Petition — Rokowsky v. Gordon

Supreme Court brief1983

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1982

ISAAC ROKOWSKY,

Petitioner,

ROBERT GORDON, LOLA JACOBSON, and

LOLA JACOBSON, as executrix of the estate of

MAURICE GORDON,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

————

Lewis A. KAPLAN

(Counsel of Record)

GERARD E. HARPER

PAUL, WEISS, RIFKIND, WHARTON

& GARRISON

A partnership including professional

corporations

345 Park Avenue

New York, New York 10154

(212) 644-8000

Attorneys for Petitioner Isaac Rokowsky

——— eee

Questions Presented

Petitioner seeks certiorari to resolve a conflict among

the circuits as to the standard governing determination

of whether a litigant has tried an unpleaded cause of action

by implied consent under Rule 15(b), Fed. R. Civ. P.,

thus justifying the entry of judgment against him on that

unpleaded claim, and to resolve related questions.

Midway through an eleven-day bench trial in a breach-

of-contract action, plaintiffs moved to amend the pleadings

to assert a new cause of action alleging fraud in the

inducement. Defendant expressly objected, and the trial

court denied the motion, albeit without prejudice. Relying

on the trial court’s ruling, defendant did not offer evidence

in his possession which, if credited, would have resulted

in dismissal of the fraud cause of action. Plaintiffs renewed

the motion to amend after the close of evidence, and again

defendant objected. The trial court reserved decision.

A year later, the trial court granted plaintiffs’ motion

to amend, and then—before defendant even learned of

its action—entered a ruinous $6.5 million judgment

against him on the newly-added fraud cause of action. It

did so on the theory that defendant—despite his express

objection—had impliedly consented to assertion and de-

termination of the new cause of action. The First Circuit

substantially affirmed. In these circumstances, defendant,

us petitioner here, raises the following questions for this

Court’s review:

1. Rule 15(b), Fed. R. Civ. P., permits post-trial

amendments of the pleadings to add an unpleaded cause

of action only if the parties tried the newly-added cause

of action by express or implied consent. When a party

express!y objects to the assertion of the newly-added cause

of action at every opportunity, and withholds probative

evidence on that claim following the trial court’s mid-trial

denial of a motion to amend, may consent to trial of the

new cause of action nevertheless be inferred merely because

two pieces of evidence which arguably relate only to the

new cause of action were introduced at trial?

2. Did the immediate entry of judgment against de-

fendant on the cause of action first added after the close

of the trial deprive him of his Seventh Amendment right to

trial by jury on the new cause of action?

3. Did the immediate entry of judgment against de-

fendant on the new cause of action, when defendant had

no prior notice that the cause of action was being tried

and, in consequence, no opportunity to present evidence

on it, deprive defendant of his Fifth Amendment right to

due process of law?

TABLE OF CONTENTS

Questions Presented ......+++eeeeeeerrrereee

Table of Authorities .......- eee eee eeeereces

Opinions Below ......----+sseseeerrssseess

Constitutional and Statutory Provisions Involved ..

Statement of the Case ......-- eee eee eer recess

ee ue cence wee ccreeecetees

EE ie Ra SG al

creed bes cece esas eee tence

The District Court’s Decision ......++++++++:

Post-Judgment Proceedings ....--+++++++++

The First Circuit’s Decision ......-+-+++++:

Reasons for Granting the Writ ......---+++e+:

I. The First Circuit’s Decision Conflicts With

the Law in Other Circuits That Consent to

Trial of an Unpleaded Claim Cannot Be In-

ferred Unless the Parties Squarely Recog-

nized That the Claim Is Being Tried .....

