USCA1 Opinion
January 27, 1995 UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
__________________
No. 94-1490
FLEET NATIONAL BANK,
Plaintiff,
v.
ANCHOR MEDIA TELEVISION, INC.,
AND KOVR OF DELAWARE, INC.,
Defendants, Appellants.
__________________
NARRAGANSETT CAPITAL, INC.,
AND EDWIN PFEIFFER,
Defendants, Appellees.
__________________
ERRATA SHEET ERRATA SHEET
The opinion of this court issued on January 26, 1995, is
amended as follows:
The second sentence of the first full paragraph on page 25
should be deleted, and the following two sentences should be
inserted in its place:
And the only other evidence of a representation
regarding commercialization levels at KOVR introduced
by Anchor at the second trial was the so-called
July/August 1988 day-part summary, a document that
summarized commercialization levels and commercial-
generated income by day and time (e.g., 7/25, 8:00-9:00
p.m.) for July and August 1988. The July/August 1988
day-part summary allegedly misrepresented that KOVR was
undercommercialized in July and August 1988 and ___________________
understated commercial-generated income during this
same period.
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
____________________
No. 94-1490
FLEET NATIONAL BANK,
Plaintiff,
v.
ANCHOR MEDIA TELEVISION, INC.,
AND KOVR OF DELAWARE, INC.,
Defendants, Appellants.
___________________
NARRAGANSETT CAPITAL, INC.,
AND EDWIN PFEIFFER,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Francis J. Boyle, Senior U.S. District Judge] __________________________
____________________
Before
Cyr, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Stahl, Circuit Judge. _____________
____________________
Stephen M. Sacks, with whom Tim Atkeson, Arnold & Porter, Anthony ________________ ____________ _______________ _______
F. Muri, and Goldenberg & Muri were on brief for appellants. _______ _________________
Charles I. Poret, with whom Richard M. Sharfman, Mark J. Kenney, ________________ ____________________ _______________
A. Lauriston Parks, Sharfman, Shanman, Poret & Siviglia, P.C., ____________________ ______________________________________________
Severson & Werson, and Hanson, Curran, Parks & Whitman, were on brief _________________ _______________________________
for defendants-appellees Narragansett Capital, Inc. and Edwin
Pfeiffer.
____________________
January 26, 1995
____________________
BOWNES, Senior Circuit Judge. In this appeal, BOWNES, Senior Circuit Judge. _____________________
appellants Anchor Media Television, Inc. ("Anchor"), and
KOVR-TV of Delaware, Inc. ("KOVR"), contend that the district
court committed several legal and discretionary errors in the
course of two trials of their claims of fraud and breach of
contract against appellees Narragansett Capital, Inc.
("Narragansett"), KOVR's former owner, and Edwin Pfeiffer,
KOVR's former general manager. After carefully reviewing the
record and considering appellants' arguments, we affirm.
I. I. __
BACKGROUND BACKGROUND __________
The complicated factual predicate of this
litigation has been meticulously rehearsed in a published
opinion by the district court. See Fleet Nat'l Bank v. ___ _________________
Anchor Media Television, Inc., 831 F. Supp. 16, 21-31 (D.R.I. _____________________________
1993). It will be reiterated here only to the extent
necessary to resolve the issues before us.
The case arises out of Narragansett's sale to
Anchor of KOVR, an ABC-affiliate television station located
in Sacramento, California. Anchor was awarded the station
after submitting the high bid at a closed auction held in
late September 1988. The sale price eventually agreed upon
by the parties was $162 million. The deal was structured as
a merger of an Anchor subsidiary into the corporate owner of
KOVR, and became final on January 25, 1989. The terms of the
-2- 2
merger were memorialized in a merger agreement ("the
Agreement") dated October 12, 1988. The case came before the
district court as an interpleader action filed by plaintiff
Fleet National Bank ("Fleet"). Fleet controlled a $5 million
escrow account established by the Agreement to address claims
that might arise from KOVR's sale. In its complaint, Fleet
asked the district court to determine proper allocation of
the escrow funds. Anchor and Narragansett, among others,
were named as defendants to the action.
Subsequently, Anchor filed cross-claims against
Narragansett and Pfeiffer, alleging breach of the Agreement
and common law fraud.1 Underlying these claims were
allegations that Narragansett had fraudulently increased its
cash flow in the months preceding the auction by: (1)
actually running more commercials than was customary in the
industry while representing that it was running fewer
commercials than was customary ("the overcommercialization
allegation"); (2) running local commercials at a time when it
was contractually obliged to be running an ABC newsbrief
("the ABC newsbrief allegation"); (3) surreptitiously
shifting to subsequent years certain operating expenses
____________________
1. Pfeiffer also brought a cross-claim against Anchor for
breach of his employment contract. The subject matter of
this claim is not before us.
-3- 3
incurred as a result of a contract with Nielson Media
Research2 ("the Nielson allegation"); and (4) charging
political candidates too much money to run political
advertisements ("the political advertising allegation"). We
discuss the particulars of these allegations infra. _____
Anchor claimed that these practices had a damaging
effect upon its bid, which was largely formulated in
accordance with standard industry valuation practices --
i.e., by taking the projected year-of-sale cash flow
(essentially, profit) and multiplying it by a number ("the
multiplier") which appropriately accounted for certain
characteristics inhering in the target market. In projecting
year-of-sale cash flow, Anchor used actual cash flow figures
from January 1, 1988 through August 31, 1988, and financial
information which enabled it to project cash flow from
September 1, 1988 through the end of the year. All of the
information on which Anchor relied in formulating its bid was
generated prior to September 28, 1988, the day on which the
bid was submitted.
Put in concrete terms, Anchor argued that
Narragansett's fraudulent inflation of its 1988 cash flow
(quantified at trial as being at least $1,943,000) caused
Anchor to bid at least $27 million more for the station than
____________________
2. Nielson Media Research is a rating service that monitors
audience viewership of a television station. Fleet Nat'l ___________
Bank, 831 F. Supp. at 28. ____
-4- 4
it would have absent the fraud. Anchor reached this number
by taking the amount of improperly-obtained 1988 cash flow
and multiplying it by 13.6, the multiplier it had used in
valuing the Sacramento market. This "effect on the bid"
constituted Anchor's theory of damages.3
____________________
3. We have some doubts about the viability of Anchor's
"effect on the bid" damages theory in the context of this
case. The parties agree that Rhode Island law, which governs
Anchor's fraud claim, applies the "benefit of the bargain"
rule in assessing damages for fraudulent misrepresentations
inducing a party to contract for the purchase of property.
