Fisher v. Trainor

United States Court of Appeals
For the First Circuit

No. 00-1489

PETER FISHER; BALFOUR HOLDING, INC.,

Plaintiffs, Appellants,

CREDIT FRANCAIS INTERNATIONAL, S.A.,

Plaintiff, Appellee,

v.

WILLIAM P. TRAINOR; DIANE M. TRAINOR; BIO-VITA, LTD.; HEMO-
INNOVATIONS, LTD.; LAUREL MOUNTAIN TRUST; WILLIAM P. TRAINOR,
AS TRUSTEE OF LAUREL MOUNTAIN TRUST; SHEA & GOULD, A LAW FIRM
IN DISSOLUTION,

Defendants,

BIOPURE CORPORATION; BIOPURE ASSOCIATES; BIOPURE ASSOCIATES
LIMITED PARTNERSHIP; CARL W. RAUSCH, AS GENERAL PARTNER OF
BIOPURE ASSOCIATES LIMITED PARTNERSHIP,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. James L. Watson, Senior Judge*]

Before

* Of the United States Court of International Trade,
sitting by designation.
 Boudin, Stahl, and Lynch,
Circuit Judges.

Marc Z. Edell, with whom Diane L. Mulligan, Dina L. Sforza,
and Edell & Associates were on brief, for appellant.
Marc S. Palay, with whom Eric W. Bloom, Winston & Strawn,
John D. Donovan, Jr., and Ropes & Gray were on brief, for
appellee Credit Francais International.
S. Elaine McChesney, with whom Robert A. Buhlman and Bingham
Dana LLP were on brief, for appellee Biopure.

March 6, 2001
 LYNCH, Circuit Judge. This consolidated case, in which

multiple frauds are alleged against a partner to a biotechnology

venture, emerges from over ten years of complex, multi-party

litigation. The case appears before us on appeal for the second

time; we originally considered it nearly five years ago. See

Credit Francais International v. Bio-Vita, Ltd., 78 F.3d 698

(1st Cir. 1996) ("CFI v. Bio-Vita"). The original appeal arose

out of two separate summary judgment orders issued by the

district court, one in July 1994 and the other in December of

the same year. The July judgment awarded Credit Francais

International a constructive trust over certain contractual

rights William Trainor had acquired from Biopure using funds he

had fraudulently obtained from CFI. The December judgment

effectively denied Peter Fisher, allegedly Trainor's innocent

partner, any similar stake in those contractual rights; the

judgment also dismissed certain direct claims Fisher had brought

against Biopure.

In CFI v. Bio-Vita, we found we lacked jurisdiction to

review the December judgment because at the time it had been

prematurely certified as final. We remanded the case, and the

district court undertook further proceedings in accordance with

our instructions. Subsequently, the district court again ruled

against Fisher, recertifying the December judgment as final. We

-3-
now affirm the judgment.1

I.

The facts of the case are laid out in detail in CFI v. Bio-

Vita. See 78 F.3d at 701-703. We briefly review, and

occasionally supplement, those facts.

In November 1989, Trainor and Fisher entered into a joint

venture to invest in and manage the testing of a human blood

substitute being developed by Biopure; by oral agreement, they

were to split the proceeds from the venture fifty-fifty.

Trainor was supposed to negotiate a contract with Biopure on

behalf of the joint venture, using Balfour -- a company

affiliated with Fisher -- as the vehicle for the transaction.

What appears to be a draft agreement, labeled a "Term Sheet,"

was drawn up accordingly, with Balfour as the named party to the

contract. The agreement called for giving Balfour an equity

share in Biopure and licensing rights to Biopure products.

However, by the time the agreement was finalized in a set of

1 As in CFI v. Bio-Vita, we refer to the parties in the
case as follows: "Fisher" collectively designates Peter Fisher
and Balfour Holdings, Inc. ("Balfour"), an entity presently
controlled by Fisher; "Trainor" collectively designates William
Trainor, his daughter Diane Trainor, and Trainor-controlled
companies, Bio-Vita, Hemo-Innovations, Ltd., and Laurel
Mountain Trust; "Biopure" collectively designates Biopure
Corporation and Biopure Associates Limited Partnership, as well
as Carl Rausch; and "CFI" designates Credit Francais
International, S.A.

