United States Court of Appeals
For the First Circuit
No. 03-2189
NED ZACHAR AND JANET ZACHAR,
Plaintiffs, Appellees,
v.
JEFFREY W. LEE, SUSAN A. LEE AND
JEFFREY W. LEE REAL ESTATE, INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nancy Gertner, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Smith,* District Judge.
W. Paul Needham, with whom Mark A. Johnson, was on brief for
appellants.
James A.G. Hamilton, with whom Susan E. Stenger and Perkins,
Smith & Cohen, LLP, were on brief for appellees.
April 2, 2004
*
Of the District of Rhode Island, sitting by designation.
SMITH, District Judge. This appeal challenges a jury
verdict and award of $205,000 in damages for breach of the implied
covenant of good faith and fair dealing in connection with an
attempted sale of a home on Nantucket Island, in Massachusetts.
The Appellants Jeffrey W. Lee, Susan A. Lee, and Jeffrey W. Lee
Real Estate, Inc. (“Lee Real Estate” or the “Lees”) assert two
errors on appeal: (1) that the district court erred by denying
their motion for judgment as a matter of law brought under Rule 50
of the Federal Rules of Civil Procedure, and (2) that the district
court should not have admitted Appellees Ned and Janet Zachar’s
(the “Zachars”) expert’s report into evidence in its entirety.
After a careful review of the record, we affirm.
I. THE FACTS
We take the facts and the reasonable inferences therefrom
in the light most hospitable to the jury’s verdict. See Correa v.
Hosp. San Francisco, 69 F.3d 1184, 1188 (1st Cir. 1995); Sanchez v.
Puerto Rico Oil Co., 37 F.3d 712, 716 (1st Cir. 1994); Wagenmann v.
Adams, 829 F.2d 196, 200 (1st Cir. 1987).
On August 21, 1998, the Zachars, enamored with Nantucket
in summer, signed a purchase and sale agreement (the “P&S”) with
the Lees to purchase property located at 2 Anne’s Lane on Nantucket
(the “Property”). The agreed-upon purchase price for the Property
was $2,050,000. In accordance with the P&S, the Zachars made the
required ten percent deposit of $205,000 to the Lees’ attorney, and
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the purchase of the Property was scheduled to close on February 2,
1999.
Like the setting sun, however, by late December 1998, the
Zachars’ desire to purchase the Property began fading to the west
when Mr. Zachar accepted a job as a telecommunications stock
analyst in San Francisco. However, under the terms of the P&S, the
Zachars’ failure to close on the Property would result in their
forfeiture of the $205,000 deposit. In an attempt to avoid this
result, the Zachars proposed an alternative arrangement that might
allow them to recoup, in whole or in part, the deposit they placed
on the Property. On January 13, 1999, the Zachars and Lees entered
into an agreement (the “Agreement”) that required the Lees to list
the Property for sale on July 1, 1999, and keep it on the market
through February 29, 2000. Under the terms of the Agreement, if
the Property sold before February 29, 2000, the Lees were obligated
to pay the Zachars any funds in excess of the sale price set forth
in the P&S up to a maximum of $205,000.
The Agreement also provided that Lee Real Estate, as the
sole broker for the Property, would use reasonable and commercially
acceptable means to sell the Property. The Agreement provided, in
pertinent part, that:
Mr. and Mrs. Lee agree to list the
property with Lee Real Estate, Inc. for sale
commencing July 1, 1999 at a price to be
chosen by them. Lee Real Estate shall market
and attempt to sell the property in a
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reasonable commercial manner as comparable
properties are marketed on Nantucket.
Agreement at ¶ 4. On July 1, 1999, the Lees listed the Property
for sale with Lee Real Estate. Because the median sales prices of
Nantucket homes in 1999 had been increasing substantially, Lee Real
Estate set the asking price for the Property at $2,475,000 --
approximately $500,000 higher than the price of the Property at the
time the Zachars and Lees entered into the P&S. The Lees did not
lower the asking price for the Property during the term of the
Agreement, and when the Agreement expired on February 29, 2000, the
Property had not sold. The Zachars were therefore unable to recoup
any of their $205,000 deposit.
II. THE PROCEEDINGS BELOW
The Zachars brought suit against the Lees and their real
estate company asserting five causes of action: (1) breach of
contract; (2) misrepresentation; (3) breach of the implied covenant
of good faith and fair dealing; (4) conversion; and (5) a violation
of Mass. Gen. Laws ch. 93A. Following a trial, the Zachars’ case
was submitted to the jury on the breach of contract and breach of
the implied covenant of good faith and fair dealing claims.1 The
1
The district court docket is silent with respect to the fate
of the Zachars’ misrepresentation and conversion claims, but
pleadings filed with the district court indicate that these claims
were voluntarily dismissed with prejudice by the Zachars prior to
the case being submitted to the jury. The ch. 93A claim was tried
to the court. On July 23, 2003, the district court issued a
written decision that dismissed the ch. 93A claim on the merits.