See Barnes v. Whipple, 68 A. 430 (R.I. 1907). Under this ___ ______ _______
rule, the defrauded purchaser is entitled to recover the
difference between the actual value of the purchased item and
its value had the seller's representations been true. See ___
Learjet Corp. v. Spenlinhauer, 901 F.2d 198, 203 (1st Cir. ______________ ____________
1990) (applying Kansas law); see also J. F. Rydstrom, ___ ____
Annotation, "Out of Pocket" or "Benefit of Bargain" as Proper ________________________________________________
Rule of Damages for Fraudulent Representations Inducing _____________________________________________________________
Contract for the Transfer of Property, 13 A.L.R. 3d 875, 885 ______________________________________
(1967). This value differential is measured at the time of
the sale. Learjet Corp., 901 F.2d at 203. _____________
When (as is usually the case) the negotiation of the sale
price immediately precedes the consummation of the sale, the
effect of the seller's fraud on the purchase price will
almost invariably quantify the difference between the actual
value of the purchased item and its value had the
representations been true. Here, however, the consummation
of the sale (i.e., the merger) took place nearly four months
after the negotiation of the sale price, at a time when fluid _____
market conditions (there was much testimony to this effect)
might have led a buyer to utilize a different multiplier than _________
the one Anchor used in formulating its bid. Moreover, the
merger took place in a calendar year different from the one _________
in which the sale price was negotiated. A buyer applying
Anchor's valuation theory at the time of merger therefore __ ___ ____ __ ______
would presumably have been looking at a different period of
time in projecting cash flow than the one at which Anchor
looked. Thus, it strikes us as somewhat speculative to infer
that the effect Narragansett's fraud had on Anchor's 1988 bid
accurately quantifies the difference between the actual value
of KOVR on January 25, 1989 (the date of the merger) and its
putative value on that date had Narragansett's
representations been true.
-5- 5
A. The First Trial A. The First Trial ___________________
A jury trial commenced on April 2, 1991, and lasted
fourteen trial days. In the course of the trial, the
district court ruled, as a matter of law and for a variety of
reasons, that a reasonable jury could not find a breach of
the Agreement or fraud on the basis of the political
advertising allegation. The court did, however, allow Anchor
to present to the jury, as the predicate for its contract and
fraud claims, the evidence underlying its
overcommercialization, ABC newsbrief, and Nielson
allegations.4 At the trial's conclusion, the jury awarded
Anchor $4.5 million for breach of contract and $13.5 million
for fraud. It also awarded Anchor $1 million in punitive
damages.
Subsequent to this verdict, and in accordance with
then-Fed. R. Civ. P. 50(b), Narragansett and Pfeiffer moved
for judgment notwithstanding the verdict or, in the
____________________
In any event, Narragansett has not raised the absence of
proof of damages as an alternative ground for affirmance.
Because this issue is somewhat involved and has not been
argued, and because we believe that affirmance is otherwise
compelled on the record and briefs before us, we do not delve
further into the damages question at this time.
4. In so stating, we reject Anchor's contention on appeal
that the Nielson allegation did not constitute part of its
breach of contract claim. In fact, we find this argument
difficult to fathom. In his closing argument, Anchor's trial
counsel clearly asserted that the alleged subterfuge
involving the Nielson contract constituted a breach of the
Agreement.
-6- 6
alternative, for a new trial. For reasons not disclosed by
the record, the district court kept this motion under
advisement for more than two years, until June 1993, when it
issued Fleet Nat'l Bank. See 831 F. Supp. 16. ________________ ___
In addressing the Rule 50(b) motion, the court
first held that Narragansett and Pfeiffer were entitled to a
new trial on Anchor's breach of contract claim. See id. at ___ ___
34-38. While the court believed that there had been
sufficient evidence to support the jury's contract verdict
based on the ABC newsbrief allegation, id. at 34-36, it ___
determined that the evidence did not permit a reasonable jury
to find breach of contract on the basis of either the
overcommercialization or Nielson allegations, id. at 36-37 ___
and 43 n.6. In making this determination, the court ruled
that Narragansett and Pfeiffer had not made any
representations or warranties in the Agreement regarding the __ ___ _________
number of commercials KOVR had broadcast in 1988, id. at 36- ___
37, and that the Nielson allegation was not viable because
Anchor had failed to prove justifiable reliance on the
alleged misrepresentation, id. at 43 n.6. A new trial was ___
ordered because the general verdict form did not allow the
court to ascertain whether the jury had relied on the legally
defective allegations in reaching its contract verdict. Id. ___
at 37-38 (citing, inter alia, Sunkist Growers, Inc. v. _____ ____ _______________________
Winckler & Smith Citrus Prods. Co., 370 U.S. 19, 29-30 (1962) __________________________________
-7- 7
and Brochu v. Ortho Pharmaceutical Corp., 642 F.2d 652, 662 ______ ___________________________
(1st Cir. 1981)).
The court also held that Narragansett was entitled
to a new trial on Anchor's fraud claim. See id. at 38-44. ___ ___
While the court believed that there had been sufficient
evidence to support the jury's verdict on this claim with
regard to the ABC newsbrief and overcommercialization
allegations, it ruled that the defective Nielson allegation
may have poisoned the general fraud verdict beyond cure. Id. ___
at 42-43.
Finally, the court negated the jury's punitive
damages award as lacking evidentiary support. Id. at 45. ___
Anchor does not challenge this ruling on appeal.
