Bamberg v. Goldman, Sachs & Co.

United States Court of Appeals
For the First Circuit

Nos. 13-2173
13-2208

JAMES AND JANET BAKER; PAUL G. BAMBERG AND ROBERT ROTH,

Plaintiffs, Appellants,

v.

GOLDMAN, SACHS & CO., ET AL,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Patti B. Saris, U.S. District Judge]

Before

Lynch, Chief Judge,
Torruella and Ripple,* Circuit Judges.

Alan K. Cotler, with whom Joan A. Yue, Debra A. Djupman, Roy
D. Prather III, Reed Smith LLP, Peter C. Horstmann, and Partridge,
Ankner & Horstmann, LLP were on brief, for appellants James and
Janet Baker.
Christian M. Hoffman, with whom Jack R. Pirozzolo, Catherine
C. Deneke, and Foley Hoag LLP were on brief, for appellants Paul G.
Bamberg and Robert Roth.
John D. Donovan, Jr., with whom Daniel V. McCaughey, Matthew
L. McGinnis, Timothy R. Cahill, Ropes & Gray LLP, Paul Vizcarrondo,
John F. Lynch, Carrie M. Reilly, Lindsey M. Weiss, Molly K. Grovak,
and Wachtell, Lipton, Rosen & Katz were on brief, for appellees
Goldman, Sachs & Co., et al.

*
Of the Seventh Circuit, sitting by designation.
November 12, 2014
 LYNCH, Chief Judge. Dragon Systems, Inc. ("Dragon"), a

leading voice recognition software company in the late 1990s,

needed infusions of capital to continue operations and so sought an

acquisition partner. It hired an investment banker, Goldman Sachs

("Goldman"), to assist it. Dragon was acquired in June 2000 by

Lernout & Hauspie Speech Products N.V. But Lernout & Hauspie had

fraudulently overstated its earnings. When that was learned,

bankruptcy ensued for the merged company, and the name Dragon and

its technology were sold from the estate.

Naturally, considerable litigation followed out of this

debacle, including these suits against Goldman by two groups of

Dragon shareholders. Goldman has been found not liable both by a

jury on claims of negligent performance of services, gross

negligence, intentional and negligent misrepresentation, and breach

of fiduciary duty, and also by a court on claims of violations of

Mass. Gen. Laws ch. 93A. After a jury found in favor of Goldman on

all of plaintiffs' common-law claims on January 23, 2013, the

district court found that Goldman had not engaged in unfair or

deceptive conduct in violation of ch. 93A. The two groups of

shareholder plaintiffs appeal from the district court's ruling on

their 93A claims, essentially arguing that there is an incongruity

between the court's findings of fact and its non-liability finding,

such as to justify reversal. As to the jury verdict, plaintiffs

argue that they are entitled to a new trial on their common law

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claims because of evidentiary errors and erroneous jury

instructions. Finding no error, we affirm.

I.

A. Factual Background

We tell the facts as found by the jury and the court.

Plaintiffs and now appellants James and Janet Baker,

Robert Roth, and Paul Bamberg in 1982 founded Dragon, a speech

recognition technology company. Dragon, a closely-held corporation

headquartered in Newton, Massachusetts, manufactured and sold

software which recognized spoken commands and transcribed ordinary

conversational speech. The Bakers, Bamberg, and Roth were

principal shareholders in the company and served at various times

as members of Dragon's board of directors and senior management.

At the time of the events giving rise to this lawsuit, the Bakers

and Seagate Technology (a principal investor in Dragon) owned 90%

of the company, while Bamberg and Roth owned 8%. At oral argument,

counsel for Bamberg and Roth referred to Bamberg, Roth, and James

Baker as the "brains behind [Dragon's] technology." Janet Baker

was Dragon's CEO from 1998 until 1999, when she was asked to

resign. The district court found that Janet Baker was "considered

difficult to work with" while she was CEO.

By the end of the 1990s, "Dragon had an extensive

research and development pipeline for future products and

opportunities . . . which included speech recognition for mobile

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telephones and handheld devices." These were called Dragon's

"golden eggs." The company was considered "a leader in speech

technology products" and was valued at roughly $600 million.

Despite Dragon's apparent eminence in the field, the company's

financial condition was in fact perilous. Dragon lost money in

every year of its existence, save one. By the end of the 1990s,

Dragon employees and executives were concerned about the company's

ability to make payroll. Dragon began to consider merging with

another company in order to obtain a capital infusion so that it

could develop the "golden eggs" and make them profitable.

In the fall of 1999, competing bidders Lernout & Hauspie

Speech Products N.V. ("L&H") and Visteon Automotive Systems

("Visteon"), a subsidiary of Ford, each offered to acquire Dragon

for approximately $580 million. Dragon then sought out Goldman to

be its investment banker. On December 8, 1999, Ellen Chamberlain,

as Dragon's Chief Financial Officer, signed an agreement (the

"Engagement Letter") with Goldman. Goldman agreed to "provide

[Dragon] with financial advice and assistance in connection with

this potential transaction, which may include performing valuation

analyses, searching for a purchaser acceptable to [Dragon],

coordinating visits of potential purchasers and assisting [Dragon]

in negotiating the financial aspects of the transaction."1 The

1
The testimony at trial generally confirmed this
description of Goldman's responsibilities in connection with the
transaction. For example, Janet Baker testified that Goldman was

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Engagement Letter stated that Goldman would receive a $150,000

quarterly fee, as well as a payment of at least $2 million if the

sale were consummated.

Significantly, the Engagement Letter also contained an

exculpation clause ("Annex A") providing that Dragon, Seagate, and

Janet Baker would not hold Goldman liable for any derivative claims

arising out of Goldman's services to Dragon "except to the extent

that any . . . claims . . . result from the gross negligence,

willful misconduct or bad faith of Goldman Sachs . . . ." Janet

Baker and Seagate signed the Engagement Letter agreeing to the

above-quoted sentence from Annex A (the only provision of the

agreement that involved them in their personal capacities).

A prior draft of the Engagement Letter, which had been

rejected, had, by contrast, provided that Goldman was engaged by

Dragon and by Janet Baker and Seagate in their capacity as

stockholders. The earlier rejected draft had also made those

stockholders guarantors of Dragon's obligation to pay Goldman for

its services. The final Engagement Letter omitted the reference to

"basically hired to facilitate a transaction." She explained, "we
were looking at doing a transaction where they would help us do
whatever due diligence needed to be done, would have facilitated us
-- which could be raising issues that needed to be addressed . . .
and negotiating the terms, looking at comparables of various kinds,
and giving us their advice." Christopher Fine of Goldman similarly
explained, "[a]s I understood it, we were retained to give input
and advice and help facilitate a . . . process . . . that was said
to be in its later stages, but [sic] to advise the company on any
and all aspects where we could provide expertise in the context of
completing this process."

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"stockholders" because Janet Baker did not wish to be personally

liable for Goldman's fee. Thus, the Engagement Letter was between

Dragon (the company) and Goldman (with the exception of the

exculpation clause, to which, as noted above, Janet Baker and

Seagate also agreed).

Goldman assembled a four-person team to work on the

Dragon merger: T. Otey Smith, Alexander Berzofsky, Richard Wayner,

and Christopher Fine. Wayner was the leader of the team. The

record shows that Wayner was an experienced banker, having been

involved in numerous transactions during his career at Goldman.

