2004.

2. Bolin’s dosing

On Friday, July 23, 2004, Andrea Ula-noff and Noah Citrin flew to Italy for a two-week vacation and to look for jewelry to buy for Bolin. That day, prior to leaving for Italy, Ulanoff was busy at the store *744 contacting customers and vendors to pick up jewelry, and paying bills that were outstanding or coming due. Also in the store were Shannon Howey and Kathleen Raby. Sometime that day, a vendor entered the store demanding payment on an outstanding bill for a piece of jewelry he sold Bolin; the store owed half of the item’s wholesale price. The vendor was heated and verbally aggressive with Bo-lin’s staff. Although Ulanoff tried to assure the vendor that the remaining balance would be paid shortly, she was unable to assuage the vendor. Eventually, the Greenwich police were called and the vendor was escorted from the store. Howey and Raby were disturbed by the event; Ulanoff, however, treated it as a normal consequence of doing business in the jewelry industry.

While Ulanoff was in Italy, she maintained contact with the store. On Wednesday, July 28, 2004, she sent a fax from her hotel to Bolin requesting that Howey handle several financial matters' — namely, transferring funds between Bolin’s accounts, stopping payment on several checks, and writing a check to pay the store’s rent. Ulanoff also told Howey to return pieces of jewelry that Bolin borrowed for a jewelry showing that the store held in Nantucket before Ulanoff left for Italy. Howey never transferred the funds or paid the rent as Ulanoff asked. When Ulanoff and Citrin left for vacation, Bolin did not have any cash on hand to pay its bills; a Bolin account with the Connecticut Community Bank was $10,000 overdrawn. (Ex. 465.)

On Wednesday, July 28, Ogden came to Bolin to collect jeweled clips that were being repaired by Citrin. Howey let her in and permitted her to search the store for the clips; Howey also looked for the clips but did not find them. Howey told Ogden that they may have fallen in the store’s “black hole,” a euphemism for being pawned. Howey then told Ogden about Ulanoffs pawning, the vendors who were calling about late payments, and the store’s empty and overdrawn bank accounts. Ogden, who was already aware of Bolin’s pawning habit, believed that Bolin’s demise was imminent and became worried not only for her clips but for the security of her loan. At about 3:15 that afternoon, Ogden called Brian O’Connor at his office out of concern that Bolin was failing and that her loans were unprotected. O’Con-nor told Ogden that she was a secured creditor and had rights in the collateral, but cautioned that he had not reviewed her file recently and did not remember what her exact rights were. Following her call with O’Connor, Ogden asked Howey to pack the Bolin-owned jewelry. At Ogden’s direction, Howey also went about creating an inventory of all of the store-owned jewelry she was packing. Ogden then left the store.

The next morning, July 29, Ogden returned to look for her jeweled clips again. When she arrived, Howey was still packing up the owned inventory as Ogden had requested before leaving the night before. In the course of her search, Ogden claims that she found the collection of Ulanoffs and Citrin’s pawn tickets in a folder or in an unlocked part of Andrea Ulanoffs desk. Ogden then says that she asked Howey about the pawn tickets, and Howey told her that some were tickets for consigned items that Ulanoff and Citrin had hocked. Ulanoff testified that this likely happened differently — she claims that the pawn tickets were actually locked in Howey’s file cabinet, and that Howey must have given Ogden the pawn tickets. Ulanoffs testimony is more persuasive. It is unlikely that Ulanoff would leave the pawn tickets, evidence of illegal conduct, in a place easily accessible to others. Moreover, Ogden already knew about the pawn tickets and had previously discussed them with How- *745 ey. It is more likely that Howey simply gave the tickets to Ogden than that Ogden innocently stumbled over them in her search for her mother’s jewelry. The evidence shows, generally, that Ogden and Howey acted in concert.

As early as July 27, 2004, Howey had begun contacting vendors whose jewels she suspected had been pawned; Ogden became deeply involved in that activity as early as July 28. Howey made some records of the items that they returned to vendors between July 27 and July 30, 2008, none of which were authorized by Ulanoff. (Ex. 1A.) For instance, inventory records introduced at trial show consigned pieces that were returned to Emsaru USA Corp. (“Emsaru”), a Bolin vendor, on July 30. (Ex. 40.) Records of Bolin’s outgoing phone calls confirm that vendors were being contacted from the store beginning on July 27. (Ex. 1020.) One phone call, made on July 30, was to John Shaban, an attorney for Phipp’s Jewelers, a vendor that sold and consigned jewelry to Bolin. (Ex. 1A) As of July 30, Ulanoff did not know Shaban, and his phone number would not have been available in the store’s records; Howey or Ogden learned of Shaban independently of Ulanoff. Bolin vendors were contacted during this period from other phone lines, too. Records from a cell phone owned by Denny Ogden, Sally Ogden’s then-husband, show that phone calls were made to Bolin vendors, such as Carol Goldstein, Perle Di Piranesi, and Emsaru, on July 29 and 30; those phone calls were made by Ogden. (Ex. 418.) Vendors who were contacted from Bolin’s office line or Ogden’s cell phone also left messages on Bolin’s answering machine on Friday, July 30. Ulanoff heard those messages after she returned to the store and described them as sounding emotional, desperate, and shocked. 6