B. The Second Trial B. The Second Trial ____________________
In accordance with the district court's opinion, a
second jury trial commenced on March 21, 1994, and lasted
eleven trial days. Prior to submitting the case to the jury,
the court ruled as a matter of law, see Fed. R. Civ. P. ___
50(a), that Anchor's overcommercialization allegation could
not be presented to the jury in support of its fraud claim,
and that Anchor's ABC newsbrief allegation could not be
presented to the jury in support of its contract claim. The
court based these rulings on determinations that Anchor had
not proven damages in connection with its
overcommercialization allegation, and that Anchor had not
-8- 8
provided Narragansett and Pfeiffer with notice of the ABC
newsbrief allegation within the fifteen-day time period
contemplated by the Agreement.5 The court also rebuffed
Anchor's attempt to revive its political advertising
allegation at this time. Thus, only Anchor's fraud claim,
now based solely on the ABC newsbrief allegation, went to the
jury. The jury returned a verdict in favor of Narragansett
and Pfeiffer on this claim. After the verdict, the court
took the apparently unprecedented step of granting the
verdict's beneficiaries judgment as a matter of law on the
same claim. In so doing, the court stated that it was ruling
on the reserved motion so that any error in the jury
instructions could be ignored in subsequent proceedings.
This appeal followed.
II. II. ___
STANDARD OF REVIEW STANDARD OF REVIEW __________________
We first deal with a technical, nomenclature
matter. Rule 50 was amended during the course of the
proceedings before the district court. The amendments
abandoned the terms "directed verdict" and "judgment n.o.v.,"
which were commonly associated with the former Rule, in favor
of the phrase "judgment as a matter of law." See generally ___ _________
____________________
5. Section 8.5 of the Agreement required any party with a
claim arising out of the Agreement to send a notice of claim
to the breaching party within fifteen business days of coming
to the belief that it had suffered damages in connection with
the claim.
-9- 9
Fed. R. Civ. P. 50 advisory committee's note. The amendments
did not, however, affect either the standard by which
district courts review motions brought under the Rule or the
standard by which we review a district court's rulings. See ___
id. ("If a motion is denominated a motion for directed ___
verdict or for judgment notwithstanding the verdict, the
party's error is merely formal. Such a motion should be
treated as a motion for judgment as a matter of law in
accordance with this rule."). For simplicity's sake, we
therefore refer to Narragansett's and Pfeiffer's various
motions, however denominated at the time of filing, as
motions for judgment as a matter of law.
To the extent that Anchor is challenging the
district court's post-trial rulings that Narragansett and
Pfeiffer were entitled to judgment as a matter of law on
certain issues, our review is de novo. See Lama v. Borras, __ ____ ___ ____ ______
16 F.3d 473, 477 (1st Cir. 1994) (affirming denial of a post-
verdict Fed. R. Civ. P. 50(b) motion for judgment as a matter
of law); Rolon-Alvarado v. Municipality of San Juan, 1 F.3d ______________ ________________________
74, 77 (1st Cir. 1993) (affirming grant of Fed. R. Civ. P.
50(a) motion for judgment as a matter of law at the close of
plaintiff's case). Thus, we will affirm these rulings only
if, after scrutinizing the proof and inferences derivable
therefrom in the light most hospitable to Anchor, we
determine that a reasonable factfinder could have reached but
-10- 10
one conclusion: that Narragansett and Pfeiffer were entitled
to judgment. See Lama, 16 F.3d at 477. Because the court's ___ ____
order granting Narragansett and Pfeiffer a new trial was
based solely upon its legal conclusions that defective claims ______
had been allowed to go to the jury, we first determine the
correctness of the court's rulings in this regard.
If we decide that the court's legal conclusions
were correct, our review becomes significantly more
circumscribed. Where the trial court has correctly
determined that legal error infected a claim presented to the
jury, we will defer to the court's judgment that a new trial
was called for on that claim absent an abuse of discretion.
See Allied Chem. Corp. v. Daiflon, Inc., 449 U.S. 33, 36 ___ ___________________ _____________
(1980) (per curiam); see also Payton v. Abbott Labs. 780 F.2d ___ ______ ___ ____ ______ ____________
147, 152 (1st Cir. 1985); 11 Charles A. Wright & Arthur R.
Miller, Federal Practice and Procedure, 2818, at 119-20 _______________________________
(1973) (deference is appropriate because "[t]he trial judge
was on the spot and is better able than an appellate court to
decide whether the error affected the substantial rights of
the parties").
Deference in this case is particularly appropriate
for two reasons. First, in its published opinion, the
district court explicitly cited as controlling authority two
cases which make clear that courts should set aside jury
verdicts in only the most compelling of circumstances. See ___
-11- 11
Fleet Nat'l Bank, 831 F. Supp. at 32 (citing Coffran v. __________________ _______
Hitchcock Clinic, Inc., 683 F.2d 5, 6 (1st Cir.) (trial judge ______________________
may not set aside jury verdict merely because s/he would have
reached a different conclusion than the jury), cert. denied, _____ ______
459 U.S. 1087 (1982), and Borras v. Sea-Land Serv., Inc., 586 ______ ____________________
F.2d 881, 886 (1st Cir. 1978) (trial court may set aside jury
verdict only where verdict (1) is against clear weight of
evidence; (2) is based upon evidence which is false; or (3)
will result in a miscarriage of justice)). And second, in
that same opinion, the court clearly stated its reasons for
ordering a new trial. See id. at 37-38 and 43 (court could ___ ___
not tell whether jury had awarded Anchor damages on
erroneously submitted evidence or improperly allowed
arguments).
Finally, we review the district court's rulings
excluding evidence offered by Anchor under the abuse of
discretion standard. E.g., Fairfield 274-278 Clarendon Trust ____ _________________________________
v. Dwek, 970 F.2d 990, 995 (1st Cir. 1992). Moreover, we are ____
free to affirm the trial judge's decisions "on any
independently sufficient ground made manifest by the record."
See, e.g., Ticketmaster-New York, Inc. v. Alioto, 26 F.3d ___ ____ ____________________________ ______
201, 204 (1st Cir. 1994).
With these criteria in mind, we review Anchor's
claims.
III. III. ____
-12- 12
DISCUSSION DISCUSSION __________
Anchor makes a number of arguments, the order of
which we rearrange for ease of analysis. As to the first
trial, Anchor contends: (1) the court erred in deciding that
the evidence was insufficient for a reasonable jury to have
found fraud based on the Nielson allegation; (2) the jury
could not, at any rate, have relied upon this allegation in
reaching its contract and fraud verdicts;6 and (3) the court
erred in ruling post-trial that Anchor should not have been
allowed to raise the issue of overcommercialization in
connection with its breach of contract claim.