Even before the Engagement Letter was signed, the Goldman team

began to involve itself in the process of conducting financial due

diligence on L&H. A jury could easily have concluded that Ellen

Chamberlain, the CFO of Dragon, was ultimately in charge of the due

diligence, and Goldman's role was to assist her in multiple ways.

On December 16 and 17, 1999, the Goldman team met with

both sets of plaintiffs and other senior Dragon management to

discuss the buyout proposals. Some of the Dragon management,

particularly Bamberg, had serious reservations about merging with

L&H. Bamberg expressed concern over L&H's employment practices and

"questionable financials." At trial, he testified that "everyone

around the table had got the message that I was skeptical about

L&H." The Goldman team identified several potential "issues" with

the L&H proposal -- for example, the volatility of L&H's stock,

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"[p]ast accounting practices re: R&D," and concerns about the

percentage of L&H's growth that was due to organic growth versus

growth by acquisition. Dragon's then-President John Shagoury

testified that Goldman "dicuss[ed] these issues with the Board" and

that, for the most part, the Board's "concerns were allayed with

explanation of what those [issues] were all about."

On December 20, 1999, Dragon entered into a period of

exclusive negotiation with Visteon. The negotiations did not prove

fruitful, and in February 2000 Dragon and Visteon allowed the

exclusivity period to lapse.

Dragon then turned its full attention to a possible

merger with L&H. At this point, the Board was "focused on speed

and certainty" because of Dragon's deteriorating financial

situation. Dragon needed the capital from a merger.

On February 9, 2000, L&H, for its part and independently

of the merger discussions, had an earnings conference call with

analysts and released its Q4 1999 earnings. L&H stated during that

call that its earnings in Asia had increased over 1000 percent,

while growth in the United States and Europe was much slower.

On February 14, the Bakers received a news article by e-

mail that both reported the L&H earnings call and raised questions

regarding the reported disparity between ample growth in Asia and

growth elsewhere. The record does not indicate whether the Bakers

raised this news article with other Dragon executives or with

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Goldman. The district court found that "[p]laintiffs were aware of

L&H's growing Asian revenues, and considered the matter to be an

important issue." Goldman did not have an analyst covering L&H at

the time, and no one at Goldman participated in the earnings call

or communicated information about the call to anyone at Dragon.

On February 17, 2000, Chamberlain e-mailed the Goldman

team to complain about the lack of progress on doing due diligence

on L&H. She "specifically requested that Goldman 'drive and

analyze' the due diligence" and identified several outstanding

issues with respect to the process. The Goldman team continued to

send due diligence requests to L&H, but it did not receive

satisfactory answers. Consequently, when Goldman prepared draft

evaluation books, it "simply included the future revenue

projections [it] received from L&H."

A key event occurred on February 29, 2000, when Goldman

faxed Dragon a memo addressed to Dragon and copied to Hale & Dorr,

Dragon's legal counsel. The facsimile transmission sheet

instructed the recipient to "forward to Paul Cohen [Dragon's in-

house counsel], Don Waite [Dragon's CEO], and Janet Baker

immediately." It was not copied to Roth or Bamberg. The memo was

entitled "Lernout & Hauspie -- Due Diligence & Accounting Issues,"

and read in part:

[T]here are several areas where we feel
greater insight and clarity needs to be gained
with respect to both due diligence and
accounting. . . . [W]e would like to re-

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 iterate our point of view that additional due
diligence, led by accounting professionals on
both sides, is important to gain greater
comfort with respect to some of the issues
indicated below.
Our experience shows that companies
like . . . L&H[], which grow via acquisition,
necessitate an extra level of care at this
stage of the process. This only becomes more
important as Dragon shareholders and employees
are ready to receive, and in some instances,
hold L&H common shares and/or options, as part
of the merger consideration. Our
recommendation is that Dragon's certified
public accountants perform comprehensive due
diligence on L&H, side by side with
management, Hale & Dorr and Goldman Sachs.

The memo then listed several specific areas of concern.

Bamberg and Roth did not receive a copy of this memo, and

they maintain that neither the Bakers nor any other members of

Dragon's senior management ever informed them of its contents.

Chamberlain, for her part, was dissatisfied with

Goldman's work. She testified that she found it "ironic that [the]

memo was written after I wrote a memo to Goldman Sachs telling them

what my expectations were from a banker and pretty much they cut

and pasted it back . . . ." It appears that this was an internal

gripe; Chamberlain did not testify that she told anyone at Goldman

of her frustration at receiving the February 29 memo. Indeed, we

have not been pointed to any evidence that anyone at Dragon ever

told Goldman that its performance was unsatisfactory, or that it

was expected to play a larger role with regard to the due diligence

process.

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 There is conflicting evidence in the record as to whether

Dragon actually followed the advice contained in the February 29

memorandum from Goldman. Janet Baker testified that Dragon took

Goldman's concerns seriously and that the Dragon team, led by

Chamberlain, went "through each and every one of these points and

discuss[ed] them at length." She explained further that Goldman

"had made some recommendations about things that [Dragon's

accountant] Arthur Andersen should look at, and we had Arthur

Andersen look at those things." But Catherine Moy of Arthur

Andersen testified that Arthur Andersen was not aware of the

February 29 memo and was never asked to implement Goldman's

recommendations. Goldman's Wayner testified that Chamberlain was

"resistant to move forward on these items" because "she and Dragon

did not want to do this level of additional detail."

The district court found that the Goldman team remained

unsatisfied with L&H's due diligence responses, but did not repeat

their concerns to anyone at Dragon after sending the February 29

memo.

Also on February 29, all plaintiffs participated in a

conference call with Goldman's Wayner and Charles Elliott, a

European software research analyst whom Goldman had recruited to

help the Bakers assess the value of L&H's stock. Goldman, as said,

did not have an analyst covering L&H at the time, and Elliott was

unaware of L&H's February 9 earnings report. Apparently, the L&H

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earnings report was not mentioned on the call. Elliott commented

generally on the state of the European software market and

speculated (correctly, as it turned out) that the stock market

would react positively to Dragon's merger with L&H. Elliott later

testified that, had he known of L&H's skyrocketing Asian revenues,

he would have been skeptical of them because he "kn[ew] something

about Asian languages, and . . . the phonetic structure makes it

incredibly difficult to take a European dictation software system

and apply it . . . to Asian languages."

On March 7, 2000, L&H announced that it had agreed to

acquire a company called Dictaphone Corporation and to assume $425

million of Dictaphone's debt. The Goldman team did not update its

evaluation of the L&H-Dragon merger to include analysis of the

effects of that transaction. Neither the district court's findings

nor the submissions of the parties indicate whether Goldman

communicated this information to anyone at Dragon or whether Dragon

knew of this acquisition from other sources.

Discussions between Dragon and L&H on a proposed merger

had continued. On March 8, 2000, CEO Waite and the Bakers met with

a team from L&H to discuss the terms of the proposed merger. Roth,

Bamberg, and the members of the Goldman team were not at this

meeting. L&H offered to buy Dragon for $500 million, half cash and

half stock, but the Bakers declined the offer and made a

counteroffer.

