Fleet National Bank v. Anchor Media Television, Inc.

January 27, 1995 UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 94-1490

FLEET NATIONAL BANK,
Plaintiff,

v.

ANCHOR MEDIA TELEVISION, INC.,
AND KOVR OF DELAWARE, INC.,
Defendants, Appellants.

NARRAGANSETT CAPITAL, INC.,
AND EDWIN PFEIFFER,
Defendants, Appellees.

ERRATA SHEET
ERRATA SHEET

The opinion of this court issued on January 26, 1995, is
amended as follows:

The second sentence of the first full paragraph on page 25
should be deleted, and the following two sentences should be
inserted in its place:

And the only other evidence of a representation
regarding commercialization levels at KOVR introduced
by Anchor at the second trial was the so-called
July/August 1988 day-part summary, a document that
summarized commercialization levels and commercial-
generated income by day and time (e.g., 7/25, 8:00-9:00
p.m.) for July and August 1988. The July/August 1988
day-part summary allegedly misrepresented that KOVR was
undercommercialized in July and August 1988 and

understated commercial-generated income during this
same period.

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 94-1490

FLEET NATIONAL BANK,

Plaintiff,

v.

ANCHOR MEDIA TELEVISION, INC.,
AND KOVR OF DELAWARE, INC.,

Defendants, Appellants.

NARRAGANSETT CAPITAL, INC.,
AND EDWIN PFEIFFER,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Francis J. Boyle, Senior U.S. District Judge]

Before
Cyr, Circuit Judge,

Bownes, Senior Circuit Judge,

and Stahl, Circuit Judge.

Stephen M. Sacks, with whom Tim Atkeson, Arnold & Porter, Anthony

F. Muri, and Goldenberg & Muri were on brief for appellants.

Charles I. Poret, with whom Richard M. Sharfman, Mark J. Kenney,

A. Lauriston Parks, Sharfman, Shanman, Poret & Siviglia, P.C.,

Severson & Werson, and Hanson, Curran, Parks & Whitman, were on brief

for defendants-appellees Narragansett Capital, Inc. and Edwin
Pfeiffer.

January 26, 1995

BOWNES, Senior Circuit Judge. In this appeal,
BOWNES, Senior Circuit Judge.

appellants Anchor Media Television, Inc. ("Anchor"), and

KOVR-TV of Delaware, Inc. ("KOVR"), contend that the district

court committed several legal and discretionary errors in the

course of two trials of their claims of fraud and breach of

contract against appellees Narragansett Capital, Inc.

("Narragansett"), KOVR's former owner, and Edwin Pfeiffer,

KOVR's former general manager. After carefully reviewing the

record and considering appellants' arguments, we affirm.

I.
I.

BACKGROUND
BACKGROUND

The complicated factual predicate of this

litigation has been meticulously rehearsed in a published

opinion by the district court. See Fleet Nat'l Bank v.

Anchor Media Television, Inc., 831 F. Supp. 16, 21-31 (D.R.I.

1993). It will be reiterated here only to the extent

necessary to resolve the issues before us.

The case arises out of Narragansett's sale to

Anchor of KOVR, an ABC-affiliate television station located

in Sacramento, California. Anchor was awarded the station

after submitting the high bid at a closed auction held in

late September 1988. The sale price eventually agreed upon

by the parties was $162 million. The deal was structured as

a merger of an Anchor subsidiary into the corporate owner of

KOVR, and became final on January 25, 1989. The terms of the

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merger were memorialized in a merger agreement ("the

Agreement") dated October 12, 1988. The case came before the

district court as an interpleader action filed by plaintiff

Fleet National Bank ("Fleet"). Fleet controlled a $5 million

escrow account established by the Agreement to address claims

that might arise from KOVR's sale. In its complaint, Fleet

asked the district court to determine proper allocation of

the escrow funds. Anchor and Narragansett, among others,

were named as defendants to the action.

Subsequently, Anchor filed cross-claims against

Narragansett and Pfeiffer, alleging breach of the Agreement

and common law fraud.1 Underlying these claims were

allegations that Narragansett had fraudulently increased its

cash flow in the months preceding the auction by: (1)

actually running more commercials than was customary in the

industry while representing that it was running fewer

commercials than was customary ("the overcommercialization

allegation"); (2) running local commercials at a time when it

was contractually obliged to be running an ABC newsbrief

("the ABC newsbrief allegation"); (3) surreptitiously

shifting to subsequent years certain operating expenses

1. Pfeiffer also brought a cross-claim against Anchor for
breach of his employment contract. The subject matter of
this claim is not before us.

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incurred as a result of a contract with Nielson Media

Research2 ("the Nielson allegation"); and (4) charging

political candidates too much money to run political

advertisements ("the political advertising allegation"). We

discuss the particulars of these allegations infra.

Anchor claimed that these practices had a damaging

effect upon its bid, which was largely formulated in

accordance with standard industry valuation practices --

i.e., by taking the projected year-of-sale cash flow

(essentially, profit) and multiplying it by a number ("the

multiplier") which appropriately accounted for certain

characteristics inhering in the target market. In projecting

year-of-sale cash flow, Anchor used actual cash flow figures

from January 1, 1988 through August 31, 1988, and financial

information which enabled it to project cash flow from

September 1, 1988 through the end of the year. All of the

information on which Anchor relied in formulating its bid was

generated prior to September 28, 1988, the day on which the

bid was submitted.

Put in concrete terms, Anchor argued that

Narragansett's fraudulent inflation of its 1988 cash flow

(quantified at trial as being at least $1,943,000) caused

Anchor to bid at least $27 million more for the station than

2. Nielson Media Research is a rating service that monitors
audience viewership of a television station. Fleet Nat'l

Bank, 831 F. Supp. at 28.