As to the second trial, Anchor asserts: (1) the
district court improperly prohibited its witnesses from
testifying regarding customary levels of commercialization in
the industry; (2) the court otherwise erred in taking from
the jury the fraud claim based on the overcommercialization
allegation; (3) the court erroneously precluded Anchor from
renewing its claims based on the political advertising
allegation; (4) the court improperly excluded certain "state
of mind" evidence relevant to the question of when Anchor
learned that it had suffered damages as a result of the
improper running of local commercials during the ABC
____________________
6. We have already rejected Anchor's argument that the
district court erred in assuming that the Nielson allegation
partially undergirded the breach of contract claim. See ___
supra note 4. _____
-13- 13
newsbrief time slot; (5) the court otherwise erred in taking
from the jury the breach of contract claim based on the ABC
newsbrief allegation; (6) the court erred in instructing the
jury on the one issue -- fraud based on the ABC newsbrief
allegation -- the jury was permitted to consider; and (7) the
court was without the power to grant judgment as a matter of
law to Narragansett and Pfeiffer after the jury had returned
a verdict in their favor on this issue.
A. Alleged First Trial Errors A. Alleged First Trial Errors ______________________________
1. Legal Viability of the Nielson Allegation _____________________________________________
Anchor first argues that the court erred in
determining that the evidence was insufficient for a
reasonable jury to have found fraud based on the Nielson
allegation. As previously stated, the Nielson allegation
involved the claimed surreptitious shifting to subsequent
years of certain 1988 operating expenses incurred as a result
of a contract between Narragansett and Nielson Media
Research. The specifics of the allegation are as follows.
Sometime after August 3, 1988, at the time Anchor
was preparing to submit its bid, Narragansett supplied Anchor
with a box that contained hundreds of contracts involving
KOVR. One of these was the Nielson contract, which set the
monthly amount that KOVR would pay for Nielson's rating
service. Attached to the contract was a two-page appendix.
On the first page of the appendix, in a section captioned
-14- 14
"Base Rate per Month," the figure "$10,000" was typed in the
space provided for the time period May 1988 through April
1989. An asterisk was next to this figure, and a
corresponding note, typed at the bottom of the same page,
read "see attached letter dated 4/7/88." No letter was
attached to the contract.
The second page of the appendix included a
computation worksheet. The worksheet included a space for
"Base Rate per Month." The figure "$3,000" was typed in this
space. Further down the page was a space captioned "Monthly
Adjustment (estimated) as of May 1988." The figure "$90.00,"
which represented 3% of the base monthly rate, was typed in
this space. Directly beneath this was a space captioned
"Estimated Monthly Net Charge as of May 1988." The figure
"$3,090.00," which represented the Base Rate per Month plus
the Monthly Adjustment, was typed in this space.
The discrepancy between the base monthly rates
provided for on the first and second pages of the appendix
was explained in the 4/7/88 letter, which Anchor discovered
only after taking control of KOVR. This letter memorialized
Nielson's agreement to Narragansett's request to defer until
the following year $7,000 per month in payments owed for the
period May through December 1988. Anchor alleged that
Narragansett's failure to include the 4/7/88 letter in the
box of contracts involving KOVR amounted to a fraudulent
-15- 15
concealment of the deferral of 1988 operating expenses in an
attempt to inflate 1988 cash flow. The alleged
misrepresentations were the "$10,000" base monthly rate
figure typed on the first page of the Nielson contract
appendix, and subsequent representations by Narragansett
officials (including Pfeiffer), both oral and in the
Agreement, that Narragansett had provided Anchor with a true
and complete set of contracts relating to KOVR.
In its order on the motions filed subsequent to the
first trial, the district court stated that, in order to make
out a fraud claim under Rhode Island law (which governs
here), Anchor was required to prove that Narragansett and
Pfeiffer knowingly misrepresented a material fact with intent
to deceive, thereby inducing Anchor to rely justifiably on
the misrepresentation to its detriment. See Fleet Nat'l ___ ____________
Bank, 831 F. Supp. at 38. The court then concluded that, in ____
light of the asterisk referring interested readers to the
4/7/88 letter and the two statements on the second page of
the Nielson contract appendix referencing a $3,000 base
monthly rate for May 1988, no reasonable jury could have
found that Anchor justifiably relied on the $10,000
representation on the first page of the Nielson contract's
appendix. See Fleet Nat'l Bank, 831 F. Supp. at 42-43. ___ ________________
Regardless of whether Anchor's reliance was
justifiable, we regard as independently supported the
-16- 16
district court's conclusion that the fraud claim based on the
Nielson allegation was not legally viable. See Alioto, 26 ___ ______
F.3d at 204. Under Rhode Island law, liability for fraud
cannot attach unless the misrepresentation at issue was
intentionally made with an intent to deceive. See East ___ ____
Providence Loan Co., 236 A.2d at 641; see also Cliftex ____________________ ___ ____ _______
Clothing Co., Inc. v. Di Santo, 148 A.2d 273, 275 (R.I. ____________________ ________
1959); Campanelli v. Vescera, 63 A.2d 722, 723 (R.I. 1949); __________ _______
Cheetham v. Ferreira, 56 A.2d 861, 864 (R.I. 1948). In our ________ ________
view, the same representations and references (i.e., the
asterisk, reference to the 4/7/88 letter, and correct
statements of the base monthly rate) which led the district
court to determine that Anchor's reliance on the $10,000
figure was not justifiable compel the conclusion that the
alleged misrepresentations were not intentionally made with
an intent to deceive. Simply put, we do not think a jury
could reasonably infer such an intent where there is an
explicit reference to the term-altering document -- the
4/7/88 letter -- on the same page as the crucial alleged __ ___ ____ ____
misrepresentation, where the true base monthly rate is twice _____
set forth on the very next page of the addendum, and where ____ ____ ____
there is no evidence that the exclusion of the letter from
the box of documents involving KOVR was intentional.
Accordingly, we affirm the court's grant of judgment as a
-17- 17
matter of law to Narragansett and Pfeiffer on Anchor's fraud
claim based on the Nielson allegation.