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 Janet Baker, on behalf of Dragon, then signed a

handwritten agreement drafted by CEO Waite under which L&H would

buy Dragon for $580 million, all stock. The Bakers and Waite did

not consult Goldman, Chamberlain, or the other Dragon board members

before Janet Baker executed the handwritten agreement.

After the execution of the agreement, on March 22, 2000,

CFO Chamberlain held a conference call with accountants from Dragon

and L&H to discuss the due diligence issues identified by Goldman

in the February 29 memo. The parties dispute whether any Goldman

employees were on this call, but the district court found that

Goldman's Berzofsky participated in this call.2 Chamberlain

testified that there were still "open issues" with respect to due

diligence after this call.

Importantly, the next day, March 23, the Goldman team and

the Dragon board of directors had a conference call to discuss the

status of due diligence. There is conflicting evidence regarding

what precisely was said at the meeting. The district court found

that the participants all agreed due diligence was completed. That

finding is supported by the record.3 The court also found that

2
In contesting this finding, Goldman points out that
Berzofsky was not a recipient of the March 21 e-mail providing the
call information.
3
James Baker testified that he had a "visual image" of
"collectively everybody in the room turning to Ellen [Chamberlain]
to report on whether -- ask the questions, have the accounting
questions been asked to [L&H's accountant] KPMG, and we turned to
her and she said yes."

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"the Goldman team did not state they were still dissatisfied with

due diligence, even though they were." That is also supported by

the record.

On March 27, 2000, Dragon board members and executives

held a meeting to consider the transaction as to which Janet Baker

had executed the March 8 handwritten agreement. All of the

plaintiffs attended the meeting, as did Waite, Chamberlain,

Shagoury, Fine, and Smith. Goldman's Wayner called into the

meeting. The evidence shows that Goldman offered tempered but

positive comments about the proposed merger. For example, Fine

testified that Goldman's assessment was "positive in the overall,"

but he also stated that Goldman "did not give an opinion pro or con

on the transaction" and that Waite "was displeased that [Goldman]

had not . . . been more positive or given more support or [a] more

definitive opinion." Still, Wayner testified that he did not

disclose any of the Goldman team's concerns about the status of due

diligence on L&H because "the client did not ask." Wayner also

noted that he had already raised those issues with Chamberlain and

Janet Baker. Similarly, Fine testified that the Goldman team did

not bring up its due diligence concerns "because th[ey] had all

been raised with substantially the same group that was in there."

Significantly, plaintiffs testified, and the district court found,

that plaintiffs would not have gone forward with the deal had

Wayner voiced his concerns about the due diligence issues at the

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March 27 meeting. Ultimately, the Dragon board voted to approve

the merger, and the transaction closed on June 7, 2000. Dragon

merged into L&H and ceased to be an independent entity.

From there, the situation deteriorated quickly. In

August 2000, the Wall Street Journal reported that L&H had vastly

overstated its Asian revenues, and indeed had identified as

customers some South Korean companies who had never done business

with L&H. The SEC began investigating L&H's financial statements,

and eventually L&H admitted that it had improperly recorded $373

million in revenue. L&H restated its financials for two and a half

years and filed for bankruptcy in November 2000. Following the

bankruptcy, plaintiffs' shares of L&H stock became worthless. The

Dragon name and technology were sold from the estate.

B. Other Proceedings

Before initiating this lawsuit, plaintiffs sued numerous

other parties to recover the losses they suffered as a result of

L&H's fraud. The defendants were L&H and several of its officers

and directors, entities related to L&H, entities and individuals

affiliated with L&H's auditor, L&H's investment bank, and certain

banks that provided financing to L&H. Plaintiffs collectively

received over $75 million in settlements from those parties.

James and Janet Baker ("the Baker plaintiffs") and Roth

and Bamberg ("the Roth plaintiffs") then sued Goldman in separate

actions in state and federal court, respectively. Goldman removed

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the Bakers' suit to federal court, and the two actions were then

consolidated for purposes of discovery and trial. They have been

consolidated for purposes of appeal.

Each set of plaintiffs brought claims for negligent and

intentional misrepresentation, negligence, gross negligence, breach

of fiduciary duty, and violations of Mass. Gen. Laws ch. 93A.4

After a 20-day trial, the jury found in favor of Goldman

on all of plaintiffs' common law claims. The verdict form

instructed the jury to reach Goldman's third-party claims against

the Bakers only if they determined that Goldman was liable to the

Roth plaintiffs. Nonetheless, the jury also found that Janet Baker

made negligent misrepresentations and had committed a breach of her

fiduciary duty to the Roth plaintiffs, and that James Baker had

committed a breach of his fiduciary duty to Bamberg.

The district court found for Goldman on plaintiffs'

ch. 93A claims.5 In a thorough opinion, the court ruled that,

although Goldman may have committed negligence by failing to (1)

disclose to plaintiffs that no one at Goldman was covering L&H at

the time of the transaction; (2) repeat the Goldman team's due

4
Goldman asserted third-party contribution claims against
the Baker plaintiffs for negligent misrepresentation and breach of
fiduciary duty with respect to any liability that the Roth
plaintiffs might establish against Goldman. These are not at issue
in the appeal.
5
There is no right to a trial by jury for claims brought
under ch. 93A. Walsh v. Chestnut Hill Bank & Trust Co., 607 N.E.2d
737, 740–41 (Mass. 1993).

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diligence concerns after expressing those concerns once in the

February 29 memo; and (3) adequately analyze L&H's Asian revenues

and its revenue projections, Goldman's conduct "was not so

egregious as to warrant ch. 93A relief." In reaching its

conclusion, the court gave weight to the jury's verdict exonerating

Goldman of any liability, as it was entitled to do.

The court also rejected the Roth plaintiffs' theory,

presented for the first time in a post-trial brief, that Goldman

had violated ch. 93A because it violated 940 Mass. Code Regs.

3.16(2). That section provides that "an act or practice is a

violation of [ch. 93A] if . . . [a]ny person or other legal entity

. . . fails to disclose to a buyer or prospective buyer any fact,

the disclosure of which may have influenced the buyer or

prospective buyer not to enter into the transaction." The court

ruled that the Roth plaintiffs had waived any claim under § 3.16(2)

by failing to present it before trial, and held that the theory was

meritless in any event because the regulation does not apply to

business-to-business transactions. The court later denied both

sets of plaintiffs' motions for reconsideration of the ch. 93A

ruling, as well as their motions for a new trial. This appeal

followed.

II.

Both the Baker plaintiffs and the Roth plaintiffs argue

that the district court erred as a matter of law in holding that

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Goldman's conduct was not "unfair or deceptive" within the meaning

of ch. 93A. Plaintiffs' briefs contend that ch. 93A does not

require a showing of "egregious" conduct and that, even if

"egregiousness" is the correct standard, Goldman's conduct rose to

that level. After de novo review, we hold that the district court

correctly articulated the legal standard applicable to plaintiffs'

ch. 93A claims, and correctly applied that standard to its factual

findings. We affirm the dismissal of those claims.

A. Standard of Review

"Following a bench trial on a chapter 93A claim, we

review the district court's legal conclusions de novo and its

underlying factual findings for clear error." Fed. Ins. Co. v.

HPSC, Inc., 480 F.3d 26, 34 (1st Cir. 2007). "[W]hether a

particular set of acts, in their factual setting, is unfair or

deceptive is a question of fact," Arthur D. Little, Inc. v.

