Petition — Mueller v. Hubbard Milling Co.

Supreme Court brief1978

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| Supreme Court, U. y

FILED 7

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| MICHAEL RODAK, JR., CLERIC

IN THE 5 race

Supreme Court of the United States

October Term, 1978

No —#8=151]

RALPH E. MUELLER AND EUGENE D. DEVANE,

Petitioners,

VS.

HUBBARD MILLING COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

_ TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

MASLON, KAPLAN, EDELMAN, BORMAN,

BRAND & McNULTY

Hyman Edelman

Charles Quaintance, Jr.

Martin G. Weinstein

1800 Midwest Plaza

Minneapolis, Minnesota 55402

(612) 339-8015

Attorneys for Petitioner

Ralph E. Mueller and Eugene D. Devane

1978—Northwest Brief Printing Co., 316 Chicago Avenue, Minneapolis 55415-—338-5078

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TABLE OF CONTENTS

Constitutional Provision and Rule of Procedure

ce ces cscs eecces

Reasons for Granting the Writ .............

In Substituting its Judgment as to the In-

tegrity of the Jurors for that of a Trial

Judge, the Court of Appeals in effect De-

prived Petitioners of their Right to Trial by

Jury in Contravention of the Seventh

Amendment, Contrary to the Law in Other

Circuits, Contrary to the Accepted and Usual

Course of Judicial Proceedings, and Con-

trary to Rule 52(a) of the Federal Rules of

EEE

The Decision of the Court of Appeals to

Vacate Judgments for a Choice of Law Is-

sue Never Raised, Argued, or Briefed be-

fore either the District Court or Court of

Appeals Conflicts with Decisions of Other

Courts of Appeals and Represents a Sub-

stantial Departure from the Accepted and

Usual Course of Judicial Proceedings .....

The Action of the Court of Appeals in Dis-

puting the Jurors’ Resolution of Credibility

Issues Conflicts with Decisions in Other

Circuits and Constitutes a Substantial De-

parture from Accepted Judicial Practice ...

SE PAP

Appendix A: Memorandum and Order of District

Court dated April 15, 1977 ........ccccceeees A-1

Appendix B: Opinion of Court of Appeals dated Ap-

= Se ge errrrere scr cerry rere ee re ee A-5

Appendix C: Judgment of Court of Appeals dated

Pe we ., BPVONeTTTeT TTT ee eee TT ee A-31

Appendix D: Order of Court of Appeals denying Pe-

tition for Rehearing dated May 2, 1978 ....... A-33

TABLE OF AUTHORITIES

Cases:

Autrey v. Williams and Dunlap, 343 F.2d 730 (Sth

oe: eee ery ree eas Kes +News 6606 36

Babb v. Schmidt, 496 F.2d 957 (9th Cir. 1974) ..... 36

Baker v. Jewell, 77 S.D. 573, 96 N.W.2d 299 (1959) 6

Bjornstad v. Northern States Power Co., 195 Minn.

439, 444, 263 N.W. 289, 291 (1935) ........... 32

Bussard v. College of St. Thomas, Inc., 294 Minn.

215, 224-25, 200 N.W.2d 155, 161-62 (1972) .32, 41

DeRue v. McIntosh, 26 S.D. 42, 47, 127 N.W. 532,

RR I ae rere ee ee 31

Dorin v. Equitable Life Assurance Society of the Unit-

ed States, 382 F.2d 83, 78 (7th Cir. 1967) ....... 20

Fairmount Glass Works v. Cub Fork Coal Co., 287

U.S. 474, 481-82, 485 (1933) ........... 24, 25, 26

Great Coastal Express, Inc. vy. International Brother-

hood of Teamsters, 511 F.2d 839 (4th Cir. 1975),

cert. denied, 425 U.S. 975 (1976) .............. 38

Grunenthal v. Long Island R.R., 393 U.S. 156 (1968) 24

Gulf Coast Building & Construction Trades Council

v. F.R. Hoar & Son, Inc., 370 F.2d 746 (Sth Cir.

POE Sune k 04 onde 65a ae oes wha oa ad uk s 20

Hague v. Alistate Ins. Co., Finance & Commerce

(Minn. S.Ct. No. 44, April 7, 1978) ........... 31

In Re Roberts, 358 F. Supp. 392 (D.S.D. 1973) ... 31

Jannenga v. Nationwide Life Insurance Co., 288 F.

e. Sir ek es | ee 34, 35, 36

La Presti v. Goodall Oil Co., 290 F.2d 653, 655

ok BR Pere r eer een rere ae 38

Lavender v. Kurn, 327 U.S. 645 (1946) ..........

Lentz v. Pearson, 246 Minn. 145, 74 N.W.2d 662

GE <0 ba WU as Cd Coie con's eS Uae eaere he die Ss

Malandris v, Merrill Lynch, Pierce, Fenner & Smith,

447 F. Supp. 543, 547 (D. Colo. 1977) .........

Metropolitan R.R. v. Moore, 121 U.S. 558, 574-75

SRE: Cia Niet thet ode aka bee 0-0 06 08's 8:0

Meyer v. Chicago, Rock Island and Pacific R.R.,

wee © ae koe, boee Cee Ue. BV7S) oc cesses

Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408

RR er eee rere

Minneapolis Brewing Co. v. Yahnke, 148 Minn. 178,

ED so hn bs es oki woe bh ous ss

Neese v. Southern Railway, 350 U.S. 77 (1955) ....

Pellerin Laundry Machinery Sales Co. v. Reed, 300

F.2d 305, 309-11 (8th Cir. 1962) ..... 33, 35, 36,

Pendergrass v. New York Life Ins. Co., 181 F.2d 136,

se ROE Peer Te TIRE Teer

Portman v, American Home Products Corp., 201 F.

yh A ge a: rn

Prudential Ins. Co. of America v. Carlson, 126 F.2d

et PSS 6 aca which ew kbet ve Ke

Schwartz v. Minneapolis Suburban Bus Co., 258

Minn. 325, 104 N.W.2d 301 (1960) ...........

Smith v. Michael Kurtz Construction Co., 232 N.W.2d

Be DN 864 eek kei an Vk ee wk db aled aa

Snyder v. United States, 350 U.S. 906 (1955) ......

Solomon Dehydrating Co. v. Guyton, 294 F.2d 439,

448 (8th Cir.) cert. denied, 368 U.S. 929 (1961) ..

+k caekdie he as RETA ea be-4s oe ee wa Bee aes

United States v. Faub, 37 U.S. (12 Pet.) 1 (1838) ....

United States v. Johnson, 327 U.S. 106, 112, 113

SE 6s 5 ocn hx 6d WAG wath’ place is Sa

University Computing Co. v. Lykes Youngstown Corp.,

See Cae Pee See Cae Ce. BOP) okie cence.

Weyerhauser Co. v. Hvidsten, 268 Minn. 448, 129

ee ea ae kn hOA Bie o¥s b4-4 808s

Statutes:

ES CR. SGOe 6 onccccacceccopheeneeneus eaes 5

BS UB. GH os csxccesnesecenaseneceuceus 5

y Bk oR; rere 2

2B CUBE. BER vc ccuecosevieubassabebesss cus 5

S.D. Compiled Laws Ann. § 53-8-5 (1976) ........ 6

Rules:

Fed. R. Civ. P. 52(a) ...... 2, 3, 17, 22, 26, 27, 28, 43

Other Authorities:

Annot., Verdict in Excess of Amount Demanded as Re-

quiring New Trial Notwithstanding Voluntary Re-

mittitur, 65 A.L.R.2d 1331, 1334 (1959) ........ 20

Carrington, Crowded Dockets and the Courts of Ap-

peals: The Threat to the Function of Review and the

National Law, 82 Harv.L.Rev. 542, 555, 567, 568,

Se CRON 0 cdc ndaceenas bane 36, 37, 43

Carrington, The Power of District Judges and the Re-

sponsibility of Courts of Appeal, 3 Ga.L.Rev. 507,

SOO, SUPSS CED conkcasubdenubentescas 37, 44

Chief Justice Burger's 1977 Report to the American

Bar Association, 63 A.B.A. J. 504, 508 (1977) ... 30

Currie, On the Displacement of the Law of the For-

um, 58 Colum.L.Rev. 964, 984-95 (1958) ...... 34

Green, Jury Trial and Mr. Justice Black, 65 Yale L.J.

482, 485, 486, 487 (1956) ................ 28, 29

6 Moore’s Federal Practice $3827 (2d ed. 1953) .... 23

6A Moore’s Federal Practice §59.05[3], at 59 (2d ed.

OPED ncn caccanké debs ace ee ee 21

Restatement (Second) of Conflict of Laws § 186 com-

magh © CIECEP o vidi dc ceeedes eee ea 39

Weisbrod, Limitations on Trial by Jury in Illinois, 19

Chi.-Kent L. Rev. 91, 92 (1940) .............. 22

Wright, The Doubtful Omniscience of Appellate Courts,

41 Minn.L.Rev. 751, 753, 762, 778-80 (1957) ..

eTeTery eT re ey 22, 23, 24, 28, 41, 43

IN THE

Supreme Court of the Anited States

October Term, 1978

No.

RALPH E. MUELLER AND EUGENE D. DEVANE,

Petitioners,

vs.

HUBBARD MILLING COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

The Petitioners, Ralph E. Mueller and Eugene D. De-

vane, respectfully pray that a Writ of Certiorari issue to

review the judgment and opinion of the United States

Court of Appeals for the Eighth Circuit entered on April

10, 1978.

CITATIONS TO OPINIONS BELOW

The relevant Memorandum and Order of the District

Court, dated April 15, 1977, is not reported; it is set

forth as Appendix A. The opinion of the Court of Ap-

peals is reported at 573 F. 2d 1029 (8th Cir, 1978); it is

set forth as Appendix B. The judgment of the Court of

Appeals for the Eighth Circuit and that Court’s order de-

nying plaintiffs’ timely petition for rehearing are set forth

as, respectively, Appendix C and Appendix D.

il.

JURISDICTION

The District Court entered judgments pursuant to jury

verdicts on March 4, 1977. The Court of Appeals vacated

those judgments on April 10, 1978. Plaintiffs’ petition

for rehearing, filed April 24, 1978, was denied by the

Court of Appeals on May 2, 1978. The jurisdiction of

the Court is invoked under 28 U.S.C. §1254(J).

il.

QUESTIONS PRESENTED

This Petition presents the following questions:

1. Whether in substituting its judgment as to the in-

tegrity of the jurors for that of a trial judge, the Court of

Appeals in effect deprived petitioners of their right to

trial by jury in contravention of the Seventh Amendment,

contrary to the law in other circuits, contrary to the ac-

cepted and usual course of judicial proceedings, and con-

trary to Rule 52(a), Federal Rules of Civil Procedure.

2. Whether the decision of the Court of Appeals to

vacate judgments for a choice of !aw issue never raised,

argued, or briefed before either the District Court or the

Court of Appeals conflicts with decisions of other Courts

of Appeals and represents a substantial departure from

the accepted and usual course of judicial proceedings.

3. Whether the action of the Court of Appeals in dis-

puting the jurors’ resolution of credibility issues conflicts

with decisions in other circuits and constitutes a substan-

tial departure from accepted judicial practice.

IV.

CONSTITUTIONAL PROVISION AND RULE OF PROCEDURE

INVOLVED

The United States Constitution, Amendment VII, pro-

vides:

In suits at common law, where the value in con-

troversy shall exceed twenty dollars, the right of tri-

al by jury shall be preserved, and no fact tried by a

jury, shall be otherwise reexamined in any Court of

the United States, than according to the rules of the

common law.

Rule 52(a), Federal Rules of Civil Procedure, provides

in relevant part:

Findings of fact shall not be set aside unless clearly

erroneous, and due regard shall be given to the op-

portunity of the trial court to judge of the credibility

of the witnesses.

Vv.

STATEMENT OF THE CASE

Trial of this case involved a number of sharp factual

disputes. Verdicts for plaintiffs reflected the jurors’ belief

that plaintiffs’ testimony was credible, while that of re-

spondent’s principal witness was not. The issues raised

on appeal were once again basically those of credibility

and integrity, this time of the jurors themselves, as well as

the witnesses. The judgment of the Court of Appeals, con-

trary to that of the district court, was that the jurors acted

improperly and that testimony of plaintiffs, particularly

Ralph Mueller, was not credible.

This case raises fundamental issues as to the proper role

of a Court of Appeals in reviewing jury verdicts. The

opinion of the Court of Appeals conflicts with decisions

of other circuits on the propriety of granting new trials in

jury cases and on the propriety of considering a choice of

law issue never raised, argued or briefed at the district

court or Court of Appeals level. In ordering a new trial,

despite the trial judge’s contrary decision and finding of

no jury misconduct, the decision represents a new and

startling departure from the long accepted rules and tra-

ditions of our judicial system.

A. Procedural Statement.

This case involves two limited partnerships in the feeder

cattle business, known as Dakota 14 and Dakota 16.

Defendant/respondent Hubbard Milling Company (“Hub-

bard”) was sole general partner; plaintiffs/petitioners

Ralph E. Mueller and Eugene D. Devane were limited

partners. The parties were involved in eight such iimited

partnerships, of which Dakota 14 and Dakota 16 were the

last two. Plaintiffs experienced mixed success with these

partnerships, and, in the aggregate had already sustained

substantial losses prior to the events underlying this litiga-

tion. In both Dakota 14 and Dakota 16 they suffered ad-

ditional losses in the hundreds of thousands of dollars.

The case involved four theories of liability, each relat-

ing to the same set of facts: federal securities law viola-

Bes

“aErBX

tions, common law fraud, breach of contract, and breach

of fiduciary duty." Hubbard demanded a jury trial. After

a trial lasting between six and seven days, and after de-

liberating another day and a half, the jury returned verdicts

in favor of Mueller and Devane as follows: Dakota 14,

Mueller, $58,389; Dakota 14, Devane, $23,154; Dakota

16, Mueller, $334,700 “plus damages of $51,000”; and

Dakota 16, Devane, $62,595 “plus damages of $9,000.”

The verdicts relating to Dakota 14 were less than half

the maximum damages shown (A-3). Those on Dakota 16

exceeded the amounts Mueller and Devane had invested in

those partnerships.

Hubbard moved for judgment notwithstanding the ver-

dicts or, in the alternative, for a new trial. The trial

court (Honorable Earl. R. Larson) denied the request for

judgment n.o.v. The motion for 2 new irial was also de-

nied as to Dakota 14, but granted as to Dakota 16, un-

less plaintiffs agreed to remit aii damages above the

amounts invested in Dakota 16 ($219,300 for Mueller

and $38,700 for Devane). In so ruling, Judge Larson re-

jected Hubbard’s contention that the verdicts were the re-

sult of passion and prejudice. Instead, he found the

case had been “tried fairly” (A-3). As to the excessive size

of the Dakota 16 verdicts, the Court found, “[{T]he mis-

take appears to be an honest one which can be corrected

by remittitur” A-3). Mueller and Devane did consent to

remittitur. Hubbard appealed.

The Court of Appeals vacated all four judgments and

remanded for a new trial. The Court cited two bases for

its decision. First, the verdicts were tainted, the Appellate

Federal jurisdiction exists because of diverse citizenship and because of

— securities act claims. 28 U.S.C. § 1332 and U.S.C. §77v and

aa.