At about 5:30 p.m. on July 29, 2004, after Ogden had discovered the folder of Bolin’s pawn tickets, Ogden and Howey went to the Greenwich Police Department to report the pawn tickets. They visited the police department because Ogden believed, on the basis of her prior conversation with her attorney, that Bolin’s pawning constituted a crime. At the Greenwich Police Department, Ogden and Howey met with Detective Harold Munrow and informed him that Ulanoff and Citrin had been pawning jewels consigned to Bolin. Howey was hysterical during the meeting, and Ogden did much of the talking. Ogden told Munrow that she was a large investor in Bolin and that she had learned of possible criminal activity taking place there — namely, pawning of unowned jewelry. She provided Munrow with the folder containing the pawn tickets, invoices from jewelers for consigned pieces and from customers for jewelry repairs, and photographs of some of the consigned jewelry that Ulanoff and Citrin allegedly pawned. Munrow photocopied all of those documents. Ogden also told Munrow that she had left her jeweled clips with Bolin and that they had not been returned for more than a year; she expressed concern that Ulanoff pawned them. Ogden never informed Munrow that she and Howey had begun returning jewelry to vendors and were planning to continue doing so.

Munrow did not instruct Ogden or How-ey to take any jewels or return anything to vendors. Nor did he advise Howey about quitting her job or about Ogden’s rights to repossess collateral under the terms of her security agreement. Munrow did tell Ogden and Howey not to give the pawn tick *746 ets to anyone else, and advised Ogden that any jewelry vendors should contact him with regards to obtaining their consigned items. He and the Greenwich Police Department also began contacting vendors themselves, and he notified Bolin’s pawnbrokers to freeze the Bolin jewelry in then-possession. Howey returned to the store that night, and Ogden went home with the folder of pawn tickets. Howey made more phone calls that night from the store between 7 and 8:30 p.m., including to Ogden’s cell phone and to vendors.

On Friday, July 30, a number of vendors and customers came to Bolin to reclaim their jewelry. Vendors also began coming to the Greenwich Police Department on Friday, July 30. Some of those vendors had been contacted by Howey, Ogden, or Munrow; others found out about Bolin’s pawning activity by word of mouth. Joel Liffman was one such customer who came to Bolin and the Greenwich Police Department that day. Ulanoff and Liffman had previously visited a jewelry vendor in New York. On the basis of that visit, he deposited money with Ulanoff to acquire about $50,000 of jewelry on his behalf; Liffman agreed to pay a premium to Ulanoff for her service. Liffman received a phone call on Friday morning about allegations that Bolin had been pawning jewelry and that Ulanoff had disappeared. He visited the store at noon to make sure that the jewelry he had arranged for Ulanoff to buy had not been pawned. He was in Bolin on July 30 for half an hour.

When Liffman arrived at the store, he found Howey and Ogden as well as an unidentified person inspecting jewelry. He asked Howey and Ogden how many other concerned vendors and customers they had spoken with that afternoon; they replied that they had only spoken with one — namely, the person who was in the store when Liffman arrived. Liffman saw that many pieces of jewelry were out of their cases and were spread out on trays atop the store’s counters. Liffman became concerned that his jewelry was among the items that were out of their cases. Liff-man asked Howey and Ogden for his records relating to his purchases, which Ogden gave him. After discovering that his jewels were missing, Liffman filed a complaint with the Greenwich Police Department. The Greenwich Police would later inform him, after its investigation, that his jewelry was located in a New York pawn shop. Sometime later in the day, an officer from the Greenwich Police Department arrived at Bolin. But when Liffman had visited the store, there was no officer on the scene.

Brian O’Connor spoke with Ogden on July 30 to follow up on their discussion of the security of Ogden’s loan to Bolin. O’Connor reported to Ogden what he found in conducting his UCC search and said that he had located a promissory note entitling her to collateral in the event of default. The promissory note he uncovered was for $500,000, and was not the correct, amended $270,000 note. He also advised her that the promissory note defined default as Bolin’s failure to pay Ogden within five days of receiving notice that payment was due. O’Connor told Ogden that only after the five days had expired could she repossess collateral in order to secure her loan.