Dooyang Corp., 147 F.3d 47, 54 (1st Cir. 1998) (quoting Ahern v.

Scholz, 85 F.3d 774, 797 (1st Cir. 1996)), "but whether that

conduct rises to the level of a chapter 93A violation is a question

of law." Fed. Ins. Co., 480 F.3d at 34; see also Casavant v.

Norwegian Cruise Line Ltd., 952 N.E.2d 908, 911–12 (Mass. 2011)

(whether an act is unfair or deceptive is a factual question, but

"[a] ruling that conduct violates [ch. 93A] is a legal, not a

factual, determination" (quoting R.W. Granger & Sons v. J & S

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Insulation, Inc., 754 N.E.2d 668, 675 (Mass. 2001))).6 Under the

clear error standard of review, we accept the district court's

findings of fact unless, after careful consideration of the entire

record, "we are 'left with the definite and firm conviction that a

mistake has been committed.'" Vinick v. United States, 205 F.3d 1,

6 (1st Cir. 2000) (quoting Anderson v. City of Bessemer City, 470

U.S. 564, 573 (1985)). If the district court's factual conclusions

are based on an erroneous view of the controlling law, however,

"the case for deference vanishes," and we review those conclusions

de novo. Id. at 6–7.

In ruling on a ch. 93A claim, a trial court is not bound

by a jury's verdict on parallel common law claims. E.g., Klairmont

v. Gainsboro Rest., Inc., 987 N.E.2d 1247, 1263–64 (Mass. 2013);

6
We note that there is arguably some inconsistency in the
caselaw concerning the proper standard of review on a ch. 93A
claim. The Supreme Judicial Court of Massachusetts has repeatedly
stated that "[a] ruling that conduct violates [ch. 93A] is a legal,
not a factual determination" that is reviewed de novo. Casavant,
952 N.E.2d at 911–12; accord R.W. Granger, 754 N.E.2d at 675. But
cases from both Massachusetts and this Circuit have consistently
held that "[t]he determination of whether certain conduct is unfair
or deceptive is a question of fact" that is reviewed for clear
error. Fed. Ins. Co., 480 F.3d at 34; accord In re Pharm. Indus.
Average Wholesale Price Litig., 582 F.3d 156, 184 (1st Cir. 2009);
Casavant, 952 N.E.2d at 912; R.W. Granger, 754 N.E.2d at 676;
Spence v. Bos. Edison Co., 459 N.E.2d 80, 88 (Mass. 1983) (whether
conduct is unfair is a matter of fact). The distinction between a
"finding of fact" that conduct is unfair or deceptive and a "legal
conclusion" that the conduct violates ch. 93A is not readily
apparent. We have no need to explore the issue further in this
case, however, because the district court's ultimate conclusion
that Goldman did not violate ch. 93A is correct under any standard
of review.

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Specialized Tech. Res., Inc. v. JPS Elastomerics Corp., 957 N.E.2d

1116, 1119–20 (Mass. App. Ct. 2011). But the court may, if it

chooses, consider the verdict in reaching its conclusions, or adopt

the verdict entirely. See Serv. Publ'ns, Inc. v. Goverman, 487

N.E.2d 520, 527 (Mass. 1986).

B. Ch. 93A Legal Standard

Chapter 93A proscribes "unfair or deceptive acts or

practices in the conduct of any trade or commerce." Mass. Gen.

Laws ch. 93A, § 2 (emphasis added). The statute provides a cause

of action to "[a]ny person who engages in the conduct of any trade

or commerce and who suffers any loss of money or property . . . as

a result of the use or employment by another person . . . [of] an

unfair or deceptive act or practice." Id. § 11. If successful, a

plaintiff is entitled to actual damages, or double or treble

damages if the defendant's violation of § 2 was willful or knowing.

Id. Here, the district court found that Goldman's "conduct was not

unfair or deceptive under ch. 93A."7

7
The Roth plaintiffs argue that they are in a different
position than the Baker plaintiffs. They argue that this is
because "the trial court failed to make an express finding as to
whether or not Goldman's acts were unfair or deceptive as to the
Roth plaintiffs." We not persuaded for two reasons. First, the
district court's statement in its order on plaintiffs' motion for
reconsideration that Goldman's conduct "was not unfair or deceptive
under ch. 93A" is most naturally read as applicable to all
plaintiffs, since it is not by its terms limited to the Bakers.
Second, because the district court dismissed the Roth plaintiffs'
ch. 93A claims, it logically must have found that Goldman's conduct
was not unfair or deceptive "as to the Roth plaintiffs."

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 Here, plaintiffs essentially do not dispute the district

court's factual determinations -- indeed, both sets of plaintiffs

base the statement of facts in their briefs almost entirely on the

district court's findings of fact. Instead, plaintiffs argue that

there is a disconnect between the district court's factual findings

and its ultimate conclusion that Goldman was not liable under

ch. 93A. The latter conclusion, plaintiffs contend, was both wrong

as a matter of law and clearly erroneous as a matter of fact.

Specifically, plaintiffs' briefs argue that the district

court applied the wrong legal standard to its findings of fact when

it held that, in order for a defendant's conduct to violate

ch. 93A, it "must be not only wrong, but also egregiously wrong."8

Plaintiffs offer an extensive catalogue of Massachusetts cases in

which the court found liability under ch. 93A without mentioning an

"egregiousness" standard. Goldman responds that cases from both

the Massachusetts state courts and this Circuit have been

consistent in requiring a heightened showing of "egregiousness" or

"rascality" in adjudicating ch. 93A claims.

8
Contrary to Goldman's assertion, neither the Baker
plaintiffs nor the Roth plaintiffs have waived the argument that
ch. 93A does not require a showing of egregiousness. Although the
plaintiffs occasionally used the term "egregious" in their
submissions and arguments to the district court, they have
maintained throughout this litigation that ch. 93A goes well beyond
the common law and encompasses a wide range of conduct, from
egregious negligence to simple "half-truth[s]" or "unscrupulous and
unethical conduct."

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 Chapter 93A "was 'designed to encourage more equitable

behavior in the marketplace.'" Commercial Union Ins. Co. v. Seven

Provinces Ins. Co., 217 F.3d 33, 40 (1st Cir. 2000) (quoting Arthur

D. Little, 147 F.3d at 55). However, "it 'does not contemplate an

overly precise standard of ethical or moral behavior. It is the

standard of the commercial marketplace.'" Id. (quoting Ahern, 85

F.3d at 798).

The language that courts have used to describe the

ch. 93A standard has varied considerably over the years. See id.

(collecting cases). Early Massachusetts decisions suggested that,

in order to violate ch. 93A § 11, conduct must "attain a level of

rascality that would raise an eyebrow of someone inured to the

rough and tumble of the world of commerce," Levings v. Forbes &

Wallace, Inc., 396 N.E.2d 149, 153 (Mass. App. Ct. 1979); see also

Spence v. Bos. Edison Co., 459 N.E.2d 80, 88 (Mass. 1983), or have

a "rancid flavor of unfairness," Atkinson v. Rosenthal, 598 N.E.2d

666, 670 (Mass. App. Ct. 1992). The First Circuit followed the

Massachusetts courts' lead in articulating the ch. 93A standard, as

it is required to under Erie. See, e.g., Quaker State Oil Ref.

