United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-2932
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First Union National Bank, as Trustee *
of the Southeast Timber Leasing *
Statutory Trust, *
*
Appellant, * Appeal from the United States
* District Court for the
v. * Eastern District of Arkansas.
*
Pictet Overseas Trust Corp., Ltd., *
Trustee of Henrietta Y. Jones Trust, *
*
Appellee. *
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Submitted: September 25, 2006
Filed: January 22, 2007
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Before WOLLMAN, BRIGHT, and BOWMAN, Circuit Judges.
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WOLLMAN, Circuit Judge.
This case is once again before us. In our prior ruling, we reversed and
remanded for further proceedings. First Union Nat’l Bank v. Pictet Overseas Trust
Corp., Ltd., 351 F.3d 810, 816 (8th Cir. 2003) (Pictet I) (hereinafter we refer to the
parties as First Union and Pictet). On remand, the district court entered summary
judgment in favor of Pictet, holding that First Union breached a fiduciary duty it owed
in its individual capacity to Pictet. First Union appeals, contending that the district
court erred in holding that the law of the case doctrine requires a finding of fiduciary
duty, urging us to hold that no fiduciary duty existed, and further requesting that we
remand with instructions to grant it summary judgment on the basis of a statutory
defense barring individual liability that was not addressed by the district court. We
hold that the law of the case doctrine does not apply and that the defense has been
constructively pled, and we thus reverse and remand for further proceedings.
I. Facts and Posture
The factual and procedural background of this case is detailed in Pictet I, and
we recount and supplement that background as follows. On May 1, 1998, the
Southeast Timber Leasing Statutory Trust (Trust) was formed as a business trust
organized under the Connecticut Statutory Trust Act, see Conn. Gen. Stat. Ann. §§ 34-
500 et seq., with First Union as trustee. The Trust was formed to purchase First Land
and Timber (FLT), an Arkansas corporation, and then, through a series of mergers
with other entities, merge the surviving entity into the Trust itself and distribute its
assets to the Trust beneficiaries. The trust agreement narrowly circumscribed the
trustee’s control of trust assets.
Pictet, in its capacity as trustee of the Henrietta Y. Jones Trust, held shares of
FLT at the time of the merger. Pictet exercised its statutory right to dissent from the
merger and recover fair value for its shares by following the procedures enumerated
in the Arkansas Business Corporation Act (Arkansas Act). See Ark. Code Ann. § 4-
27-1301 et seq. This included notifying First Union of its dissent, tendering its shares,
and providing its own estimate of fair value–$5.1 million.
First Union set $3.8 million aside in a Golden Gate Bank account, which
represented the pro rata value of Pictet’s shares under the merger agreement. The
remaining merger consideration, including money placed in a holdback escrow
account intended to indemnify or reimburse “loss parties,” was distributed to the non-
dissenting shareholders in accordance with the merger agreement and associated
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exchange agreement. At specified intervals, in accordance with the exchange
agreement, the holdback monies were released by the escrow agent to another bank
for distribution to former shareholders. The last such distribution occurred in
December 1999.
In March 1999, First Union filed suit against Pictet in an Arkansas state court
to determine the fair value of Pictet’s shares. Pictet removed the case to federal court
and filed a counterclaim alleging that First Union’s untimely lawsuit fixed the value
of Pictet’s shares at $5.1 million plus interest. On May 8, 2000, by consent order,
First Union was required to pay Pictet the $3.8 million held for it in the Golden Gate
Bank account. Upon realizing that First Union no longer had sufficient assets to pay
the $5.1 million plus interest Pictet sought, Pictet amended its counterclaim to include
claims for conversion and breach of fiduciary duty. On February 9, 2001, the district
court issued a judgment in the appraisal action in Pictet’s favor for $5.1 million. On
March 15, 2002, the district court held that First Union also owed 6% interest on the
money due to Pictet (Interest Rate Decision). Pictet moved for reconsideration,
arguing that the court had not disposed of its breach of fiduciary duty claim. In
response to the motion, First Union specifically cited § 34-523(b) of the Connecticut
Statutory Trust Act (Connecticut Act) as barring Pictet from holding First Union
individually liable for the alleged breach of fiduciary duty. Although the court
mentioned in its Interest Rate Decision that “First Union owed a duty,” in its
subsequent order denying Pictet’s motion for reconsideration the court stated that it
would not reach Pictet’s breach of fiduciary duty claim because it did not believe that
First Union had been sued in its individual capacity. Following the denial of the
motion for reconsideration, Pictet appealed, arguing that First Union in its individual
capacity was a proper party to the action. First Union again asserted its Connecticut
Act defense in its appellee’s brief. We held that First Union had been individually
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sued on the conversion and breach of fiduciary duty claims and remanded the case for
further proceedings.1 Pictet I, 351 F.3d at 815.