-4-
three instruments in late January 1990, Trainor secretly

substituted his own company, Bio-Vita, as the named party to the

contract, effectively shouldering Fisher out of the deal.2

Pursuant to these finalized instruments (referred to

collectively as the "Biopure contract"), Trainor transferred

$1.25 million to Biopure as partial consideration for the equity

share granted under the contract. In addition, he transferred

$1.8 million to a personal trust account, out of which he paid

various expenses incurred in performance of the contract. It

was later discovered that Trainor had obtained all of these

funds by way of a fraud on CFI, a French bank, in the late 1980s

-- before the formation of the Biopure venture.

Meanwhile, Fisher, purportedly unaware of any of his co-

venturer's mischief and still believing himself to be a party to

the Biopure contract, traveled to Guatemala in early 1990 to

oversee clinical testing of Biopure's product. Although the

extent of Fisher's labors in Guatemala are much disputed, Fisher

claims to have spent substantial time and effort there acquiring

2 Fisher on occasion disputes that the Term Sheet was
merely a draft agreement; indeed, below we discuss his claim
that the Term Sheet was a binding agreement between himself and
Biopure which Biopure breached. But in order to make sense of
his claim against Trainor, which we consider to be his primary
claim, it is necessary to assume that the Term Sheet was merely
a draft agreement, replaced by a final agreement fraudulently
manipulated by Trainor.

-5-
governmental approval for the clinical trials and overseeing

their administration.

In June 1990, Biopure was alerted to various facts about

Trainor and Fisher's backgrounds. Among other things, Biopure

learned that Trainor and Fisher both had considerable histories

of being sued for fraud and financial misdealing; further,

Trainor had several convictions for fraud and other white-collar

crimes. Believing that Trainor and Fisher had misrepresented

themselves by not earlier revealing these facts, and worrying

about the integrity of their dealings with Biopure, Biopure

rescinded the Biopure contract in August 1990.

From these events, a tangle of claims emerged, sprawling

across two (eventually consolidated) lawsuits. For the purposes

of this appeal, only the following need be mentioned:

(1) Trainor sued Biopure for breach of the Biopure contract.

(2) Fisher sued Trainor under various theories for

defrauding him of his share of the Biopure contract rights.

Among other forms of relief, Fisher sought a constructive trust

over the rights. Fisher also sued Biopure for breach of

contract and related counts.

(3) Biopure sued both Trainor and Fisher for fraud,

racketeering, and related counts; among other forms of relief,

-6-
it sought a declaration that the Biopure contract was void for

fraud and that its recission was effective.

(4) CFI brought claims against Trainor, Fisher, and Biopure

for a constructive trust over the Biopure contract rights, on

the ground that those rights had been acquired using funds

fraudulently obtained from CFI.

Much of the early proceedings in the case concerned Fisher's

claim that Trainor had violated their oral joint venture

agreement by substituting Bio-Vita as the named party to the

Biopure contract. That claim was tried before a jury in 1992.

The jury issued a special verdict, but Trainor and Fisher were

unable to agree on its meaning, and a mistrial was declared.

The later proceedings in the case give rise to the current

appeal. In July 1994, the district court granted summary

judgment to CFI against Trainor, awarding CFI a constructive

trust over the Biopure contract rights (the choses in action in

Trainor's suit against Biopure) and allowing CFI to step into

Trainor's shoes to litigate those rights. The court noted that

its decision did not address Fisher's claims and their possible

effect on CFI's constructive trust.

In December 1994, the district court granted summary

judgment to both Biopure and CFI against Fisher. As to

Biopure's motion for summary judgment, the court found that

-7-
Fisher could only assert claims against Biopure in his capacity

as a partner to the joint venture. But because any rights that

the joint venture might have had against Biopure were

transferred to CFI by way of the July judgment, Fisher was now

precluded from suing on these rights directly. As to CFI's

motion for summary judgment, the court held that any claim

Fisher had to a constructive trust over the Biopure contract

rights was trumped by CFI's claim to such trust. The court

reasoned that "[a]s between victims of a fraud who are unrelated

to the person responsible for the fraud and a partner of the

defrauder, even one who may have himself been victimized, it is

clearly fair to impute the fraud to the latter."