Corp. v. Garrity Oil Co., 884 F.2d 1510, 1513 (1st Cir. 1989).

In 1995, the Supreme Judicial Court of Massachusetts

stated that it found "uninstructive phrases such as 'level of

rascality'" and instead would "focus on the nature of challenged

conduct and on the purpose and effect of that conduct as the

-22-
crucial factors in making a [ch.] 93A fairness determination."

Mass. Emp'rs Ins. Exch. v. Propac-Mass, Inc., 648 N.E.2d 435, 438

(Mass. 1995) (citation omitted). But even after Propac-Mass,

Massachusetts courts, when addressing claims that a defendant's

negligent act constituted a violation of ch. 93A, continued using

labels akin to the "level of rascality" phrase to describe the

level of negligence necessary for a finding of liability. See,

e.g., Ross v. Cont'l Res., Inc., 899 N.E.2d 847, 861 (Mass. App.

Ct. 2009). Moreover, the SJC has repeatedly held that "mere

negligence," standing alone, is not sufficient for a violation of

ch. 93A -- something more is required. E.g., Klairmont, 987 N.E.2d

at 1257; Darviris v. Petros, 812 N.E.2d 1188, 1192 (Mass. 2004);

Swanson v. Bankers Life Co., 450 N.E.2d 577, 580 (Mass. 1983). In

Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017 (Mass.

2004), which the district court relied on for the legal standard

that it applied in this case, the SJC described that "something

more" as "extreme or egregious" negligence.9 See id. at 1032;

accord Lily Transp. Co. v. Royal Institutional Servs., Inc., 832

N.E.2d 666, 687 n.15 (Mass. App. Ct. 2005); cf. Stonehill Coll. v.

Mass. Comm'n Against Discrimination, 808 N.E.2d 205, 229–30 (Mass.

2004) (in order for breach of contract to constitute a ch. 93A

9
This reading of the statute does not render § 11's
provision for double and treble damages superfluous. Double or
treble damages are authorized if a violation is "willful" or
"knowing." Mass. Gen. Laws ch. 93A, § 11. Conduct can be
egregiously negligent without being willful or knowing.

-23-
violation, there must be "some egregious circumstance surrounding

that breach"). And our Circuit has again followed the

Massachusetts courts' lead in using the term "egregious" to state

the standard of ch. 93A liability. See, e.g., In re Pharm. Indus.,

582 F.3d at 185 (quoting Mass. Sch. of Law at Andover, Inc. v. Am.

Bar Ass'n, 142 F.3d 26, 41 (1st Cir. 1999)); In re TJX Cos. Retail

Sec. Breach Litig., 564 F.3d 489, 497 (1st Cir. 2009).10

Thus, while we share the SJC's sentiment in Propac-Mass

that phrases such as "level of rascality" are uninstructive, we

find no legal error in the district court's analysis. It drew the

"egregious" standard directly from caselaw from the SJC and this

Circuit. If the standard for ch. 93A liability requires

clarification, the SJC can provide it in an appropriate case. See

Gill v. Gulfstream Park Racing Ass'n, Inc., 399 F.3d 391, 402 (1st

Cir. 2005) ("A federal court sitting in diversity cannot be

expected to create new doctrines expanding state law.").

10
Plaintiffs are correct that the first mention of the term
"egregious" in the ch. 93A caselaw is found, not in a Massachusetts
case, but rather in a First Circuit opinion, Massachusetts School
of Law. 142 F.3d at 41 (stating that the "general meter" of
ch. 93A claims "is that the defendant's conduct must be not only
wrong, but also egregiously wrong -- and this standard calls for
determinations of egregiousness well beyond what is required for
most common law claims"). But the SJC's adoption of that term in
its own ch. 93A jurisprudence shows that it concurs with the
Massachusetts School of Law formulation.

-24-
C. The District Court's Factual Findings

The district court identified three instances of

questionable conduct on the part of Goldman: (1) its failure to

disclose that Elliott was not covering L&H at the time of

plaintiffs' February 29 conference call with him; (2) its failure

to reiterate at a later date (and in particular, at the final

meeting on March 27) the due diligence-related concerns expressed

in the February 29 memo; and (3) its work on the valuation analysis

of L&H. There was ample evidence in the record upon which the

judge could have concluded that this conduct was neither unfair nor

deceptive. We consider each of the three instances identified

above in turn.

First, with regard to the Elliott call, the trial

testimony and Janet Baker's contemporaneous notes of the call

suggest that Wayner introduced Elliott as a European equities

analyst -- not, as plaintiffs now contend, as an expert on L&H

specifically. The district court did not clearly err in rejecting

plaintiffs' argument that Goldman misrepresented Elliott's

knowledge of L&H or otherwise acted unfairly or deceptively during

the call. Indeed, it is unclear what additional information

plaintiffs think they would have gained had Elliott been covering

L&H, or had Wayner mentioned the Asian earnings report to Elliott.

Janet Baker was aware of L&H's surging Asian revenues, and it is

doubtful that the Bakers would have changed their views on the

-25-
merger based on Elliott's telling them something that they already

knew.11 In fact, Chamberlain testified that it would not have been

important to her whether or not Elliott was covering L&H.

Second, turning to Goldman's due diligence concerns, the

district court found that "the Goldman team should have disclosed

their continuing due diligence concerns at the March 27 meeting or

on the March 23 conference call." Nonetheless, the court held that

their failure to do so was not "egregious" because Goldman had

already informed Chamberlain, who was in charge of due diligence at

Dragon, and the rest of the Dragon team about the due diligence

concerns. That finding was not error. Members of the Goldman team

testified at trial that they saw no need to raise those issues yet

again at the March 27 meeting because Goldman had made clear to

Dragon personnel that it was not satisfied with L&H's due diligence

responses. Plaintiffs have pointed to no evidence that anyone from

Dragon ever complained to Goldman that its work on the transaction

had been unsatisfactory or that it was expected to play a larger

11
Plaintiffs point to Elliott's testimony that, had he
known of the reported Asian revenues, he would have been
"s[k]eptical" because he "kn[e]w something about Asian languages,
and [he] would have really challenged this on the basis that the
phonetic structure makes it incredibly difficult to take a European
dictation software and apply it to -- to Asian languages." This
argument rings hollow. Elliott's hypothetical skepticism would
have been based not on his expertise as a financial analyst, but
rather on his (entirely coincidental) familiarity with Asian
languages. This is reason to doubt that Elliott would have been in
a better position to judge the technical plausibility of L&H's
success in Asia than the Bakers, who are experts in computer
dictation software.

-26-
role in the due diligence process. Further, despite the concerns

raised in the February 29 memo, Janet Baker had already signed a

handwritten deal with L&H on March 8. Goldman could have

reasonably believed, based on this development, that the deal had

essentially been agreed to and hence that raising further concerns

after this point would simply serve to irritate its client.

The Roth plaintiffs, noting that they were never informed

of Goldman's due diligence concerns because they never received a

copy of the February 29 memo, argue that Goldman's conduct was

unfair or deceptive as to them, even if was not unfair or deceptive

as to the Bakers. According to the Roth plaintiffs, Goldman

deceived them because it painted a rosy picture of the

transaction's prospects in the February 29 call with Elliott and in

the March 27 meeting and never told Bamberg and Roth of the

outstanding due diligence issues.