On remand, Pictet moved for summary judgment. In its response and renewal
of its own summary judgment motion, First Union incorporated by reference its
Connecticut Act defense. The district court granted Pictet’s motion for summary
judgment on the breach of fiduciary duty claim (Fiduciary Duty Decision). It held,
inter alia, that it had already ruled that First Union owed Pictet a fiduciary duty, and
that it would not reconsider its position because the existence of a fiduciary duty was
the law of the case. It further held that because First Union knew that Pictet valued
its shares at $5.1 million, First Union breached its fiduciary duty by allowing
disbursements that encroached upon that amount. The decision said nothing of the
Connecticut Act defense.
II. Discussion
We review the district court’s grant of summary judgment de novo, applying
the same standards as the district court. Schwan’s IP, LLC v. Kraft Pizza Co., 460
F.3d 971, 974 (8th Cir. 2006). We view the facts in the light most favorable to the
nonmoving party and will affirm if the record demonstrates that there are no genuine
issues of material fact and the moving party is entitled to judgment as a matter of law.
Id. at 975.
We address on appeal two central issues: whether the law of the case doctrine
requires a finding of fiduciary duty, and whether the Connecticut Act was sufficiently
pled to preclude a summary judgment in the absence of additional legal
determinations. We address each in turn.
1
In Pictet I, we expressly limited our decision to the issue of whether First
Union had been sued in its individual or representative capacity and did not address
whether First Union, in any capacity, owed a fiduciary duty to Pictet.
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A. The Law of the Case
Pictet contends that the law of the case doctrine mandates a holding that First
Union owed a fiduciary duty in its individual capacity. We conclude that the law of
the case doctrine does not apply because the existence of the fiduciary duty was never
previously established.
We have described the law of the case doctrine as providing that “when a court
decides upon a rule of law, that decision should continue to govern the same issues in
subsequent stages in the same case.” Morris v. American Nat’l Can Corp., 988 F.2d
50, 52 (8th Cir. 1993) (quoting Arizona v. California, 460 U.S. 605, 618 (1983)). The
underlying intent of the doctrine is to “prevent[] the relitigation of settled issues in a
case, thus protecting the settled expectations of parties, ensuring uniformity of
decisions, and promoting judicial efficiency.” Little Earth of the United Tribes, Inc.
v. United States Dep’t of Hous. & Urban Dev., 807 F.2d 1433, 1441 (8th Cir. 1986).
The doctrine applies to appellate decisions, see Mosley v. City of Northwoods, 415
F.3d 908, 911 (8th Cir. 2005), as well as to final decisions by the district court that
have not been appealed. Little Earth, 807 F.2d at 1441 (citing In re Design Classics,
Inc., 788 F.2d 1384, 1386 (8th Cir. 1986)). It does not apply to interlocutory orders,
however, “for they can always be reconsidered and modified by a district court prior
to entry of a final judgment.” United States v. Hivley, 437 F.3d 752, 766 (8th Cir.
2006) (citing Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066,
1070 (8th Cir. 1995)).
In its Fiduciary Duty Decision, the district court established First Union’s
fiduciary duty in part based on its determination that the law of the case doctrine
applied.2 Implicitly, this would require the district court to have already issued a final
2
The district court additionally enumerated other considerations which it
believed bolstered its conclusion. Even if a fiduciary duty existed, the justifying
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order in which it had held that First Union owed a fiduciary duty in its individual
capacity. We see no evidence of such an order in the court’s Interest Rate Decision,
and the district court’s “postjudgment interpretation of [its prior] judgment is
irrelevant to an appellate court’s determination of the judgment’s meaning.” Kerndt
v. Ronan, 458 N.W.2d 466, 471 (Neb. 1990); see also Neujahr v. Neujahr, 393
N.W.2d 47, 49 (Neb. 1986); Crofts v. Crofts, 445 P.2d 701, 702-03 (Utah 1968).
The district court’s introductory remarks in its Interest Rate Decision
summarized its holding and said that First Union owed a duty, but the court never
mentioned the word “fiduciary,” specified the capacity in which First Union may have
owed the duty, or described the basis for finding the existence of such duty.