Court held, by “passion” and “prejudice”. “We do not

agree,” the Court declared, with the trial court’s finding

that the verdicts were sound (A-29).

Second, the Court of Appeals held the verdicts to be

supported by parol evidence which under South Dakota

law was inadmissible. Hubbard had objected to the ad-

mission of certain parol evidence, but had submitted the

question to the trial court under Minnesota law, not South

Dakota law (Tr. 57-58). At trial, in both oral and writ-

ten submissions; upon motion for new trial; and on ap-

peal, Hubbard consistently presented the parol evidence

issue as a matter of Minnesota law. Despite the absence of

any argument that South Dakota law should apply, the

Court of Appeals held that the trial court had erred by

applying Minnesota law, which is relatively liberal as to

the admissibility of parol, and in failing to apply South

Dakota law, which is unusually restrictive. $.D. Compiled

Laws Ann. §53-8-5 (1967); Baker v. Jewell, 77 $.D. 573,

96 N.W.2d 299 (1959).

B. Statement of Facts.

1. Structure of the Transactions.

Each of the Dakota Feeders limited partnerships pur-

chased feeder cattle that it fattened at feedlot facilities

operated by Fall River Feedlots, Inc. (“Fall River”).

Fall River is owned seventy five percent by Hubbard and

twenty five percent by C. M. Largent, Fall River’s presi-

dent and manager. Largent was responsible to John Mc-

Neal, a vice president of Hubbard. McNeal was responsible

for Hubbard’s performance of its duties as general partner

of each limited partnership.

Ns ee

From 1971, when the first Dakota Feeders limited

partnerships were formed, until 1973 and 1974, when

the events underlying this litigation began, each partner-

ship operated in a similar manner. Each used virtually

identical limited partnership form agreements to docu-

ment its existence. Bank loans were used both to fi-

nance investments by the limited partners and to finance

partnership acquisitions of feed and cattle. For each lim-

ited partnership that was to proceed, Largent (as Hub-

bard’s agent) bought. fattened, and sold a herd of cattle;

thereafter, the limited partnership was dissolved.

All of the capital for the limited partnerships came from

the limited partners, in the form of cash and letters

of credit. For its management services Hubbard received

four dollars per animal from Dakota 14 and Dakota 16.

Hubbard was also entitled to receive a percentage of any

profit.

Fall River received payment from the limited partner-

ship for feed and the use of its feed lot. Fall River

needed to operate at about seventy percent of its capacity

in order to break even (Pl. Ex. 29, part 16).

Mueller and Devane are in the management consult-

ant business. In addition to the investments they made

with Hubbard, they had experience with other cattle and

real estate investments. At first, they dealt with Hubbard

through an intermediary; however, by the summer of

1973, prior to the events underlying this litigation, they

had come to deal directly with Hubbard (Tr. 218). The

principal relationship was between Mueller, speaking

for himself and Devane, and McNeal, speaking for Hub-

bard. Mueller dealt frequently with McNeal, both by tele-

phone and in personal meetings, and developed a substan-

tial degree of confidence in McNeal. Mueller testified:

I felt very comfortable with Mr. McNeal. I had a

lot of confidence and respect. I thought when we

discussed things that we discussed things openly

and that they were for real. (Tr. 253)

Mueller and McNeal agreed to the formation of Dakota

14 in July of 1973. By September and October it was ap-

parent that Dakota 14 would suffer substantial losses. The

parties agreed orally to reduce the size of the Dakota 14

herd from the 3,000 specified in the limited partnership

agreement (PI. Ex. 8) to 2,752 (Tr. 97).

Mueller and Devane did not seek to recover all losses

sustained in Dakota 14, but confined their claims to those

losses occurring as a result of additional investments they

made in December, 1973. As they made their Dakota 16

investments in October, 1973, we turn first to that part-

nership.

2. Dakota 16

It was in the context of severe losses impending for

Dakota 14 and Dakota 12, an earlier partnership which

ultimately produced losses exceeding $200,000, that

Mueiler expressed his reluctance to form a new partner-

ship. He explained to McNeal, “John, we just can’t buy

ourselves into another loss position. It just doesn’t make

sense” (Tr. 70). McNeal urged a prompt decision on

forming Dakota 16, claiming there were others anxious to

take space in the feedlot if Mueller and Devane chose not

to proceed (Tr. 73). This claim by McNeal was false (Tr.

948). At the same time, McNeal sought to reassure Muel-

ler that “things would get better after the first of the year”

(Tr. 71). Largent predicted that Dakota 16 would be “a

real bari: burner” (Tr. 82).

hn teal ie

Mug Mery ver

Mueller repeated that he and Devane did “not want to

buy ourselves into another loss position” (Tr. 71). Even-

tually, Mueller testified:

I told John that the only way that we could really

go ahead on this partnership [Dakota 16] was that

if we had breakevens that were satisfactory that we

had a chance to come out on it. (Tr. 72)

Mueller and McNeal then discussed “breakevens” for

any cattle that Dakota 16 might purchase. In the feeder

cattle business, the term “breakeven” refers to an esti-

mated price at which cattle must be sold in order to equal

the total of the original purchase expense of the cattle

and the cost of feed. When the Dakota Feeders partner-

ships began, in late 1971, breakevens were in the thirty

cents per pound range. By the early fall of 1973, break-

evens had risen to record highs, being then, in excess of fif-

ty cents per pound (Tr. 76), However, McNeal and Lar-

gent predicted that the purchase price for feeder cattle

would soon decline, thereby causing breakevens to simi-

larly decline (Tr. 71, 81).

McNeal told Mueller that for Dakota 16, breakevens of

forty-three to forty-five cents would be “logical . . . to con-

sider” (Tr. 72). Mueller agreed. McNeal then agreed, as

Mueller testified:

[/]f we would go into this partnership that he would

call us before any cattle were purchased if they were

above 43 or 45 cents, if they were above the 45-

cent range. (Tr. 73) (emphasis supplied)

With the predictions that breakevens would drop and

McNeal’s assurances, Mueller and Devane executed the

form partnership documents on October 15, 1973, and

made their capital contributions.’ The documents were

form documents, incorporating none of the oral assur-

ances the agreement McNeal had made. They were iden-

tical, except for dates and numbers, with the forms used

in all previous Dakota Feeders limited partnerships. The

forms were those which had previously been approved by

the participating banks (Tr. 262). Mueller did not insist

that the agreement McNeal made be reduced to writing,

because “I just trusted what he said” (Tr. 259).* McNeal,

however, denied giving any oral promises or assurances

to Mueller. The jurors resolved the factual dispute in fa-

vor of plaintiffs, a resolution the Court of Appeals did

not accept (See discussion in Part VI, infra).

On November 27, 1973, Mueller and Devane first

learned, despite McNeal’s assurances about forty-three

to forty-five cent breakevens, that Hubbard had al-

ready bought 417 cattle for Dakota 16, with breakevens

of forty-seven cents. Some of them were purchased prior

to any agreement of the parties. (Pl. Ex. 4, Tr. 83)

Mueller called McNeal to complain, expressing con-

cern particularly over the breakevens (Tr. 85). Mueller

?The contributions were made to enable the partnership to purchase pre-

paid feed and, in the event breakevens did decline to forty-five cents

or less, to purchase feeder cattle. The plan was to purchase the feed

before the end of 1973, regardless of feeder cattle prices and break-

evens, in order to be assured of the tax benefits of a prepaid feed

contract if prices improved regs gee | in 1974. If prices did not im-

prove, the prepaid feed was to be sold “when it was evident [we] were

not going to complete the nership” (Tr. 87). Largent and McNeal

both admitted discussing possibility of a feed in 1973,

then reselling it in 1974 if prices for feeder cattle did not improve

(Tr. 555, 1003-05). During December, 1973, Largent did buy prepaid

feed for the partnership intending to resell if the partnership did not

proceed with the purchase of cattle (Tr. 87, 555).

3In the cattle business particularly, the evidence established, trust is

important. It is a matter of pride not to insist on written agreements.

Not only Mueller, but also one of the witnesses Hubbard called, so

testified (Tr. 251-52, 779).

emphasized that the purchase created problems for him

because his banker had loaned him the money for Dakota

16 predicated on the representation that the partnership

would make purchases at forty-three to forty-five cent

breakevens (Tr. 89). McNeal responded, as Mueller tes-

tified, that “they wouldn’t do any more without talking

to us” (Tr. 89). McNeal repeated similar assurances in

December (Tr. 103).

In fact, neither Hubbard nor Fall River bought any

more cattle for Dakota 16 in either November or De-

cember of 1973, facts duly reported to Mueller (Pl. Ex. 4).

In January, 1974, Largent purchased 1,516 cattle for

Dakota 16. That number represented over sixty percent of

all cattle Fall River purchased for all customers in January,

1974 (Pl. Ex. 35, Tr. 94). Contrary to McNeal’s represen-

tation that Fall River had potential customers waiting in

line, Fall River needed to have those cattle in its lot in

order to have enough cattle on feed to avoid operating at

a loss during several months of 1974 (Pl. Ex. 29, part

16; Tr. 947, 950). Contrary to McNeal’s agreement, all

1,516 cattle were purchased at breakevens exceeding for-

ty-five cents and most at breakevens exceeding fifty cents

(Tr. 90-92; Pl. Ex. 4). Despite the fact McNeal and Muel-

ler had at least four telephone conversations in January

(PI. Ex. 31; Tr. 143-44), McNeal did not once discuss

these purchases with Mueller (Tr. 89-90).

Only when Mueller’s son contacted Fall River for its

monthly report on January 31, did plaintiff learn of the

January purchases (Tr. 90). Mueller called McNeal in

anger, demanding to know why he had permitted the Jan-

uary purchases. Mueller testified:

He said, well, they had to buy them in January.

I said, “But I thought we were going to talk about

this before we bought them.” His answer to me was

that they had to buy them in January to fill the part-

nership. (Tr. 91)

The result of these purchases, combined with declining

fat cattle prices and rising feed prices, was a financial

disaster. Mueller and Devane lost their entire investment,

$258,000. This sum is the total amount of the jury ver-

dicts as remitted on Dakota 16.

3. Dakota 14

Meanwhile, the financial condition of Dakota 14 was

deteriorating. On December 12, 1973, the financing bank

instructed Largent to sell the herd immediately (Tr. 744-

46). Largent sought alternatives to a forced sale, stating

he believed the value of the cattle would increase in Jan-

uary. The bank sought a guarantee from Hubbard, which

it declined to give (Tr. 289). Instead, McNeal urged the

limited partners to prevent a forced sale by making further

investments, representing that this was “[t]he one alterna-

tive that the bank has offered” to forced sale (Pl. Ex. 10).

McNeal admitted he never told Mueller that the bank had

also offered the alternative of a guarantee by Hubbard,

which it refused (Tr. 289).

McNeal also failed to inform the limited partners that

the bank was requiring a compensating balance for its

loans to Dakota 14. In late November the bank required

the partnership to borrow $169,300, deposit it back with

the bank, and pay interest on it without being able to use

the funds (Pl. Ex. 28, part 8). The result, aside from

nearly crippling a partnership already in financial dis-

tress, was to increase the bank’s effective interest rate to

twelve percent. McNeal knew this raised a usury prob-

lem, but made no objection on behalf of the partner-

ship and sought no legal opinion on the subject; he never

mentioned the compensating balance requirement or the

twelve percent interest factor to Mueller (Tr. 1041-45).

Rather, McNeal had represented to Mueller that the bank

was charging ten percent (Tr. 116).

A forced sale in December would have resulted in a

loss of approximately $102 per animal or $294,000 (PI.

Ex. 10). When McNeal proposed additional investments

to prevent a forced sale, Mueller held a series of conversa-

tions with McNeal. On December 24, Mueller told Mc-

Neal that he and Devane did not want to proceed without

some form of safeguard from Hubbard (Tr. 102). On De-

cember 26, Mueller and his son went to Mankato to dis-

cuss the situation with McNeal in person (Tr. 102-03).

Mueller expressed reluctance to provide an additional let-

ter of credit without “a form of stop-loss agreement” (Tr.

103). McNeal said he felt the prices for cattle would im-

prove after the first of the year, Mueller testified:

I said, well this is fine, but we sure don’t want to

lose this second letter of credit . . . So our concern

was let’s at least limit our exposure. Mr. McNeal,

John said he thought they could do that and he would

talk with their counsel and that they would see what

they could do to get us a revised contract. (Tr.

104)*

*McNeal testified he did not recall the conversation on December 24 (al-

though the fact of the telephone call is shown in Pl. Ex. 31) or the

meeting on December 26 (although portions of the conversations con-

cerning future prices are reflected in Pl. Ex. 19). While the jurors ac-

cepted Mueller’s testimony, the Court of Appeals appears to have de-

cided it is doubtful the conversations occurred.

Hubbard’s counsel did provide a revised contract. That

document did not contain a guarantee against losses over

$100 per head, but it did state that Hubbard “agrees to

use its best efforts to attempt to hold losses to $100

per head” through use of advance contracts (Pl. Ex. 11-

A). When Mueller complained to McNeal about the ab-

sence of a guarantee, McNeal told Mueller:

[H]e would take care of the situation, assured me

that they would really do their best to really do this

. . . so that we wouldn’t lose more than $100. (Tr.

104-05)

Reassured, Mueller and Devane signed the revised

agreement. They then contributed additional letters of

credit for another $110,000 (PI. Ex. 12).°

Future prices for fat cattle did in fact rise during early

January. Mueller called McNeal and urged him to ad-

vance contract the cattle and “minimize our losses” (Tr.

105; see also, Tr. 111). McNeal resisted at first, then

said he would call Largent “and see what they could do

about it” (Tr. 105).

The bank, secure with the second letters of credit, never

required advance contracting for Dakota 14; Hubbard

5Mueller’s uncontroverted testimony, was that he and Devane provided

the second letiers of credit “after” receiving the revised contract (Tr.

110). Hubbard did not dispute this sequence at trial, but in its briefs

and argument before the Court of A , Tepeatedly argued that

the letters had been given earlier and thus could not have been given

in reliance on the revised contract or oral representations and accused

plaintiffs of giving “false” testimony and of using a “twisted or dis-

torted fact technique” (Appellant’s Reply Brief, pp. 11 and 22, see

also Brief of Appellant, pp. 10 and 11). Common sense confirms the

sequence of events described by Mueller: one would hardly expect

Hubbard to add the “best efforts” language to its revised contract if

plaintiffs had already made their second investments in Dakota 14.

The Court of Appeals, as discussed infra, appears to have come to

its decision in large measure because it disbelieved Mueller’s testimony.

It appears to have accepted Hubbard’s position even on this after-

thought (A-12).

mre

never accomplished it. Prices declined steadily after Jan-

uary 10. Advance contracting at that dite would have held

losses to $51 per head (Pl. Ex. 33A). Advance contracting

in late January would have meant losses of $92 per head

(Pl. Ex. 33B). Holding the cattle to slaughter weight

meant losses of $157 per head (Pl. Ex. 33A).

As prices continued to decline in February, Mueller

continued to urge McNeal to advance contract the cat-

tle (Tr. 145). McNeal himself made no attempt to advance

contract the cattle beyond a telephone call to Largent. Lar-

gent testified that some time in January or February he

talked to two packers who were not interested in advance

contracting (Tr. 838-39).

