A unanimous panel of the Appellate Division, First Department, yesterday ordered an evidentiary hearing into whether hedge fund manager Brandon Fradd forged a document in a suit filed by a former member of the fund, James Melcher, who alleges he was cheated out of compensation. The opinion, signed by Justice Rosalyn Richter (See Profile), also reinstated a claim for breach of contract, which a jury found equitably estopped. Melcher’s attorney, Jeffrey Jannuzzo, said the newly reinstated claim could be worth $6 million, on top of $500,000 Melcher already won on a different claim in the jury trial.

Melcher alleges that Fradd forged an amendment to operating agreement of the hedge fund, Apollo Medical Fund Management, reducing Melcher’s compensation, and then claimed to have accidentally burned the amendment so that it could not be analyzed by forensic experts. Apollo withdrew its claims about the amendment before trial, and the jury considered only whether the operating agreement had been amended orally.

Melcher asked that, as a penalty for the alleged forgery, Apollo’s pleadings be stricken and default judgment entered from the beginning of the case. Richter said that because Melcher had won anyway, striking the pleadings was not appropriate. Nonetheless, the panel ordered an evidentiary hearing on the forgery issue. “Defendants’ alleged misconduct should not be immune from inquiry merely because they made a last-minute decision not to rely upon the allegedly fabricated and spoliated document,” wrote Richter in Melcher v. Apollo Medical Fund Management, 604047/03. She was joined by Justices Luis Gonzalez (See Profile), John Sweeny (See Profile), Karla Moskowitz (See Profile) and Dianne Renwick (See Profile).

Melcher filed a separate fraud lawsuit against Apollo and Fradd’s counsel, Greenberg Traurig and its partner Leslie Corwin, for allegedly aiding the forgery. The First Department dismissed that case as time-barred in a 3-2 opinion earlier this month (NYLJ, Jan. 18). Jannuzzo said at the time he would appeal.