Accordingly, the district court’s reference to First Union’s duty was irrelevant to
Pictet’s breach of fiduciary duty claim against First Union. Ambiguous orders are to
be construed by examining the record and proceedings, the findings and opinion of
the court, and the respective contentions of the parties. See Oklahoma v. Texas, 256
U.S. 70, 88 (1921). Pictet contends that the words the district court chose to use to
establish the interest rate on the payments withheld indicate that a finding of fiduciary
duty was subsumed within the rate selected – rendering it a necessary part of its
decision rather than constituting mere dicta.3 As indicated in Pictet I, however, “the
appropriate value of Pictet’s shares and the applicable interest thereon is distinct from
whether First Union is liable for mismanaging or converting the proceeds from the
sale of those shares . . . .” Pictet I, 351 F.3d at 816. This statement reflects our
considerations, however, did not address why the duty should extend to First Union
in its individual capacity. In any event, the district court would not allow First Union
to take issue with these considerations or the court’s conclusion in light of the court’s
belief that the law of the case doctrine precluded any challenge to its earlier decision.
3
Pictet’s analysis is based on the court’s statement that “although first Union
owed a duty to Pictet, any damage awarded to Pictet in excess of the interest awarded
would be duplicative and contrary to equitable principles.” (Appellant’s App. at 649).
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conclusion that the district court’s interest rate determination had no bearing on the
potential existence of a fiduciary duty.
We did not then, nor do we now, consider the duty the court found tangentially
relevant to the interest rate determination to be related to the fiduciary duty presently
relevant to Pictet’s claim.4 In the in-depth discussion following the court’s
introductory summary of its Interest Rate Decision, the court abandoned the duty
language altogether – replacing it instead with a discussion centered predominately
on First Union’s unjustifiable payment delays. (Appellant’s App. at 654-56). Nothing
in the Interest Rate Decision’s treatment of its interest rate determination begins to
approach in detail the fiduciary duty considerations and findings that the district
court’s Fiduciary Duty Decision alludes to as having been previously weighed and
decided. Even though First Union had argued in the pre-Interest Rate Decision
proceeding that it did not owe Pictet a fiduciary duty, and even though the court
expressed a readiness to resolve all issues with finality, the district court addressed the
breach of fiduciary duty claim by effectively dismissing it as moot. See Pictet I, 351
F.3d at 813. Even had the district court intended to resolve the fiduciary duty issue
in its Interest Rate Decision, it failed to do so with sufficient directness and clarity to
establish the settled expectations of the parties necessary for the subsequent
application of the law of the case doctrine. Accordingly, we conclude that the law of
the case doctrine cannot apply and that the Interest Rate Decision requires neither the
district court, nor us, to find that a fiduciary duty existed.
4
Instead, we interpret the court’s March 15 language as referring to a general
duty to pay the money owed under the statute in a timely fashion. In any case, the
duty mentioned by the court only applied to First Union in its representative capacity
because the district court did not believe itself to have jurisdiction over First Union
individually when it issued its Interest Rate Decision.
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B. The Connecticut Act Defense
We next turn to the relevance of the Connecticut Act defense to the case. There
are two issues relevant to our inquiry: whether the Connecticut Act represents an
affirmative defense, and, if so, whether the affirmative defense was inadequately pled
and therefore waived. We conclude that the Connecticut Act is an affirmative defense
under Arkansas law, and we consider it constructively pled and not waived.
The Connecticut Act states in relevant part:
(b) Except to the extent otherwise provided in the governing instrument
of a statutory trust, a trustee, when acting in such capacity, shall not be
personally liable to any person other than the statutory trust or a
beneficial owner for any act, omission or obligation of the statutory trust
or any trustee thereof.
C.G.S.A. § 34-523.
We believe that the Connecticut Act represents an affirmative defense under
Arkansas law. Whether the Connecticut Act is an affirmative defense is a question of
Arkansas state law. Cf. Troxler v. Owens-Illinois Inc., 717 F.2d 530, 532 (11th Cir.
1983); Williams v. Jader Fuel Co., 944 F.2d 1388, 1400 (7th Cir. 1991) (“In a
diversity case, the legal and factual sufficiency of an affirmative defense is examined
with reference to state law.”). First Union asserts that the Connecticut Act is not an
affirmative defense because the Act restricts the duties owed to all but those specified,
and therefore does not simply limit recovery. This argument echoes our holding that
“[when] the defense involved is one that merely negates an element of the plaintiff’s
prima facie case . . . it is not truly an affirmative defense and need not be pleaded
despite rule 8(c).” Masuen v. E.L. Lien & Sons, Inc., 714 F.2d 55, 57 (8th Cir. 1983)
(per curiam) (quoting Sanden v. Mayo Clinic, 495 F.2d 221, 224 (8th Cir. 1974)).