In CFI v. Bio-Vita, we heard appeals from the July and

December summary judgment orders. Trainor originally appealed

the July judgment, but voluntarily dismissed his appeal early in

the appellate process. Fisher also appealed the July judgment,

but belatedly and in a manner that prevented proper briefing.

We declined to relieve Fisher of his errors and thus let the

July judgment stand. CFI v. Bio-Vita, 78 F.3d at 708.

Our disposition of the appeal of the December judgment was

more complex. We found that we lacked jurisdiction to review

the judgment because it had been prematurely certified as final:

the claims it concerned so overlapped with claims still pending

-8-
below as to make final certification inappropriate under Fed. R.

Civ. P. 54(b). Id. We found such overlap was traceable, inter

alia, to a claim Fisher had not presented until appellate oral

argument: Fisher claimed that his labors in Guatemala

constituted a contribution to the value of the Biopure contract

rights untainted by Trainor's fraud on CFI. Such "sweat

equity," we noted, possibly entitled him to a proportionate

share of CFI's constructive trust over those rights, if he could

overcome his waiver of the claim. However, we declined to

determine whether Fisher should be relieved from his waiver.

Instead, we instructed the district court to make such

determination on remand after further development of the factual

record. That determination, we advised, would turn on whether

(1) Fisher's "sweat equity" argument was so compelling as

virtually to ensure his success, and (2) whether failure to

address it would result in a gross miscarriage of justice -- in

particular by leaving CFI with a gross windfall, insofar as the

value of the Biopure contract rights which it held greatly

exceeded its losses resulting from Trainor's fraud. Id. at 709.

On remand, the district court developed the factual record as we

instructed, reopening discovery to allow Fisher to adduce

evidence of his "sweat equity" and the value of the Biopure

contract rights.

-9-
 Meanwhile, in December 1996, CFI settled its claims against

Biopure, effectively liquidating its constructive trust over the

Biopure contract rights. The settlement agreement calls for

Biopure to pay CFI approximately $3.35 million plus interest --

roughly reimbursing CFI for the approximately $3.05 million

Trainor stole from it and used in the Biopure venture.

In February 2000, the district court denied Fisher's request

to be relieved from his waiver, finding that Fisher's "sweat

equity" contributions to the Biopure venture were minimal and

that in any event CFI had reaped no windfall from the

constructive trust. It also observed that, since this court's

ruling in CFI v. Bio-Vita, many of the claims that were pending

at that time had by now been either settled or dismissed. The

only claims still pending before the district court were

Fisher's claims against Trainor (and related counterclaims

Trainor has made against Fisher); and as to these pending

claims, the district court found no overlap with the claims

adjudicated in the December judgment. Accordingly, the court

recertified the December judgment as final.

II.

We begin by addressing the propriety of the district court's

recertification of the December judgment, on which our

jurisdiction to review the judgment depends. In CFI v. Bio-

-10-
Vita, our finding of an impermissible overlap between claims on

appeal from the December judgment and claims still pending

before the district court rested on the following factors.

First, all parties on appeal still had claims pending below, and

final certification is particularly suspect in such

circumstances. Second, Biopure's pending fraud and racketeering

claims against Fisher and CFI's pending claims against Biopure

overlapped with claims on appeal from the December judgment, in

that they all touched on Trainor's fraud on CFI and Fisher's

culpability for it. Third, Fisher's pending claims against

Trainor potentially overlapped with the claims on appeal from

the December judgment in that both concerned Fisher's "sweat

equity" contribution to the Biopure venture; that overlap

depended, however, on whether Fisher should be allowed to raise

the "sweat equity" argument despite his earlier failure to do

so.

Since our remand, each of these barriers to final

certification has been eliminated. Biopure and CFI, having

settled or dismissed all of their claims that were pending at

the time of our earlier decision, are no longer parties to any

claims presently pending before the district court. Thus there

are no longer any overlaps traceable to their claims. Fisher

still has claims pending against Trainor in which Fisher's

-11-
"sweat equity" may be an issue; but given that the district

court declined to relieve Fisher from his waiver of the "sweat

equity" argument, the potential overlap we feared in CFI v. Bio-

Vita has not been realized.3 Hence we conclude that the district

court did not abuse its discretion in recertifying the December

judgment, and that the judgment is properly before us on appeal.