1. Consent Cannot Be Inferred Unless the

Parties Squarely Recognized That the

Unpleaded Cause of Action Was In

EE a

JIA A un FF W W

\o)

PAGE

2. Consent Cannot Be Inferred When a

Party Explicitly Objects to the Newly-

Added Cause of Action ..........+-- 13

II. The Immediate Entry of Judgment on a

Cause of Action Added to the Pleadings

After Trial Deprived Defendant of His Sev-

enth Amendment Right to Trial by Jury .. 15

III. The Immediate Entry of Judgment on a

Cause of Action Added to the Pleadings

After Trial Deprived Defendant of Due

ik rican nev cnn teense 20

Cs en a ee ce cence ness 22

pg a a la

First Circuit opinion, January 27, 1983 ....... la

District Court original opinion, November 19,

in he ie nn cece ceeenens lla

District Court opinion denying motion for a new

trial, January 18, 1982 .........-..-ee6- 30a

First Circuit judgment, January 27, 1983 ..... 40a

District Court amended judgments, January 21,

eck twa doe nececerensss 43a

District Court original judgments, November 18,

oe eh a ov cm anee ee nees 45a

First Circuit order denying rehearing, February

pA Ee er 47a

First Circuit order and opinion staying the man-

date, March 4, 1983 ........ccevecccces 50a

TABLE OF AUTHORITIES

Cases

Aetna Insurance Co. Vv. Kennedy, 301 U.S. 389

a iw oo cw ence cus

Armstrong Vv. Manzo, 380 U.S. 545 (1965) ....

Baldwin v. Hale, 68 U.S. [1 Wall.] 223 (1863) ..

Bowles v. Bennett, 629 F.2d 1092 (Sth Cir. 1980)

Bruce Vv. Bohanon, 436 F.2d 733 (10th Cir. 1970),

cert. dented, 403 U.S. 918 (1971) ...........

Central Illinois Public Service Co. v. United States,

WO BE CPE ob bv osc ebc buwleceuesacs

Dimick v. Schiedt, 293 U.S. 474 (1935) ........

First Wisconsin Nat'l Bank v. Klapmeir, 526 F.2d

TE TI PU oiiokv ve bie eeicceccuns

Fuentes Vv. Shevin, 407 U.S. 67 (1972) ........

Gaines W. Harrison & Sons, Inc. v. J. I. Case Co.,

ioe ©. cee, 20s CRG. 1960) ..........

Heyman Vv. Kline, 456 F.2d 123 (2d Cir.), cert.

agrnmed, 40> US. BAT CIST2Z) cow ec cw wes

Illinois State Employees Union v. Lewis, 473 F.2d

561 (7th Cir. 1972), cert. denied, 410 U.S. 943

iin ca wecesuce.

In re Zweibon, 565 F.2d 742 (D.C. Cir. 1977) ...

Johnson Vv. Harrah’s Club, 30 Fed. R. Serv. 2d 1153

OT BE oo ek cw cebu ce cess

Johnson v. Zerbst, 304 U.S. 458 (1938) ........

Laffey v. Northwest Airlines, Inc., 567 F.2d 429

(D.C. Cir. 1976), cert. denied, 434 U.S. 1086

ok io awe ws cewee wns

PAGE

18-19

PAGE

Locke Mfg. Cos. v. United States, 237 F. Supp. 80

Uy, Comm. 1964) <n oc cece se ecceessesses 14

MBI Motors Co. Vv. Lotus East, Inc., 506 F.2d 709

CG Cie. TTR) - . ow ccm ese c ents tees: 10, 11

McGraw V. Matthaei, 388 F. Supp. 84 (E.D. Mich.

DS occ ealeceepe ees ooesetsses ess 14

Monod V. Futura, Inc., 415 F.2d 1170 (10th Cir.

Se ee les aks fiinnindand ae 11

Morgan v. United States, 304 U.S. 1 (1938) .... 21

Morgantown V. Royal Insurance Co., 337 U.S. 254

oe eee tee te etree 16

Mosley v. St. Louis Southwestern Ry., 634 F.2d 942

(5th Cir.), cert. denied, 452 U.S. 906 (1981) 18

Nerenhausen Vv. Chicago, Milwaukee, St. Paul &

Pacific R.R. Co., 479 F. Supp. 750 (D. Minn.

eet we ene ee tee 14

Niedland v. United States, 338 F.2d 254 (3d Cir.