The failure of Hubbard, McNeal, and Largent to ad-

vance contract the cattle came at a time when McNeal

was advising Hubbard’s bank that it is always possible to

advance contract cattle (Tr. 1039). When instructed by

that bank to advance contract cattle for other partner-

ships in December of 1973 and June of 1974, Hubbard

did so within a week of the demand (Tr. 928-32).

In any event, Mueller’s pleas to advance contract Da-

kota 14 cattle were not met. Instead, Fall River retained

the cattle past normal slaughter weights, for weeks after

the projected selling dates. Fall River profited from this

course, while the limited partners bore all losses. Mueller

and Devane lost their entire initial investment in Dakota

14 and approximately one-half of their December invest-

ments (Tr. 112).

Plaintiffs argued to the jury that Hubbard’s liability was

established by its failure to use its “best efforts” to advance

contract, as the written agreement required, and also by

its misrepresentations and concealments.

The jury returned verdicts on Dakota 14 for a total of

slightly over $80,000, representing most, but not all, of

the losses incurred after the December investments.

The Court of Appeals vacated all four judgments, hold-

ing they were all tainted by passion and prejudice of the

jurors and by inadmissible parol evidence.

Vi.

REASONS FOR GRANTING THE WRIT

We submit that the Court of Appeals erred in three

significant respects, each placing it in conflict with other

Courts of Appeals and each involving significant depar-

ture from the accepted and usual course of judicial pro-

ceedings.

1. The Court of Appeals erred in substituting its

judgment as to the integrity of the jurors for that of the

trial judge.

2. The Court erred in vacating judgments for a

choice of law issue never raised, argued, or briefed be-

fore either the district court or the Court of Appeals.

3. The Court erred in substituting its judgment as to

the credibility of witnesses for that of the jurors.

This petition presents basic issues as to the power and

responsibilities of a Court of Appeals vis-a-vis trial judge

and jury.

A. In Substituting its Judgment as to the Integrity of the

Jurors for that of a Trial Judge, the Court of Appeals

in Effect Deprived Petitioners of their Right to Trial

by Jury in Contravention of the Seventh Amendment,

Contrary to the Law in Other Circuits, Contrary to the

Accepted and Usual Course of Judicial Proceedings,

and Contrary to Rule 52(a) of the Federal Rules of

Civil Procedure.

The Court of Appeals held that the trial court had

erred in denying defendant’s motion for a new trial, stating

“passion and prejudice” “led to the grossly excessive ver-

dict on Dakota 16.” (A-30). The Court reached this con-

clusion with no written analysis of the law on this subject,

an incomplete analysis of the facts and despite the trial

court’s express finding that the verdicts were not the re-

sult of passion and prejudice. This appears to be the first

instance in the history of the federal court system where

a Court of Appeals has reversed such a determination

by a district court judge. In so doing the Court of Ap-

peals acted contrary to the Seventh Amendment, the law

in other circuits, the accepted and usual course of judicial

proceedings, and Rule 52(a) of the Federal Rules of Civil

Procedure.

The trial court, Judge Larson, made an express finding

that “the [jury’s] mistake appears to be an honest one,”

and that the excessive verdicts were not the result of “bi-

as, prejudice, or a reckless disregard of the evidence and

instructions” (A-3). The Court of Appeals held, “We do

not agree,” citing three facts: the “large excess in itself,”

what the Court perceived to be the “absence of any plaus-

ible explanation,” and the “plus damages” (A-29). Those

facts are, under the authorities cited below, insufficient for

reversal.

The “absence of any plausible explanation” reference is

simply another way of saying the Court of Appeals may

substitute its views of the integrity of the jury for those of

the trial court. It is wholly subjective and speculative; it

involves a plain non sequitur. That we do not know why

the jury arrived at certain figures means only that: we do

not know. One might just as well say the reason for the

jury’s decision “must have been” ignorance, confusion, or

color blindness as say the reason “must have been” pas-

sion and prejudice.

We are not permitted to interview the jurors, so we do

not know the reasons for either the relatively small size

of the Dakota 14 verdicts or the relatively large size of

the Dakota 16 verdicts.* Defendant never sought an evi-

dentiary hearing as to the existence of passion or preju-

dice.’ What the Court of Appeals has done amounts to

requiring the prevailing party to demonstrate the integrity

of the jury without permitting it to conduct any evidentiary

hearing.

‘Without waiving our position that speculation is not called for, we do

believe there are plausible explanations for the amounts of the ver-

dicts. One is simple confusion, inasmuch as the case “was an exceed-

ingly difficult one to comprehend, given the sophisticated financial

dealings involved.” (A-3). Another is the sag mer the jurors added

the amount of the prepaid feed contract for Dakota 16 (Pl. Ex. 28,

part 12) to the amount of the lost investments, a possibility that fits

the Dakota 16 verdicts within Five Dollars.

The Court also relied on the “plus damages” aspects of the ver-

dicts, although the uncontroverted facts suggest strongly that the jurors

added those figures to cover plaintiffs’ counsel fees (A-3). This was

an error, but easily corrected by remittitur.

THad defendant seriously believed it could establish that passion and

prejudice swayed the jury, it could have requested an evidentiary hear-

ing as contemplated in Schwartz v. Minneapolis Suburban Bus Co.,

258 Minn. 325, 104 N.W.2d 301 (1960).

Judge Larson cited two central facts in support of his

finding that the excessive verdicts were the result of an

“honest mistake,” not the result of passion and prejudice:

“the low verdicts awarded for Dakota No. 14” and the

fact that the “case was tried fairly” (A-3). Those two facts

are undisputed. We do not perceive how a jury swept

away by passion would award less than plaintiffs invested

in Dakota 14. We also do not understand how an appel-

late court deems it permissible to overturn a verdict for

passion when there was not a single objection during ar-

gument and no claim made at trial that counsel for plain-

tiffs attempted to arouse passion in the jury.

We believe it is demeaning to these jurors even to argue

about whether they were affected by “passion” and “prej-

udice,” so far were they from that state. However, the

finding has been made and we are obliged to respond. If

the members of this Court or the Court of Appeals had

been able to observe the members of the jury throughout

the trial, a finding of “passion” and “prejudice” would

appear utterly unfair. Each of them were individuals of

modest means and limited business experience, conscien-

tiously attempting to absorb the complicated facts and

arguments. The trial judge observed the jury during the

six and one-half days of trial, during a request it made

for additional information concerning Dakota 14, and

during the reading of the verdicts. Judge Larson also ob-

served the demeanor of counsel throughout trial. He had

ample support for his characterization of the atmosphere

of the trial as one “tried fairly” and of the jurors’ mistake

as “an honest one which can be corrected by remittitur”

(A-3).

In rejecting Judge Larson’s explicit finding that remit-

tur was an adequate corrective measure the Court of Ap-

peals substituted its judgment for his as to the integrity

of the jurors. In so doing it placed itself squarely in con-

flict with other circuits.

In the past, the Court of Appeals for the Eighth Cir-

cuit had held that the decision of a trial judge to permit

remittitur, rather than require a new trial, must stand un-

less the result is “monstrous” or “shocking.” Solomon

Dehydrating Co. v. Guyton, 294 F.2d 439, 448 (8th

Cir.), cert. denied, 368 U.S. 929 (1961).

The Seventh Circuit Court of Appeals adopted a simi-

lar approach in Dorin v. Equitable Life Assurance Society

of the United States, 382 F.2d 73 (7th Cir. 1967), where

it affirmed denial of a new trial when plaintiff agreed to

a remittitur from $57,500 to $17,500 for compensatory

damages and from $125,000 to $7,500 for punitive dam-

ages. The Court stated:

[W]hatever the cause of the jury’s making an ex-

cessive aware of damages, the judge could properly

conclude that such cause did not infect the jury’s

finding on the existence of malice to the prejudice of

Equitable. There was nothing in the record, other

than the size of the award, to impeach the objectivity

of the jury or the fairness of the proceedings. . .

382 F.2d at 78.

In addition to the Seventh Circuit, the Fifth Circuit has

adopted a similar rule. See, e.g., Gulf Coast Bldg. & Con-

struction Trades Council v, F.R. Hoar & Son, Inc., 370

F.2d 746 (Sth Cir. 1967). See also Annot., Verdict in

Excess of Amount Demanded as Requiring New Trial

Notwithstanding Voluntary Remittitur, 65 A.L.R. 2d 1331,

1334 (1959):

ME SOA de ss 7 inca.

In the vast majority of the cases which have consid-

ered the question it has been held, often without ex-

tended discussion, that the mere fact that a verdict

has been returned in excess of the amount of damages

demanded by a party in his pleadings . . . will not

necessitate a new trial when the successful party is

willing to remit the amount by which the verdict ex-

ceeds his demand.

We urge that it takes considerably more for an appel-

late court to overturn the trial judge’s finding that the

jury acted with integrity than, “We do not agree with

such determination” (A-29). That is a wholly subjective

standard for “review;” in fact it is no standard at all.

The standard for reversal must be at least that the deter-

mination was “clearly erroneous.” 6A Moore’s Federal

Practice {59.05[3], at 59 (2d ed. 1974). In fact, we be-

lieve the law permits reversal only when the result would

otherwise be “monstrous” or “shocking.” Solomon Dehy-

drating Co. v. Guyton, 294 F.2d at 448. Rarely may a

Court of Appeals reverse a finding of fact by the trial

judge on such a subjective matter as the integrity of the

jury:

[I]t should never do so where it does not clearly ap-

pear that the findings are not supported by any evi-

dence. United States v. Johnson, 327 U.S. 106, 112

(1946) (emphasis supplied) (reversing the Court of

Appeals for reversing the trial court’s denial of new

trial motion, based on the trial court’s finding of an

absence of false testimony).

By its seeming departure from Solomon the Court of

Appeals creates a conflict among the circuits.

Beyond that conflict, the Seventh Amendment and Rule

52(a), neither of which were mentioned in the opinion of

the Court of Appeals, proscribe the result reached by that

court in this case.

In reviewing both the size of the verdicts and Judge

Larson’s decision not to grant a new trial, the Court of

Appeals abridged the Seventh Amendment’s provision

’ limiting examination of facts found by juries.

As Charles Alan Wright points out, somewhat sarcas-

tically, “The Seventh Amendment might have been thought

to give difficulty,” when a Court of Appeals undertakes

review of the character undertaken here.* After all, the

common law never permitted review of an order denying

a motion for a new jury trial.

An exhaustive examination of the early English cases

has led one writer to conclude there is not a single

case where an English court at common law ever

granted a new trial, as being against the evidence,

unless the judge or judges who sat with the jury stated

in open court, or certified, that the verdict was

against the evidence, and that he was dissatisfied

with the verdict.*

Modern courts remain sensitive to the special role of

the jury and to the constitutional protection afforded that

role. The deference which jury verdicts must be accorded

to satisfy constitutional dictates is cogently summarized in

Malandris v. Merrill Lynch, Pierce, Fenner & Smith, 447

F. Supp. 543, 547 (D. Colo. 1977) as follows:

SWright, The Doubtful Omniscience of Appellate Courts, 41 Minn. L.

Rev. 751, 753 (1957).

*Wright, supra note 8 at 762, citing Weisbrod, Limitations on Trial by

Jury in Illinois, 19 Chi.-Kent L.Rev. 91, 92 (1940).

The constitutional right of trial by jury is nothing

less than the right to have human conflict resolved

by the considered judgment of representative mem-

bers of the community, Any interference with such a

community judgment must be justified by compelling

circumstances showing unfairness in the manner in

which the issue was presented or considered. In eval-

uating a motion to set aside a jury verdict, it must

be remembered that the Seventh Amendment of the

United States Constitution specifically preserved the

right of trial by jury as it existed in the common law

courts of England.

There are two related, but distinguishable Seventh

Amendment questions present in this case. One is whether

the Court of Appeals had power to review the size of the

verdicts, especially in the absence of a finding that they

were “monstrous” or “shocking.” Solomon Dehydrating

Co. v. Guyton, 294 F.2d at 448. The other is whether the

Court of Appeals had power to review the order denying a

new trial, when the trial court found there was no passion

or prejudice.

The Wright article previously quoted deals with both

issues. As to the first, Professor Wright points out that the

Supreme Court has in the past held that appellate courts

have no such authority,” but that all courts of appeals

except the Eighth Circuit have held otherwise. In doing

sv, those courts “have generally ignored the Seventh

Amendment issue,” as well as prior decisions of this

10Metropolitan R.R. v. Moore, 121 U.S. 558, 574-75 (1887) (“motions

for a new trial based on the ground that the damages allowed by the

verdict are excessive” present “purely a question of fact,” and are not

reviewable).

“Wright, supra note 8 at 753, quoting a concession by Professor Moore,

who favors review of the size of verdicts. 6 Moore's Federal Practice

93827 (2d ed. 1953).

Court. Now the Court of Appeals for the Eighth Circuit

has joined its brethren. We believe it was improper, or at

least inappropriate, for the Court of Appeals here to re-

view the size of the verdicts, when neither the Court nor

even Hubbard claimed that the results were “monstrous”

or “shocking.” Solomon Dehydrating Co. v. Guyton, 294

F.2d at 448. See also Neese v. Southern Railway, 350 U.S.

77 (1955); Snyder v. United States, 350 U.S. 906

(1955); Grunenthal v. Long Island R.R., 393 U.S. 156

(1968).

Of greater significance, however, is the other Seventh

Amendment issue, whether a Court of Appeals may or

should review an order denying a new trial, when the trial

court has found an absence of passion or prejudice. So

far as we are aware, this case represents the first occa-

sion upon which a Court of Appeals has done so. In 1957,

Wright was able to observe:

[Slo far as I can find, there is not a single case in

which a federal appellate court has ever reversed and

ordered a new trial on the ground that the trial court

did abuse its discretion in denying a motion of this

type [for new trial on the ground “verdicts are against

the weight of the evidence”)].”

The Supreme Court has expressed the view repeatedly that

an appellate court may not review denial of a motion

for a new trial for any error of fact, including the size of a

verdict. Fairmount Glass Works v. Cub Fork Coal Co.,

287 U.S. 474 (1933); United States v. Faub, 37 USS.

(12 Pet.) 1 (1838); United States v. Socony-Vacuum Oil

Co., 310 U.S. 150 (1940). In Socony-Vacuum, this Court

stated categorically:

12Wright, supra note 8, at 760.

Certainly, denial of a motion for a new trial on

the grounds that the verdict was against the weight of

the evidence would not be subject to review. 310

USS. at 248.

See also Portman v. American Home Products Corp., 201

F.2d 847, 848 (2d Cir. 1953).

In Fairmount Glass, this Court dealt with a claim

that the excessiveness of a verdict required a new trial.

Speaking for the Court, Mr. Justice Brandeis stated:

The rule that this Court will not review the action

of a federal trial court in granting or denying a mo-

tion for a new trial for error of fact has been settled

by a long and unbroken line of decisions; and has

been frequently applied where the ground of the mo-

tion was that the damages awarded by the jury were

excessive or were inadequate. The rule precludes

likewise a review of such action by a Circuit Court

of Appeals . . . Sometimes the rule has been rested

on that part of the Seventh Amendment which pro-

vides that “no fact tried by a jury shall be otherwise

re-examined in any court of the United States than

according to the rules of the common law.” More fre-

quently the reason given, for the denial of review is

that granting or refusing of a motion for new trial

is a matter within the discretion of the trial court.