2. Effect of the Nielson Allegation on the Verdict ___________________________________________________
Anchor makes an alternative argument that the
Nielson allegation, and its supporting evidence, could not
possibly have influenced the jury's verdict on its breach of
contract and fraud claims. Anchor contends that it
introduced little evidence in support of the Nielson
allegation at trial, and that it did not quantify the damages
arising out of it during its closing. Relying on this
contention, Anchor asserts that the district court, by
jettisoning the contract and fraud verdicts, allowed "the
tail to wag the dog."
Although the Nielson allegation was not the primary
focus of Anchor's case, a review of the first trial record
shows that Anchor specifically mentioned it in both its
opening and closing arguments. Moreover, Anchor supported
the allegation by having Patrick Murphy, its Chief Financial
Officer, testify to the incompleteness of the Nielson
contract and explain to the jury that the omission of the
4/7/88 letter from the box of contracts involving KOVR
fraudulently "presented to us a larger cash flow than what
they should have because of the shifting of expenses." And
while Anchor did not quantify for the jury the damages
arising out of the Nielson allegation, it did provide the
-18- 18
jury with a damages theory (i.e., improperly-obtained 1988
cash flow multiplied by 13.6, the multiplier Anchor used in
arriving at its bid) by which the jury could easily and
rationally have quantified the damages for itself. In light
of all this, and in the absence of any suggestion on appeal
that a remittitur would have been appropriate, we cannot say
that the district court abused its discretion in determining
that the general fraud and contract verdicts returned at the
conclusion of the first trial may have been incurably
infected by the legally deficient Nielson allegation.
Accordingly, we affirm the district court's decision to award
Narragansett and Pfeiffer new trials on Anchor's contract and
fraud claims.
3. The Breach of Contract Claim Based on the ___________________________________________________
Overcommercialization Allegation ________________________________
As we have noted, a second basis for the setting
aside of the contract verdict was the district court's post-
trial determination that there were no representations or
warranties in the Agreement regarding the number of
commercials KOVR had been running prior to Anchor's
submission of its bid. Anchor claims that the court erred in
reaching this conclusion, denoting three contractual
provisions which, in its view, a reasonable juror could have
construed as pertaining to 1988 commercialization levels.
The first of these provisions, which can be found
at paragraph 5.1(a) of the Agreement, and which is captioned
-19- 19
"Conduct of the Business Until Effective Time," states:
"Except as [Anchor] may otherwise consent in writing, until
the Effective Time [Narragansett] will (i) operate its ____
business only in the usual, regular and ordinary manner . . .
." (Emphasis supplied). Plainly, through its use of the
future tense "will," this representation covers only the
period of time between the date of the Agreement, October 12,
1988, and the date the merger became effective, January 25,
1989. Thus, despite Anchor's attempts to convince us
otherwise,7 paragraph 5.1(a) simply cannot be read as
pertaining to the period of time (i.e., that portion of 1988
prior to Anchor's submission of its bid) when the sale and _____ __
running of too many commercials at KOVR might have affected
the amount Anchor bid for the station. And because Anchor's
damages theory involved only the effect of artificially
inflated 1988 cash flow on its bid, conduct which took place __ ___ ___
after the submission of the bid is completely irrelevant to
its claims.
The second provision, found at paragraph 5.1(e) and
captioned "Preservation of Business," does not help Anchor
for the same reason. The provision states: "[Narragansett]
____________________
7. In what appears to be an attempt to avoid paragraph
5.1(a)'s temporal limitations, the citation to paragraph
5.1(a) in Anchor's brief omits paragraph 5.1(a)'s caption
("Conduct of Business Until Effective Time") and alters the
phrase "will (i) operate" to read "operat[ed]." If this was
deliberate, it was deceptive; if a mistake, it was
inexcusable.
-20- 20
shall conduct the business and operations of the Station _____
diligently and in the ordinary course in substantially the
same manner as heretofore conducted." (Emphasis supplied).
Through its use of the future tense "shall," this provision
also only covers a period of time subsequent to October 12,
1988, the date of the Agreement. And as we have explained,
any improper actions taken by Narragansett or Pfeiffer during
this time period are irrelevant under the damages theory
pursued by Anchor.
The final provision relied upon by Anchor,
paragraph 4.1(f), simply cannot be construed as warranting
"customary" commercialization levels at KOVR. Captioned
"Absence of Certain Changes or Events," the provision sets
forth a number of illustrative asset-dissipating and capital
structure-altering events and transactions, warranting an
absence of such events or transactions "since the date of the
Unaudited Financial Statements [August 31, 1988]." The
proviso upon which Anchor seizes states that "the Company has
not . . . (v) entered into . . . any other material
commitment, contractual obligation or transaction other than
in the ordinary course of business . . . ."
Leaving aside the fact that Anchor did not
introduce specific evidence of overcommercialization at KOVR
from August 31, 1988 through September 28, 1988 (the only
period of time prior to Anchor's submission of its bid that
-21- 21
this provision can be read to cover), we are at a loss to see
how it would be reasonable to regard the sales of commercials
challenged here as being transactions outside of KOVR's
"ordinary course of business." As the district court
observed, paragraph 4.1(f)'s "ordinary course of business"
proviso, when read in context, should be construed as simply
warranting that Narragansett had not entered into any
transactions (1) of an unusual type for a television station;
or (2) that would tend to unduly dissipate KOVR's assets or
alter its capital structure. See Fleet Nat'l Bank, 831 F. ___ _________________
Supp. at 37. Certainly, sales of commercial time are not
unusual transactions for a television station; indeed, the
revenues generated by such sales constitute a station's
lifeblood. Moreover, the record is devoid of evidence that
the number of such sales entered into by Narragansett during
the relevant time period -- even if in excess of industry
norms -- threatened to unduly dissipate KOVR's assets or
alter its capital structure.
To be sure, the actual meaning of a contractual
provision which can reasonably accommodate two or more __________
interpretations should be left to the jury. See, e.g., ___ ____
Bushkin Assocs., Inc. v. Raytheon Co., 815 F.2d 142, 148-49 ______________________ ____________
(1st Cir. 1987) (applying Massachusetts law). But the
question whether a provision can reasonably support a
proffered interpretation is a legal one, to be decided by the
-22- 22
court. See Fashion House, Inc. v. K Mart Corp., 892 F.2d ___ ____________________ _____________
1076, 1083 (1st Cir. 1989) (applying Michigan law)
("Determining whether or not a contract is ambiguous is, like
other questions of contract construction, a matter for the
court."). Here, we think that the court correctly determined
that Anchor's proffered interpretation of paragraph 4.1(f)'s
"ordinary course of business" proviso -- which reads the
proviso as warranting customary commercialization levels at
KOVR during 1988 -- was not one that a reasonable juror could
accept. Accordingly, we affirm the court's ruling.