The district court rejected this contention "because the

Goldman bankers reasonably believed that Janet Baker and

Chamberlain, their main contacts at Dragon, would inform the rest

of Dragon's board and senior management about important events and

documents leading up to the merger." This conclusion is amply

supported in the record.12 Roth testified that Janet Baker and

Chamberlain were his "interface" with regard to the status of due

12
Insofar as the Roth plaintiffs mean to argue that this
finding was clear error, we disagree for the reasons stated in the
text.

-27-
diligence and that he "relied on Janet Baker to obtain information

on [L&H] including its financial condition in order to determine

whether to vote to approve the merger with L&H." Bamberg similarly

testified that he relied on Janet Baker to "keep[] both Bob and

myself up to date on major issues while not troubling us with

details."

The Roth plaintiffs' contention that "[t]hree Goldman

witnesses admitted knowing that the Roth [p]laintiffs . . . were

unaware of its due diligence concerns" is not supported by the

record. The Roth plaintiffs cite the following pieces of testimony

for their argument:

C From Wayner's deposition: "Q: You did not tell the people
assembled [at the March 27 meeting] that Goldman Sachs
had not obtained information it had requested? A:
Depends on how you phrase that question. There's a
subset of persons that knew that was our point of view.
So are you asking me whether no one in that room knew
that or did I mention it at this meeting?"

C From Fine's deposition: "We gave our advice . . . to all
the principals who were in the room at the board meeting.
We had talked to -- the Baker's [sic] had seen our books
where some of the issues had been raised. The memo had
gone to Mr. Waite. The majority or [sic] the people who
were capable of approving and not approving had seen our
reservations."

C From Smith's deposition: "Q: If Rich Wayner was not
satisfied with the due diligence that was obtained
regarding Asian revenues, customer agreements, licensing
agreements, related party transactions, would you have
expected Wayner to have expressed those views at the
March 27, 2000 board meeting? A: No. . . . I would not
have -- that to have been done in that form, no. It
would have been an embarrassment to Ms. Baker and the
deal leaders."

-28-
 The Roth plaintiffs read this testimony to suggest that

Goldman knew that Roth and Bamberg were, as counsel put it at oral

argument, "in the blind," and intentionally withheld information

from them in order to make sure the transaction would go forward.13

To the contrary, it is reasonable to read Wayner's and Fine's

statements to mean that they saw no need to raise their due

diligence concerns yet again because they had already communicated

those concerns to most, if not all, of the individuals who had a

stake in the transaction. And it is reasonable to read Smith's

testimony as simply stating that he did not want to impede the

progress of the transaction because Janet Baker had already made it

known that she wanted to consummate the deal as quickly as possible

-- indeed, she had already agreed to the transaction in writing

three weeks before. The district court did not err in its

conclusion that Goldman did not act unfairly or deceptively in

failing to raise its due diligence concerns specifically with Roth

and Bamberg.

13
At oral argument, counsel were in disagreement as to
whether Roth and Bamberg, who held a minority of Dragon's stock,
could have blocked the merger with L&H had they wished to. The
parties submissions provide no guidance on this point. We need not
resolve the question to decide this case. The district court
apparently assumed that Roth and Bamberg could have vetoed the
transaction, because it found that the deal would not have gone
forward had Goldman disclosed its concerns to the Roth plaintiffs.
Yet the court also found that Goldman's conduct was not unfair or
deceptive. As explained above, that finding was not error.

-29-
 The Roth plaintiffs have suggested that, because Judge

Saris found that the L&H transaction would likely not have gone

forward if Goldman had raised its ongoing concerns about due

diligence at the March 27 meeting, she was required to find a

violation of ch. 93A as a matter of law. We disagree. It is true

that cases from Massachusetts and this Circuit have defined a

"deceptive" act as one that "could reasonably be found to have

caused a person to act differently from the way he or she otherwise

would have acted." Incase Inc. v. Timex Corp., 488 F.3d 46, 57

(1st Cir. 2007) (quoting Aspinall v. Philip Morris Cos., 813 N.E.2d

476, 486 (Mass. 2004)); see also Grossman v. Waltham Chem. Co., 436

N.E.2d 1243, 1245 (Mass. App. Ct. 1982). But it cannot be that any

conduct gives rise to liability under ch. 93A by virtue of the mere

fact that the conduct affects a person's actions in a way that

eventually causes that person harm. Were that so, one could be

liable under ch. 93A simply for giving bad advice, no matter how

well-intentioned and well-founded the advice. That is not the law.

Indeed, as said, the SJC has instructed that even negligent

misrepresentations (which, by definition, "could reasonably be

found to have caused a person to act differently from the way he or

she otherwise would have acted") give rise to ch. 93A liability

only if they are "extreme" or "egregious." Marram, 809 N.E.2d at

1032.

-30-
 Finally, with regard to Goldman's "professionally

negligent" financial analysis of the Dragon-L&H transaction, the

district court did not err in finding that this conduct was neither

unfair nor deceptive. In reaching its conclusion, the district

court properly took into account the jury's finding, based on

sufficient evidence, that Goldman was not negligent in rendering

professional services. Goldman raised a bevy of due diligence

issues in the February 29 memo. Plaintiffs have presented no

evidence that Dragon ever responded by asking Goldman to do further

due diligence work. Moreover, there is testimony that Goldman was

engaged primarily to raise questions and facilitate the merger, not

to lead the due diligence on Dragon's eventual merger partner.

Chamberlain -- not Goldman -- was the "quarterback" of due

diligence. The jury called it one way whether there was any

negligence at all; the district court called it another, but was

certainly entitled to consider the jury finding in weighing whether

Goldman had been unfair or deceptive.

In short, the district court properly determined that

Goldman's conduct, even if sloppy and unforthcoming, was not unfair

or deceptive. The court's factual findings are supported by the

record, and it correctly applied the ch. 93A legal standard to

those findings. We find no error in the district court's analysis

of plaintiffs' ch. 93A claims.

-31-
 III.

The Roth plaintiffs contend that the district court erred

in rejecting their belated theory of Goldman's liability under 940

Mass. Code Regs. 3.16(2). Not so. The Roth plaintiffs waived any

claim under § 3.16(2) by failing to raise it before trial and

waiting until the jury had ruled against them on their common law

theories.

Under Mass. Gen. Laws ch. 93A § 2(c), the attorney

general is empowered to make rules and regulations defining the

"[u]nfair methods of competition and unfair or deceptive acts or

practices" that violate § 2(a). One such regulation provides that

an "act or practice is a violation of [ch. 93A] if . . . [a]ny

person or other legal entity subject to this act fails to disclose

to a buyer or prospective buyer any fact, the disclosure of which

may have influenced the buyer or prospective buyer not to enter

into the transaction." 940 Mass. Code Regs. § 3.16. In their

post-trial brief to the district court, the Roth plaintiffs argued

that Goldman's conduct in this case violated § 3.16 because Goldman

failed to disclose facts that would have influenced whether the

Roth plaintiffs agreed to vote for the Dragon-L&H merger (and thus

"buy" L&H stock). Plaintiffs did not raise this argument either

before or at trial. We agree with the district court that the Roth

plaintiffs waived any claim under § 3.16. See DCPB, Inc. v. City

of Lebanon, 957 F.2d 913, 917 (1st Cir. 1992) (plaintiff cannot,

-32-
after trial, "superimpose a new (untried) theory on evidence

introduced for other purposes"), superseded on other grounds, as

recognized in Lamboy-Ortiz v. Ortiz-Vélez, 630 F.3d 228, 243 n.25

(1st Cir. 2010).