III.

The appeal presents two questions: first, whether Fisher has

any claims remaining against Biopure; second, whether Fisher is

entitled to any portion of the constructive trust awarded CFI

over the Biopure contract rights. Our review of the district

court's summary judgment on these questions is de novo. See

Thomas v. Eastman Kodak Co., 183 F.3d 38, 47 (1st Cir. 1999),

cert. denied, 528 U.S. 1161 (2000). The law of Massachusetts

3 There does remain a slight overlap with respect to the
"sweat equity" issue: on appeal, we must review whether the
district court properly declined to relieve Fisher from his
waiver of the "sweat equity" argument; and below, evidence of
Fisher's "sweat equity" might play a role in his claims against
Trainor. But our inquiry concerns only whether evidence of
Fisher's "sweat equity" is so compelling as to warrant relief
from waiver, and this distinct legal issue is not likely to
recur in a future appeal of Fisher's claims against Trainor.
Moreover, as a practical matter, Fisher has not pursued his
claims against Trainor for over five years now and all but
admitted at oral argument that he was not likely to pursue them
after this appeal. Thus, there is simply no realistic threat
here of redundant piecemeal review that would counsel against
final certification.

-12-
governs.4

A. Claims Against Biopure

Fisher's leading claim against Biopure on appeal is for

breach of contract. Fisher claims that the so-called "Term

Sheet" between Balfour and Biopure was not a draft agreement

later superceded by the Biopure contract, but rather is a

binding agreement by itself, and that Biopure is in breach by

refusing to recognize Fisher's rights under it.5

The problem with Fisher's claim is that, as the district

4 Although the district court made no express choice-of-
law determination, see Bio-Vita v. CFI, 78 F.3d at 708 n.16, the
parties assume that Massachusetts law governs, and we do not
choose to question the parties' assumption. See New Ponce
Shopping Ctr. v. Integrand Assur. Co., 86 F.3d 265, 267 (1st
Cir. 1996).
5 Fisher makes two other claims against Biopure on
appeal: first, he argues a promissory estoppel claim, alleging
that Fisher relied on the promises made in the Term Sheet in
undertaking his labors in Guatemala; second, he claims that
Biopure was unjustly enriched by Fisher's work in Guatemala. We
address these claims only briefly here because Fisher's
argument for them on appeal is wholly frivolous. Fisher's sole
argument is that the district court erred in granting summary
judgment on these claims in its December 1994 judgment because
three years earlier it had denied Biopure's motion for summary
judgment on these same claims, and that earlier ruling stands
as law of the case. Fisher is simply wrong that the court's
earlier ruling constitutes the law of the case: "an initial
denial of summary judgment does not foreclose, as the law of the
case, a subsequent grant of summary judgment on an amplified
record." Bonnie & Co. Fashions, Inc. v. Bankers Trust Co., 955
F. Supp. 203, 210 (S.D.N.Y. 1997); see also Bethlehem Steel
Export Corp. v. Redondo Constr. Corp., 140 F.3d 319, 321 (1st
Cir. 1998). Any other argument Fisher might have made in
support of these claims he has waived by not raising on appeal.

-13-
court held, at this point in the litigation any contract rights

arising out of Fisher's joint venture with Trainor belong to

CFI. Regardless of whether those rights derive from the Term

Sheet or the Biopure contract, the point of the district court's

July 1994 judgment was to grant CFI a constructive trust over

those rights, because they had been acquired with funds

defrauded from CFI. The July judgment did leave Fisher room to

claim a stake to CFI's constructive trust, and we consider his

claims on that point below; but unless and until he succeeds on

those claims, only CFI has the right to recover under any rights

against Biopure arising from the Fisher-Trainor joint venture.

Apparently recognizing this obstacle to suit, Fisher

obscurely claims "in the alternative" that he never entered into

any contract with Biopure as part of a joint venture with

Trainor. Rather, he says, he entered into his own contract with

Biopure in the form of the Term Sheet, while Trainor contracted

with Biopure separately. Thus, he concludes, his is an

independent claim: he claims rights against Biopure wholly

independent from any rights acquired by Trainor with tainted

funds, and hence wholly independent from the rights granted CFI

in the July judgment.