In sum, we agree with the district court that
Anchor should not have been permitted to present the Nielson
allegation to the jury, and that Anchor should not have been
allowed to raise the issue of overcommercialization in
connection with its breach of contract claim. We further
rule that the court did not abuse its discretion in
determining that these improperly asserted allegations may
well have affected the jury's general contract and fraud
verdicts at the first trial. We therefore affirm the court's
post-trial order, see Fleet Nat'l Bank, 831 F. Supp. 16, in ___ _________________
all respects.8
____________________
8. Because of these rulings, we need not discuss whether the
court's new trial order on the fraud claim against
Narragansett can be alternatively upheld on the basis of the
court's post-trial determination that it should not have
submitted to the jury the question of Narragansett's
vicarious liability as Pfeiffer's alter ego or co-
conspirator. See Fleet Nat'l Bank, 831 F. Supp. at 44-45. ___ ________________
-23- 23
B. Alleged Second Trial Errors B. Alleged Second Trial Errors _______________________________
1. Exclusion of Witness Testimony Regarding ___________________________________________________
Customary Levels of Commercialization in the ___________________________________________________
Industry Anchor complains that, at the second trial, ________
the district court improperly excluded, for lack of
foundation, testimony by Anchor's Senior Vice President,
Lawrence Clamage, regarding customary levels of
commercialization in the industry. Anchor underscores this
plaint by pointing out that Clamage was permitted to testify,
over objection, to industry norms in the first trial, and
that the court offered no rationale for its contrary ruling
at the second trial. Anchor further contends that the court
committed legal error in not allowing it to read to the jury
testimony regarding industry norms given at the first trial
by John Sheehan, who was unavailable for the second trial.
In the alternative, Anchor asserts that the court abused its
discretion by denying it a one-day continuance so that
Sheehan could appear. Anchor claims that all three of these
erroneous, discretionary rulings were highly prejudicial
because the court's award of judgment as a matter of law on
Anchor's fraud claim based on overcommercialization was
premised upon an absence of evidence by which Anchor could
"structure the amount of damages for overcommercialization."
While the equities of the situation involving
Sheehan are not nearly as one-sided as Anchor represents them
-24- 24
in its brief,9 we can understand Anchor's frustration with
the court's failure to explain why Clamage's testimony was
admissible in the first trial but not in the second.
Especially in light of the two-year delay in deciding the new
trial motion, we think that Anchor was entitled to an
explanation for the court's change of mind. The fact of the
matter is, however, that evidence regarding commercialization
norms in the industry was completely irrelevant in the second
trial.
As we have explained, the court properly ruled that
the Agreement could not be construed as warranting customary
commercialization levels during the time period Anchor
examined in developing its bid. And the only other evidence
of a representation regarding commercialization levels at
KOVR introduced by Anchor at the second trial was the so-
called July/August 1988 day-part summary, a document that
summarized commercialization levels and commercial-generated
income by day and time (e.g., 7/25, 8:00-9:00 p.m.) for July
and August 1988. The July/August 1988 day-part summary
allegedly misrepresented that KOVR was undercommercialized in ___________________
July and August 1988 and understated commercial-generated
____________________
9. Anchor had more than a month's notice that the second
trial would begin on March 21, 1994. Despite this notice,
Anchor apparently did not ascertain Sheehan's availability as
a witness until it was in the middle of presenting its case.
Indeed, Anchor did not communicate with Sheehan at all
between January 27, 1994 and March 25, 1994, the date on
which it learned of Sheehan's unavailability.
-25- 25
income during this same period. Thus, there was no evidence
in the second trial of a representation to Anchor that KOVR
was commercialized in accordance with industry norms in 1988,
and Anchor had no basis for arguing that it was damaged
because it bid too much in reliance on such a representation.
Accordingly, we affirm the court's exclusion of the testimony
regarding industry standards on the independent ground that
it was irrelevant. See Alioto, 26 F.3d at 204; see also Fed. ___ ______ ___ ____
R.Evid.402("Evidence whichisnotrelevantis notadmissible.").10
____________________
10. After the district court excluded evidence regarding
industry norms at the second trial, Anchor argued an
alternative "expectancy" damages theory. Under this late-
arising theory, Anchor sought to recover the revenue it
expected to generate by running more commercials on KOVR,
which it had been fraudulently induced to believe was
substantially undercommercialized at the time of the sale.
In a throw-away line in its reply brief, Anchor contends that
evidence of industry norms was relevant to proof of damages
under its expectancy damages theory.
An expectancy damages theory which would look to the
difference between the revenue Narragansett falsely claimed
to have been generating in July/August 1988, and the revenue
that a station commercialized in accordance with industry
norms would have been generating at that time, is not
implausible. Indeed, it strikes us as being much more in
line with the fraud damages to which Anchor actually was
entitled under Rhode Island law than the "effect on the bid"
theory pursued throughout this litigation. See supra note 3. ___ _____
The problem is, however, that Anchor never sought to quantify
its expectancy damages in this way until its reply brief. In _____
fact, Anchor represented to the district court on at least
three occasions that evidence of industry norms was
irrelevant to its expectancy damages theory. See Second __________ ___
Trial Transcript, 3/29/94, at 13 (two representations to this
effect), and 3/30/94 at 18. Instead, Anchor sought to
quantify its expectancy damages as the difference between the
actual 1988 revenues generated by the overcommercialized KOVR
(a fact of which it learned only subsequent to taking over __________ __
the station), and the far lower revenues the false day-part
summary indicated that KOVR was realizing. We discuss the
-26- 26
2. The Fraud Claim Based on the Over- ______________________________________
commercialization Allegation ____________________________
As noted, subsequent to the conclusion of Anchor's
case in the second trial, the district court granted
Narragansett and Pfeiffer judgment as a matter of law on
Anchor's fraud claim based on the overcommercialization
allegation for failure to prove damages. Anchor contests
this ruling, arguing that it proved expectancy damages by
demonstrating the difference between the actual revenue
generated by the "too many" commercials run in 1988, and the
lower revenue the July/August 1988 day-part summary falsely
indicated was being generated. See supra note 10. ___ _____
Throughout both trials, Anchor consistently
maintained that KOVR was covertly running commercials far in
excess of industry norms during the time period Anchor
examined in formulating its bid. Anchor also consistently
contended that, after taking over the station in 1989, it had
to reduce commercialization levels in order to bring the
station into conformity with industry norms. Given these
positions, Anchor would have been estopped from raising, near
the conclusion of its case in the second trial, an explicit
____________________
legal viability of this quantification in the next section of
our opinion; suffice it to say at this point that Anchor has
waived any argument that evidence of industry norms was
relevant to its expectancy damages theory. See, e.g., ___ ____
Sandstrom v. Chemlawn Corp., 904 F.2d 83, 86 (1st Cir. 1990) _________ ______________
(deeming waived an argument not made below or in appellant's
opening brief).