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it would have absent the fraud. Anchor reached this number

by taking the amount of improperly-obtained 1988 cash flow

and multiplying it by 13.6, the multiplier it had used in

valuing the Sacramento market. This "effect on the bid"

constituted Anchor's theory of damages.3

3. We have some doubts about the viability of Anchor's
"effect on the bid" damages theory in the context of this
case. The parties agree that Rhode Island law, which governs
Anchor's fraud claim, applies the "benefit of the bargain"
rule in assessing damages for fraudulent misrepresentations
inducing a party to contract for the purchase of property.
See Barnes v. Whipple, 68 A. 430 (R.I. 1907). Under this

rule, the defrauded purchaser is entitled to recover the
difference between the actual value of the purchased item and
its value had the seller's representations been true. See

Learjet Corp. v. Spenlinhauer, 901 F.2d 198, 203 (1st Cir.

1990) (applying Kansas law); see also J. F. Rydstrom,

Annotation, "Out of Pocket" or "Benefit of Bargain" as Proper

Rule of Damages for Fraudulent Representations Inducing

Contract for the Transfer of Property, 13 A.L.R. 3d 875, 885

(1967). This value differential is measured at the time of
the sale. Learjet Corp., 901 F.2d at 203.

When (as is usually the case) the negotiation of the sale
price immediately precedes the consummation of the sale, the
effect of the seller's fraud on the purchase price will
almost invariably quantify the difference between the actual
value of the purchased item and its value had the
representations been true. Here, however, the consummation
of the sale (i.e., the merger) took place nearly four months
after the negotiation of the sale price, at a time when fluid

market conditions (there was much testimony to this effect)
might have led a buyer to utilize a different multiplier than

the one Anchor used in formulating its bid. Moreover, the
merger took place in a calendar year different from the one

in which the sale price was negotiated. A buyer applying
Anchor's valuation theory at the time of merger therefore

would presumably have been looking at a different period of
time in projecting cash flow than the one at which Anchor
looked. Thus, it strikes us as somewhat speculative to infer
that the effect Narragansett's fraud had on Anchor's 1988 bid
accurately quantifies the difference between the actual value
of KOVR on January 25, 1989 (the date of the merger) and its
putative value on that date had Narragansett's
representations been true.

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A. The First Trial
A. The First Trial

A jury trial commenced on April 2, 1991, and lasted

fourteen trial days. In the course of the trial, the

district court ruled, as a matter of law and for a variety of

reasons, that a reasonable jury could not find a breach of

the Agreement or fraud on the basis of the political

advertising allegation. The court did, however, allow Anchor

to present to the jury, as the predicate for its contract and

fraud claims, the evidence underlying its

overcommercialization, ABC newsbrief, and Nielson

allegations.4 At the trial's conclusion, the jury awarded

Anchor $4.5 million for breach of contract and $13.5 million

for fraud. It also awarded Anchor $1 million in punitive

damages.

Subsequent to this verdict, and in accordance with

then-Fed. R. Civ. P. 50(b), Narragansett and Pfeiffer moved

for judgment notwithstanding the verdict or, in the

In any event, Narragansett has not raised the absence of
proof of damages as an alternative ground for affirmance.
Because this issue is somewhat involved and has not been
argued, and because we believe that affirmance is otherwise
compelled on the record and briefs before us, we do not delve
further into the damages question at this time.

4. In so stating, we reject Anchor's contention on appeal
that the Nielson allegation did not constitute part of its
breach of contract claim. In fact, we find this argument
difficult to fathom. In his closing argument, Anchor's trial
counsel clearly asserted that the alleged subterfuge
involving the Nielson contract constituted a breach of the
Agreement.

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alternative, for a new trial. For reasons not disclosed by

the record, the district court kept this motion under

advisement for more than two years, until June 1993, when it

issued Fleet Nat'l Bank. See 831 F. Supp. 16.

In addressing the Rule 50(b) motion, the court

first held that Narragansett and Pfeiffer were entitled to a

new trial on Anchor's breach of contract claim. See id. at

34-38. While the court believed that there had been

sufficient evidence to support the jury's contract verdict

based on the ABC newsbrief allegation, id. at 34-36, it

determined that the evidence did not permit a reasonable jury

to find breach of contract on the basis of either the

overcommercialization or Nielson allegations, id. at 36-37

and 43 n.6. In making this determination, the court ruled

that Narragansett and Pfeiffer had not made any

representations or warranties in the Agreement regarding the

number of commercials KOVR had broadcast in 1988, id. at 36-

37, and that the Nielson allegation was not viable because

Anchor had failed to prove justifiable reliance on the

alleged misrepresentation, id. at 43 n.6. A new trial was

ordered because the general verdict form did not allow the

court to ascertain whether the jury had relied on the legally

defective allegations in reaching its contract verdict. Id.

at 37-38 (citing, inter alia, Sunkist Growers, Inc. v.

Winckler & Smith Citrus Prods. Co., 370 U.S. 19, 29-30 (1962)

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and Brochu v. Ortho Pharmaceutical Corp., 642 F.2d 652, 662

(1st Cir. 1981)).

The court also held that Narragansett was entitled

to a new trial on Anchor's fraud claim. See id. at 38-44.

While the court believed that there had been sufficient

evidence to support the jury's verdict on this claim with

regard to the ABC newsbrief and overcommercialization

allegations, it ruled that the defective Nielson allegation

may have poisoned the general fraud verdict beyond cure. Id.

at 42-43.

Finally, the court negated the jury's punitive

damages award as lacking evidentiary support. Id. at 45.

Anchor does not challenge this ruling on appeal.

B. The Second Trial
B. The Second Trial

In accordance with the district court's opinion, a

second jury trial commenced on March 21, 1994, and lasted

eleven trial days. Prior to submitting the case to the jury,

the court ruled as a matter of law, see Fed. R. Civ. P.