Nevertheless, the statutory language of the relevant Connecticut Act section is entirely
silent as to whom a trustee may owe duties. It does not preclude other sources of law
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from imposing duties on the trustee, and therefore does not negate an essential
element of Pictet’s prima facie case. Instead it limits the population of individuals to
whom a trustee may be individually liable irrespective of those to whom the trustee
owes duties. Although we have not found an Arkansas case directly on point, the
Arkansas Supreme Court has previously held that statutory exemptions must be
affirmatively pled as affirmative defenses. See Marine Servs. Unlimited, Inc. v.
Rakes, 918 S.W.2d 132, 136 (Ark. 1996). In light of the statute’s silence as to duties,
we consider the liability-limiting language of the Connecticut Act sufficiently
analogous to a statutory exemption from Arkansas law. Accordingly, we believe the
Act represents an “avoidance or affirmative defense” within the meaning of Ark. R.
Civ. P. 8(c).
We turn, then, to the question whether the affirmative defense provided by the
Act has been waived. Generally, failure to plead an affirmative defense results in a
waiver of that defense. Fed. R. Civ. P. 8(c); see also Jacobs Mfg. Co. v. Sam Brown
Co., 19 F.3d 1259, 1266 (8th Cir. 1994) (applying Missouri law); Bissett v. Burlington
N. R.R. Co., 969 F.2d 727, 731 (8th Cir. 1992); Piekarski v. Home Owners Sav. Bank,
F.S.B., 956 F.2d 1484, 1489 (8th Cir. 1992) (applying the Minnesota rules of
procedure). The Supreme Court has indicated that the Rule 8(c) pleading requirement
is intended to give the opposing party both notice of the affirmative defense and an
opportunity to rebut it. Grant v. Preferred Research, Inc., 885 F.2d 795, 797-98 (11th
Cir. 1989) (citing Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313,
350 (1971)). We have, therefore, eschewed a literal interpretation of the Rule that
places form over substance, Thomas v. St. Luke’s Health Sys., Inc., 869 F. Supp.
1413, 1428-29 (N.D. Iowa, 1994), aff’d per curiam, 61 F.3d 908 (8th Cir. 1995)
(unpublished table decision), and instead have held that “[w]hen an affirmative
defense ‘is raised in the trial court in a manner that does not result in unfair surprise,
. . . technical failure to comply with Rule 8(c) is not fatal.’” Financial Timing Publ’ns,
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Inc. v. Compugraphic Corp., 893 F.2d 936, 944 n.9 (8th Cir. 1990) (quoting Allied
Chem. Corp. v. Mackay, 695 F.2d 854, 855 (5th Cir. 1983)).5
Pictet has not shown that he would be unfairly surprised or prejudiced by
inclusion of the defense and so we construe First Union’s assertions of the affirmative
defense as constructively amending its pleadings. First Union twice informed Pictet
of its intent to use the Connecticut Act as a defense against Pictet’s breach of fiduciary
duty claim prior to Pictet’s motion for summary judgment that prompted the Fiduciary
Duty Decision. It did so first in its April 2, 2002 response to Pictet’s motion for
reconsideration following the district court’s Interest Rate Decision and then in its
subsequent appellee’s brief filed in this court in Pictet I. In these filings, First Union
not only specified and paraphrased the relevant code sections but also described why
they precluded individual liability for Pictet’s claim. Pictet demonstrated its
awareness of the defense by addressing it in its reply brief in Pictet I.6 Yet even had
Pictet not previously acknowledged the defense, First Union’s filings alone would still
have afforded Pictet notice sufficient to undermine any claim of surprise over First
Union’s incorporation of the defense in its response to Pictet’s summary judgment
motion in the pre-Fiduciary Duty Decision proceedings. Indeed, by the time it
renewed its own summary judgment motion after our remand in Pictet I, Pictet had
5
Consequently, where the circumstances merit it, we have accepted and
favorably cited affirmative defenses first raised at various stages of litigation. See,
e.g., Sanders v. Dep’t of the Army, 981 F.2d 990, 991 (8th Cir. 1992) (per curiam)
(finding that the district court did not abuse its discretion by allowing an affirmative
defense to be raised for the first time in a motion to dismiss); Stoebner v. Parry,
Murray, Ward & Moxley, 91 F.3d 1091, 1093-94 (8th Cir. 1996) (per curiam) (citing
favorably a 9th Circuit opinion allowing an affirmative defense to be raised for the
first time in a summary judgment motion when there is no prejudice); Coohey v.