-27- 27
alternative argument that it expected to commercialize at
levels commensurate with those actually employed at KOVR in ____________ ____
1988. Cf. Desjardins v. Van Buren Community Hosp., 37 F.3d ___ __________ _________________________
21, 23 (1st Cir. 1994) (doctrine of judicial estoppel "may
apply to bar a litigant from engaging in intentional self-
contradiction as a means of obtaining unfair advantage")
(citations omitted). Such an argument was, however, implicit
in Anchor's alternative damages theory.
In quantifying its expectancy damages by
subtracting the lower, misrepresented revenues set forth in
the July/August day-part summary from the higher, actual 1988
revenues that KOVR was generating, and in explicitly
repudiating any suggestion that the lower, misrepresented
revenues more properly should be subtracted from the revenues
the station would have generated had it been commercialized
in accordance with industry norms, Anchor implicitly argued
that, at the time it bought the station, it expected to
generate the same commercial revenues it later learned that _____
the station had generated in 1988. Absent a proffer that it
somehow anticipated earning these revenues by commercializing
in accordance with industry norms, however, (and there was no
such proffer here), the only way Anchor could have expected
to earn the higher revenues was if it expected to run the
same number of commercials that Narragansett actually had
been running in July/August 1988. In other words, given the
-28- 28
state of the record at the second trial, necessarily subsumed
within Anchor's alternative damages theory was a tacit
argument -- i.e., that Anchor expected to run the same number
of commercials that Narragansett had been running at the
relevant time in 1988 -- which was completely at odds with
the stance Anchor had taken regarding 1988 commercialization
levels. The district court did not err in prohibiting
Anchor from altering its litigation position in this way. It
follows, therefore, that the court did not err in ruling that
Anchor had failed to prove expectancy damages arising out of
any fraudulent misrepresentation of commercialization levels
by Narragansett or Pfeiffer. See Campanelli, 63 A.2d at 724 ___ __________
(proof of fraud includes proof of damage-causing reliance by ______________
plaintiff); Cheetham, 56 A.2d at 863 (purchaser defrauded to ________
his/her disadvantage has fraud action under Rhode Island ____________
law). 3. The Political Advertising Allegation ________________________________________
Having granted Narragansett and Pfeiffer judgment
as a matter of law on Anchor's contract and fraud claims
based on the political advertising allegation during the
first trial, the district court summarily11 precluded
Anchor from arguing at the second trial that Narragansett had
artificially inflated 1988 revenues by overcharging political
____________________
11. Prior to opening arguments in the second trial, the
court stated that it was "likely" to rule out the allegation
for the same reasons that it had ruled it out at the first
trial. The next day, without elaborating, the court notified
the parties that the allegation was indeed out of the case.
-29- 29
candidates for commercial time. Anchor assigns error only to ____
this second trial ruling, arguing that it was improper unless
"there is no theory of the facts under which the allegations
of the complaint state a cause of action. Vartanian v. _________
Monsanto Co., 14 F.3d 697, 700 (1st Cir. 1994)." Anchor's _____________
argument completely overlooks the procedural posture of its
political advertising allegation at the second trial.
Perhaps nothing better highlights Anchor's
misapprehension of this issue than its citation to Vartanian _________
as supporting authority. The above-quoted language from
Vartanian summarizes the standard by which we review the _________
propriety of the a district court's dismissal of a claim
under Fed. R. Civ. P. 12(b)(6). The exclusion of the
political advertising allegation at the second trial was not, ___
however, a Rule 12(b)(6) dismissal. When the court ruled the
allegation out of the second trial, Anchor had already been
afforded a complete opportunity to substantiate and argue it,
and the court had deemed it insufficient to go to a jury.
Thus, despite Anchor's attempts to depict it otherwise, the
court's exclusion of the political advertising allegation
from the second trial was tantamount to a denial of a Fed. R.
Civ. P. 60(b) motion to set aside a properly-entered prior
order. See Fed. R. Civ. P. 60(b) (setting forth the ___
circumstances in which a court may relieve a party or a
-30- 30
party's representative from a final order).12 And we
review such denials only for an abuse of discretion. See, ___
e.g., de la Torre v. Continental Ins. Co., 15 F.3d 12, 14-15 ____ ___________ _____________________
(1st Cir. 1994) (orders denying relief under Fed. R. Civ. P.
60(b) -- which allows for "extraordinary relief". . . "only
under exceptional circumstances" -- reviewed solely for an
abuse of discretion) (citations omitted).
Because it failed to understand the procedural path
it had to follow, Anchor did not present the trial court (and
has not presented us) with an argument that a revival of its
political advertising allegation was required under any of
the criteria -- e.g., mistake, inadvertence, surprise,
excusable neglect, newly-discovered evidence, fraud, etc. --
delineated in Rule 60(b). Instead, Anchor argues that, by
the time of the second trial, it "had reconsidered its
arguments on [the political advertising] issue and [had]
marshalled new evidence in support of its claim." Plainly,
this is an inadequate foundation upon which to premise a
request for relief under Rule 60(b). Cf. Rothwell Cotton Co. ___ ___________________
v. Rosenthal & Co., 827 F.2d 246, 251 (7th Cir.) ("Rothwell's _______________
brief is long on support for why summary judgment is not
____________________
12. Apparently believing itself entitled to renew its
political advertising allegation at the second trial as of
right, Anchor never formally moved the court for relief from
the prior order under Rule 60(b). Its arguments in support
of its position were instead set forth in its opposition to
Narragansett's pretrial motion in limine to exclude the __ ______
allegation from the second trial.