I ra wet cece at ee mens eeteeeees 11

Sambo’s Restaurants, Inc. V. Ann Arbor, 663 F.2d

686 (6th Cir. 1981) ....---seecccececsess 18

Schultz v. Cally, 528 F.2d 470 (3d Cir. 1975) .. 10, 11

Simler v. Conner, 372 U.S. oot (1963) «2055+. 20

Wallin v. Fuller, 476 F.2d 1204 (5th Cir. 1973) 9, 12

Wuchter V. Pizzutti, 276 U.S. BS CUSED ou cus ess 22

Constitutional Provisions, Statutes & Rules

US. Const., amend. V. ...---esesececeseccess 2

U.S. Const., amend. VII ....-.-++++++: 2, 16, 19, 20, 22

We OE BITTE on cence neces cncesnesneess 2

WTO BITTE one nce ee cde ceseesoeees

UE EME cha esc ens cen sserer ees ces 2,13, 8

Vii

PAGE

Federal Rule of Civil Procedure 15 ........- 6, 9, 10, 13,

16, 22, 26

Federal Rule of Civil Procedure 38 ......-+++>: 16

Other Authorities

3 J. Moore, Federal Practice (2d om. 1962) ocx: 12

Restatement (Second) of Judgments § 27 (1981) .. 13

18 C. Wright, A. Miller & E. Cooper, Federal Prac-

tice & Procedure (1981) .....seeeeeeereees 13

No.

IN THE

Supreme Court of the United States

October Term, 1982

IsAAC ROKOWSKY,

Petitioner,

Vv.

RoBERT GORDON, LOLA JACOBSON, and LoLa JACOBSON,

as executrix of the estate of MAURICE GORDON,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

Petitioner Isaac Rokowsky asks that a writ of certiorari

issue to review the judgment of the United States Court of

Appeals for the First Circuit, entered on January 27, 1983.

Opinions Below

The opinion of the Court of Appeals is unreported and

appears in the Appendix at la. The District Court’s original

opinion is reported at 501 F. Supp. 1114 and appears in the

Appendix at lla. The District Court’s opinion denying

petitioner’s motion for a new trial is reported at 531 F.

Supp. 435 and appears in the Appendix at 30a. An unre-

ported order of the Court of Appeals staying issuance of

the mandate appears in the Appendix at 50a.

Jurisdiction

The judgment of the Court of Appeals was entered on

January 27, 1983. (App. at 40a.) A timely petition for

rehearing and rehearing en banc was denied on February

28, 1983. (App. at 47a.) Jurisdiction of this Court is

invoked under 28 U.S.C. § 1254(1).

Constitutional and Statutory Provisions Involved

The Seventh Amendment to the United States Constitu-

tion provides:

“In suits at common law, where the value in contro-

versy shall exceed twenty dollars, the right of trial

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.”

The Fifth Amendment to the United States Constitution

provides in pertinent part:

“No person shall be . . . deprived of life, liberty, or

property, without due process of law.”

The Rules Enabling Act, 28 U.S.C. § 2072, provides in

pertinent part:

“The Supreme Court shall have the power to pre-

scribe by general rules, the forms of process, writs,

pleadings, and motions, and the practice and pro-

cedure of the district courts . . . in civil actions ....

“Such rules shall not abridge, enlarge or modify

any substantive right and shall preserve the right of

trial by jury as at common law and as declared by

the Seventh Amendment to the Constitution.”

Federal Rule of Civil Procedure 15(b) provides in

pertinent part:

“Amendments to Conform to the Evidence.

When issues not raised by the pleadings are tried by

express or implied consent of the parties, they shall

be treated in all respects as if they had been raised

in the pleadings. Such amendment of the pleadings

as may be necessary to cause them to conform to the

evidence and to raise these issues may be made upon

motion of any party at any time, even after judg-

ment; but failure so to amend does not affect the

result of the trial of these issues.”