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jury found that the Lees did not breach the Agreement and returned
a verdict on that count in their favor. However, the jury found
that the Lees breached the implied covenant of good faith and fair
dealing, and awarded the Zachars $205,000 in damages with respect
to that count.
Pursuant to Fed. R. Civ. P. Rule 50, the Lees moved for
judgment as a matter of law at the close of the evidence and again
following the jury verdict. The district court denied both
motions. This appeal followed.
III. ANALYSIS
A. Sufficiency of the Evidence on the Plaintiffs’
Implied Covenant of Good Faith and Fair
Dealing Claim.
The Lees argue that there was insufficient evidence for
the jury to conclude that they breached the implied covenant of
good faith and fair dealing. Specifically, the Lees contend that
because the jury found that they did not breach the Agreement
(including the provision regarding the reasonable marketing of the
property), it could not have considered evidence relating to the
marketing of the property to find a breach of the implied covenant.
Accordingly, the Lees contend there was insufficient evidence,
absent marketing-related evidence, to find a breach of the implied
covenant and the district court should therefore have granted their
Rule 50 motion.
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In most instances, we review de novo the district court’s
decision to deny a Rule 50 motion for judgment as a matter of law.
See Gibson v. City of Cranston, 37 F.3d 731, 735 (1st Cir. 1994).
In undertaking this review, we look to all evidence in the record,
drawing all reasonable inferences therefrom in the nonmovants’
favor, and resist the temptation to weigh the evidence or make our
own credibility determinations. See Reeves v. Sanderson Plumbing
Prods., Inc., 530 U.S. 133, 151, 120 S. Ct. 2097, 147 L. Ed. 2d 105
(2000); Correa, 69 F.3d at 1191; Gibson, 37 F.3d at 735. We “may
reverse the denial of such a motion only if reasonable persons
could not have reached the conclusion that the jury embraced.”
Correa, 69 F.3d at 1191 (citing Sanchez, 37 F.3d at 716).
However, before we undertake this review we must be
satisfied that the Lees properly preserved their arguments for
appeal. Rule 50(a) requires that challenges to the sufficiency of
the evidence must be raised initially at the close of the evidence.
Such challenges must be sufficiently specific so as to apprise the
district court of the grounds relied on in support of the motion.
See Fed. R. Civ. P. 50(a)(2); Correa, 69 F.3d at 1196.
Accordingly, a motion for judgment as a matter of law at the close
of the evidence “preserves for review only those grounds specified
at the time, and no others.” Id. (citing Sanchez, 37 F.3d at 723).
If the Rule 50(a) motion is denied and the case is submitted to a
jury, the movant must renew the motion once again in order to
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preserve the issue for appeal. See Fed. R. Civ. P. 50(b); Martin
H. Redish, 9 Moore’s Federal Practice ¶ 50.41 (3d ed. 2003). The
grounds for the renewed motion under Rule 50(b) are limited to
those asserted in the earlier Rule 50(a) motion. See Correa, 69
F.3d at 1196 (“The movant cannot use [a Rule 50(b)] motion as a
vehicle to introduce a legal theory not distinctly articulated in
its close-of-evidence motion for a directed verdict.”); Sanchez, 37
F.3d at 723.
The Lees argued in their Rule 50(a) motion that the
Zachars’ claim for breach of the implied covenant of good faith and
fair dealing was “indistinguishable from their claim for breach of
contract.” They further argued that, to the extent that these
claims could be treated separately, “there was no breach of the
implied covenant.” The district court denied this motion.
Following the jury verdict, the Lees renewed their motion under
Rule 50(b). The Rule 50(b) motion tried a new tack arguing that
because the jury found in their favor on the breach of contract
claim (implicitly finding that they had acted in a commercially
reasonable manner when marketing the Property), the jury could not
have relied upon the Lees’ marketing efforts to conclude that the
Lees breached the implied covenant of good faith and fair dealing.
Absent that evidence, the Lees argued that there was insufficient
evidence to support a verdict on the implied covenant of good faith
and fair dealing claim. Unpersuaded, the district court also
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denied this motion. In this appeal, the Lees press the same
grounds argued in the Rule 50(b) motion.
The Lees’ challenge to the implied covenant of good faith
and fair dealing claim is one that was not advanced in their Rule
50(a) motion. At the close of the evidence, the Lees sought
judgment as a matter of law arguing that the breach of contract and
breach of the implied covenant of good faith and fair dealing
claims were essentially duplicative. Such an objection however is
simply not sufficient to preserve, and certainly cannot be read to
encompass, the legal theory underlying the Lees’ Rule 50(b) motion
and this appeal (that a finding of breach of contract is a
prerequisite to a finding of breach of the implied covenant of good
faith and fair dealing).