287 U.S. at 481-82 (footnotes omitted).

Here, the Court of Appeals neither considered the Sev-

enth Amendment issue nor acknowledged that the deci-

sion on the motion for new trial was within the trial court’s

discretion. There is significant doubt whether a Court of

Appeals has the power to overrule a trial judge on a mo-

tion for new trial, where the only ground given is a “fac-

tual” determination by the Court of Appeals that the jury

acted improperly. United States v. Johnson, 327 U.S. at

112, Fairmount Glass Works v. Cub Fork Coal Co.,

287 U.S. at 481-82. It seems elementary that the Court

may not do so without even finding an abuse of discretion.

One of the most disturbing aspects of this case is the

superficial manner in which the Court makes the serious

charge that the jury acted improperly, particularly in the

absence of any claimed misconduct of counsel, plaintiffs,

or the trial court. Equally as serious is the cursory man-

ner in which the appellate court disregarded the trial

judge’s contrary finding. Both acts run afoul of this Court’s

pronouncement in Fairmount Glass:

Appellate courts should be slow to impute to juries

a disregard of their duties, and to trial courts a want

of diligence or perspicacity in appraising the jury’s

conduct. 287 U.S. at 485 (emphasis supplied)

The latter act also runs afoul of Rule 52(a) of the Fed-

eral Rules of Civil Procedure, which provides in relevant

part:

Findings of fact shall not be set aside unless clearly

erroneous, and due regard shall be given to the op-

portunity of the trial court to judge of the credibility

of the witnesses.

Judge Larson made a finding of fact, one directly relating

to the credibility or integrity of the jurors, whom only he

of all the judges reviewing this case observed. The Court

of Appeals did not apply even the “clearly erroneous” test,

but only a newly formulated “We do not agree” test (A-

29) or, in other words, no test at all.

Vacating judgments on that subjective basis, ignoring

the express requirement of Rule 52(a), would in itself con-

stitute such a departure from accepted and usual judicial

practice as to require an exercise of this Court’s power of

supervision.

The error, however, is magnified in this case by two ad-

ditional factors that make the Court’s rather blatant

exercise of appellate power even more unacceptable and

more unusual than if it involved only a failure to invoke

the “clearly erroneous” test. The decision of the Court of

Appeals ignores the second independent requirement of

Rule 52(a), and as discussed above, ignores the Seventh

Amendment.

Rule 52(a) also requires “due regard” be given to the

trial court’s opportunity to “judge credibility.” Here, the

Court gave no regard to Judge Larson’s opportunity to

observe the jurors, counsel, and the parties. On such a sub-

tle, delicate, subjective question as whether the jurors have

been swept away by “passion” or “prejudice,” the finding

of a trial judge is obviously entitled to more respect than,

“We do not agree.” In fact, under much more difficult

circumstances, this Court has said that a Court of Ap-

peals may “never” reverse a trial judge’s finding as to

credibility of a witness, a question analogous to integrity

of jurors, “where it does not clearly appear that the find-

ings are not supported by any evidence.” United States v.

Johnson, 327 U.S. 106, 112 (1946). There, the Court rein-

stated a criminal conviction, which the Court of Appeals

had vacated on the grounds one of the government wit-

nesses had lied at trial. The Court observed:

The circuit court of appeals was right in the first in-

stance, when it declared that it did not sit to try de

novo motions for a new trial. It was wrong in the

second instance when it did review the facts de novo

and order the judgment set aside. 327 U.S. at 113.

Sweeping away a finding of honesty on the part of the

jurors, as the Court of Appeals has done here, lends sub-

stance to the following view of Dean Leon Green:

[T]he appellate courts have now secured control of

all the essentials of jury trial, The trial judge is not

much more than a trial examiner, while the jury simp-

ly satisfies the public and professional craving for

ceremonial. . . .°

The Court’s complete disregard of the dual requirements

of Rule 52(a), if permitted to stand, will have the inevit-

able effect of diminishing respect for trial judge and jury.

It also invites more appeals, suggesting that a party with

a witness whom the jurors or trial judge do not believe

may have a lawyer whom, in the absence of all witnesses,

the Court of Appeals will believe.

As Charles Alan Wright has expressed:

The principal consequences of broadening appel-

late review are two. Such a course impairs the con-

fidence of litigants and the public in the decisions of

the trial courts, and it multiplies the number of ap-

peals . . . When they are successful, and lead to a

new trial, they add to the burden on already-crowded

trial courts.“*

This case reflects a disturbing trend, one that has

troubled liberal and conservative commentators alike. It is

only natural that members of courts of appeals should be-

lieve they are better able to judge the merits of a case than

Green, Jury Trial and Mr. Justice Black, 65 Yale L.J. 482, 486 (1956).

“Wright. supra note 8 at 779-80.

mere jurors. It is only natural that they should desire to

“do justice.”** The problem, as stated by Dean Green, is

obvious:

Trial by record before an appellate court . . . has

little resemblance to jury trial as it had developed

in Anglo-American judicial history. .. , Nor does trial

by record serve the cause of justice to a greater ad-

vantage than jury trial; trial by record has its dan-

gers, also. It is rare that the “fall out” in jury trial

does not pollute a record with error. Moreover, the

trial may be recorded with the utmost fidelity, but

many of its overtones and undertones do not find their

way into the record. In the trial court the case is

pulsing with life; by the time it reaches the appellate

court, much of its life has leaked out or evaporat-

ed.”°

Not only is life gone from the record, but there is danger

in “[p]assing on the merits of a close case at long range

in time and distance and in a hushed environment.’

Here, we submit, bold attacks on Mueller’s credibility, de-

livered by respected defense counsel, persuaded the Court

of Appeals that the trial result was wrong. “If the appel-

late court is so convinced, its judicial conscience drives it

to exercise some control to nullify what looks from afar

like a bad result.”"*

Aside from the fact that the Court of Appeals may

well be wrong in its assessment of what is fair and just in a

given case, as we believe it was here; further dangers

arise from the Court of Appeals’ usurpation of the role of

157d. at 779.

16Green, supra note 13 at 486.

NJd. at 487.

18].

trial judge and jury. Those dangers were expressed best by

the Eighth Circuit Court of Appeals’ own opinion in Pen-

dergrass v. New York Life Ins. Co., 181 F.2d 136 (8th

Cir. 1950). That opinion, rendered at a time that the

Eighth Circuit was a stronghold of belief in the exercise of

appellate self-restraint, dealt with review of a nonjury tri-

al. Its remarks apply with even greater force to review of

a jury trial.

The entire responsibility for deciding doubtful fact

questions in a nonjury case should be, and we think

it is, that of the district court. The existence of any

doubt as to whether the trial court or this Court is

the ultimate trier of fact issues in nonjury cases is, we

think, detrimental to the orderly administration of

justice, impairs the confidence of litigants and the

public in the decisions of the district courts, and mul-

tiplies the number of appeals in such cases. 181 F.2d

at 138 (emphasis supplied).”°

All who practice in or serve our judicial system are

only too well aware of the

vexing problems of delay, congestion, and excessive

expense that we experience in the resolution of dis-

putes.”

One of the central aspects of those problems has been the

disproportionate increase in the number of appeals, in-

creases measured in the hundreds of percentage points in

the last decade and a half.”

This case, we submit, provides an opportunity to re-

spond significantly to the problem of congestion that the

Chief Justice has repeatedly described.

19See also id. at 485.

20Chief Justice Burger's 1977 Report to the American Bar Association,

63 A.B.A. 504 (1977).

217d. at 508.

B. The Decision of the Court of Appeals to Vacate Judg-

ments for a Choice of Law Issue Never Raised, Ar-

gued, or Briefed before either the District Court or

Court of Appeals Conflicts with Decisions of Other

Courts of Appeals and Represents a Substantial De-

parture from the Accepted and Usual Course of Ju-

dicial Proceedings.

The ground for vacating plaintiffs’ judgments to which

the opinion of the Court of Appeals devoted the major-

ity of its analysis is that South Dakota law required exclu-

sion of parol evidence in the presentation of plaintiffs’ con-

tract claims. That opinion of April 10, 1978, is the first

occasion on which the South Dakota law as to parol evi-

dence entered the trial or appeal of this case.

Without brief or argument on either issue, the Court

held: 1) South Dakota law governs the admissibility of

parol evidence in this action; 2) South Dakota law ex-

cludes plaintiffs’ parol contract evidence. We believe there

is real doubt as to whether the Court of Appeals correctly

decided either issue.” However, we do not ask this Court

22As the Court noted (A-19), Minnesota law governs the choice of laws

issue.-The Supreme Court of Minnesota has evidenced recently an in-

creasing tendency to apply Minnesota law when the case involves

substantial contacts with Minnesota. See, e.g., Hague v. Allstate Ins.

Co., Finance & Commerce (Minn. S.Ct., No. 44, April 7, 1978) and

Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973). This

change was noted in Meyer v. Chicago, Rock Island and Pacific R.R.,

508 F.2d 1395, 1396 (8th Cir. 1975). Here, all parties either reside

or work in Minnesota; all dealings between Mueller and McNeal oc-

curred in Minnesota; all written agreements were executed in Minne-

sota. It is true, of course, that the partnership agreements for Dakota

16 and Dakota 14 (but not the revised contract for Dakota 14) pro-

vide that they are to be interpreted under South Dakota law.

South Dakota law is concededly most restrictive as to admissibility

of parol evidence. However, there are opinions interpreting the South

Dakota statute and a virtually identical statute in North Dakota that

suggest parol is permissible to show an oral agreement to induce a

written agreement. See, e.g., De Rue v. McIntosh, 26 S.D. 42, 47,

127 N.W. 532, 534 (1910); In re Roberts, 358 F. Supp. 392 (D.S.D.

1973); Smith v. Michael Kurtz Construction Co., 232 N.W.2d 35

(N.D. 1975).

to review the merits of the decision of the Court of Appeals

on either issue; we doubt that either is of national im-

portance. What we do urge this Court to review is whether

the Court of Appeals may or should decide a case on the

basis of a choice of laws issue never presented to the dis-

trict court. Such action, we submit, is fundamentally un-

fair; it is also in conflict with the decisions of at least

four other Courts of Appeals.

We emphasize there is no doubt that South Dakota law

was never urged upon the trial court and that defend-

ant assented to the applicability of Minnesota law. Prior to

trial, Hubbard’s experienced trial counsel anticipated and

researched the parol evidence issue. Hubbard submitted a

brief on the issue early during testimony of the first wit-

ness at trial (Tr. 57), presenting the issue as a question of

Minnesota law. Oral argument ensued, again Hubbard in-

terpreting what “the Minnesota Supreme Court. . . says.

_.. (Tr. 58). Hubbard’s motion for new trial submitted

the same issue to the district court, again as a matter of

Minnesota law. At the appellate level, Hubbard contin-

ued to present the parol evidence issue as a matter of

Minnesota law (Brief of Appellant, pp. 33-35). All cases

it cited are Minnesota cases.* The South Dakota law as

23Judge Larson, a man with decades of experience as a trial lawyer

and judge in Minnesota, made the correct decision as to admissibility

of the parol evidence under Minnesota law. Minnesota permits intro-

duction of parol evidence not only to prove oral agreements that

were inducements to enter written agreements (as we believe South

Dakota law does), but also to prove collateral oral agreements not in-

tended to be covered by writing and to establish oral agreements made

or reaffirmed subsequent to a written agreement (neither of which

South Dakota law appears to permit). Bussard v. College of St. Thomas,

Inc., 294 Minn. 215, 224-25, 200 N.W.2d 155, 161-62 (1972) (noting

that parol is “especially likely” to be admissible when one is dealing

with “standardized forms”); Weyerheuser Co. v. Hvidsten, 268 Minn.

448, 129 N.W.2d 772 (1964): Lentz v. Pearson, 246 Minn. 145, 74

N.W.2d 662 (1956); Bjornstad v. Northern States Power Co., 195

Minn. 439, 444, 263 N.W. 289, 291 (1935); Minneapolis Brewing

Co. v. Yahnke, 148 Minn. 178, 181 N.W. 331 (1921) (concerning oral

“consideration for . . . signing” a written agreement).

to parol evidence was not mentioned once, at trial, in

briefs, or on oral argument.

Deciding the case on a choice of laws issue never pre-

sented to the district court represents a radical departure

from prior practice in the Eighth Circuit and places that

Court in conflict with decisions of the Courts of Appeals

in the Fifth, Ninth, Tenth and District of Columbia Cir-

cuits.

The Court of Appeals for the Eighth Circuit had

previously taken the position that a court of appeals is

wholly without power to inject a new choice of laws ques-

tion into an appeal. Pellerin Laundry Machinery Sales Co.

v. Reed, 300 F.2d 305, 309-10 (8th Cir. 1962). The

Court declared that a choice of laws issue “may not be in-

jected into the case for the first time on appeal.” 300 F.

2d at 309. It went on to state:

In the present case there is nothing in the record to

show that the possible application of the Louisiana

law was called to the trial court’s attention and re-

jected by that court. Absent this there can be no er-

ror. 310 F.2d at 310 (emphasis supplied)

In Pellerin, appellant at least raised the conflict on appeal

and the parties had an opportunity to brief and argue it.

Here, the parties having had no opportunity to brief or ar-

gue the issue, it is particularly unfair, both to plaintiffs

and to the trial judge, and inappropriate for the Court

of Appeals to inject the issue for the first time in a revers-

ing opinion.

The Court of Appeals for the District of Columbia has

taken a somewhat different approach, holding that an

appellate court has the power to consider a choice of laws

issue raised for the first time on appeal, but indicating

that the exercise of that power is rarely appropriate. Jan-

nenga v. Nationwide Life Insurance Co., 288 F.2d 169

(D.C. Cir. 1961). In Jannenga, the Court affirmed a di-

rected verdict for defendant; the directed verdict was the

result of applying the law of the forum, rather than the

place of contract, concerning which types of misrepresen-

tations preclude recovery under a life insurance policy.

The Court’s opinion contains this analysis:

In an exhaustive treatment of the subject Profes-

sor Brainerd Currie has noted the inadequacy of al-

lowing briefs on appeal to substitute for bringing the

matter to the attention of the trial court. He points

out that retrial may be needed to test issues and de-

fenses not theretofore considered, and urges that

judicial notice statutes not be interpreted as discharg-

ing the duty of counsel to bring the law of other juris-

dictions to the attention of the trial court. See Currie,

On the Displacement of the Law of the Forum, 58

Colum.L. Rev. 964, 984-95 (1958).

Thus, orderly administration of justice suggests

that plaintiff should not at this late stage be allowed

to rely on the law of another jurisdiction. While this

court recognizes its power to take judicial notice of

applicable state law, or to remand for its applica-

tion, nothing in this record suggests that it is appro-

priate to do so in order to avoid injustice or to pro-

mote the ends of justice. We conclude, therefore,

that the trial court was not bound to notice and ap-

ply the law of Ohio or Maryland statutory law

when appellant not only failed to rely on either but

affirmatively argued the law of the District. 288 F.

2d at 172 (emphasis supplied).

Here, of course, Hubbard did not even raise the issue

on appeal. For the Court of Appeals to interject the issue

of South Dakota law on its own, as occurred here, and re-

quire a new trial because of it, is to depart substantially

from the accepted and usual course of judicial proceed-

ings.

