April 17, 2006
On April 13, 2006, in a unanimous decision by a three-judge panel, the Superior Court of New Jersey, Appellate Division, affirmed three separate opinions of the Hon. Kenneth C. MacKenzie, Presiding Chancery Judge of the Superior Court of New Jersey, Morris County, holding that New Jersey investment banker Alfred C. Eckert III had engaged in “bad faith” and “willful misconduct” in his dealings with New Jersey resident Mikael Salovaara and the investment partnerships they established. The Appellate Court affirmed Judge MacKenzie’s decision barring Eckert from receiving $2.7 million in indemnification due to Eckert ’s bad faith and willful misconduct, thus limiting Mr. Eckert to receiving no more than $360,336.51 of the over $3 million he paid in legal expenses. Members Joseph L. Buckley and Richard H. Epstein and associate Jonathan S. Jemison of Newark’s Sills Cummis Epstein & Gross P.C. represent Mr. Salovaara. Eckert is represented by Michael K. Furey of Morristown’s Riker Danzig Scherer Hyland Perretti.
In late 1991, Eckert and Salovaara withdrew as partners from Goldman Sachs to form their own investment entity, Greycliff Partners, in Morristown, through which they attracted over $200 million in investments. Mr. Eckert abandoned Greycliff Partners and their funds to form a competing fund, then known as Greenwich Street Capital Partners, an act that the New Jersey Superior Court found to be “unprecedented (and unacceptable) in the financial business.” See Salovaara v. Eckert, 1998 WL 34075425 * 13 (N.J. Ch. Div. 1998). Salovaara was ultimately awarded $5 million dollars for Eckert’s wrongful conduct, which was affirmed on appeal. Id. On September 24, 2002, Judge MacKenzie barred Eckert from indemnification for any portion of the judgment, holding in Salovaara’s favor that Eckert had acted in “bad faith” and engaged in “willful misconduct.” See Salovaara v. Eckert, 2002 WL 32396171 *5 (N.J. Ch. Div. 2002). Today, Eckert is the CEO of GSC Partners, a Florham Park, New Jersey investment manager of alternative assets that claims to manage billions of dollars in assets.
Eckert spent $3 million in legal fees in his unsuccessful defense of the suit by Salovaara, and sought to have those fees indemnified by partnerships owned equally by himself and Salovaara. On May 25, 2004 the Court issued an “interim decision” rejecting Eckert’s claim that he was entitled to be indemnified for any portion of his $1 million in legal fees incurred on his unsuccessful appeal, thus reducing Eckert’s claim to a portion of the remaining $2 million in fees. After the interim decision, Mr. Eckert still claimed in excess of $1 million in indemnification, a position that the Court rejected in an October 18, 2004 decision.
Sills Cummis Member Joseph L. Buckley said, “The Appellate Court’s decision correctly recognized that a fund manager who acts in bad faith and engages in willful misconduct, like Mr. Eckert, should not be allowed to profit at the expense of his victim.”