50(a), that Anchor's overcommercialization allegation could

not be presented to the jury in support of its fraud claim,

and that Anchor's ABC newsbrief allegation could not be

presented to the jury in support of its contract claim. The

court based these rulings on determinations that Anchor had

not proven damages in connection with its

overcommercialization allegation, and that Anchor had not

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provided Narragansett and Pfeiffer with notice of the ABC

newsbrief allegation within the fifteen-day time period

contemplated by the Agreement.5 The court also rebuffed

Anchor's attempt to revive its political advertising

allegation at this time. Thus, only Anchor's fraud claim,

now based solely on the ABC newsbrief allegation, went to the

jury. The jury returned a verdict in favor of Narragansett

and Pfeiffer on this claim. After the verdict, the court

took the apparently unprecedented step of granting the

verdict's beneficiaries judgment as a matter of law on the

same claim. In so doing, the court stated that it was ruling

on the reserved motion so that any error in the jury

instructions could be ignored in subsequent proceedings.

This appeal followed.

II.
II.

STANDARD OF REVIEW
STANDARD OF REVIEW

We first deal with a technical, nomenclature

matter. Rule 50 was amended during the course of the

proceedings before the district court. The amendments

abandoned the terms "directed verdict" and "judgment n.o.v.,"

which were commonly associated with the former Rule, in favor

of the phrase "judgment as a matter of law." See generally

5. Section 8.5 of the Agreement required any party with a
claim arising out of the Agreement to send a notice of claim
to the breaching party within fifteen business days of coming
to the belief that it had suffered damages in connection with
the claim.

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Fed. R. Civ. P. 50 advisory committee's note. The amendments

did not, however, affect either the standard by which

district courts review motions brought under the Rule or the

standard by which we review a district court's rulings. See

id. ("If a motion is denominated a motion for directed

verdict or for judgment notwithstanding the verdict, the

party's error is merely formal. Such a motion should be

treated as a motion for judgment as a matter of law in

accordance with this rule."). For simplicity's sake, we

therefore refer to Narragansett's and Pfeiffer's various

motions, however denominated at the time of filing, as

motions for judgment as a matter of law.

To the extent that Anchor is challenging the

district court's post-trial rulings that Narragansett and

Pfeiffer were entitled to judgment as a matter of law on

certain issues, our review is de novo. See Lama v. Borras,

16 F.3d 473, 477 (1st Cir. 1994) (affirming denial of a post-

verdict Fed. R. Civ. P. 50(b) motion for judgment as a matter

of law); Rolon-Alvarado v. Municipality of San Juan, 1 F.3d

74, 77 (1st Cir. 1993) (affirming grant of Fed. R. Civ. P.

50(a) motion for judgment as a matter of law at the close of

plaintiff's case). Thus, we will affirm these rulings only

if, after scrutinizing the proof and inferences derivable

therefrom in the light most hospitable to Anchor, we

determine that a reasonable factfinder could have reached but

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one conclusion: that Narragansett and Pfeiffer were entitled

to judgment. See Lama, 16 F.3d at 477. Because the court's

order granting Narragansett and Pfeiffer a new trial was

based solely upon its legal conclusions that defective claims

had been allowed to go to the jury, we first determine the

correctness of the court's rulings in this regard.

If we decide that the court's legal conclusions

were correct, our review becomes significantly more

circumscribed. Where the trial court has correctly

determined that legal error infected a claim presented to the

jury, we will defer to the court's judgment that a new trial

was called for on that claim absent an abuse of discretion.

See Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33, 36

(1980) (per curiam); see also Payton v. Abbott Labs. 780 F.2d

147, 152 (1st Cir. 1985); 11 Charles A. Wright & Arthur R.

Miller, Federal Practice and Procedure, 2818, at 119-20

(1973) (deference is appropriate because "[t]he trial judge

was on the spot and is better able than an appellate court to

decide whether the error affected the substantial rights of

the parties").

Deference in this case is particularly appropriate

for two reasons. First, in its published opinion, the

district court explicitly cited as controlling authority two

cases which make clear that courts should set aside jury

verdicts in only the most compelling of circumstances. See

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Fleet Nat'l Bank, 831 F. Supp. at 32 (citing Coffran v.

Hitchcock Clinic, Inc., 683 F.2d 5, 6 (1st Cir.) (trial judge

may not set aside jury verdict merely because s/he would have

reached a different conclusion than the jury), cert. denied,

459 U.S. 1087 (1982), and Borras v. Sea-Land Serv., Inc., 586

F.2d 881, 886 (1st Cir. 1978) (trial court may set aside jury

verdict only where verdict (1) is against clear weight of

evidence; (2) is based upon evidence which is false; or (3)

will result in a miscarriage of justice)). And second, in

that same opinion, the court clearly stated its reasons for

ordering a new trial. See id. at 37-38 and 43 (court could

not tell whether jury had awarded Anchor damages on

erroneously submitted evidence or improperly allowed

arguments).

Finally, we review the district court's rulings

excluding evidence offered by Anchor under the abuse of

discretion standard. E.g., Fairfield 274-278 Clarendon Trust

v. Dwek, 970 F.2d 990, 995 (1st Cir. 1992). Moreover, we are

free to affirm the trial judge's decisions "on any

independently sufficient ground made manifest by the record."

See, e.g., Ticketmaster-New York, Inc. v. Alioto, 26 F.3d

201, 204 (1st Cir. 1994).

With these criteria in mind, we review Anchor's

claims.

III.
III.

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DISCUSSION
DISCUSSION

Anchor makes a number of arguments, the order of

which we rearrange for ease of analysis. As to the first

trial, Anchor contends: (1) the court erred in deciding that

the evidence was insufficient for a reasonable jury to have

found fraud based on the Nielson allegation; (2) the jury

could not, at any rate, have relied upon this allegation in

reaching its contract and fraud verdicts;6 and (3) the court

erred in ruling post-trial that Anchor should not have been

allowed to raise the issue of overcommercialization in

connection with its breach of contract claim.