Given the Lees’ failure to comply with the strictures of
Rule 50, our review is limited to “‘whether the record reflects an
absolute dearth of evidentiary support for the jury’s verdict.’”
Davignon v. Clemmey, 322 F.3d 1, 13 (1st Cir. 2003) (quoting Udemba
v. Nicoli, 237 F.3d 8, 13-14 (1st Cir. 2001)). Under this standard,
the district court will only be reversed when “its ruling is
obviously insupportable.” Id. (citing Udemba, 237 F.3d at 13-14).
A review of the record leaves us with no doubt that the jury had
sufficient evidence before it (albeit conflicting evidence) to
conclude that the Lees violated the implied covenant of good faith
and fair dealing.
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It is apparent that the Lees developed the theory raised
in their Rule 50(b) motion only after the jury’s verdict, because
the Lees failed to object to the jury instruction on the implied
covenant of good faith and fair dealing claim. If the Lees
believed that the breach of a contract is a sine qua non in any
claim for breach of the implied covenant of good faith and fair
dealing, they would - and should – have asked for such an
instruction. They did not, and by failing to do so, the Lees
forfeited their argument to the extent that it was not forfeited by
their failure to assert those grounds in their Rule 50(a) motion.
Furthermore, even if the Lees’ argument in this appeal
could be construed as a claim that the jury’s verdicts in this case
were inconsistent (a ruling in their favor on the breach of
contract but against them with respect to the implied covenant),
such an argument would still be waived. This court has held that
objections to the inconsistency of verdicts ordinarily must be made
after the verdict is read and before the jury is discharged. See
Babcock v. General Motors Corp., 299 F.3d 60, 63-64 (1st Cir. 2002).
Here, the Lees failed to raise an objection to the verdicts before
the jury was discharged. Therefore, the Lees’ argument in this
appeal is forfeited to the extent that it amounts to a claim that
the verdicts were inconsistent.
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B. Admission of the Expert Report in its
Entirety.
The Lees argue that the district court erred when it
admitted into evidence the entire appraisal report of Robert W.
Saben, Jr., the Zachars’ expert witness. The Lees contend that
portions of the report (specifically, those containing Saben’s
opinion that a reasonable marketing period for the Property would
have been six to twelve months) are based on an unreliable
methodology, and that Saben was not qualified to render such an
opinion.
We review a district court’s decision to admit expert
testimony for abuse of discretion. Gaydar v. Sociedad Instituto
Gineco-Quirurgico y Planificacion, 345 F.3d 15, 24 (1st Cir. 2003);
Correa v. Cruisers, a Div. of KCS Int’l, Inc., 298 F.3d 13, 24 (1st
Cir. 2002). During direct examination of Saben, his appraisal
report of the Property was offered into evidence. The Lees’
counsel objected to the admission of the entire report, but did not
specify any portions of the report. The district court admitted
the entire appraisal report into evidence. The Zachars contend
that such a general objection to the admission of an expert report
is insufficient under Fed. R. Evid. 103(a)(1)(requiring objections
to the admission of evidence to state the “specific ground of
objection”), and therefore does not preserve this ground for
appeal. While the Zachars may be correct with respect to the need
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for specificity in the objection, a trial objection is not the only
avenue available to a party to preserve the right to appeal.
Prior to trial, the Lees filed a motion in limine to
prevent Saben from testifying regarding the adequacy of the Lees’
marketing efforts. This motion was denied by the district court.
The 2000 Amendment to Federal Rule of Evidence 103 specifically
provides that once the district court “makes a definitive ruling on
the record admitting . . . evidence, either at or before trial, a
party need not renew an objection . . . to preserve a claim of
error for appeal.” Fed. R. Evid. 103(a)(2); accord Crowe v.
Bolduc, 334 F.3d 124, 133 (1st Cir. 2003)(holding that denial of a
motion in limine preserves an issue for appeal, despite the absence
of an objection at trial). Here, the Lees preserved their grounds
for appeal with respect to Saben’s appraisal report by filing the
motion in limine and receiving a definitive denial of that motion
on the record. Accordingly, the Lees’ inartful objection at trial
to the admission of the report does not prevent them from appealing
the admission of the appraisal report. See Crowe, 334 F.3d at 133.
Freed from this procedural snag, we turn to the substance
of the Lees’ argument. Rule 702 of the Federal Rules of Civil
Procedure sets forth the ground rules for consideration of expert
testimony. The rule provides:
If scientific, technical, or other specialized
knowledge will assist the trier of fact to
understand the evidence or to determine a fact
in issue, a witness qualified as an expert by
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knowledge, skill, experience, training or
education may testify thereto in the form of
an opinion or otherwise, if (1) the testimony
is based upon sufficient facts or data, (2)
the testimony is the product of reliable
principles and methods, and (3) the witness
has applied the principles and methods to the
facts of the case.