-31- 31
appropriate in light of all the evidence and legal arguments
it now presents, but short on explaining why Rothwell should
be able to begin presenting those arguments -- in waves --
almost six weeks after the district court had already ruled
against Rothwell."), reh'g denied, opinion amended, 835 F.2d _____ ______ _______ _______
710 (7th Cir. 1987). Furthermore, our own review of the
record reveals no "exceptional circumstances" which would
have made relitigation of the political advertising
allegation appropriate. Accordingly, the district court
acted well within its discretion in prohibiting Anchor from
pursuing this allegation at the second trial.
4. Remaining Appellate Issues ______________________________
The four remaining arguments Anchor presses on
appeal relate to decisions the district court made in
connection with the ABC newsbrief allegation. See supra at ___ _____
13-14. We need not and do not reach the merits of these
arguments, because our review of the record compels us to
conclude that, for an independent reason, Anchor's claims for
breach of contract and fraud based on these claims were
legally deficient. See Alioto, 26 F.3d 204.13 ___ ______
____________________
13. While we do not address the merits of Anchor's argument
that the court was without the power to grant judgment as a
matter of law to Narragansett and Pfeiffer on the one issue
that went to the jury after the jury had returned a verdict _____
in their favor, we do note that this type of order is utterly
superfluous. The beneficiary of a jury verdict may, after
all, always assert on appeal (as an alternative basis for
upholding the verdict) a properly preserved argument that the
claim underlying the verdict was legally deficient. And we,
-32- 32
As already explained, the essence of Anchor's ABC
newsbrief allegation was that Narragansett fraudulently
increased its cash flow in the months preceding the auction
by running local commercials at a time when it was
contractually obliged to be running an ABC newsbrief. Anchor
quantified the damages arising out of this fraudulent conduct
in accordance with its "effect on the bid" damages theory.
See supra at 4-5. That is to say, Anchor argued that the ___ _____
proper measure of damages arising from this conduct was the
amount of 1988 revenue generated by the improper practice
times the multiplier (13.6) Anchor used in formulating its
bid.
As the district court noted in granting
Narragansett and Pfeiffer judgment as a matter of law after
the jury verdict on the fraud claim based on this allegation,
see supra at 9 and note 13, the problem with this damages ___ _____
theory in context is that most, if not all, of the revenue at
issue still would have been generated in the absence of the
alleged fraud. Anchor's own damages witness, Martin Ross,
admitted: (1) few, if any, local commercials are sold to run
at a specific point in time; (2) most local commercials are
____________________
of course, would review such a legal argument de novo -- __ ____
i.e., without deference to the trial court's opinion as to
its merits. Thus, there is no practical reason for the court
to resolve a reserved motion for judgment as a matter of law
where the jury has found in favor of the party or parties who
initially filed the motion.
-33- 33
"preemptable" (i.e., able to be run, in the station's
discretion, outside of the general time frame for which they
have been sold); and (3) on a given day, "there's probably
always going to be some commercial availability." Moreover,
Mr. Ross conceded that Anchor had failed to go through KOVR's
1988 program logs and determine which of the improperly-run
commercials could not have been run elsewhere, thus
generating irreplaceable revenue.
Anchor does not dispute any of this. In fact, it
appears to recognize that its bid was not actually affected
by fraud in connection with the ABC newsbrief (and any
concomitant breach of the Agreement such fraud would have
engendered) except to the extent that the fraud generated
irreplaceable revenue. Anchor argues, however, that, in _____________
order to prove its damages, all it had to do was quantify
Narragansett's ill-gotten revenue. In its view, once it had
quantified such revenue, it became Narragansett's and
Pfeiffer's burden to prove the extent to which the revenue
was replaceable (as part of their burden of proving failure
to mitigate damages).
This argument is unconvincing. The law does not
contemplate that a party victimized by fraud or breach of
contract prove, without reference to the rest of the record,
the narrow effects of the fraud or breach; it requires that
party to prove, as an element of its case, the extent to __ __ _______ __ ___ ____
-34- 34
which it was damaged by the fraud or breach. In the face of _______
the uncontroverted evidence showing that KOVR still would
have generated most of the revenues it obtained by running
local commercials when it should have been running the ABC
newsbrief, it is apparent that Anchor, by proving only the
amount of revenue traceable to the improper practice, failed
to provide the jury with a basis upon which to premise a
reasoned damages finding. Thus, Anchor failed to prove an _______
element of its case.
While ingenious, it is incorrect to suggest that
Narragansett and Pfeiffer bore the burden of proving the
extent to which the ill-gotten income was replaceable as part
of their duty to prove failure to mitigate damages. The
doctrine of mitigation of damages imposes on a party injured
by either a breach of contract or a tort the duty to exercise
reasonable diligence and ordinary care in attempting to
minimize its damages. Black's Law Dictionary 1002 (6th ed. _______________________
1990). The doctrine thus presupposes, as a threshold matter, ___________
the existence of a causal nexus between the damages sought
and the breach or tort, looking at whether and to what extent
an intervening cause (i.e., a plaintiff's own negligence) may
have contributed to these damages. Here, the question is not
whether and to what extent Anchor's own conduct contributed
to its damages; it is, rather, the threshold question of
whether the damages Anchor sought were caused by the conduct
-35- 35
of which Anchor complained. Accordingly, the doctrine of
mitigation of damages is completely inapposite.
In sum, we think it clear that Anchor's contract
and fraud claims based on the ABC newsbrief allegation were
deficient because of an absence of proof of damages. We
therefore reject Anchor's remaining appellate arguments, all
of which pertain to the district court's handling of these
claims.
IV. IV. ___
CONCLUSION CONCLUSION __________
For the reasons stated above, the judgment of the
district court is affirmed in all respects.
Affirmed. Costs to appellees. Affirmed. Costs to appellees. ______________________________
-36- 36