As to the second trial, Anchor asserts: (1) the

district court improperly prohibited its witnesses from

testifying regarding customary levels of commercialization in

the industry; (2) the court otherwise erred in taking from

the jury the fraud claim based on the overcommercialization

allegation; (3) the court erroneously precluded Anchor from

renewing its claims based on the political advertising

allegation; (4) the court improperly excluded certain "state

of mind" evidence relevant to the question of when Anchor

learned that it had suffered damages as a result of the

improper running of local commercials during the ABC

6. We have already rejected Anchor's argument that the
district court erred in assuming that the Nielson allegation
partially undergirded the breach of contract claim. See

supra note 4.

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newsbrief time slot; (5) the court otherwise erred in taking

from the jury the breach of contract claim based on the ABC

newsbrief allegation; (6) the court erred in instructing the

jury on the one issue -- fraud based on the ABC newsbrief

allegation -- the jury was permitted to consider; and (7) the

court was without the power to grant judgment as a matter of

law to Narragansett and Pfeiffer after the jury had returned

a verdict in their favor on this issue.

A. Alleged First Trial Errors
A. Alleged First Trial Errors

1. Legal Viability of the Nielson Allegation

Anchor first argues that the court erred in

determining that the evidence was insufficient for a

reasonable jury to have found fraud based on the Nielson

allegation. As previously stated, the Nielson allegation

involved the claimed surreptitious shifting to subsequent

years of certain 1988 operating expenses incurred as a result

of a contract between Narragansett and Nielson Media

Research. The specifics of the allegation are as follows.

Sometime after August 3, 1988, at the time Anchor

was preparing to submit its bid, Narragansett supplied Anchor

with a box that contained hundreds of contracts involving

KOVR. One of these was the Nielson contract, which set the

monthly amount that KOVR would pay for Nielson's rating

service. Attached to the contract was a two-page appendix.

On the first page of the appendix, in a section captioned

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"Base Rate per Month," the figure "$10,000" was typed in the

space provided for the time period May 1988 through April

1989. An asterisk was next to this figure, and a

corresponding note, typed at the bottom of the same page,

read "see attached letter dated 4/7/88." No letter was

attached to the contract.

The second page of the appendix included a

computation worksheet. The worksheet included a space for

"Base Rate per Month." The figure "$3,000" was typed in this

space. Further down the page was a space captioned "Monthly

Adjustment (estimated) as of May 1988." The figure "$90.00,"

which represented 3% of the base monthly rate, was typed in

this space. Directly beneath this was a space captioned

"Estimated Monthly Net Charge as of May 1988." The figure

"$3,090.00," which represented the Base Rate per Month plus

the Monthly Adjustment, was typed in this space.

The discrepancy between the base monthly rates

provided for on the first and second pages of the appendix

was explained in the 4/7/88 letter, which Anchor discovered

only after taking control of KOVR. This letter memorialized

Nielson's agreement to Narragansett's request to defer until

the following year $7,000 per month in payments owed for the

period May through December 1988. Anchor alleged that

Narragansett's failure to include the 4/7/88 letter in the

box of contracts involving KOVR amounted to a fraudulent

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concealment of the deferral of 1988 operating expenses in an

attempt to inflate 1988 cash flow. The alleged

misrepresentations were the "$10,000" base monthly rate

figure typed on the first page of the Nielson contract

appendix, and subsequent representations by Narragansett

officials (including Pfeiffer), both oral and in the

Agreement, that Narragansett had provided Anchor with a true

and complete set of contracts relating to KOVR.

In its order on the motions filed subsequent to the

first trial, the district court stated that, in order to make

out a fraud claim under Rhode Island law (which governs

here), Anchor was required to prove that Narragansett and

Pfeiffer knowingly misrepresented a material fact with intent

to deceive, thereby inducing Anchor to rely justifiably on

the misrepresentation to its detriment. See Fleet Nat'l

Bank, 831 F. Supp. at 38. The court then concluded that, in

light of the asterisk referring interested readers to the

4/7/88 letter and the two statements on the second page of

the Nielson contract appendix referencing a $3,000 base

monthly rate for May 1988, no reasonable jury could have

found that Anchor justifiably relied on the $10,000

representation on the first page of the Nielson contract's

appendix. See Fleet Nat'l Bank, 831 F. Supp. at 42-43.

Regardless of whether Anchor's reliance was

justifiable, we regard as independently supported the

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district court's conclusion that the fraud claim based on the

Nielson allegation was not legally viable. See Alioto, 26

F.3d at 204. Under Rhode Island law, liability for fraud

cannot attach unless the misrepresentation at issue was

intentionally made with an intent to deceive. See East

Providence Loan Co., 236 A.2d at 641; see also Cliftex

Clothing Co., Inc. v. Di Santo, 148 A.2d 273, 275 (R.I.

1959); Campanelli v. Vescera, 63 A.2d 722, 723 (R.I. 1949);

Cheetham v. Ferreira, 56 A.2d 861, 864 (R.I. 1948). In our

view, the same representations and references (i.e., the

asterisk, reference to the 4/7/88 letter, and correct

statements of the base monthly rate) which led the district

court to determine that Anchor's reliance on the $10,000

figure was not justifiable compel the conclusion that the

alleged misrepresentations were not intentionally made with

an intent to deceive. Simply put, we do not think a jury

could reasonably infer such an intent where there is an

explicit reference to the term-altering document -- the

4/7/88 letter -- on the same page as the crucial alleged

misrepresentation, where the true base monthly rate is twice

set forth on the very next page of the addendum, and where

there is no evidence that the exclusion of the letter from

the box of documents involving KOVR was intentional.

Accordingly, we affirm the court's grant of judgment as a

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matter of law to Narragansett and Pfeiffer on Anchor's fraud

claim based on the Nielson allegation.

2. Effect of the Nielson Allegation on the Verdict

Anchor makes an alternative argument that the

Nielson allegation, and its supporting evidence, could not

possibly have influenced the jury's verdict on its breach of

contract and fraud claims. Anchor contends that it

introduced little evidence in support of the Nielson

allegation at trial, and that it did not quantify the damages

arising out of it during its closing. Relying on this

contention, Anchor asserts that the district court, by

jettisoning the contract and fraud verdicts, allowed "the

tail to wag the dog."