Fed. R. Evid. 702. The Supreme Court’s decisions in Daubert v.
Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed.
2d 469 (1993), and Kumho Tire Co. v. Carmichael, 526 U.S. 137, 119
S. Ct. 1167, 143 L. Ed. 2d 238 (1999), guide district courts when
determining the admissibility of evidence under Rule 702. Under
the holding of Daubert, a district court must act as a “gatekeeper”
by determining “whether the reasoning or methodology underlying the
testimony is . . . valid and whether that reasoning properly can be
applied to the facts in issue.” 509 U.S. at 592-93. The court’s
assessment of reliability is flexible, but “an expert must
vouchsafe the reliability of the data on which he relies and
explain how the cumulation of that data was consistent with
standards of the expert’s profession.” SMS Sys. Maint. Servs.,
Inc. v. Digital Equip. Corp., 188 F.3d 11, 25 (1st Cir. 1999). In
Kumho Tire, the Court extended the reach of Daubert’s gatekeeping
function to cover all types of expert testimony involving technical
or otherwise specialized knowledge. 526 U.S. at 141.
The Lees argue that Saben was not qualified to render the
opinion that a reasonable marketing period for the Property would
have been six to twelve months. Further, the Lees argue that,
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irrespective of his qualifications, Saben relied on an unreliable
methodology to reach his opinion. However, these are issues we
need not decide because even if we assume Saben was not qualified
to provide an opinion as to the marketing of the Property, and the
portion of the report in question was, in fact, the product of an
unreliable methodology, the district court’s admission of that
portion of the report would be harmless error.
In determining whether an error is harmless, “[o]ur
inquiry is ‘whether [admission] of the evidence affected the
plaintiff[s’] substantial rights.’” Lubanski v. Coleco Indus.,
Inc., 929 F.2d 42, 46 (1st Cir. 1991) (quoting Vincent v. Louis Marx
& Co., Inc., 874 F.2d 36, 41 (1st Cir. 1989)). “‘The standard for
reviewing a district court’s nonconstitutional error in a civil
suit requires that we find such error harmless if it is highly
probable that the error did not affect the outcome of the case.’”
Moulton v. Rival Co., 116 F.3d 22, 26 (1st Cir. 1997) (quoting
Harrison v. Sears, Roebuck & Co., 981 F.2d 25, 29 (1st Cir. 1992)).
The centrality of the evidence that was admitted and the
prejudicial effect of its inclusion are important factors to
consider; however, a harmless error analysis must consider the
admission of the evidence in light of the entire record. See
Vincent, 874 F.2d at 41.
Saben’s opinion regarding a reasonable marketing period
for the Property was hardly the focus of his testimony, or of the
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Zachars’ case for that matter. A review of Saben’s testimony, as
well as the appraisal report itself, reveals that the marketing
opinion was buried on one page near the end of Saben’s forty-five
page appraisal report. Saben’s marketing opinion was not addressed
on either direct examination or in closing argument.2 Moreover,
the record reveals that the jury had enough (though not abundant)
evidence, independent of the contested portion of Saben’s report,
to conclude that the Lees’ approach to the marketing of the
Property amounted to a breach of the implied covenant of good faith
and fair dealing. The jury heard testimony regarding the Lees’
listing price for the Property and its substantial increase since
the Zachars signed the P&S. The jury also heard evidence showing
that the Lees never lowered the price of the Property during the
time it was on the market, despite the fact that they never
received an offer on the Property. Jeffrey Lee even testified that
it is common practice to lower the price of a house when no offers
are forthcoming. From this evidence, the jury could have concluded
that the Lees’ asking price for the Property was over-inflated and
their refusal to lower the price was deliberately intended to ward
off potential buyers. The Zachars presented additional evidence
2
In their brief, the Lees contend that the Zachars’ counsel
inserted the marketing opinion into the appraisal report so that it
could be mentioned in closing argument. However, while the
Zachars’ counsel did discuss the appraisal report during closing
argument, he never specifically addressed Saben’s opinion regarding
the reasonable marketing period for the Property.
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that the Lees failed to advertise the Property in the Inquirer &
Mirror, a publication commonly used to advertise the sale of
Nantucket real estate, for much of July. This omission, coupled
with the over-inflated price, was adequate evidence for the jury to
determine that the Lees breached the implied covenant of good faith
and fair dealing. Consequently, while it is theoretically possible
that the admission of Saben’s entire expert report had some slight
prejudicial effect on the jury, we cannot say with “‘fair assurance
. . . that the judgment was [] substantially swayed’” by its
admission. Espeaignnette v. Gene Tierney Co., 43 F.3d 1, 9 (1st
Cir. 1994) (quoting Lubanski, 929 F.2d at 46).
Affirmed.
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