This rank revisionism can be quickly dismissed. Throughout

the course of the litigation, Fisher has maintained that the

-14-
Term Sheet was negotiated not on his personal behalf, but on

behalf of his joint venture with Trainor. Not only did Fisher

state in his complaint that "Fisher and Trainor agreed that they

would use Balfour as a vehicle for their transaction with

Biopure," and that the Term Sheet was negotiated with Balfour

"being used on behalf of the joint venture," but Fisher later

swore to the same in a 1991 affidavit, and again in the 1992

trial proceedings.6

Thus Fisher cannot claim to have entered any independent

contract with Biopure. If the Term Sheet was a binding

contract, it was entered into jointly by Fisher and Trainor, and

the fact remains that whatever rights the joint venture acquired

it acquired with funds Trainor defrauded from CFI.

Consequently, Fisher cannot escape the reach of the July

judgment, which granted to CFI any rights so acquired. The

district court's grant of summary judgment on Fisher's claims

against Biopure was thus not in error.

6 Moreover, Fisher's suggestion of parallel independent
contracts is problematic for myriad other reasons. For example,
it is highly dubious that Biopure would intentionally enter
contracts granting the same equity interests and licensing
rights to two independent parties. Or another example: if
Fisher did enter the Term Sheet independently, he would appear
to be in breach; for the agreement calls for the contracting
party to transfer millions to Biopure in consideration, and
Fisher admits that, unlike Trainor, he did not make any
significant financial outlays whatever in his dealings with
Biopure.

-15-
B. Claims to CFI's Constructive Trust

We turn next to Fisher's claim to a portion of CFI's

constructive trust. Fisher's claim is two-pronged. First, he

argues that as an equal partner in the Biopure venture, he is

entitled to share in the fruits of the venture, namely, the

Biopure contract rights. This is so, Fisher maintains, even to

the extent that the rights were acquired with funds Trainor

defrauded from CFI, because Fisher was at all relevant times

innocent of the fraud. Second, Fisher raises the argument he

earlier waived: even assuming he has no claim to the fruits of

the joint venture insofar as they are tainted by Trainor's

fraud, he still has a claim to any untainted portion, i.e., he

still has a claim to the extent that they were acquired through

his own "sweat equity."

As to Fisher's first argument, the applicable legal

principles are clear when each is taken in isolation; what is

difficult to see at first blush is how those principles

intersect. First, it is clear that if Trainor had never

defrauded CFI, but rather had only defrauded Fisher by cutting

him out of the Biopure contract, then Fisher would be entitled

to impose a constructive trust on the contract rights on behalf

of the joint venture, securing his fifty-percent share in the

rights. For where a partner usurps a benefit properly belonging

-16-
to the partnership, he holds it in trust for the partnership, so

that any innocent partner is "put as nearly as possible in the

same position which he would have occupied if there had been no

wrongdoing." Meehan v. Shaughnessy, 535 N.E.2d 1255, 1270

(Mass. 1989) (quoting Shulkin v. Shulkin, 16 N.E.2d 644, 651

(Mass. 1938)).

Second, it is clear that if Trainor had never been Fisher's

co-venturer, but rather had only defrauded CFI and later entered

the Biopure venture wholly on his own, then CFI would be

entitled to impose a constructive trust on the Biopure contract

rights in their entirety. For where one person wrongfully takes

the property of another and exchanges it for other property, the

wronged party is generally entitled to assert a constructive

trust over the property received in exchange. See 5 Austin W.

Scott & William F. Fratcher, Scott on Trusts § 508.1, at 561

(4th ed. 1989). Moreover, it is undisputed that all of

Trainor's contributions to the Biopure venture consisted of

funds tainted by his fraud on CFI; so Trainor could have no

claim to any untainted portion of the Biopure contract rights.

Cf. id. § 516, at 610-11 (explaining that where wrongdoer

acquires property with both tainted and untainted funds, wronged

party is entitled only to a share of the property proportional

to taint and may impose a constructive trust on the property

-17-
only to that extent).

In short, had Trainor only defrauded the joint venture, the

joint venture would be entitled to the Biopure contract rights.