Although the Nielson allegation was not the primary

focus of Anchor's case, a review of the first trial record

shows that Anchor specifically mentioned it in both its

opening and closing arguments. Moreover, Anchor supported

the allegation by having Patrick Murphy, its Chief Financial

Officer, testify to the incompleteness of the Nielson

contract and explain to the jury that the omission of the

4/7/88 letter from the box of contracts involving KOVR

fraudulently "presented to us a larger cash flow than what

they should have because of the shifting of expenses." And

while Anchor did not quantify for the jury the damages

arising out of the Nielson allegation, it did provide the

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jury with a damages theory (i.e., improperly-obtained 1988

cash flow multiplied by 13.6, the multiplier Anchor used in

arriving at its bid) by which the jury could easily and

rationally have quantified the damages for itself. In light

of all this, and in the absence of any suggestion on appeal

that a remittitur would have been appropriate, we cannot say

that the district court abused its discretion in determining

that the general fraud and contract verdicts returned at the

conclusion of the first trial may have been incurably

infected by the legally deficient Nielson allegation.

Accordingly, we affirm the district court's decision to award

Narragansett and Pfeiffer new trials on Anchor's contract and

fraud claims.

3. The Breach of Contract Claim Based on the

Overcommercialization Allegation

As we have noted, a second basis for the setting

aside of the contract verdict was the district court's post-

trial determination that there were no representations or

warranties in the Agreement regarding the number of

commercials KOVR had been running prior to Anchor's

submission of its bid. Anchor claims that the court erred in

reaching this conclusion, denoting three contractual

provisions which, in its view, a reasonable juror could have

construed as pertaining to 1988 commercialization levels.

The first of these provisions, which can be found

at paragraph 5.1(a) of the Agreement, and which is captioned

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"Conduct of the Business Until Effective Time," states:

"Except as [Anchor] may otherwise consent in writing, until

the Effective Time [Narragansett] will (i) operate its

business only in the usual, regular and ordinary manner . . .

." (Emphasis supplied). Plainly, through its use of the

future tense "will," this representation covers only the

period of time between the date of the Agreement, October 12,

1988, and the date the merger became effective, January 25,

1989. Thus, despite Anchor's attempts to convince us

otherwise,7 paragraph 5.1(a) simply cannot be read as

pertaining to the period of time (i.e., that portion of 1988

prior to Anchor's submission of its bid) when the sale and

running of too many commercials at KOVR might have affected

the amount Anchor bid for the station. And because Anchor's

damages theory involved only the effect of artificially

inflated 1988 cash flow on its bid, conduct which took place

after the submission of the bid is completely irrelevant to

its claims.

The second provision, found at paragraph 5.1(e) and

captioned "Preservation of Business," does not help Anchor

for the same reason. The provision states: "[Narragansett]

7. In what appears to be an attempt to avoid paragraph
5.1(a)'s temporal limitations, the citation to paragraph
5.1(a) in Anchor's brief omits paragraph 5.1(a)'s caption
("Conduct of Business Until Effective Time") and alters the
phrase "will (i) operate" to read "operat[ed]." If this was
deliberate, it was deceptive; if a mistake, it was
inexcusable.

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shall conduct the business and operations of the Station

diligently and in the ordinary course in substantially the

same manner as heretofore conducted." (Emphasis supplied).

Through its use of the future tense "shall," this provision

also only covers a period of time subsequent to October 12,

1988, the date of the Agreement. And as we have explained,

any improper actions taken by Narragansett or Pfeiffer during

this time period are irrelevant under the damages theory

pursued by Anchor.

The final provision relied upon by Anchor,

paragraph 4.1(f), simply cannot be construed as warranting

"customary" commercialization levels at KOVR. Captioned

"Absence of Certain Changes or Events," the provision sets

forth a number of illustrative asset-dissipating and capital

structure-altering events and transactions, warranting an

absence of such events or transactions "since the date of the

Unaudited Financial Statements [August 31, 1988]." The

proviso upon which Anchor seizes states that "the Company has

not . . . (v) entered into . . . any other material

commitment, contractual obligation or transaction other than

in the ordinary course of business . . . ."

Leaving aside the fact that Anchor did not

introduce specific evidence of overcommercialization at KOVR

from August 31, 1988 through September 28, 1988 (the only

period of time prior to Anchor's submission of its bid that

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this provision can be read to cover), we are at a loss to see

how it would be reasonable to regard the sales of commercials

challenged here as being transactions outside of KOVR's

"ordinary course of business." As the district court

observed, paragraph 4.1(f)'s "ordinary course of business"

proviso, when read in context, should be construed as simply

warranting that Narragansett had not entered into any

transactions (1) of an unusual type for a television station;

or (2) that would tend to unduly dissipate KOVR's assets or

alter its capital structure. See Fleet Nat'l Bank, 831 F.

Supp. at 37. Certainly, sales of commercial time are not

unusual transactions for a television station; indeed, the

revenues generated by such sales constitute a station's

lifeblood. Moreover, the record is devoid of evidence that

the number of such sales entered into by Narragansett during

the relevant time period -- even if in excess of industry

norms -- threatened to unduly dissipate KOVR's assets or

alter its capital structure.

To be sure, the actual meaning of a contractual

provision which can reasonably accommodate two or more

interpretations should be left to the jury. See, e.g.,

Bushkin Assocs., Inc. v. Raytheon Co., 815 F.2d 142, 148-49

(1st Cir. 1987) (applying Massachusetts law). But the

question whether a provision can reasonably support a

proffered interpretation is a legal one, to be decided by the

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court. See Fashion House, Inc. v. K Mart Corp., 892 F.2d

1076, 1083 (1st Cir. 1989) (applying Michigan law)

("Determining whether or not a contract is ambiguous is, like

other questions of contract construction, a matter for the

court."). Here, we think that the court correctly determined

that Anchor's proffered interpretation of paragraph 4.1(f)'s

"ordinary course of business" proviso -- which reads the

proviso as warranting customary commercialization levels at

KOVR during 1988 -- was not one that a reasonable juror could

accept. Accordingly, we affirm the court's ruling.