The Roth plaintiffs contend that their general argument

that Goldman's failure to disclose relevant facts about the L&H

transaction violated ch. 93A was sufficient to put Goldman on

notice of the § 3.16 claim, but we are not persuaded. Goldman knew

only that it was defending against claims of "unfair or deceptive"

acts under ch. 93A, § 2. It had no warning of any claim that it

had per se violated § 2 via § 3.16 until after trial. See

Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168, 1172 (1st Cir. 1995)

(plaintiff may not "leave defendants to forage in forests of facts,

searching at their peril for every legal theory that a court may

some day find lurking in the penumbra of the record"). To allow

the Roth plaintiffs to raise this claim so late would have

undoubtedly prejudiced Goldman. See Grand Light & Supply Co., Inc.

v. Honeywell, Inc., 771 F.2d 672, 680 (2d Cir. 1985) ("Where a

party seeks to apply evidence presented on a separate issue already

in the case to a new claim added after the conclusion of the trial,

the opponent may be unfairly prejudiced."); see also Lebanon, 957

F.2d at 917 (citing Honeywell for this proposition).

Even if the Roth plaintiffs had properly raised an

argument under § 3.16, we see no basis in present Massachusetts law

-33-
to credit the claim. The SJC's decision in Knapp Shoes Inc. v.

Sylvania Shoe Manufacturing Corp., 640 N.E.2d 1101 (Mass. 1994),

strongly suggests that § 3.16 applies only to transactions

involving consumers and not to transactions involving sophisticated

business entities.

In Knapp, the SJC held that 940 Mass. Code Regs.

§ 3.08(2), providing in relevant part that "[i]t shall be an unfair

and deceptive act or practice to fail to perform or fulfill any

promises or obligations arising under a warranty," applies only to

consumer claims under ch. 93A. Knapp, 640 N.E.2d at 1104. The

court reasoned that the other subsections in § 3.08 "use the term

'consumer' to denote the persons protected by their provisions, and

concern matters generally involved in consumer transactions." Id.

at 1105. Even though subsection (2), by its terms, did not limit

its application to consumers, the court found that the context of

the statute indicated that it did not apply to business-to-business

transactions. Id. ("Where the bulk of the regulation applies only

to consumers and their interests, and subsection (2) contains no

language suggesting that it was meant to apply to a broader class

of persons or interests, we conclude that the portion of subsection

(2) at issue was not intended to encompass a contract dispute

between businessmen based on a breach of . . . warranty . . . .").

The same reasoning is applicable here. Two of the four

subsections of § 3.16 mention "consumers" and concern consumer

-34-
protection issues. Subsection (3) makes an act or practice a

violation of ch. 93A if "[i]t fails to comply with existing

statutes, rules, regulations or laws, meant for the protection of

the public's health, safety, or welfare promulgated by the

Commonwealth or any political subdivision thereof intended to

provide the consumers of this Commonwealth protection." Subsection

(4), in similar fashion, makes an act or practice a violation of

ch. 93A if "[i]t violates the Federal Trade Commission Act, the

Federal Consumer Credit Protection Act or other Federal consumer

protection statutes within the purview of [ch.] 93A, § 2." Thus,

just as in Knapp, "[i]t is reasonably clear that, in drafting the

regulation, the Attorney General had in mind protection for

consumers against unfair or deceptive acts or practices." 640

N.E.2d at 1105; see also In re First New Eng. Dental Ctrs., 291

B.R. 229, 241 (D. Mass. 2003) (applying Knapp's reasoning to

conclude that § 3.16 does not apply to "business to business

transactions"); Callahan, Note, Massachusetts General Laws Chapter

93A, Section 11: The Evolution of the "Raised Eyebrow" Standard,

36 Suffolk U. L. Rev. 139, 157–58 (2002) (after Knapp, "courts may

apply similar reasoning to invalidate applicability of other

regulations to business-to-business transactions"); cf. Indus. Gen.

Corp. v. Sequoia Pac. Sys. Corp., 44 F.3d 40, 44 (1st Cir. 1995)

("A commentator has noted that section 11 'probably does not

contain a general duty of disclosure' . . . ." (quoting Gilleran,

-35-
The Law of Chapter 93A § 4:10 (1989 & Supp. 1994))). But see

Lechoslaw v. Bank of Am., 618 F.3d 49, 58 (1st Cir. 2010)

(suggesting that § 3.16 applies to businesses); Lily Transp. Corp.

v. Royal Inst'l Servs., Inc., 832 N.E.2d 666, 673–74 (Mass. App.

Ct. 2005) (same).

The Roth plaintiffs argue that § 3.16 is "general" and so

should not be read to exclude businesses from its scope. They note

that the preamble to the section provides that it does not "limit[]

the scope of any other rule, regulation or statute." But § 3.16 is

no more general than § 3.08, which likewise covered multiple

subjects and provided that it "in no way limits, modifies, or

supersedes any other statutory or regulatory provisions dealing

with warranties." See Knapp, 640 N.E.2d at 1104. In short, we

simply see no meaningful distinction between § 3.16 and § 3.08 that

would counsel against applying Knapp's reasoning to the former.

This is ultimately an issue for the SJC to resolve.14

IV.

Finally, plaintiffs argue that they are entitled to a new

trial because the district court erred in (1) admitting the

drafting history and Annex A of the Engagement Letter between

Goldman and Dragon and (2) instructing the jury regarding the

14
The Roth plaintiffs have not asked for certification of
this issue to the SJC.

-36-
relevance of the Engagement Letter and its drafting history. Both

of these contentions are without merit.

A. Admission of the Drafting History and Annex A

We review the district court's evidentiary rulings for

abuse of discretion. Enos v. Union Stone, Inc., 732 F.3d 45, 49

(1st Cir. 2013). If we find error, we reverse unless "it is highly

probable that the error did not affect the outcome of the case."

McDonough v. City of Quincy, 452 F.3d 8, 19–20 (1st Cir. 2006).

The district court properly applied state law in

admitting the Engagement Letter and its drafting history. In Nycal

Corp. v. KPMG Peat Marwick LLP, 688 N.E.2d 1368 (Mass. 1998), the

SJC set forth the requirements for a plaintiff asserting a claim of

negligent misrepresentation against a defendant who supplies

information for the guidance of others in business transactions.

Under Nycal, if the plaintiff and defendant are not in contractual

privity (as is the case here, because Goldman was engaged by

Dragon, not by plaintiffs), in order to succeed on a negligent

misrepresentation claim, the plaintiff must show that the defendant

had "actual knowledge . . . of the limited -- though unnamed --

group of potential [parties] that will rely on the [defendant's

advice], as well as actual knowledge of the particular financial

transaction that such information is designed to influence." 688

N.E.2d at 1371–72 (quoting First Nat'l Bank of Commerce v. Monco

-37-
Agency Inc., 911 F.2d 1053, 1062 (5th Cir. 1990)); see also

Restatement (Second) of Torts § 552 (1977).