Statement of the Case

The Facts: The trial court found the following facts.

Petitioner Isaac Rokowsky (“defendant”) buys and

manages real estate on behalf of himself and other investors.

Respondents Robert Gordon, Lola Jacobson, and the estate

of Maurice Gordon (“plaintiffs”) owned real estate in

Boston, Massachusetts.

In February 1974, plaintiffs entered into contracts to

sell some Boston real estate to Alida Realty, Inc., a shell

corporation established by defendant’s attorney, for $16

million cash and the assumption of existing mortgages.

Alida paid a deposit of $600,000 on the signing of the

contracts. The contracts provided that, in the event of a

breach by Alida, plaintiffs would be entitled to liquidated

damages equal to the deposit. The closing was set for

June 1974.

The sale did not close. Some time after the contracts

were signed, defendant told plaintiffs that he could not

raise the $16 million cash portion of the purchase price

required by the contracts. The closing date was adjourned

while the parties negotiated with a view toward restructur-

ing the deal to require less cash and a purchase money

mortgage. These negotiations proved fruitless, and, in mid-

1975, plaintiffs sold the Boston properties to another

purchaser. Plaintiffs never formally called upon defendant

to close under the principal purchase contract.

Pretrial: After the properties were sold, plaintiffs sued

defendant, Alida, and others for breach of contract. To

explain their failure to call for a closing, plaintiffs alleged

that defendant (as Alida’s principal) had committed an

anticipatory breach and had induced them not to close.

In consequence, they claimed, defendant was personally

liable for the alleged breach of contract. Defendant re-

sponded that the contract had been mutually abandoned

and, in any event, that only Alida could be liable for any

breach,’ and then only for liquidated damages.

Four years of discovery and pretrial proceedings ensued.

Consistent with the pleadings, trial preparation focused

on why the deal failed to close—mutual abandonment or

repudiation by defendant. Not once in four years did any

party hint, let alone give notice, that plaintiffs were assert-

ing fraud in the inducement of the contracts of sale.?

' Defendant asserted that Alida was used as the contract vendee,

with plaintiffs’ knowledge and consent, for the purpose of insulating

him from personal liability on the contracts.

2In an order staying issuance of its mandate pending the filing of

this petition, the Court of Appeals, responding to defendant’s peti-

tion for rehearing, said that it was a “misstatement” to say that plain-

tiffs’ only claim was for breach of contract, because plaintiffs “also

alleged, at the start, fraud in the inducement of the renegotiated con-

tracts.” (App. at 5la.) (Emphasis added.) With all due respect,

the court’s remark misses the point. There was no doubt plaintiffs

had charged that defendant fraudulently induced extensions of the

(footnote continued on following page)

The Trial: Jurisdiction in the district court was based

on diversity of citizenship, 28 U.S.C. § 1332. The parties

having waived a jury on the contract claim, trial was held

before the court (Skinner, J.).

On the sixth day of the eleven-day trial, plaintiffs moved

to amend their complaint to add a new and (they admitted)

“different” cause of action: that defendant had never in-

tended to pay the original contract price, and thus had

fraudulently induced the contracts that were executed in

February 1974. Defendant immediately objected to the

proposed amendment, pointing out that the parties had

taken no discovery on the issue, and that the addition

of the new claim would be prejudicial.

The trial court denied the motion to amend without

prejudice. Not surprisingly, defendant did not offer evi-

dence then in his possession which, if credited, would have

resulted in dismissal of the fraudulent inducement cause

of action, had that claim been in the case. In particular,

defendant had an appraisal showing that the value of the

property after the contracts were signed was higher than

the contract price—evidence which tended to show that

plaintiffs were not injured by signing the contracts of sale,

and which he obviously would have offered had he thought

the fraud cause of action was in the case.

At the close of trial, plaintiffs renewed their motior:

to amend, and again defendant objected. The trial court

reserved decision.