In sum, we agree with the district court that

Anchor should not have been permitted to present the Nielson

allegation to the jury, and that Anchor should not have been

allowed to raise the issue of overcommercialization in

connection with its breach of contract claim. We further

rule that the court did not abuse its discretion in

determining that these improperly asserted allegations may

well have affected the jury's general contract and fraud

verdicts at the first trial. We therefore affirm the court's

post-trial order, see Fleet Nat'l Bank, 831 F. Supp. 16, in

all respects.8

8. Because of these rulings, we need not discuss whether the
court's new trial order on the fraud claim against
Narragansett can be alternatively upheld on the basis of the
court's post-trial determination that it should not have
submitted to the jury the question of Narragansett's
vicarious liability as Pfeiffer's alter ego or co-
conspirator. See Fleet Nat'l Bank, 831 F. Supp. at 44-45.

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B. Alleged Second Trial Errors
B. Alleged Second Trial Errors

1. Exclusion of Witness Testimony Regarding

Customary Levels of Commercialization in the

Industry Anchor complains that, at the second trial,

the district court improperly excluded, for lack of

foundation, testimony by Anchor's Senior Vice President,

Lawrence Clamage, regarding customary levels of

commercialization in the industry. Anchor underscores this

plaint by pointing out that Clamage was permitted to testify,

over objection, to industry norms in the first trial, and

that the court offered no rationale for its contrary ruling

at the second trial. Anchor further contends that the court

committed legal error in not allowing it to read to the jury

testimony regarding industry norms given at the first trial

by John Sheehan, who was unavailable for the second trial.

In the alternative, Anchor asserts that the court abused its

discretion by denying it a one-day continuance so that

Sheehan could appear. Anchor claims that all three of these

erroneous, discretionary rulings were highly prejudicial

because the court's award of judgment as a matter of law on

Anchor's fraud claim based on overcommercialization was

premised upon an absence of evidence by which Anchor could

"structure the amount of damages for overcommercialization."

While the equities of the situation involving

Sheehan are not nearly as one-sided as Anchor represents them

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in its brief,9 we can understand Anchor's frustration with

the court's failure to explain why Clamage's testimony was

admissible in the first trial but not in the second.

Especially in light of the two-year delay in deciding the new

trial motion, we think that Anchor was entitled to an

explanation for the court's change of mind. The fact of the

matter is, however, that evidence regarding commercialization

norms in the industry was completely irrelevant in the second

trial.

As we have explained, the court properly ruled that

the Agreement could not be construed as warranting customary

commercialization levels during the time period Anchor

examined in developing its bid. And the only other evidence

of a representation regarding commercialization levels at

KOVR introduced by Anchor at the second trial was the so-

called July/August 1988 day-part summary, a document that

summarized commercialization levels and commercial-generated

income by day and time (e.g., 7/25, 8:00-9:00 p.m.) for July

and August 1988. The July/August 1988 day-part summary

allegedly misrepresented that KOVR was undercommercialized in

July and August 1988 and understated commercial-generated

9. Anchor had more than a month's notice that the second
trial would begin on March 21, 1994. Despite this notice,
Anchor apparently did not ascertain Sheehan's availability as
a witness until it was in the middle of presenting its case.
Indeed, Anchor did not communicate with Sheehan at all
between January 27, 1994 and March 25, 1994, the date on
which it learned of Sheehan's unavailability.

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income during this same period. Thus, there was no evidence

in the second trial of a representation to Anchor that KOVR

was commercialized in accordance with industry norms in 1988,

and Anchor had no basis for arguing that it was damaged

because it bid too much in reliance on such a representation.

Accordingly, we affirm the court's exclusion of the testimony

regarding industry standards on the independent ground that

it was irrelevant. See Alioto, 26 F.3d at 204; see also Fed.

R.Evid.402("Evidence whichisnotrelevantis notadmissible.").10

10. After the district court excluded evidence regarding
industry norms at the second trial, Anchor argued an
alternative "expectancy" damages theory. Under this late-
arising theory, Anchor sought to recover the revenue it
expected to generate by running more commercials on KOVR,
which it had been fraudulently induced to believe was
substantially undercommercialized at the time of the sale.
In a throw-away line in its reply brief, Anchor contends that
evidence of industry norms was relevant to proof of damages
under its expectancy damages theory.
An expectancy damages theory which would look to the
difference between the revenue Narragansett falsely claimed
to have been generating in July/August 1988, and the revenue
that a station commercialized in accordance with industry
norms would have been generating at that time, is not
implausible. Indeed, it strikes us as being much more in
line with the fraud damages to which Anchor actually was
entitled under Rhode Island law than the "effect on the bid"
theory pursued throughout this litigation. See supra note 3.

The problem is, however, that Anchor never sought to quantify
its expectancy damages in this way until its reply brief. In

fact, Anchor represented to the district court on at least
three occasions that evidence of industry norms was
irrelevant to its expectancy damages theory. See Second

Trial Transcript, 3/29/94, at 13 (two representations to this
effect), and 3/30/94 at 18. Instead, Anchor sought to
quantify its expectancy damages as the difference between the
actual 1988 revenues generated by the overcommercialized KOVR
(a fact of which it learned only subsequent to taking over

the station), and the far lower revenues the false day-part
summary indicated that KOVR was realizing. We discuss the

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2. The Fraud Claim Based on the Over-

commercialization Allegation

As noted, subsequent to the conclusion of Anchor's

case in the second trial, the district court granted

Narragansett and Pfeiffer judgment as a matter of law on

Anchor's fraud claim based on the overcommercialization

allegation for failure to prove damages. Anchor contests

this ruling, arguing that it proved expectancy damages by

demonstrating the difference between the actual revenue

generated by the "too many" commercials run in 1988, and the

lower revenue the July/August 1988 day-part summary falsely

indicated was being generated. See supra note 10.