Regardless of whether the Pellerin or Jannenga view

be more sound, it is clear that the Court of Appeals in this

case adhered to neither. Under the Pellerin view, the

Court had not the power to consider the issue. Under

the Jannenga view, it had the power to apply South Da-

kota law at this late stage of the proceedings only if it de-

termined, upon a reasoned analysis, that the interests of

justice required it to do so. The “ends of justice” must

mean more than that the Court of Appeals disagrees with

the trial judge and jury. It can hardly mean that a new

trial is necessary because the trial judge decided a parol

evidence question on the law of the forum as experienced

defense counsel had, indeed, urged him to do.

The Court of Appeals here did not address the “ends of

justice” issue in any manner and gave no rationale for ap-

plying a law never previously urged or considered in the

case. Such a decision can only lead to disillusionment and

lack of confidence in our appellate court system and to

an increase in the dramatic backlog of cases that already

afflicts our district and appellate courts. If permitted to

stand, it will foster appeals in cases that involve little be-

yond credibility issues.“ It will obviously result in an-

other jury trial here and make such retrials more likely in

the future.

*4Hubbard cast its parol evidence argument as appropriate because of

“false” testimony by Mueller and as necessary to prevent “fraud”

(Appellant’s Reply Brief, p. 22).

The Court’s conduct places it in conflict with its own

prior decision in Pellerin. It is also in conflict with the

District of Columbia Circuit decision in Jannenga for

the Court made no determination as to the extent of its

power to rule on the choice of law issue at such a late

stage in the case or on the propriety of exercising such

power. This decision also conflicts with the Fifth, Ninth

and Tenth circuits. Autrey v. Williams and Dunlap, 343

F.2d 730 (Sth Cir. 1965); Babb v. Schmidt, 496 F.2d 957

(9th Cir. 1974); Prudential Ins. Co. of America v, Carl-

son, 126 F.2d 607 (10th Cir. 1942).

While Pellerin and Jannenga represent a pre-existing

conflict among the circuits as to the abstract issue of their

power, we emphasize that the decision in this case is in

conflict with the decisions in each of those cases. Not only

has the Court exercised power it arguably does not have

(Pellerin), but it has done so without applying any stand-

ards* and without setting forth the justification re-

quired for doing so after trial (Jannenga).

*°Even those who tend to favor the exercise of greater review power by

appellate courts recognize:

There is a danger that courts of appeals’ decisions may themselves

become more responsive to the personal values of individual circuit

judges, and less responsive to general and idealized values of the

system as a thing apart from the individuals momentarily operating

it. Carrington, Crowded Dockets and the Courts of Appeals: The

Threat to the Function of Review and the National Law, 82 Harv.

L. Rev. 542, 555 (1969).

As an appellate court exercises more power, the need to articulate

the bases therefor increases significantly. Here, we believe, an analysis

of whether it was appropriate to apply South Dakota law would neces-

sarily have led to rejecting it.

We note that Carrington appears to favor the trend towards the

discovery and exercise of greater power by the courts of appeals as

“responsive to our rising expectations for law as an instrument of so-

cial reform” and as necessary “to protect citizens from personalized

applications of officia! power.” Jd, at 568. The decision by the Court

of Appeals here involves neither social reform issues nor applications

of official power. The need for review of possibly arbitrary conduct

Such action by the Court of Appeals raises fundamental

issues Of fairness and of the proper relatinship of appel-

late court to trial judge and jury. Those issues affect the

“dignity and significance of the trial court[s]” to exercise

their function of “bringing repose” to disputes.** Con-

comitantly, those issues involve questions of maintaining

respect for the appellate courts and of exercising control

over already burgeoning trial and appellate court dockets.

Therefore, we submit, the decision of the Court of Ap-

peals herein warrants review to resolve conflicts among

the circuits and warrants exercise of this Court’s power of

supervision.

C. The Action of the Court of Appeals in Disputing the

Jurors’ Resolution of Credibility Issues Conflicts with

Decisions in Other Circuits and Constitutes a Substan-

tial Departure from Accepted Judicial Practice.

While the opinion of the Court of Appeals devotes

most of its discussion to the parol evidence rule, it creates

a strong impression that the real reason for its decision is

that the Court disagrees with the unanimous decision of

the jurors. The Court made a point of expressing its doubt

as to the merits of plaintiffs’ claims:

A careful review of the record convinces us that all

of plaintiffs’ theories were of marginal validity at

best... . (A-28).

of a single trial judge is not present when the case involves private

litigants of approximately equal sophistication. Even Carrington tends

to oppose appellate review of the size of jury verdicts, as occurred

here. Carrington, The Power of District Judges and the Responsibility

of Courts of Appeal, 3 Ga.L.Rev. 507, 525-26 (1969).

26Carrington, supra note 25, 82 Harv.L.Rev. at 567.

As plaintiffs’ claims stand or fall on an assessment of the

credivility of Mueller and McNeal, the Court’s doubt as

to the validity of plaintiffs’ claims necessarily involves

doubts as to Mueller’s credibility, The Court reveals that

this was the case in its recital of facts, using over and

over such phrases as “McNeal allegedly stated,” “state-

ments allegedly made by McNeal,” “McNeal allegedly

made a number of statements,” “certain alleged commun-

ications,” and other language expressing doubt (A-

10, 21, 9, 13, and 28). On one page of the Slip Opinion

alone, the Court uses the word “allegedly” seven times

to describe oral agreements or representations the jury de-

termined McNeal had made (A-9-10).

We respectfully suggest that a “review of the record”

is not a substitute for the opportunity the jurors had to

observe the demeancr of the witnesses. Plaintiffs’ case

turned largely, if not entirely, on the credibility of Muel-

ler as against that of McNeal and, to a lesser extent, Lar-

gent. In the past, the Eighth Circuit Court of Appeals

would have stopped once it made that determination.

[WJhere, as here, there is a clear conflict between

the only two principal witnesses to a transaction the

question presented is largely one of credibility and

must be resolved by the trier of fact. Pellerin Laundry

Machine Sales Co. v. Reed, 300 F.2d 305, 311 (8th

Cir. 1962).

The law, of course, has traditionally been similar in other

circuits, particularly in the context of a jury trial. See, e.g.,

Great Coastal Express, Inc. v. International Brotherhood

of Teamsters, 511 F.2d 839 (4th Cir. 1975), cert. denied,

425 U.S. 975 (1976); University Computing Co. v. Lykes

Youngstown Corp., 504 F.2d 518, 531 (5th Cir. 1974);

La Presti v. Goodall Oil Co., 290 F.2d 653, 655 (7th Cir.

1961). Accord, LaVender v. Kurn, 327 U.S. 645 (1946).

The failure to grant the traditional deference accord-

ed jury determinations of credibility, although not explicit-

ly recognized in the opinion of the Court of Appeals, is

woven in the very fabric of that opinion. The Court’s pre-

occupation with Mueller’s credibility is demonstrated by

expression of doubt as to the “validity” of plaintiffs’

claims—which are obviously “valid” if one believes Muel-

ler, as the jurors did—and by its repeated use of terms

denoting doubt. In applying a most restrictive interpreta-

tion of South Dakota’s most restrictive parol evidence rule,

the Court of Appeals reflects its distrust of jurors and its

belief that members of an appellate court are better able to

decide questions of credibility than members of a jury.

In this context, we emphasize that there was nothing

inconsistent between Mueller’s testimony as to the terms

of his oral agreements with McNeal and the written instru-

ments that were also in evidence.”

As to Dakota 16, McNeal’s principal oral promise was

not to purchase at breakevens over forty-five cents a pound

We discuss this subject in anticipation that Hubbard may claim in its

response to this Petition that the Court of Appeals may have vacated

the judgments on parol evidence grounds even had it applied Minne-

sota law on the subject. We doubt that such an assertion would be

accurate, in light of the Minnesota cases cited in note 23.

Moreover, the very fact that the Court of Appeals reached the

choice of law question necessarily implied that the Court believed

that Minnesota law would permit the introduction of the parol evi-

dence in question. It is a fundamental tenet of choice of law that no

choice need be made unless the local law of the two states in ques-

tion differs. Where the local law is the same, the contract is to be

treated as if it had contact with only one state. Restatement (Second)

of Conflict of Laws § 186, comment c (1971). Had the Court of Ap-

peals believed that both Minnesota and South Dakota law required

the exclusion of the parol evidence, it surely would not have devoted

19 pages of its opinion to what it perceived as a “false conflict”.

without prior discussions with Mueller (Tr. 73). The Court

of Appeals found this promise to be inconsistent with

three provisions of the written agreement. First, the

Court stated it is inconsistent with the provision that the

partnership “shall purchase” 2,000 cattle. However, the

written agreement does not specify the conditions under

which purchases shall be made, as the oral agreement

does. It cannot be said the agreement required defendant

to purchase 2,000 cattle. A similar provision in the Da-

kota 14 agreement did not prevent a decision to reduce

the number of cattle purchased (Tr. 97; Pl. Ex. 8). De-

fendant bought no cattle for Dakota 16 in November or

December because of adverse market conditions and ac-

knowledged that if market conditions had not improved

in January, it would not have bought for Dakota 16 at

all (Tr. 816-18). Second, the court points to language

that no limited partner shal] participate in the “control,

Operation or management” of partnership business. That

language hardly prohibits the discussions that McNeal

promised before making purchases at breakevens over

forty-five cents. McNeal certainly considered discussions

to be appropriate on other partnership business. The record

reflects over a hundred telephone communications be-

tween the parties (Pl. Ex. 31; Tr. 47). Third, the

Court refers to language of consent to purchases made “on

such terms and conditions as may be determined by the

General Partner.” Again, that language does not prohibit

the General Partner from, and is not inconsistent with,

agreeing to have discussions prior to making any purchas-

es at breakevens above forty-five cents.

As to Dakota 14, the Court of Appeals asserts that

plaintiffs claimed the existence of a “guarantee” and then

asserts the written agreement is inconsistent with a

“guarantee.” Plaintiff did not claim McNeal promised to

“guarantee” against losses, but rather that defendant

“would really watch out for us” (Tr. 104). The phrase,

“some guarantee,” appears once in Mueller’s testimony

(Tr. 104), not as a statement of a promise, but as a de-

scription of Mueller’s request. Plaintiffs’ argument, as to

Dakota 14, did not approach a claim of a “guarantee,”

but instead focused on the absence of “best efforts,” with

brief mention of the promise to protect plaintiffs (Tr. 1135-

43). An Oral promise to protect or “watch out” for plain-

tiffs is not inconsistent with a written “best efforts”

promise.

As discussed above, this case is representative of the

fact “appellate power is rapidly on the increase”* and

represents an extreme example of the trend. Members of

appellate courts naturally “desire to ‘do justice’ ”,” but

may they assume that trial judges do not?

Surely the trial judge, aware of all the nuances of the

trial, was in a better position to judge whether the oral

agreements were intended to be integrated into the writ-

ten agreements and whether the two were consistent. Such

determinations must be made “in light of the situation of

the parties, the subject matter and purposes of the transac-

tion, and like attendant circumstances,” including the

language of both the written and oral agreements. Bus-

sard v. College of Saint Thomas, Inc., 294 Minn. 215,

224, 200 N.W.2d 155, 161 (1972).

In the Dakota 16 partnership, the parties used a form

written agreement necessary for plaintiffs’ bankers (Tr.

28Wright, supra note 8 at 778.

29Jd. at 779.

262) and not reviewed by counsel (Tr. 257-58). The par-

ties carried on extensive oral negotiations that, the evi-

dence reflects, were not intended to be covered by any

writing (Tr. 258-59). In the case of the Dakota 14 limited

partnership, plaintiffs relied in argument primarily upon

the written promises (Tr. 1137-43). The plaintiffs also re-

lied on oral promises, made before and after the written

promises. The oral promises, made before the written

agreements, were inducements to enter the written agree-

ments, both as to Dakota 14 and Dakota 16. Those made

later served to assure plaintiffs, falsely, that the written

promises would be fulfilled and constituted reaffirmed

agreements. The evidence shows that plaintiffs would not

have executed the written agreements as to either Da-

kota 14 or Dakota 16 but for the oral promises of John

McNeal (Tr. 72, 106). The Court of Appeals doubted

that McNeal made those promises, but the jury—afer

lengthy, careful deliberation—decided he did.

The jurors believed Ralph Mueller. Judge Larson ap-

pears to believe another group of jurors would also. We

draw that inference from his statement, “The Court be-

lieves that a new trial would not produce a substantially

different result . . .” (A-3). The record cannot adequately

depict the differences between Ralph Mueller and John

McNeal that led the jury to believe one and not the other.

As the case turned upon a conflict of testimony between

the two men, those differences—in openness, frankness,

demeanor, and candor—must have had controlling signi-

ficance in determining the outcome of the trial. Judge

Larson apparently believes those differences will lead to

verdicts for plaintiffs in a new triai if one is required. We

do not believe plaintiffs should have to bear the emotion-

al and financial expense it would take to prove that point,

simply because the Court of Appeals was swayed by a

sharply worded, emotional attack on their credibility.

Until relatively recently, the Court of Appeals for the

Eighth Circuit had been considered a bulwark of the

“ancient faith” that regarded the appellate court as having

a sharply limited role in reviewing decisions on factual is-

sues.” As long ago as 1957, Charles Alan Wright dis-

cerned “signs of wavering” in that Court.” The decision

here under review signals full scale abandonment. It plac-

es the Court of Appeals for the Eighth Circuit squarely

within the camp of those appellate courts that deem their

principal task to be that of achieving the “right” result,

as they see it, in each case that comes before them.

At a time when the Court of Appeals for the Eighth

Circuit almost always turned aside appeals based on fac-

tual consideration—Was the verdict too large? Should

there have been a new trial? Were the witnesses credi-

ble?—that Court consistently received substantially fewer

appeals than every other circuit court, except for the First

Circuit. We doubt that those two facts are unrelated.

The coexistence of those two facts lends weight to the

observation, made more than once, that a time-honored,

effective way to reduce the backlog of appellate and trial

caseloads is to limit the scope of appellate review.”

We believe such a reduction to be particularly appropriate

when, as here, the dispute is between private litigants and

“comes to the court of appeals with a double imprimatur”

Wright, supra note 8 at 753. The context of that quotation relates

specifically to review of a trial judge’s findings as to size of verdict, the

we of the first section of this Petition.

82Carrington, supra note 25, 82 Harv.L.Rev. at 588.

33Wright, supra note 8 at 780.

of a jury verdict and the trial court’s order denying a new

trial.™

Vil.

CONCLUSION

There are significant policy reasons that favor reversal

of the decision below, including conflicts among the cir-

cuits, fundamental issues relating to the proper relation-

ship of appellate courts to trial judges and juries, prob-

lems of compliance with the Seventh Amendment and Rule

52(a), Federal Rules of Civil Procedure, granting control

of crowded dockets and bringing expensive litigation to a

close. There are virtually no negative considerations pres-

ent in this case, as it involves the results of a jury trial be-

tween private litigants who have approximately equal ac-

cess to the court system.

We submit that the decision of the Court of Appeals

herein, if permitted to stand, strikes at the heart of the jury

system. It undercuts and usurps the role of the trial judge.

It stands for the principle that the Court of Appeals may

substitute its judgment on issues of credibility and integ-

rity for those of trial judge and jury. It deprives plaintiffs

of the very right to triai by jury that defendant demand-

ed.

The Petitioners request that the Writ of Certiorari issue.