(footnote continued from preceding page)

closing date in June and July 1974; that charge was crucial to plain-

tiffs’ contract case, because plaintiffs had to explain their failure to

call for a closing in order to prove their willingness to perform the

original contracts. But not even plaintiffs claimed that they had ever

pleaded a cause of action for fraud in the inducement of the original

contracts.

The District Court’s Decision: A year later, the trial

court entered judgment for defendant on the contract claim.

Though finding that defendant was personally liable for

breach of contract, the court held that plaintiffs were

entitled only to the $600,000 deposit, which was liquidated

damages and which they had already received. (App. at

274.)

The court did not stop there, however. Instead, it

granted plaintiffs’ motion to add the fraud cause of action,

and promptly entered a $6.5 million judgment against

defendant on that claim. The court made no mention

of defendant’s express objections to the motion, and made

no finding that defendant had consented to trial on the

fraud cause of action. (App. at 28a.)

Post-Judgment Proceedings: Defendant moved for a

new trial, arguing that the post-trial amendments of the

pleadings and the immediate entry of judgment on the

newly-added cause of action deprived him of both due

process of law and his right to a jury trial on the fraud

cause of action. Defendant noted his reliance on the court’s

mid-trial ruling denying the motion to amend, and he

identified exculpatory evidence he could have presented

had he known that the fraud cause of action was to be

tried.

The court denied the motion. The court ruled that de-

fendant’s right to a jury trial was “subsumed” into an

inquiry whether defendant had impliedly consented to trial

on the fraud cause of action under Rule 15(b), Fed. R.

Civ. P. And this inquiry, the court said, turned solely on

whether the record contained evidence relevant only to the

fraud cause of action. (App. at 32a.)

Parsing the lengthy trial transcript, the court found two

bits of evidence on the basis of which it concluded that

defendant had “inferentially recognized” that the cause of

action for fraud was in issue. (App. at 35a.)3 The court

then held that, because the evidence at trial supported the

finding of fraud and resulting damages, the fact that de-

fendant could have presented different evidence was insuf-

ficient to entitle defendant to a new trial. (App. at 36a-38a. )

The First Circuit's Decision: On appeal, defendant argued

tnat Consent to trial on the unpleaded fraud cause of action

could not be implied in the face of his explicit objection to

the newly-added claim, and, in any event, in the absence

of a finding that he Squarely recognized that the fraud cause

of action was in issue. He argued also that the two bits

of evidence on which the trial court relied, even if relevant

only to the fraud cause of action, were insufficient as a

matter of law to infer a waiver of jury trial on the newly-

added claim or notice sufficient to satisfy due process.

The Court of Appeals substantially affirmed.4 The appel-

late court agreed with the trial court that defendant’s right

to a jury trial rested on whether the parties had tried the

unpleaded fraud cause of action by consent under Rule

15(b). And the legal standard governing consent, the

3The first instance of evidence on which the trial court relied

involved defendant’s testimony that he had a commitment from a

third party to put up the cash for the original contract price. The

evidence was directly relevant to defendant’s pleaded claim that

plaintiffs had abandoned the contract knowing that defendant could

perform and, indeed, the Court of Appeals was unwilling to Say

that this evidence definitely related only to the unpleaded fraud claim

(App. at 7a). The other piece of evidence was one plaintiff's testi-

mony, On Cross-examination by defendant, that plaintiffs looked to

defendant personally to raise the cash required by the original con-

tracts. That evidence bore directly on plaintiffs’ argument, in their

breach-of-contract claim, that defendant, and not the shell corpora-

tion Alida, was personally responsible for the performance of the

contracts; indeed, as the trial court acknowledged, defendant's trial

counsel so stated at the time (App. at 35a).

4It reduced the trial court’s judgments by $540,000. (App. at

10a.)

court held, was “whether evidence was introduced that went

only, as distinguished from incidentally, to the issue of

fraud in the inducement, and, since the court did not reopen,

whether that issue had been fully tried.” ( App. at 7a.)