Throughout both trials, Anchor consistently

maintained that KOVR was covertly running commercials far in

excess of industry norms during the time period Anchor

examined in formulating its bid. Anchor also consistently

contended that, after taking over the station in 1989, it had

to reduce commercialization levels in order to bring the

station into conformity with industry norms. Given these

positions, Anchor would have been estopped from raising, near

the conclusion of its case in the second trial, an explicit

legal viability of this quantification in the next section of
our opinion; suffice it to say at this point that Anchor has
waived any argument that evidence of industry norms was
relevant to its expectancy damages theory. See, e.g.,

Sandstrom v. Chemlawn Corp., 904 F.2d 83, 86 (1st Cir. 1990)

(deeming waived an argument not made below or in appellant's
opening brief).

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alternative argument that it expected to commercialize at

levels commensurate with those actually employed at KOVR in

1988. Cf. Desjardins v. Van Buren Community Hosp., 37 F.3d

21, 23 (1st Cir. 1994) (doctrine of judicial estoppel "may

apply to bar a litigant from engaging in intentional self-

contradiction as a means of obtaining unfair advantage")

(citations omitted). Such an argument was, however, implicit

in Anchor's alternative damages theory.

In quantifying its expectancy damages by

subtracting the lower, misrepresented revenues set forth in

the July/August day-part summary from the higher, actual 1988

revenues that KOVR was generating, and in explicitly

repudiating any suggestion that the lower, misrepresented

revenues more properly should be subtracted from the revenues

the station would have generated had it been commercialized

in accordance with industry norms, Anchor implicitly argued

that, at the time it bought the station, it expected to

generate the same commercial revenues it later learned that

the station had generated in 1988. Absent a proffer that it

somehow anticipated earning these revenues by commercializing

in accordance with industry norms, however, (and there was no

such proffer here), the only way Anchor could have expected

to earn the higher revenues was if it expected to run the

same number of commercials that Narragansett actually had

been running in July/August 1988. In other words, given the

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state of the record at the second trial, necessarily subsumed

within Anchor's alternative damages theory was a tacit

argument -- i.e., that Anchor expected to run the same number

of commercials that Narragansett had been running at the

relevant time in 1988 -- which was completely at odds with

the stance Anchor had taken regarding 1988 commercialization

levels. The district court did not err in prohibiting

Anchor from altering its litigation position in this way. It

follows, therefore, that the court did not err in ruling that

Anchor had failed to prove expectancy damages arising out of

any fraudulent misrepresentation of commercialization levels

by Narragansett or Pfeiffer. See Campanelli, 63 A.2d at 724

(proof of fraud includes proof of damage-causing reliance by

plaintiff); Cheetham, 56 A.2d at 863 (purchaser defrauded to

his/her disadvantage has fraud action under Rhode Island

law). 3. The Political Advertising Allegation

Having granted Narragansett and Pfeiffer judgment

as a matter of law on Anchor's contract and fraud claims

based on the political advertising allegation during the

first trial, the district court summarily11 precluded

Anchor from arguing at the second trial that Narragansett had

artificially inflated 1988 revenues by overcharging political

11. Prior to opening arguments in the second trial, the
court stated that it was "likely" to rule out the allegation
for the same reasons that it had ruled it out at the first
trial. The next day, without elaborating, the court notified
the parties that the allegation was indeed out of the case.

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candidates for commercial time. Anchor assigns error only to

this second trial ruling, arguing that it was improper unless

"there is no theory of the facts under which the allegations

of the complaint state a cause of action. Vartanian v.

Monsanto Co., 14 F.3d 697, 700 (1st Cir. 1994)." Anchor's

argument completely overlooks the procedural posture of its

political advertising allegation at the second trial.

Perhaps nothing better highlights Anchor's

misapprehension of this issue than its citation to Vartanian

as supporting authority. The above-quoted language from

Vartanian summarizes the standard by which we review the

propriety of the a district court's dismissal of a claim

under Fed. R. Civ. P. 12(b)(6). The exclusion of the

political advertising allegation at the second trial was not,

however, a Rule 12(b)(6) dismissal. When the court ruled the

allegation out of the second trial, Anchor had already been

afforded a complete opportunity to substantiate and argue it,

and the court had deemed it insufficient to go to a jury.

Thus, despite Anchor's attempts to depict it otherwise, the

court's exclusion of the political advertising allegation

from the second trial was tantamount to a denial of a Fed. R.

Civ. P. 60(b) motion to set aside a properly-entered prior

order. See Fed. R. Civ. P. 60(b) (setting forth the

circumstances in which a court may relieve a party or a

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party's representative from a final order).12 And we

review such denials only for an abuse of discretion. See,

e.g., de la Torre v. Continental Ins. Co., 15 F.3d 12, 14-15

(1st Cir. 1994) (orders denying relief under Fed. R. Civ. P.

60(b) -- which allows for "extraordinary relief". . . "only

under exceptional circumstances" -- reviewed solely for an

abuse of discretion) (citations omitted).

Because it failed to understand the procedural path

it had to follow, Anchor did not present the trial court (and

has not presented us) with an argument that a revival of its

political advertising allegation was required under any of

the criteria -- e.g., mistake, inadvertence, surprise,

excusable neglect, newly-discovered evidence, fraud, etc. --

delineated in Rule 60(b). Instead, Anchor argues that, by

the time of the second trial, it "had reconsidered its

arguments on [the political advertising] issue and [had]

marshalled new evidence in support of its claim." Plainly,

this is an inadequate foundation upon which to premise a

request for relief under Rule 60(b). Cf. Rothwell Cotton Co.

v. Rosenthal & Co., 827 F.2d 246, 251 (7th Cir.) ("Rothwell's

brief is long on support for why summary judgment is not

12. Apparently believing itself entitled to renew its
political advertising allegation at the second trial as of
right, Anchor never formally moved the court for relief from
the prior order under Rule 60(b). Its arguments in support
of its position were instead set forth in its opposition to
Narragansett's pretrial motion in limine to exclude the

allegation from the second trial.