Carrington, supra note 25, 3 Ga.L.Rev. at 520.

Dated: July 26, 1978.

HYMAN EDELMAN

CHARLES QUAINTANCE, JR.

MARTIN G. WEINSTEIN

Attorneys for Petitioners Ralph E. Mueller

and Eugene D. Devane

MASLON, KAPLAN, EDELMAN,

BORMAN, BRAND & McNULTY

1800 Midwest Plaza

Minneapolis, Minnesota 55402

(612) 339-8015

A-1

APPENDIX A

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

FOURTH DIVISION

Ralph E. Mueller and Eugene D. Devane,

Plaintiffs,

vs.

Hubbard Milling Company,

Defendant.

Memorandum and Order

No. 4-75 Civ. 388

Plaintiffs Ralph E. Mueller and Eugene D. Devane,

limited partners in two cattle feeding ventures, brought

this action against their general partner, Hubbard Milling

Company. Plaintiffs sought to recover damages for alleged

violations of defendant’s fiduciary obligations.

Two counts were submitted to the jury for each plaintiff,

one for Dakota Feeders No. 14 Limited Partnership and

une for Dakota Feeders No. 16 Limited Partnership. On

each count four theories of liability were offered; viola-

tions of §10(b) of the Securities Exchange Act of 1934 and

Rule 10b-5(c) thereunder, common law misrepresentation

and concealment, breach of contract, and breach of fidu-

ciary duty.

The jury found for both plaintiffs on both counts. For

A-2

Dakota No. 14, damages were set at $58,389 and $23,154

for Mueller and Devane respectively. The awards for

Dakota No. 16 were somewhat unusual. Mueller received

$354,000 “+ damages of $51,000,” and Devane was

awarded $62,595 “+ damages of $9,000.” (Quoting from

the verdict forms.) Upon receipt of the completed verdict

forms, the Court asked the forewoman of the jury whether

the additional amounts were to be added to the principal

amounts and the reply was in the affirmative.

Defendant now moves for judgment n.o.v. or, in the al-

ternative, for a new trial. Plaintiffs request prejudgment

interest on Dakota No. 14 and in the event of a remittitur,

prejudgment interest on Dakota #16, and attorneys’ fees.

The Court is of the opinicn that the evidence warranted

submission of the case to the jury and that substantial evi-

dence supports the verdicts. The motion for judgment

n.o.v. will therefore be denied. On the motion for a new

trial defendant claims numerous rulings and _ instructions

by the Court were erroneous and prejudicial. The Court

does not believe that the claimed errors warrant a new

trial.

Defendants also contend that the jury verdicts were so

improper as to reflect passion and prejudice warranting a

new trial. It is true that the verdicts for Dakota No. 16

were excessive even without the extra amounts included

by the jury. Mueller and Devane asked only for $219,300

and $38,700, respectively, which represent the total

amount of their investment in Dakota No. 16. Plaintiffs

concede that a remittitur to these amounts would be ap-

propriate.

It is impossible to know why the verdicts exceeded the

demands, or why the additional amounts were included.

A-3

Defendant claims that the jury may have wanted to “stick

it” to the defendant, a corporation. This charge is difficult

to sustain in view of the low verdicts awarded for Dakota

No. 14. Plaintiff Mueller claimed a maximum of $119,-

098 but received less than half, $58,389. Devane received

$23,154, precisely the same proportion of his requested

$47,229. The case was an exceedingly difficult one to

comprehend, given the sophisticated financial dealings

involved." The jury heard six and one-half days of testi-

mony, argument, and instructions and was referred to well

over one hundred exhibits. Deliberations consumed an-

other day and a half. During the course of their delibera-

tions, the jury requested and received a chart of plaintiffs’

alternative damage calculations for Dakota No. 14. Un-

der these circumstances, the Court cannot conclude that

the verdicts were the result of bias, prejudice, or a reckless

disregard of the evidence and instructions. Rather, the

mistake appears to be an honest one which can be cor-

rected by remittitur.’ The case was tried fairly by able

counsel and the Court believes that a new trial would not

produce a substantially different result on either Dakota

No. 14, or Dakota No. 16 after remittitur.

Plaintiffs’ motions for prejudgment interest and for an

award of attorneys’ fees must be denied.

1Defendant demanded the jury trial. Plaintiffs did not.

*Defendant contends that even if the jury mistakenly gave plaintiffs

more than they requested, no such innocent motive can be attributed

to the additional amounts inserted by the jury. Again, it is impossible

to know why these extra amounts were added. It is far more plausible,

however, that these sums represent compensation for attorneys’ fees

(as suggested in the post-trial affidavit of plaintiffs’ counsel) rather

than some form of punitive damages. Plaintiffs did request punitive

—— in their complaint but the Court declined to submit the issue

to the jury.

A-4

ORDER

1. Defendant’s motion for judgment n.o.v. is de-

nied.

2. Defendant’s motion for a new trial is denied as to

Dakota No. 14, and granted as to Dakota No. 16 unless

plaintiffs, within fifteen days, in a writing filed with the

Clerk of Court, remit all damages above the sums of $219,-

300 (Mueller) and $38,700 (Devane). If such remittitur is

duly filed, the motion for a new trial is denied in all re-

spects.

3. Plaintiffs’ motions for prejudgment interest and at-

torneys’ fees are denied.

A-5

APPENDIX B

United States Court of Appeals

For the Eighth Circuit

Nos. 77-1413 and 77-1432

Ralph E. Mueller and Eugene D. Devane,

Appellees/Cross-Appellants,

VS.

Hubbard Milling Company,

Appellant/Cross-Appellees.

Appeal and cross-appeal from the United States District

Court for the District of Minnesota.

Submitted: November 18, 1977

Filed: April 10, 1978

Before VAN OOSTERHOUT, Senior Circuit Judge, LAY

AND STEPHENSON, Circuit Judges.

VAN OOSTERHOUT, Senior Circuit Judge.

Ralph E. Mueller and Eugene D. Devane brought this

action in the United States District Court for the District

of Minnesota against Hubbard Milling Company (Hub-

bard) to recover certain investment losses sustained by

A-6

them as limited partners in two limited partnership cattle

feeding ventures, referred to by the parties as Dakota 14

and Dakota 16, in which Hubbard acted as sole general

partner. Following extensive pretrial discovery and a

lengthy trial, the cause was submitted to a jury on four

theories of liability: federal securities law violations, com-

mon law fraud, breach of contract and breach of fidu-

ciary duty. Hubbard's request for special verdict forms was

denied, and the jury was instructed to return general ver-

dicts with respect to each of the two plaintiffs and each

of the two limited partnerships (a total of four verdicts).

Substantial verdicts were returned for plaintiffs in each in-

stance. The Dakota 16 verdicts substantially exceeded the

amount sought by plaintiffs and the maximum amount

sustainable by the evidence. Plaintiffs later consented to

remittiturs on the Dakota 16 verdicts, and judgments were

entered on the Dakota 14 verdicts as returned and the Da-

kota 16 verdicts as remitted. Post-trial relief sought by

Hubbard was denied.’ Alleging numerous grounds for re-

versal, Hubbard appeais. Plaintiffs cross-appeal from a

denial of their claim for prejudgment interest.

For the reasons stated herein, we vacate the judgments

entered below, dismiss plaintiffs’ cross-appeal without

prejudice and remand for further proceedings.

Dakota 14 and Dakota 16 were the last in a series of

eight limited partnerships in which Hubbard acted as gen-

eral partner and plaintiffs as limited partners. All of the

partnerships were formed for the purpose of fattening cat-

‘Hubbard did not seek the remittiturs.

A-7

tle to slaughter weight at feedlot facilities operated by Fall

River Feedlots, Inc. (Fall River), in Hot Springs, South

Dakota. Fall River was owned 75% by Hubbard and 25%

by T. M. Largent, Fall River’s president and manager. Lar-

gent was responsible to John McNeal, a vice president of

Hubbard, for his actions as feedlot manager. In addition

to supervising Largent, McNeal was responsible for Hub-

bard’s performance of its duties as general partner under

the partnership agreements. For each limited partnership

Largent bought, fattened and sold a herd of cattle; the part-

nership was then dissolved.

All of the capital in the limited partnerships was con-

tributed by the limited partners; in addition to cash con-

tributions, the limited partners provided letters of cred-

it? In exchange for its management services, Hubbard

received from the partnership a per head fee, which was

four dollars for both Dakota 14 and Dakota 16. Hubbard

also received a sliding percentage of any profit, ranging

from five per cent of the first ten dollars per head profit

to twenty per cent of the total profit if it exceeded twenty-

four dollars per head.

Mueller and Devane were without question experienced

investors. The partnership agreements were modeled after

a limited partnership agreement (Dakota 1) offered by the

First National Bank of Minneapolis to its customers as

part of an investment opportunities package known as

“Total Plan.” The partnerships provided a significant tax

shelter for the limited partners. Mueller at times consulted

2On Dakota 14, Mueller contributed $65,718 and provided a letter of

credit in the amount of $91,275; Devane contributed $26,082 and

ided a letter of credit in the amount of $36,225. On Dakota 16,

ueller contributed $91,800 and provided a letter of credit in the

amount of $127,000; Devane contributed $16,200 and provided a

letter of credit in the amount of $22,500.

A-8

his attorney and his accountant with respect to the invest-

ments. In 1972 and 1973 Mueller had also formed and

been president of a cattle placement and monitoring busi-

ness, which purchased about 25,000 head of cattle for

its customers.

The partnerships were formed pursuant to the Uniform

Limited Partnership Act as enacted in South Dakota,

South Dakota Compiled Laws Annotated, chapter 48-6

(1967). The agreements recited that they “shall be con-

strued and enforced in accordance with the laws of the

State of South Dakota.”

Paragraph 8 of the agreements vested exclusive man-

agement of the partnerships in Hubbard; Hubbard was

authorized, inter alia:

(a) to purchase, hold and sell cattle;

(b) to engage, at its discretion, in “hedging” ac-

tivities including advance contracting and commodi-

ties futures trading in cattle, and to utilize Partner-

ship assets in an amount not to exceed $10 per head

of Partnership cattle owned at the time of such hedg-

ing activities to cover the costs thereof;

sons in such manner, on such security (including as-

sets of the Partnership and assets pledged to the

Partnership) and on such terms as it may see fit, pro-

vided that such borrowings must be made without re-

course to the Partnership or to any Partner [.]

Paragraph 17 provided: “No Limited Partner shall partici-

pate in the control, operation or management of the Part-

nership business” and “The Limited Partners hereby con-

A-9

sent to any purchase or other acquisition, sale, lease, ex-

change, conveyance or other disposition, mortgage or oth-

er encumbrance by the General Partner on behalf of the

Partnership, of any or all property now or hereafter ac-

quired for the Partnership, on such terms and conditions

as may be determined by the General Partner, notwith-

standing that any party hereto may have an interest there-

in.”

At the risk of oversimplification and without attempting

to relate all or even most of the relevant evidence, we out-

line the particular events which gave rise to this lawsuit.

Although the agreement for Dakota 14 was executed prior

to the one for Dakota 16, the dispute over Dakota 16 devel-

oped first, and we accordingly discuss it first.

In the feeder cattle business, the term “breakeven” re-

fers to an estimated price at which cattle must be sold in

order to “break even” with the original purchase expense

and the cost of feeding. The central controversy over Da-

kota 16 concerns statements allegedly made by McNeal

that Hubbard would notify plaintiffs before purchasing

any cattle at breakevens higher than forty-five cents per

pound.

Prior to October 15, 1973, Mueller, according to his own

testimony, was reluctant to form Dakota 16 because of

difficulties then being encountered with Dakota 14 and

its immediate predecessor, Dakota 12. Discussing the

matter with McNeal, he explained, “we just can’t buy our-

selves into another loss position.” In the course of nego-

tiations, McNeal allegedly made a number of statements

which induced plaintiffs to execute the agreement. Most

A-10

significantly,’ he “agreed that if we would go into this

partnership that he would call us before any cattle were

purchased if they were above 43 or 45 cents, if they were

above the 45-cent range.”

The Dakota 16 agreement was executed on October 15,

1973. Paragraph 5 recited: “The Partnership shall purchase

an aggregate of 2,000 feeder cattle and calves during the

period from November 1, 1973 through February 14,

1974 and shall market the fattened cattle in lots during the

period of March through August of 1974.”

On November 12, 1973, Hubbard transferred to Da-

kota 16 417 head of cattle which Fall River had previously

purchased, some of them in early October. Mueller and De-

vane did not learn of the transfer until November 27.

Upon learning of the transfer, Mueller called McNeal to

express concern over Hubbard’s transferring cattle pur-

chased before the Dakota 16 agreement was executed,

and more especially, over the fact that the 417 cattle had

been purchased at breakevens of forty-seven cents. He ex-

plained that the purchase would cause him to have trouble

with his banker because his banker had loaned him the

money for Dakota 16 on the basis that purchases would

be at breakevens of forty-three to forty-five cents, Mueller

testified that McNeal told him “they wouldn’t do any more

[purchasing] without talking to us.”

No additional cattle were purchased for or transferred

to Dakota 16 in November or December. However, Hub-

bard did purchase an additional 1,516 head of cattle, all

3Among other statements allegedly made at this time are the following:

McNeal allegedly stated that other persons were anxious to take space

in the feedlot if plaintiffs decided not to ; this statement al-

legedly was false. McNeal allegedy stated “things would oS

ter after the first of the year”; Largent allegedly stated that ota

16 would be “a real barn burner.”

A-11

at breakevens in excess of forty-five cents, at various times

in January. Mueller testified he did not learn of these

purchases until January 31.

Declining fat cattle prices, rising feed prices and other

factors combined in making Dakota 16 a financial disaster.

Hubbard sold the cattle on advance contract in June 1974.

Mueller and Devane lost their entire investment, which

amounted to $258,000. This sum is the total amount of

the verdicts as remitted on Dakota 16.

The Dakota 14 agreement was executed on July 31,

1973. Paragraph 5 recited: “The partnership shall purchase

an aggregate of 3,000 feeder cattle and calves during the

period of August through October of 1973, and shall mar-

ket the fattened cattle in lots during the period of January

through April of 1974.” The dispute over Dakota 14 con-

cerns certain second letters of credit delivered by plain-

tiffs in December 1973. As already noted, supra note 2,

plaintiffs had delivered first letters of credit at the time

the partnership was formed.

The purchase and feeding of Dakota 14 cattle was fi-

nanced through the First National Bank of the Black Hills.

Under the financing agreement the bank had authority,

at any time its loans exceeded 80% of the value of its

collateral, to direct that the partnership’s cattle—collater-

al on the loans—be sold. By early December 1973 Dakota

14 had acquired about 2752 head of cattle, the value of

which had diminished with declining slaughter cattle

prices. Concomitantly, increasing feed costs had necessi-

tated greater loans from the bank than originally had been

expected. As a result, on December 12, the bank, pursuant

to its contractual authority, instructed Hubbard to sell the

Dakota 14 cattle.

A-12

A December sale of the cattle would have resulted in a

loss to the partnership of about $102 per head. Because

of a belief that slaughter cattle prices would rise begin-

ning in January, alternatives to the forced sale were sought.