Likewise, had Trainor only defrauded CFI and never entered the

joint venture, CFI would be entitled to the Biopure contract

rights. The question that we must decide is if, as we assume

arguendo, Trainor acquired the Biopure contract rights through

frauds on both CFI and the joint venture, whose claim to the

rights has priority?

In arguing this question, the parties have embarked on

something of a wild goose chase. CFI argues that Fisher cannot

claim any proceeds from the funds Trainor defrauded from CFI

because, under Massachusetts partnership law, Fisher is

vicariously liable for Trainor's actions as his co-venturer.

The district court took the same position, holding that "even

the most innocent joint venturer cannot escape liability for the

acts of another principal carried out on behalf of the joint

venture." Fisher answers that he cannot be held vicariously

liable for Trainor's fraud on CFI because it occurred prior to

the formation (and therefore outside the scope) of the joint

venture. CFI replies that, while Fisher may not be liable for

Trainor's fraud on CFI prior to the formation of the joint

venture, he is nonetheless liable for Trainor's "fraudulent use"

-18-
of CFI's funds, which did occur in the scope of the joint

venture; however, CFI fails to explain how the mere use of CFI's

funds in the Biopure venture constitutes an independent fraud on

CFI.

This debate, however, is simply irrelevant to the question

at hand. CFI need not establish vicarious liability in order to

succeed on its constructive trust claim. A constructive trust

claim is grounded in the law of unjust enrichment; thus, in

order to impose a constructive trust on the joint venture's

holdings, CFI need not prove that the joint venture vicariously

wronged CFI, but rather it need only prove that the joint

venture holds what does not rightfully belong to it. See

Higgins v. Shenango Pottery Co., 256 F.2d 504, 508 (3d Cir.

1958) (distinguishing between recovery against partnership on

vicarious liability theory and constructive trust theory); see

also 1 Alan R. Bromberg & Larry E. Ribstein, Bromberg & Ribstein

on Partnership § 4.07(a) n.8 (1991 & Supp. 1999) (noting that

although partnership is vicariously liable for partner's acts

only if committed during partnership, "a court might impose a

constructive trust on property or funds received by a

partnership as a result of a partner's wrongful pre-formation

act").

Thus, even if Trainor's fraud against Fisher is remedied,

-19-
Fisher still cannot shield himself from CFI's constructive trust

claim. Remedying Trainor's fraud against Fisher merely undoes

Trainor's "switch," restoring the joint venture as the party to

the Biopure contract. Even with the Biopure contract rights

restored to the joint venture, however, the joint venture must

in turn hand over the contract rights to CFI, because they were

acquired with CFI's funds. The only way the joint venture could

stave off this result is if it were a bona fide purchaser of

CFI's funds. See generally Restatement (First) of Restitution

§ 168 cmt. b (1937 & Supp. 1997); Scott & Fratcher, supra, at §

507. But clearly it is not. In no sense did the joint venture

give value for the funds; rather, the funds were simply

Trainor's contribution of equity to the venture.7

So Fisher has no claim to the Biopure contract rights

superior to that of CFI, insofar as the rights were acquired

with CFI's funds. The next question, then, is whether the

Biopure contract rights were acquired to any extent through

7 There is a further argument that, even had the joint
venture given value for the funds, it was not without notice of
CFI's claim to the funds, as is required of a bona fide
purchaser. See Mass Gen. Laws ch. 108 § 12 (1999) (one
partner's knowledge of any matter relating to partnership
affairs operates as knowledge of the partnership); see also
Bromberg & Ribstein, supra, at § 4.06(d), at 4:104.1-4:105
(where partner contributes to partnership certain property
defrauded from third party, there is some authority for charging
partnership with constructive knowledge of the property's
taint). We do not reach the question, however.

-20-
independent, untainted contributions to the joint venture by

Fisher, in which case Fisher would be entitled to keep that

portion of the contract rights corresponding to such

contributions. See Provencher v. Berman, 699 F.2d 568, 570-571

(1st Cir. 1983). Fisher concedes that all the financial

contributions to the venture were made by Trainor, and that he

can claim to have made only "sweat equity" contributions to the

venture. As we held in CFI v. Bio-Vita, because Fisher waived

any "sweat equity" argument in the earlier proceedings before

the district court, he could raise it later only if, first, the

argument were so compelling as virtually to insure his success,

and second, failing to address it would result in a gross

miscarriage of justice -- in particular, a windfall to CFI

grossly disproportionate to its losses. See 78 F.3d at 709-10.