O’Connor counseled Ogden to be careful to take actions consistent with being Bo-lin’s creditor, and not the store’s manager or owner; furthermore, he advised Ogden not to remove anything from the store until the five-day waiting period had expired. O’Connor did not tell Ogden anything about returning items to vendors or creditors. He also said that if she repossessed any items from the store, she should take an independent inventory with a witness present. Neither O’Connor nor *747 Ogden knew of Sylvia Ulanoffs loan to Bolin or about any other loans that were of a higher priority than Ogden’s. Before their phone call ended, O’Connor agreed to write a letter on Ogden’s behalf demanding that Ulanoff repay Ogden her loan. O’Connor wrote and faxed the letter to Bolin that same day.

At the end of the day of July 30, Howey and Ogden arranged the jewelry in the store that had not been claimed by or returned to vendors. Ogden asked Howey to separate the store-owned jewelry from the pieces Bolin held on consignment. Howey placed the jewelry she identified as store-owned in thirteen envelopes and inventoried them; together, the jewelry was worth $607,645.60 at cost. (Ex. 1002.) Neither Howey nor Ogden photographed this jewelry or took other steps to document it. Ogden also took the store’s two computers and several books from the store’s shelves. Ogden took the jewels and Bolin property to her Greenwich home and placed them in her bedroom, where she had left the pawn tickets the night before. She placed as many jewels as she could in her personal safe. The only people who had access to her room from the time she placed the jewels there and returned them were she and her husband. There were contractors painting her house during this period, however, and it is possible that one or more of these workers entered her bedroom even though it was not being painted. No evidence was introduced that any painters did, in fact, enter the bedroom or come into contact with the Bolin property stored there.

Before leaving on Friday evening, How-ey hung a typed note from Bolin’s front door reading: “TO OUR CUSTOMERS / BOLIN IS CLOSING IT’S [sic] DOORS / FOR INFORMATION CALL [redacted Ulanoff cell phone number] OR [redacted Ulanoff home phone number]. / WE ARE SORRY FOR ANY / INCONVENICE [sic].” (Ex. 73.) Ogden also left the demand letter that O’Connor had signed and faxed. Howey closed and locked the store, which, after her and Ogden’s efforts, had been mostly emptied.

While Howey and Ogden were emptying Bolin’s inventory, Ulanoffs father passed away on July 28 in Florida. Ulanoff was notified of this while in Italy. With How-ey’s assistance, Ulanoff scheduled a flight to Florida for the next day, July 29; because of complications in the travel arrangements, she did not arrive in Florida until Friday, July 30. On the morning of July 30, Howey called Ulanoffs cell phone. Howey first told Ulanoff that Sally Ogden had come to the store looking for her jeweled clips. Ulanoff told Howey that the clips were in the basement safe, where Noah Citrin had left them; she then told Howey to return the clips to Ogden. How-ey then informed Ulanoff that she was quitting her position as Bolin’s manager. Distraught over her father’s death, Ulanoff was unable to talk Howey out of her decision; instead, she accepted Howey’s resignation and told her to close the store for the rest of the day. At 6:45 p.m. that night, Howey sent a fax to Greenwich Bank & Trust, where Bolin held an account, informing the bank that she had quit her job at Bolin and asking to be removed as a signatory to Bolin’s accounts. (Ex. 39.)

Ulanoff returned to Greenwich following her father’s funeral on the night of Saturday, July 31, 2004. When she returned, she had a message on her cell phone from Ogden demanding payment of $400,000 and threatening litigation if she did not receive the payment immediately. Ulanoff visited Bolin on Sunday, August 1, 2004, the morning after she returned to Greenwich. When she arrived at Bolin, she found the out-of-business sign tacked to the front door. Inside the store, Ulanoff *748 found papers strewn about, files open, the store’s computers and several books gone, and little to no jewelry in the cases or safes. She also found the demand letter written by Brian O’Connor. The letter stated that the principal Ulanoff owed to Ogden was $425,000 and that if Ulanoff did not pay within five days, Ogden would “take all necessary action to enforce collection on [the] note.” (Ex. 429A.)

After visiting the store, Ulanoff met with her attorney, Phillip Russell, and brought Ogden’s demand letter with her. Russell contacted O’Connor and told him that Ulanoff would permit Ogden to take property from the store as collateral for her loan. On August 5, 2004, Russell faxed a letter to O’Connor granting Ula-noffs permission to Ogden to enter Bolin and “take whatever steps she deems necessary to preserve” any remaining assets. (Ex. 157.) During this time, vendors continued visiting Bolin and attempting to find their jewels. John Shaban, an attorney representing Phipp’s Jewelers, reported lost jewelry to the Greenwich Police Department on August 8, 2004, after being tipped off about Bolin’s pawning by Ogden.