Testimony was adduced that the bank was willing to ac-

cept a guarantee from Hubbard in lieu of the sale and that

Hubbard refused this offer. Plaintiffs contend this fact was

fraudulently concealed from them.‘ In any event, Hub-

bard did advise plaintiffs: “The one alternative that the

bank has offered to the Partnership is for the Limited

Partners to provide an additional $197,000 in irrevocable

letters of credit to be pledged to the bank as collateral to

the loans.”

Late in December plaintiffs did provide second letters

of credit, Mueller in the amount of $79,920 and Devane in

the amount of $31,718; also late in December the parties

executed a “Memorandum Supplementing Limited Part-

nership Agreement” (the Supplementing Agreement).

This agreement explained the problem that had developed

with the bank, recited that Mueller and Devane thereby

agreed to contribute to the partnership second letters of

credit in the respective amounts noted above, and pur-

ported to set forth the understanding of the parties with

respect to the second letters ui credit. The events which

attended the execution of these documents, and the se-

anence in which the events occurred, are the subject of

much dispute.

‘Plaintiffs also contend that Hubbard fraudulently concealed from them

the fact that the bank was requiring a compensating balance for its

loans to Dakota 14. This arrangement allegedly had the effect of

raising the interest rate on the loans from ten per cent to twelve per

cent. Plaintiffs further contend that the arrangement “raised a possible

usury problem” under South Dakota law and that Hubbard breached

ae —? duty to plaintiffs by failing to investigate this alleged

problem.

A-13

Part of the dispute can be traced to the fact that the

second letters of credit bear the dates December 18 and

20° while the Supplementing Agreement bears the dates

December 28 and 31.° These dates are of some signifi-

cance because of certain alleged communications on De-

cember 24 and 26.

According to Mueller’s testimony, he called McNeal on

December 24 to express his reluctance to go through with

the second letters of credit because of the amount of money

involved and the then-current cattle prices. This conversa-

tion was followed by a visit by Mueller to McNeal’s office

on December 26. Mueller described the substance of the

December 26 meeting as follows:

Well, the substance again is that we were reluctant

to sign this supplement and come up with the addi-

tional letters of credit and our thought was that there

would be a possibility of putting in some safeguard in

in which there would be—I guess you could call it a

form of stop-loss agreement for this second letter of

credit. So we discussed the approach to this, and

which I had discussed with my attorney. We dis-

cussed the approach to it and then John McNeal al-

so said that he felt that, again that this cattle price

thing was going to straighten out after the first of the

year and that 14 would be all right. I said, well, this

is fine, but we sure don’t want to lose this second

letter of credit because we had already lost a lot of

money obviously on 12 and that we were concerned

5The letters of credit recite: “Effective December 18, 1973” and “Dated:

December 20, 1973.”

®The Supplementing Agreement was signed by McNeal for Hubbard on

December 28 and by Mueller and Sans on December 31.

A-14

about this. So we talked then about putting in a stop-

loss provision or a provision in this that they would

sell out this partnership to limit our loss to $100. per

head, because what we were really doing by going

into the second letter of credit, that we would lose

considerably more than $100. a head, I think be-

tween $150 and $160. a head or more. So our con-

cern was let’s at least limit our exposure. Mr. Mc-

Neal, John said he thought they could do that and he

would talk with their counsel and that they would

see what they could do to get us a revised contract,

Then we talked about putting in some guarantee

that this would happen. John McNeal said, well, he

really didn’t like to do this because it really fouled

up the lawyers to ask them to write all these things

in, but that they would really watch out for us.

Mueller further testified that McNeal said “he would take

care of the situation, assured me that they would really do

their best to really do this and to really take care of the

situation so that we wouldn’t lose more than $100.”

The Supplementing Agreement executed by the parties

contained the following “best efforts” clause:

In order to attempt to minimize losses for Limited

Partners in Dakota Feeders #14, the General Partner

agrees to use its best efforts to attempt to advance

contract for the sale of the Partnership’s cattle when

futures prices fall to the levels set forth below. It is

understood, however, that advance contracting can

be done only if packers are willing to buy cattle at a

fixed price for a future delivery date. * * * * Since

futures markets are sometimes very erratic, it may be

A-15

impossible at time for the General Partner to effec-

tively advance contract for the sale of any cattle. If,

however, such a sale is possible, the following guide-

lines will be followed by the General Partner in de-

termining when specific pens of cattle should be of-

fered to packers for advance contracting. For pens

Nos. 86, 14, 83, 73, 77, 51, 91 and 5, the General

Partner agrees to use its best efforts to attempt to

hold losses to $100 per head by advance contracting

according to the guidelines set forth below [.]

The agreement made clear throughout, however, that

Hubbard was not insuring plaintiffs against loss of their

additional investments. It recited:

The Limited Partners understand that the General

Partner makes no representations as to the specific

amounts of any loss per head on any specific pen

pursuant to the above arrangement. The Limited

Partners also understand that the General Partner’s ob-

ligations under this arrangement are only to use its

best efforts and that an advance contract sale at

any time may not be possible.

The agreement also set forth the following conspicuous

limitations:

EACH LIMITED PARTNER SHOULD UNDER-

STAND THAT NEITHER THE PARTNERSHIP

NOR THE GENERAL PARTNER HAS ANY BA-

SIS FOR DETERMINING THE FUTURE MAR-

KET PRICES FOR SLAUGHTER CATTLE. IF

PRESENT PRICES SHOULD DECLINE, EACH

LIMITED PARTNER MAY LOSE ALL OR A

PART OF THE ADDITIONAL LETTER OF

CREDIT TO BE CONTRIBUTED BY HIM.

A-16

NEITHER THE PARTNERSHIP NOR THE GEN-

ERAL PARTNER MAKES ANY ASSURANCE

THAT SLAUGHTER CATTLE PRICES WILL IN-

CREASE DURING THE PERIOD BETWEEN

THE DATE HEREC F AND THE SCHEDULED

MARKETING DATI S. THERE IS IN FACT THE

POSSIBILITY THAT SLAUGHTER CATTLE

PRICES COULD BE LOWER ON SUCH DATES.

SHOULD SUCH PRICES BE LOWER THAN THE

PRESENT ESTIMATE ADVANCE CONTRACT

PRICES USED TO CALCULATE THE LOSSES

DESCRIBED ABOVE, THE LIMITED PART-

NERS LOSSES WOULD BE HIGHER THAN

CALCULATED ABOVE.

Slaughter cattle prices did rise in January 1974, but

they fell during the following months. Mueller testified

that he asked McNeal several times in January to advance

contract the cattle, and it appears to be undisputed that

losses would have been held to less than $100 per head if

the cattle had been advance contracted in January. The

evidence is, to say the least, disputed as to whether Hub-

bard made bona fide efforts to advance contract the cattle

early in the year.

In the end, according to Mueller’s testimony, the part-

nership lost about $155 per head, a sum which repre-

sented the plaintiffs’ entire initial investment in Dakota 14

and approximately half the amount of the second letters

of credit. The jury returned verdicts on Dakota 14 for

Mueller in the amount of $58,389 and for Devane in the

amount of $23,154. As indicated above, judgment was

entered on these verdicts.

A-17

Hubbard contends, inter alia, that the district court’s ad-

mission into evidence of testimony by Mueller concerning

oral communications between Mueller and McNeal was

erroneous and prejudicial with respect to the contract

claims on both Dakota 14 and Dakota 16. We agree with

Hubbard that as to the contract claims the testimony

should have been excluded under the parol evidence rule.

Hubbard first objected to the alleged parol evidence ear-

ly in the trial. At that time the trial court overruled the

Objection and indicated that it would not give a requested

instruction limiting the jury’s consideration of the evidence

to the fraud claims;’ Hubbard was granted a continuing

objection. The objection was reasserted in Hubbard’s mo-

tions for directed verdicts at the close of the plaintiffs’

evidence and the close of all of the evidence and again in

Hubbard’s post-trial motion for judgment notwithstand-

ing the verdict.

It will be recalled that the Dakota 14 and Dakota 16

agreements recite that they “shall be construed and en-

forced in accordance with the laws of the State of South

Dakota.” Under well-established principles, questions of

Substantive law concerning the construction and enforce-

ment of the agreements are accordingly governed by South

Dakota law. Restatement (Second) of Conflict of Laws

7The importance of Hubbard’s request for a limiting instruction and of

the trial court’s refusal to give it cannot be over-emphasized. The

result we reach might be different if Hubbard had not made the re-

quest or if the trial court had granted it.

A-18

$187 (1969).* It is also well-established that the parol

evidence issue before us is one of substantive law and falls

within this rule. “Whether a contract is integrated in a

writing and, if so, the effects of integration are deter-

mined by the local law of the state selected by application

of the rules of §$187-188.” Id. §140. Accord: Schewe v.

Bentsen, 424 F.2d 60, 62 (Sth Cir. 1970); Merchants

Nat'l Bank & Trust Co. v. Professional Men’s Assn, 409

F.2d 600, 602-03 (Sth Cir. 1969); Kirtley v. Abrams,

299 F.2d 341, 345 n.6 (2d Cir. 1962); Long v. Morris,

128 F.2d 653, 141 A.L.R. 1041 (3d Cir. 1942); Annot.,

141 A.L.R. 1043 (1942). The rationale behind Restate-

ment Section 140 is both simple and sound: “Rules which

determine when a contract is integrated should be deter-

mined by the law which governs the contract. Such rules

are not concerned primarily with judicial administration

. and may affect substantially the obligations of the

SRestatement Section 187 in substantial part reads:

(1) The law of the state chosen by the parties to govern their con-

tractual rights and duties will be applied if the particular issue is

one which the parties could hav resolved by an explicit provision

in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern their con-

tractual rights and duties will be applied, even if the particular issue

is one which the parties could not have resolved by an explicit pro-

vision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties

or the transaction and there is no other reasonable basis for

the parties’ choice, or

(b) application of the law of the chosen state would be contrary

to a fundamental policy of a state which has a materially

greater interest than the chosen state in the determination of

the cages issue and which, under the rule of § 188, would

be state of the applicable law in the absence of an effec-

tive choice of law by the parties.

On the facts of this case, there is no basis for upsetting the parties’

choice of South Dakota law.

A-19

parties under the contract.” Restatement §140, Comment

c. We accordingly apply South Dakota rather than Minne-

sota law in resolving the parol evidence question.®

In South Dakota the parol evidence rule is of statutory

origin: “The execution of a contract in writing, whether

the law requires it to be written or not, supersedes all the

oral negotiations or stipulations concerning its matter

which preceded or accompanied the execution of the in-

strument.” $.D. Compiled Laws Ann. §53-8-5 (1967). A

related statute governs oral communications occurring af-

ter a written contract is executed: “A contract in writing

may be altered by a contract in writing without new con-

sideration or by an executed oral agreement, and not oth-

erwise.” S.D. Compiled Laws Ann. §53-8-7 (1967).

The South Dakota Supreme Court has authoritatively

construed Section 53-8-5 as follows:

[W]here a contract which has been reduced te writ-

ing and executed by the parties is complete, clear and

unambiguous in its terms and contains mutual con-

tractual covenants, or where the consideration con-

sists of a specific and direct promise to do or not to

do certain things, this part of the contract, in the

absence of fraud, mistake, or accident, cannot be

*Under the rule of Klaxon Company v. Stentor Electric Manufacturing

Company, Inc., 313 U.S. 487 (1941), we must of course apply Min-

nesota conflict-of-laws rules with respect to the state law contract

claims before us. Our research does not disclose that the Minnesota

Supreme Court has had occasion to consider the principle stated

in Restatement Section 140. However, Section 140 is premised upon

the widely accepted view that the parol evidence rule is a rule of

substantive law, a premise with which the Minnesota Supreme Court

agrees. Anchor Cas. Co. v. Bird Island Produce, Inc., 249 Minn. 137,

82 N.W.2d 48, 54 (1957). In the absence of any contrary indication,

we accordingly conclude that the Minnesota Supreme Court would,

if confronted with the issue, agree with Restatement Section 140.

A-20

changed or modified by parol or extrinsic evidence,

nor can new terms be added to the contract, nor to

the contractual consideration therein expressed, nor,

where all these facts exist, may a party to a contract

show that he was induced to sign the contract by the

making of a prior or contemporaneous oral agree-

ment, where such showing would be tantamount to

adding to or subtracting from the contractual con-

sideration expressed in the written contract.

Baker v. Jewell, 77 S.D. 573, 96 N.W.2d 299, 301-02

(1959); Kindley v. Williams, 76 S.D. 225, 76 N.W. 2d

227, 229-30 (1956). In the absence of fraud, mistake or

accident, it is presumed that the written agreement ex-

presses the final intention of the parties upon the subject

matter of the contract. Northwestern Pub. Serv. Co. v.

Chicago & N.W. Ry. Co., 87 S.D. 480, 210 N.W.2d 158,

160 (1973).

Although some aspects of the parol evidence rule are,

in South Dakota and elsewhere, recurring sources of con-

troversy, it is well-established that oral negotiations or

agreements which preceded execution of a written contract

may not, at least ordinarily, be employed to contradict

and nullify its express terms. Eggers v. Eggers, 79 S.D.

233, 110 N.W.2d 339, 342 (1961); Kindley v. Williams,

supra, 76 N.W.2d at 230. And in South Dakota the same

rule is statutorily prescribed with respect to unexecuted

oral agreements made after execution of a written contract.

S.D. Compiled Laws §53-8-7 (1967), quoted supra.

Turning first to the Dakota 16 controversy, we conclude

that the challenged parol evidence is inconsistent with the

written partnership agreement. Mueller was permitted to

A-21

testify to statements allegedly made by McNeal that Mc-

Neal would call plaintiffs before purchasing any cattle at

breakevens higher than forty-five cents per pound. Para-

graph 5 of the written agreement provided that the part-

nership “shall purchase” an aggregate of 2,000 feeder cat-

tle and calves, and paragraph 8 vested exclusive manage-

ment authority in Hubbard. Most significantly, paragraph

17 specified: (1) “No Limited Partner shall participate in

the control, operation or management of the Partnership

business”; and (2) “The Limited Partners hereby consent to

any purchase . . . by the General Partner on behalf of the

Partnership, of any or all property now or hereafter ac-

quired for the Partnership, on such terms and conditions

as may be determined by the General Partner . . .” (Em-

phasis supplied). These provisions make abundantly clear

that under the agreement as written Hubbard had no con-

tractual obligation to purchase cattle at any particular

price. Mueller’s testimony, which purported to establish

that Hubbard did have such a contractual obligation, di-

rectly contradicted the writing and should accordingly

have been excluded insofar as plaintiffs’ contract claims

are concerned.

We reach the same conclusion with respect to the Da-

kota 14 contract claims. The critical dispute on these

claims concerns the “best efforts” clause contained in the

December 1973 Supplementing Agreement. Again, the

pertinent portions of Mueller’s testimony and the pertinent

provisions of the written agreement, both of which are set

out in considerable detail supra, are fundamentally incon-

sistent.

Mueller was permitted to testify about discussions he

allegedly had with McNeal in which the two of them con-

A-22

sidered inserting 2 “stop-loss” or “guarantee” provision

in the agreement to the effect that plaintiffs would not

lose more than one hundred dollars per head on their Da-

kota 14 investments. This testimony could well have left

the jury with the impression that McNeal had promised

Mueller everything short of an actual guarantee, and in-

deed, that the only reason the written agreement did not in

terms contain a guarantee was that “it really fouled up

the lawyers to ask them to write all these things in.” The

written agreement, of course, contained no guarantee, but

it did contain the “best efforts” clause. If the agreement

were otherwise silent as to the intended meaning of the

words “best efforts”, plaintiffs might convincingly argue

that Mueller’s testimony would be admissible for the pur-

pose of explaining, in consistent additional terms, the in-

tended meaning of the uncertain or ambiguous words “best

efforts.” But that is not the issue before us, and we do not

pass on it.”