Fisher has proven neither proposition, as the district court

correctly held. He has not put forward compelling evidence that

a significant portion of the value of the Biopure contract

rights is attributable to his "sweat equity." It appears that

his most significant "sweat equity" contribution was merely

recruiting to the joint venture a business associate who vaguely

alleges that he helped "cut through red tape" in order to

expedite the Guatemalan clinical trials of Biopure's product.

-21-
As for Fisher's claim that he "was strongly involved in all the

coordination" of the studies, Fisher conceded in the 1992 trial

that he himself spent only five days in Guatemala during the

trials and that his personal involvement was "very superficial."

Suffice it to say that, compared to the approximately $3

million in capital Trainor contributed to the joint venture,

Fisher's evidence of his "sweat equity" is not so compelling as

virtually to insure his success.8

Even more clear is that Fisher cannot demonstrate that

failure to award him a portion of CFI's constructive trust will

yield a gross windfall to CFI. In settling with Biopure, CFI

has liquidated the trust, for an amount roughly equivalent to

the funds used in the Biopure venture, plus interest. 9 We

8 The mere fact that Fisher and Trainor at one time
agreed to split profits does not imply that Fisher's "sweat
equity" contribution to the joint venture should be
presumptively valued at half the venture's worth. For when
Fisher and Trainor originally agreed to split the proceeds of
their joint venture, Fisher had planned to contribute half of
the venture capital. It was only later that Trainor, perhaps as
part of his plan to defraud Fisher, insisted that he would
supply all the capital himself. There is no evidence that the
two ever agreed that Fisher would receive half the proceeds of
the joint venture based merely on his "sweat equity."
9 The CFI-Biopure settlement does not correspond exactly
to the amount Trainor stole from CFI: the agreement calls for
Biopure to pay CFI $300,000 in cash and $3.05 million plus
interest into escrow; by comparison, the district court found in
its July judgment that Trainor stole approximately $3.05 million
from CFI. However, under the settlement, interest is assessed
only starting in 1995, whereas CFI was defrauded of its funds in

-22-
presume that settlement fairly represents the value of the

underlying claims. Cf. City Partnership Co. v. Atlantic

Acquisition Ltd. P'ship, 100 F.3d 1041, 1043-44 (1st Cir. 1996).

There is no evidence, sufficient to rebut that presumption, that

CFI intentionally settled for less than the trust was worth in

order to sidestep the concerns about a gross windfall we voiced

in our earlier opinion. In fact, before our earlier opinion,

CFI and Biopure had reached a tentative settlement for a lesser

amount than they agreed upon subsequently.

Fisher disputes that the settlement accurately represents

the value of the Biopure contract rights; he claims that the

rights are worth hundreds of millions, based on the current

value of Biopure stock. His valuation is flawed for a number of

reasons, but most importantly because it assumes that the joint

venture's contract with Biopure is valid, even though Biopure

rescinded the contract in 1990. In settling with Biopure, CFI

had to anticipate the likelihood that, were it to try the joint

venture's claims against Biopure for breaching the contract,

Biopure might succeed in proving the contract void for fraud and

its recission effective. This factor alone could account for

1989. Moreover, CFI credibly claims to have incurred
considerable legal costs in litigating this case over many
years. Under these circumstances, we cannot conclude that CFI
has received any windfall as a result of the settlement, let
alone a gross windfall.

-23-
any discrepancy between the amount of the Biopure-CFI settlement

and Fisher's valuation of the contract rights.

Hence, because Fisher's "sweat equity" argument is neither

compelling nor necessary to consider in order to avoid a gross

miscarriage of justice, the district court was correct not to

relieve Fisher of his waiver. CFI thus was entitled to a

constructive trust over the Bio-Vita contract rights in their

entirety, and its settlement with Biopure is entitled to remain

intact.

IV.

For the foregoing reasons, the judgment of the district

court is affirmed.

-24-