SAN JOSE -- A jury has awarded $10 million to two former Silicon Valley investors who claimed they were cheated after their former fund -- launched by 49ers legends -- was seized by a creditor.
Jurors in the three-week trial ruled that Capital Dynamics, a Swiss investment house that bought the funds from creditor Silicon Valley Bank, acted with "malice, oppression or fraud" in voiding the contracts of Duran Curis and Darren Wong, who had managed more than $2 billion in funds for HRJ Capital before the firm's 2008 collapse.
While the award was about half of what Curis and Wong had been seeking, Capital Dynamics vowed to appeal, saying the judge and jury misunderstood the law.
"We vehemently disagree with the verdict," Thomas Kubr, the firm's founder and executive chairman, told this newspaper from Zurich.
Kubr said Santa Clara County Superior Court Judge James Kleinberg was wrong in November when he ruled that Capital Dynamics was bound to honor the contracts Curis and Wong had signed with HRJ. Those pacts promised both men a portion of the management fees and other income generated by HRJ's investments in venture capital firms, real estate trusts and hedge funds.
Former 49ers Harris Barton and Ronnie Lott began raising the investment funds from fellow star athletes during the dot-com era; Niners legend Joe Montana later joined up, although he'd left the firm before its failure.
HRJ got into trouble thanks to its strategy of "warehousing" investments, which means making financial commitments before yet having the money in hand. The firm borrowed millions from Silicon Valley Bank to make good on those promises, but that approach imploded when the global credit crunch left HRJ unable to raise enough from new investors to repay the bank.
Attorneys for Capital Dynamics had argued during the trial that Wong and Curis were responsible for the risky scheme and were to blame for HRJ's collapse, although Barton on the stand defended his former employees.
After Silicon Valley Bank seized control of HRJ's funds in December 2008, Wong and Curis were pushed out for allegedly planning to force the firm into involuntary bankruptcy so they could recover some of what was owed to them. Both men had worked for months without full pay as HRJ teetered toward bankruptcy.
Capital Dynamics argued unsuccessfully that the contracts Wong and Curis had signed with HRJ Capital became void when the men left the firm and HRJ ceased to exist.
"The notion that my clients did anything wrong seems absurd," Michael Baumann, the attorney for Curis and Wong, said Thursday.
He said the two men -- who now work for investment firms based in Santa Monica and Beijing, respectively -- "are gratified that their claims have been vindicated."
Vindication was also on the minds of Barton and Lott.
Barton, a former All-Pro offensive lineman, said via email that the trial proved he and Lott had worked to do right both by the plaintiffs and the investors in the funds as they were being taken over by Silicon Valley Bank.
"As you can imagine, this is a huge relief for me personally," Barton added. "I think HRJ put together some exceptional investment portfolios, and I hope that the funds continue to do well."
The funds' future performance is very much a key to how much money Wong and Curis might ultimately reap. Judge Patricia Lucas is expected to sit down with both sets of attorneys in coming weeks to hammer out how much of the funds' profits -- if any -- the plaintiffs will be entitled to in the future.
Lucas also will decide how much the two men are due in attorney fees. All told, people familiar with the case said the final judgment could top $13 million. Any amount that withstands appeal ultimately will be paid out of the HRJ funds Capital Dynamics now manages.
Kubr -- whose firm oversees a $17 billion global portfolio -- said he's confident an appeals court will agree Capital Dynamics was protecting HRJ's investors when it concluded the Wong and Curis contracts were no longer valid.
"If these guys want to accuse us of fraud for not paying a claim that had no legal basis," he said, "well, that was the right thing to do."
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.