In determining whether language in a written contract

“is reasonably capable of being understood in more than

one sense” and therefore susceptible to interpretation by

parol, the courts will not examine the contractual provi-

sions in isolation. Ponderosa-Nevada, Inc., v. Venners,

243 N.W.2d 801, 804 (S.D. 1976). “It is a fundamental

rule of contract construction that the entire contract and

each and all of its parts and provisions must be given

meaning if that can consistently and reasonably be done.”

Compare Dail v. Vodicka, 237 N.W.2d 7, 9 (S.D. 1975), and Habeck

v. Sampson, 221 N.W.2d 483, 486-87 (S.D. 1974), (language of writ-

ten contract ambiguous or uncertain), with Eggers v. Eggers, supra,

110 N.W.2d at 341-42, and Hobbs v. Whitelock, 57 §.D. 198, 231

N.W. 904, 907 (1930), (language of written contract not ambiguous

Or uncertain). See generally 30 Am.Jur. 2d Evidence §§ 1069-71, 1074

(1967).

A-23

Id. Here, the Supplementing Agreement was nor otherwise

silent as to the intended meaning of the words “best ef-

forts.” Rather, it stated in numerous places, twice in con-

spicuous language, that Hubbard was in no position to pre-

dict future cattle prices and that plaintiffs’ losses could be

substantial. It also cautioned that advance contracting of

cattle might not be possible. In short, it made clear that

the venture was a risky one. Thus, the written agreement

as a whole necessarily foreclosed the possibility that “best

efforts” could be understood or construed to mean any-

thing even remotely approximating a guarantee. See id.

For that reason the agreement should have spoken for

itself, and Mueller’s testimony should have been excluded

insofar as plaintiffs’ contract claims are concerned.

Plaintiffs seek to avoid application of the parol evi-

dence rule by suggesting, first, that Mueller’s testimony is

admissible to establish the existence of an oral agreement

that is collateral to the written agreement, and second, that

Mueller’s testimony is admissible to establish the consid-

eration for the written agreement. A collateral oral agree-

ment will not, however, suffice to avoid application of the

parol evidence rule where it is, as here, inconsistent with

the written contract. Eggers v. Eggers, supra, 110 N.W.

2d at 342; Moncur v. Jones, 72 §.D. 202, 31 N.W.2d 759,

764-65 (1948); Barnes v. Hill City Lumber Co., 34 S.D.

158, 147 N.W. 775, 777 (1914); In re Roberts, 358 F.

Supp. 392, 396-97 (D.S.D. 1973) (applying South Da-

kota law); 30 Am.Jur. 2d Evidence §1049 (1967). As to

the consideration theory, the South Dakota Supreme Court

held in Farmers’ Elevator Co. v. Swier, 50 S.D. 436, 210

N.W. 671, 673 (1926):

A-24

One exception [to the parole evidence rule] fre-

quently invoked is that recitals as to the considera-

tion of a written instrument are not conclusive, and

that it is competent to inquire into the consideration

and show by parol or other extrinsic evidence what

the real consideration was. This exception, however,

has no application where the statement in a written

instrument as to consideration is of a contractual na-

ture and consists of a specific and direct promise to

do certain things.

See also Independent Harvester Co. v. Anderson, 45 S.D.

60, 186 N.W. 112, 114-15 (1921).

There can be little doubt that the admission of parol

evidence on both the Dakota 14 and Dakota 16 contract

claims was not only erroneous but also prejudicial. Even

with the parol evidence, Hubbard presented a strong de-

fense to the contract claims, and plaintiffs’ counsel

pointedly emphasized the pivotal nature of the parol testi-

mony during closing argument. We cannot, therefore,

deem the error harmless.”

We point out that it is well-established in South Dakota

that parol evidence is admissible to prove fraud;” in

cases where fraud is proved, however, the proper remedy

is voiding the contract or damages for fraud, not recovery

on the contract. Sabbagh v. Professional & Business Men's

“It is questionable whether, had the trial court properly excluded the

parol evidence as to the contract claims on Dakota 16, sufficient evi-

dence would have remained to warrant submission of those claims

to the jury. Because we corn<'ude that a reversal is necessary, how-

ever, we do not resolve this issue. If the case is retried, the district

court will of course be free to consider it.

12The South Dakota Supreme Court has in this context rejected the dis-

tinction between fraud in the execution and fraud in the inducement

and allows parol evidence to prove either. Baker v. Jewell, supra, 96

N.W.2d at 303-04.

A-25

Life Ins. Co., 79 S.D. 615, 116 N.W.2d 513, 520-21

(1962); Baker v. Jewell, supra, 96 N.W.2d at 302-03.

While the parol evidence here is admissible to prove fraud,

it remains inadmissible to prove breach of contract. Bak-

er v. Jewell, supra, 96 N.W.2d at 303. As already noted,

an appropriate limiting instruction was requested and re-

fused. See note 7, supra.

III.

There remains for consideration the troublesome issue

of what effect the erroneous and prejudicial admission of

parol evidence on the contract claims should have on the

general verdicts returned by the jury. On the facts of this

case, we conclude that the verdicts must be set aside.

As noted at the outset of this opinion, Hubbard re-

quested a special verdict by which the jury could have

made known which theory or theories of lia‘ility were

supported by the evidence. The request was denied.” In-

stead, the cause was submitted io the jury under the fol-

lowing general instruction, as requested by the plaintiffs:

Plaintiffs have set forth a single set of facts, with

four legal theories each as to why the evidence entitles

13It is settled that submission of a special verdict to a federal jury is a

matter of procedure governed by the federal rules and not by state

—. Lowery v. Clouse, 348 F.2d 252, 260 (8th Cir. 1965). Under

ule 49(a), Fed.R. Civ.P., submission of a special verdict is permissive

and not a matter of right, and it is discretionary with the trial court.

Id., SA J. Moore Federal Practice 4 49.03{1] at 2208 (1977).

We do not hold that the trial court's refusal to submit the special

verdict here was an abuse of discretion, much less that such refusal

by itself constituted reversible error. But we do suggest that cases

such as this, where multiple theories of liability are asserted, are the

ones most suited to the use of special verdicts, because special verdicts

will often obviate the necessity of deciding difficult | questions

which are not essential to an appropriate disposition the contro-

versy.

A-26

them to relief from some or all of their losses in con-

. nection with Dakota 16 and Dakota 14. Those the-

ories, about which I will soon give you more detailed

instructions, are: breach of contract, breach of fidu-

ciary duty, misrepresentation and concealment, and a

fraudulent course of conduct in connection with a

sale of securities. If you determine that the plaintiffs

are entitled to recover on any of these theories in

connection with Dakota 16 or Dakota 14, you will

then determine the damages of each plaintiff in ac-

cordance with the instructions I shall give you and

render a verdict for plaintiffs in the amount you de-

termine is proper. If you find that the plaintiffs are

entitled to relief on none of the theories they assert,

then you will render verdicts for the defendant.

The insurmountable difficulty is that the general ver-

dicts returned by the jury under this instruction may rest

solely upon the contract claims, which are tainted with

the trial court’s erroneous and prejudicial admission of

parol evidence.

A similar problem was recently analyzed by Judge

Friendly for the Second Circuit in Morrissey v. National

Maritime Union, 544 F.2d 19 (2d Cir. 1976). At issue in

that case were, infer alia, distinct claims under Sections

101(a)(2) and 101(a)(5) of the Landrum-Griffin Act, 29

U.S.C. §§411(a)(2) & 411(a)(5). After concluding that the

district court had erred in submitting the Section 101(a)(5)

claim to the jury, the Second Circuit went on to hold that

a general verdict on the two claims could not stand. We

quote a substantial portion of the analysis:

The general rule is that when one of the two claims

A-27

that have been submitted to the jury should not have

been submitted, a general verdict, such as was ren-

dered here on the LG [Landrum-Griffin] claims

cannot stand. United New York and New Jersey

Sandy Hook Pilot Ass'n v. Halecki, 358 U.S. 613,

619, 79 S. Ct. 517, 520, 3 L.Ed. 541 (1959); Pat-

ton v. Wells, 121 F. 337, 340 (8th Cir. 1903);

Fatovic v. Nederlandsch-Ameridaansche Stoom-

vaart, 275 F.2d 188, 190 (2 Cir. 1960). The lan-

guage used is generally quite absolute (“a new trial

will be required, for there is no way to know that the

invalid claim . . . was not the sole basis for the ver-

dict”—Halecki. “[s]ince we cannot determine from

the general verdict . . . whether they relied upon a

proper or improper claim . . . we must reverse the

judgment and order a new trial”—Fatovic). How-

ever, a few recent cases have disregarded the error

when the appellate court was fairly convinced that

the jury proceeded only on the sound ground. In Col-

lum v. Butler, 421 F.2d 1257 (7 Cir. 1970), a §1938

action for police brutality, the trial court charged

that recovery might be had if the police had beaten

the plaintiff or had kept him from contacting coun-

sel or family. The court of appeals held that §1983

would not cover the latter point, in the absence of

unusual circumstances not there shown, but that

plaintiff's judgment should be affirmed. The domi-

nant issue at trial had been the physical abuse, and

that was the only issue on which damages had been

proven; the other issues had been of “such relative

insignificance” that the result “would not have been

substantially affected if these issues had not been

A-28

submitted,” 421 F.2d at 1260. Gardner v. General

Motors Corp., 507 F.2d 525, 529 (10 Cir. 1974), is

to much the same effect. See also Roginsky v. Ri-

chardson-Merrell, Inc., 378 F.2d 832, 837-38 (2

Cir. 1967).

Assuming these cases to have been soundly de-

cided, we think the qualification on the general rule

of Halecki and other cases must be kept within rath-

er strict bounds. Here we find no sufficient basis for

confidence that the verdict on the LG count would

have been rendered, and particularly that the same

verdict would have been rendered, if the complaint

under §101(a)(5) had not been submitted.

544 F.2d at 26-27 (citations omitted in part).

We are in agreement with the above analysis, which is

decisive here. First, there is no material distinction between

a situation, like that in Morrissey, in which one of several

theories of liability should not have been submitted to a

jury at all, and a situation, like that here, in which one

of several theories of liability is not sustainable because of

an erroneous and prejudicial admission of evidence. The

essential inquiry in either case is whether the appellate

court is fairly convinced that the jury proceeded on a

sound basis. Second, we are unable to say with any confi-

dence that the verdicts returned below rested on anything

other than the contract claims. Plaintiffs’ counsel stated in

closing argument: “Our principal focus has been on the

contract claims, the promises that John McNeal made.. .”

A careful review of the record convinces us that all of

plaintiffs’ theories were of marginal validity at best and

that the contract theory might well have provided the sole

basis for the verdicts.

A-29

IV.

What has heretofore been said is sufficient in itself to

warrant a new trial on all issues. We are also of the view

that the trial court erred in not granting a new trial on all

issues On the ground that the verdicts were the result of

passion and prejudice on the part of the jury. Such issue

was raised by timely motion for new trial.

The trial court points out that on Dakota 16 plaintiffs

concede that Mueller and Devane asked for only $219,300

and $38,700 respectively, which represents the total

amount of their investment in Dakota 16 and that no proof

was offered in support of any greater amount. The ver-

dicts exceed the amounts claimed by Mueller and Devane

by $186,400 and $32,895 respectively. The court denied

a mistrial as to Dakota 14 but granted a new trial as to

Dakota 16 unless remittitur down to the amount claimed

was filed. Such remittitur was filed.

The trial court states that it is impossible to know why

the jury awarded such grossly excessive verdicts. We

agree. The court ultimately determined that the excessive

verdicts were not the result of bias, prejudice or reckless

disregard but were due to an honest mistake and that the

error could be corrected by remittitur to the maximum

amount claimed. We do not agree with such determina-

tion. The large excess in itself and the absence of any

plausible explanation therefor clearly points to bias and

prejudice on the part of the jury. Such conclusion is

strengthened by the fact that the jury not only filled in the

appropriate verdict blanks with an excessive amount but

added in writing “plus damages of $51,000” as to Mueller

and “plus damages of $9,000” for Devane. There is noth-

ing in the court’s instructions or the evidence which would

A-30

warrant adding the plus amounts to the verdicts. The issue

of punitive damages was not submitted to the jury. Such

added damages in our view can only be explained on the

basis of bias, passion or prejudice on the part of the jury.

We recognize that in many situations excessive verdicts

can be cured by an appropriate remittitur. However, we

cannot say under this record that an impartial jury, in

event it found liability, would award the full amount

claimed by the plaintiffs on Dakota 16.

The jury’s award on the Dakota 14 claim was well

within permissible limits. Plaintiffs have not made out a

strong case of liability on either Dakota 14 or 16. Both

claims were tried to the same jury. The passion and preju-

dice which led to the grossly excessively verdict on Dakota

16 may well have influenced the jury on the liability issues

on both Dakota 14 and 16.

Accordingly, the verdicts returned below are set aside

and the judgments entered on those verdicts are vacated.

Plaintiffs’ cross-apneal seeking prejudgment interest is dis-

missed without prejudice. The cause is remanded to the

district court for further proceedings not inconsistent with

this opinion.

A true copy.

Attest:

Clerk, U.S. Court of Appeals, Eighth Circuit.

A-31

APPENDIX C

United States Court of Appeals

For the Eighth Circuit

No. 77-1413

Ralph E. Mueller and Eugene D. Devane,

Appellees,

vs.

Hubbard Milling Company,

Appellant.

No. 77-1432

Ralph E. Mueller and Eugene D. Devane,

Appellants.

vs.

Hubbard Milling Company,

Appellee.

Appeal and cross-appeal from the United States District

Court for the District of Minnesota.

JUDGMENT

September Term, 1977

These causes were heard on the record of the United

States District Court for the District of Minnesota and

were argued by counsel.

A-32

On Consideration Whereof, it is now here ordered by

this Court that the verdicts of the said District Court are

set aside and the judgments of the District Court entered

on those verdicts are vacated.

It is further ordered by this Court that plaintiffs’ cross-

appeal seeking prejudgment interest is dismissed without

prejudice.

And it is further ordered by this Court that these causes

are remanded to the said District Court for further pro-

ceedings not inconsistent with this Court’s opinion.

April 10, 1978.

A-33

APPENDIX D

United States Court of Appeals

For the Eighth Circuit

No. 77-1413 and 77-1432

Ralph E. Mueller, et al.,

Appellees, Cross-Appellants,

VS.

Hubbard Milling Company,

Appellant, Cross-Appellee.

September Term, 1977

Appeals from the United States District Court for the Dis-

trict of Minnesota

The Court having considered petition for rehearing en

banc filed by counsel for appellees/cross-appellants,

Ralph E. Mueller et al., and, being fully advised in the

premises, it is ordered that the petition for rehearing en

banc be, and it is hereby, denied.

Considering the petition for rehearing en banc as a

petition for rehearing, it is ordered that the petition for re-

hearing also be, and it is hereby, denied.

May 2, 1978.

ea ot

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