Provisions of the draft Engagement Letter indicating that

Goldman was to be employed by individual stockholders were

explicitly removed from the final agreement. That is clearly

relevant to Goldman's knowledge as to whether individual

shareholders would rely on Goldman's financial advice, when the

plaintiffs expressly chose not to sign the agreement in order to

avoid the indemnification obligations which the signatory, Dragon,

undertook. Accordingly, the Engagement Letter and its drafting

history were relevant to both sets of plaintiffs' negligent

misrepresentation claim, see Fed. R. Evid. 401, and the plaintiffs

have not shown that their relevance was substantially outweighed by

a risk of unfair prejudice, see Fed. R. Evid. 403. The evidence

was admissible.15

Annex A was relevant to the case for the same reason as

was the drafting history. The final version of Annex A, like the

rest of the agreement, excluded any relevant reference to

"Stockholders," which further strengthens the inference that

Goldman did not intend for individual stockholders to rely on its

15
The drafting history of the Engagement Letter was not
barred by the parol evidence rule. That rule prohibits the
introduction of evidence of the circumstances leading to an
agreement's execution for the purpose of contradicting or changing
its terms. See ITT Corp. v. LTX Corp., 926 F.2d 1258, 1264 (1st
Cir. 1991).

-38-
financial advice. Thus, even though Annex A concerned Goldman's

liability for derivative, rather than direct, claims, the district

court did not abuse its discretion in admitting it. This is all

the more so given the district court's explicit instruction to the

jury that the exculpatory clause in Annex A "is inapplicable . . .

because the plaintiffs' claims are . . . direct claims for

themselves as individual shareholders." We assume that the jury

followed this instruction. United States v. George, 761 F.3d 42,

57 (1st Cir. 2014).16

Even if admission of Annex A was arguably an abuse of

discretion, any error was harmless, given the court's cautionary

instruction and the substantial amount of other evidence tending to

suggest that Goldman did not intend individual shareholders to rely

on its advice. See SEC v. Happ, 392 F.3d 12, 28–29 (1st Cir. 2004)

(admission of cumulative evidence was harmless error).

16
The Baker plaintiffs argue that Goldman's counsel made
improper arguments based on the Engagement Letter and its drafting
history in closing argument. We disagree. Counsel's comments are
fairly read as simply outlining the theory of relevance articulated
above -- the fact that the word "Stockholders" was removed from the
agreement makes it less likely that Goldman knew individual
stockholders would rely on its advice. In any event, plaintiffs
did not lodge a contemporaneous objection to Goldman's closing, and
the allowance of the statements certainly did not rise to the level
of plain error. See Portuges-Santana v. Rekomdiv Int'l Inc., 725
F.3d 17, 26 (1st Cir. 2013) (where party fails to object to
statements made in closing, claim of improper argument reviewed for
plain error).

-39-
B. Jury Instructions

We review de novo a claim that a jury instruction was

based upon an erroneous statement of the law. Hatch v. Trail King

Indus., Inc., 656 F.3d 59, 64 (1st Cir. 2011). "We review for

abuse of discretion 'whether the instructions adequately explained

the law or whether they tended to confuse or mislead the jury on

the controlling issues.'" Id. (quoting United States v. Silva, 554

F.3d 13, 21 (1st Cir. 2009)); see also Johnson v. Spencer Press of

Me., Inc., 364 F.3d 368, 378 (1st Cir. 2004) ("So long as th[e]

language properly explains the controlling legal standards and is

not unduly confusing or misleading, it will not be second-guessed

on appeal."). "We look at the instructions as a whole, not in

isolated fragments." Hatch, 656 F.3d at 64.

The plaintiffs objected to the last paragraph of the jury

instructions concerning the Engagement Letter on the ground that it

was "somewhat confusing." The instructions on the Engagement

Letter read as follows:

[L]et me just mention briefly this engagement
letter you've heard so much about, the
engagement letter.
The engagement letter is a contract
between Goldman Sachs and the company, Dragon
Systems. The shareholders were not parties to
the contract with one exception -- the so-
called exculpation clause. This clause only
applies to something in the law called
derivative actions by shareholders on behalf
of the corporation for damages suffered by the
corporation. That provision is inapplicable
here because the corporation no longer existed
after the merger and because the plaintiffs'

-40-
 claims are what are known as direct claims for
themselves as individual shareholders. That's
why I keep saying, it's always the plaintiffs
as individual shareholders.
Because the shareholders were not
parties to the engagement letter, they cannot
sue for breach of contract. That's why you
don't see "breach of contract" in here
anywhere. However, Goldman Sachs may still be
held responsible for certain common law causes
of action. You may have heard the term
"torts." That's what we've just been talking
about for the last hour. These torts include
negligence, gross negligence, negligent
misrepresentation[,] fraud or intentional
misrepresentation, and breach of fiduciary
duty. Those claims require that the
plaintiffs establish that Goldman Sachs owed
them a duty as I have just instructed you.
However, in determining whether Goldman
Sachs is liable, you can consider all of the
evidence, including the engagement agreement,
the course of dealing between the parties
before and after the agreement, and the
history of negotiating the agreement.

There was no error in this jury instruction, nor was it

confusing.17 The jury was entitled to consider the agreement and

its drafting history in considering both sets of plaintiffs' tort

claims. As said, the evidence was relevant to plaintiffs'

17
We reject the Roth plaintiffs' argument that the
instruction was confusing because it encouraged the jury to lump
both sets of plaintiffs together in considering Goldman's
liability. First, the Engagement Letter and drafting history were
relevant to both sets of plaintiffs' claims because, as explained
above, they were probative of Goldman's intent. Second, the
district court explicitly instructed the jury that it should
consider the claims of each plaintiff individually. The jury
obviously followed that directive, as its answers to the questions
regarding Goldman's contribution claim do differentiate between the
various plaintiffs. For example, the jury found that Janet Baker
breached her fiduciary duty to Roth and Bamberg but that James
Baker breached his fiduciary duty to Bamberg, but not to Roth.

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negligence claims because it suggested that Goldman did not foresee

that individual shareholders would rely on its advice. It was

relevant to the intentional misrepresentation claims because, to

prove such a claim, a plaintiff must show that the defendant

intended to induce the plaintiff to act upon a false statement.

Masingill v. EMC Corp., 870 N.E.2d 81, 88 (Mass. 2007). And it was

relevant to the breach of fiduciary duty claims because a fiduciary

relationship exists only if the plaintiff justifiably reposed trust

in the defendant and the defendant knew of and accepted that trust.

Broomfield v. Kosow, 212 N.E.2d 556, 560 (Mass. 1965); see also

Maffei v. Roman Catholic Archbishop of Bos., 867 N.E.2d 300, 313

(Mass. 2007); Patsos v. First Albany Corp., 741 N.E.2d 841, 851

(Mass. 2001).18 The last paragraph of the quoted instruction was

both clear and substantively correct.

V.

We affirm the decision of the district court. Costs are

awarded to Goldman.

18
As Goldman notes, the district court instructed the jury
on these elements of the intentional misrepresentation and breach
of fiduciary duty claims, and plaintiffs did not object to those
instructions.

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