On the eve of August 1, 2004, Ulanoff, exhausted and grieving, attempted suicide and was hospitalized. She was not released until August 10, 2004. Bolin remained closed throughout this period. It would never reopen.

3. Aftermath of Bolin’s dosing

On August 17, 2004, Ulanoff met with Nick Dubiago, Bolin’s retained accountant. During the meeting, Ulanoff explained the events that had transpired during the week of July 26, 2004 and that Ogden and Howey had taken Bolin’s jewelry and put the store out of business. She also admitted to Dubiago that she had been pawning jewelry to pay for Bolin’s liabilities and expenses, including her own compensation. Dubiago told her that had he known that, he would have included the pawning as liabilities on Bolin’s tax returns. Ulanoff also told Dubiago that her car had recently been repossessed and that she was worried about being arrested for the pawning. 7 After meeting with Ulanoff, Dubiago spoke with Ogden by phone. Ogden confirmed that she had taken jewelry from Bolin but insisted that she had returned all of the consigned jewelry to the vendors. She also said that the store-owned jewelry in her possession was worth only about $200,000. Ogden also told Dubiago that she had taken the jewelry and closed the store based on O’Connor’s advice.

Bolin filed for Chapter 7 bankruptcy on August 20, 2004. Michael Daly was appointed the bankruptcy trustee. Daly visited the locked Bolin store with Detective Munrow on September 9, 2004 and found the store-closing sign still hanging from the front door. Inside, Daly discovered a store that was largely empty and without inventory for sale; Bolin’s safes held little other than loose stones and jewelry that was unfinished or being repaired. Daly did not find Bolin’s computers or books.

Daly spoke with Ulanoff and found out that Ogden had taken much of Bolin’s owned jewelry. Daly then contacted Brian O’Connor to retrieve Bolin’s jewelry. That was the first notice O’Connor received of Ogden’s repossession of collateral from Bolin. Through O’Connor, Daly got in contact with Ogden and demanded that she return Bolin’s computers to him so that he could access the store’s electronic inventory system and assess the extent of Bolin’s inventory, what was missing, and what could be liquidated. Ogden complied *749 and brought Daly the two computers she took from the store on July 30, 2004. Searching through the inventory system with Andrea Ulanoff, Daly found 192 items of jewelry that were returned to vendors on July 28, 29, and 30, totaling $691,091.80 on an at-cost basis.

Ogden returned the jewelry she had taken to Daly in February or March of 2005, after Ogden had changed her attorney and her new counsel reached a stipulation with Daly about the items that Ogden had in her possession. Working with' Detective Munrow, Daly photographed and labeled all of the jewelry that Ogden provided and then compared the pieces to the records in Bolin’s electronic inventory system. He found that there were pieces of Bolin-owned jewelry still missing after Ogden returned all of the jewels; similarly, Daly’s search revealed that Ogden had taken items of jewelry that were not included in Bolin’s records of store-owned inventory.

Daly knew that Bolin jewelry had been pawned and that pieces were still waiting to be redeemed. But it was difficult to determine what pieces had been pawned— pawned jewelry was listed in the store’s inventory as if it were still in Bolin’s possession. The bankruptcy estate, moreover, had no funds to redeem the jewelry it confirmed had been pawned, despite efforts that Daly took to recover $160,000 in accounts receivable due to Bolin. The jewelry that Ulanoff and Citrin pawned, therefore, remained in the possession of the pawnbrokers and could not be secured and liquidated by the bankruptcy trustee.

After securing the owned inventory that Ogden returned, Daly took steps to liquidate the remaining jewels that Bolin owned. First, he offered the jewelry for appraisal and sale. The first appraisal he received valued the entire collection at $25,000, which Daly rejected. Daly next attempted to consign the jewelry, which proved more successful. Using a jewelry wholesaler whom he knew personally, Daly was able to liquidate some of Bolin’s jewelry for approximately $88,000, although Daly received only about $66,000 after paying the wholesaler’s commission. Daly estimates that the wholesaler has another $50,000 worth of jewelry to be sold on consignment. For the Bolin jewelry that the wholesaler refused to sell on consignment, Daly found a retailer who agreed to buy or sell on consignment the remaining items for about $24,000.

Daly never considered selling the business as a whole instead of the individual jewelry that Bolin owned. It was his opinion that Bolin did not own enough jewelry to be a credible jewelry retailer in Greenwich, and lacked much goodwill after the store’s messy demise. Daly characterized the process of liquidating Bolin as “total chaos.” The property that could be sold was disorganized and Bolin’s records were convoluted and incomplete. Furthermore, the value of the jewelry had sunk considerably because of the delay between the bankruptcy and the eventual liquidation. Jewelry buyers, in Daly’s view, understood that the bankruptcy estate wa