United States, 172 F.3d 1060, 1064 n.8 (8th Cir. 1999) (recognizing that “an
affirmative defense can even be raised on appeal where the evidence supports that
defense.”).
6
Pictet addressed the defense by inaccurately arguing there that it should be
ignored because it had never been raised prior to appeal.
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known of the Connecticut Act defense for over a year – certainly a long enough period
to preclude a claim of surprise. See, e.g., Grant, 885 F.2d at 797-98 (finding one
month notice sufficient to preclude unfair surprise); Ball Corp. v. Xidex Corp., 967
F.2d 1440, 1443-44 (10th Cir. 1992) (describing the 10th Circuit’s common law rule
stating that inadequately plead affirmative defenses may still be proven at trial if
notice of intent to raise the defense was provided at least three months prior to trial).
Nor can Pictet credibly claim prejudice. All facts relevant to the defense are
already on the record and not in dispute. Pictet knew of the defense for some time and
even acknowledged First Union’s attempt to raise it. Finally, Pictet had an
opportunity to respond to the defense subsequent to learning of it. Nothing prevented
Pictet from responding to the defense after our remand in Pictet I. We have affirmed
decisions recognizing a constructive amendment in similar circumstances where
affirmative defenses have been raised other than in a responsive pleading, see, e.g.,
Thomas v. St. Luke’s Health Sys., Inc., 849 F. Supp. 1413, 1428-29 (N.D. Iowa), aff’d
per curiam, 61 F.3d 908 (8th Cir. 1995) (unpublished table decision), and likewise
here construe First Union’s multiple assertions of the Connecticut Act in its prior
summary judgment and appellate filings as pleading the affirmative defense.7 See also
7
We recognize that in at least one of our sister circuits, “[p]ost-verdict or [post]-
judgment amendments are occasionally allowed, but where they may substantially
prejudice the other party or are merely the result of a long and unreasonable delay,
particularly if the movant was aware of the facts upon which the amendment is
predicated and could have raised the matter before judgment, such amendments
properly may be denied.” Trinity Carton Co. v. Falstaff Brewing Corp., 767 F.2d 184,
194 (5th Cir. 1985). Even were we to consider First Union’s answer amended after
the district court’s initial decision effectively declaring Pictet’s claim moot, we would
not consider Pictet prejudiced. The district court’s initial decision had not dealt with
the claim on its merits. Therefore, Pictet did not suffer prejudice resulting from the
delay because, by effectively declaring the issue moot and not deciding it at that time,
even had First Union amended its answer earlier, the district court would still not have
addressed either party’s substantive arguments on the merits until after our subsequent
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Pantzer v. Shields Dev. Co., 660 F. Supp. 56 (D.C. Del. 1986) (deeming a seller’s
answer amended to include the affirmative defense of the statute of frauds, despite the
seller’s failure to raise that defense in its answer, because the seller raised the defense
pretrial in a summary judgment motion, and the buyer had fair notice of the defense,
responded to it in the answering brief, and suffered no prejudice, since the facts
underlying the statute of frauds inquiry were not disputed).
We express no opinion regarding the effect of the Connecticut Act defense on
Pictet’s breach of fiduciary duty claim. Cf. Occhino v. United States, 686 F.2d 1302,
1311 (8th Cir. 1982) (“[I]t is not appropriate that this court decide de novo issues
presented to but not decided by the district court.”); Mark v. Nix, 983 F.2d 138, 140
(8th Cir. 1993) (“We generally do not consider an issue not decided by the district
court, particularly when the outcome is debatable and our refusal will not otherwise
produce a plain miscarriage of justice.”). Likewise, because the question whether
First Union owed a fiduciary duty in its individual capacity to Pictet may be rendered
moot depending on how the district court resolves the Connecticut Act’s effect on the
claim, and because our law of the case holding leaves the matter open for further
argument and consideration, we consider it premature at this time for us to decide
whether the fiduciary duty at issue exists. Instead, we expect the final resolution of
the issue to be premised entirely on the district court’s legal determinations informed
by the fully presented legal argument of the parties. Accordingly, as there remain
questions of law that the district court must resolve before ruling on the motion for
summary judgment, we reverse the district court’s summary judgment and remand the
case for further proceedings consistent with this opinion.
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remand. We do consider the pleadings constructively amended prior to the Fiduciary
Duty Decision.
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