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appropriate in light of all the evidence and legal arguments

it now presents, but short on explaining why Rothwell should

be able to begin presenting those arguments -- in waves --

almost six weeks after the district court had already ruled

against Rothwell."), reh'g denied, opinion amended, 835 F.2d

710 (7th Cir. 1987). Furthermore, our own review of the

record reveals no "exceptional circumstances" which would

have made relitigation of the political advertising

allegation appropriate. Accordingly, the district court

acted well within its discretion in prohibiting Anchor from

pursuing this allegation at the second trial.

4. Remaining Appellate Issues

The four remaining arguments Anchor presses on

appeal relate to decisions the district court made in

connection with the ABC newsbrief allegation. See supra at

13-14. We need not and do not reach the merits of these

arguments, because our review of the record compels us to

conclude that, for an independent reason, Anchor's claims for

breach of contract and fraud based on these claims were

legally deficient. See Alioto, 26 F.3d 204.13

13. While we do not address the merits of Anchor's argument
that the court was without the power to grant judgment as a
matter of law to Narragansett and Pfeiffer on the one issue
that went to the jury after the jury had returned a verdict

in their favor, we do note that this type of order is utterly
superfluous. The beneficiary of a jury verdict may, after
all, always assert on appeal (as an alternative basis for
upholding the verdict) a properly preserved argument that the
claim underlying the verdict was legally deficient. And we,

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As already explained, the essence of Anchor's ABC

newsbrief allegation was that Narragansett fraudulently

increased its cash flow in the months preceding the auction

by running local commercials at a time when it was

contractually obliged to be running an ABC newsbrief. Anchor

quantified the damages arising out of this fraudulent conduct

in accordance with its "effect on the bid" damages theory.

See supra at 4-5. That is to say, Anchor argued that the

proper measure of damages arising from this conduct was the

amount of 1988 revenue generated by the improper practice

times the multiplier (13.6) Anchor used in formulating its

bid.

As the district court noted in granting

Narragansett and Pfeiffer judgment as a matter of law after

the jury verdict on the fraud claim based on this allegation,

see supra at 9 and note 13, the problem with this damages

theory in context is that most, if not all, of the revenue at

issue still would have been generated in the absence of the

alleged fraud. Anchor's own damages witness, Martin Ross,

admitted: (1) few, if any, local commercials are sold to run

at a specific point in time; (2) most local commercials are

of course, would review such a legal argument de novo --

i.e., without deference to the trial court's opinion as to
its merits. Thus, there is no practical reason for the court
to resolve a reserved motion for judgment as a matter of law
where the jury has found in favor of the party or parties who
initially filed the motion.

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"preemptable" (i.e., able to be run, in the station's

discretion, outside of the general time frame for which they

have been sold); and (3) on a given day, "there's probably

always going to be some commercial availability." Moreover,

Mr. Ross conceded that Anchor had failed to go through KOVR's

1988 program logs and determine which of the improperly-run

commercials could not have been run elsewhere, thus

generating irreplaceable revenue.

Anchor does not dispute any of this. In fact, it

appears to recognize that its bid was not actually affected

by fraud in connection with the ABC newsbrief (and any

concomitant breach of the Agreement such fraud would have

engendered) except to the extent that the fraud generated

irreplaceable revenue. Anchor argues, however, that, in

order to prove its damages, all it had to do was quantify

Narragansett's ill-gotten revenue. In its view, once it had

quantified such revenue, it became Narragansett's and

Pfeiffer's burden to prove the extent to which the revenue

was replaceable (as part of their burden of proving failure

to mitigate damages).

This argument is unconvincing. The law does not

contemplate that a party victimized by fraud or breach of

contract prove, without reference to the rest of the record,

the narrow effects of the fraud or breach; it requires that

party to prove, as an element of its case, the extent to

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which it was damaged by the fraud or breach. In the face of

the uncontroverted evidence showing that KOVR still would

have generated most of the revenues it obtained by running

local commercials when it should have been running the ABC

newsbrief, it is apparent that Anchor, by proving only the

amount of revenue traceable to the improper practice, failed

to provide the jury with a basis upon which to premise a

reasoned damages finding. Thus, Anchor failed to prove an

element of its case.

While ingenious, it is incorrect to suggest that

Narragansett and Pfeiffer bore the burden of proving the

extent to which the ill-gotten income was replaceable as part

of their duty to prove failure to mitigate damages. The

doctrine of mitigation of damages imposes on a party injured

by either a breach of contract or a tort the duty to exercise

reasonable diligence and ordinary care in attempting to

minimize its damages. Black's Law Dictionary 1002 (6th ed.

1990). The doctrine thus presupposes, as a threshold matter,

the existence of a causal nexus between the damages sought

and the breach or tort, looking at whether and to what extent

an intervening cause (i.e., a plaintiff's own negligence) may

have contributed to these damages. Here, the question is not

whether and to what extent Anchor's own conduct contributed

to its damages; it is, rather, the threshold question of

whether the damages Anchor sought were caused by the conduct

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of which Anchor complained. Accordingly, the doctrine of

mitigation of damages is completely inapposite.

In sum, we think it clear that Anchor's contract

and fraud claims based on the ABC newsbrief allegation were

deficient because of an absence of proof of damages. We

therefore reject Anchor's remaining appellate arguments, all

of which pertain to the district court's handling of these

claims.

IV.
IV.

CONCLUSION
CONCLUSION

For the reasons stated above, the judgment of the

district court is affirmed in all respects.

Affirmed. Costs to appellees.
Affirmed. Costs to appellees.

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