In determining whether the issue was “fully tried,” the

court declined to consider whether additional evidence

might have been offered had the issue been pleaded. Rather,

having concluded that at least one piece of evidence went

only to the fraudulent inducement cause of action, and thus

that defendant had “notice” that the fraud cause was in

issue, the court held that any further evidence on that claim

should have been offered at the trial. ( App. at 8a.)

Thus the First Circuit has ruled that « onsent to trial on

an unpleaded cause of action may be inferred—in the face

of an express objection—solely on the basis of scraps of

evidence gleaned from an eleven-day trial record, and with-

out regard to whether the party against whom the claim

is directed squarely recognized that the claim was in issue

or whether he would have offered additional evidence had

he known the cause of action was in the case. And, the

court below has held, those same scraps of evidence are

sufficient as a matter of law to deprive a party of his right

to a jury trial and to notice of the claim consistent with due

process.

Reasons for Granting the Writ

The First Circuit’s Decision Conflicts With the Law

in Other Circuits That Consent to Trial of an Un-

pleaded Claim Cannot Be Inferred Unless the Parties

Squarely Recognized That the Claim Is Being Tried.

Trial by surprise is the antithesis of the Federal Rules of

Civil Procedure. Basic to those Rules is that litigants must

be fully apprised of the claims to be tried—by pleading, by

discovery, by pre-trial order. A party who tries a claim thus

defined is not later free to seek judgment based on a different

claim of which the opposing party is unaware. Rule 15(b),

instead, allows relief on an unpleaded claim only if the

claim was “tried by express or implied consent of the

parties.”

1. Consent Cannot Be Inferred Unless the Parties

Squarely Recognized That the Unpleaded Cause

of Action Was in Issue.

There is a sharp conflict among the circuits on the legal

standard that should be applied in determining whether a

party has impliedly consented to trial of an unpleaded cause

of action, and, in consequence, to a Rule 15(b) amendment.

The First Circuit held below that the test is solely “whether

evidence was introduced that went only, as distinguished

from incidentally, [citation omitted], to the [unpleaded]

issue . . . .” (App. at 7a.)° Thus, the propriety of a post-

trial amendment turns solely on a post hoc analysis of the

evidence at trial. No consideration is given to whether the

5 Accord, Wallin v. Fuller, 476 F.2d 1204, 1210 (Sth Cir. 1973)

(discussed infra, at 12).

party against whom the amendment is offered in fact under-

stood that the unpleaded claim was being tried or to whether

he could have offered additional probative evidence.

This view is in direct conflict with the standard applied

in the Third, Sixth, and District of Columbia Circuits. The

Sixth Circuit, for example, has expressly rejected this ap-

proach to determining the propriety of amendments under

Rule 15(b), stating:

“{A] trial court may not base its decision upon an

issue that was tried inadvertently. Jmplied consent

to the trial of an unpleaded issue is not established

merely because evidence relevant to that issue was

introduced without objection. At least it must ap-

pear that the parties understood the evidence to be

aimed at the unpleaded issue.”

MBI Motor Co. v. Lotus East, Inc., 506 F.2d 709, 711 (6th

Cir. 1974) (emphasis added).°

The practical difference between these two standards is

vast, and it is well illustrated by contrasting what happened

in this case with the Sixth Circuit’s MBI Motor case.

Here, the only cause of action against defendant that

went to trial was for breach of contract. Defendant here

not only did not expressly consent to trial of the claim that

he fraudulently induced the original contracts, he expressly

objected to assertion of that unpleaded claim at ever oppor-

tunity. And the trial court initially agreed with defendant

that plaintiffs’ belated amendment should not be allowed;

defendant was entitled to, and did, rely on that mid-trial

ruling. But the trial court later reversed itself and entered

judgment for $6.5 million without any further proceedings.

/ Accord, Laffey v. Northwest Airlines, Inc., 567 F.2d 429, 478

& n.370 (D.C. Cir. 1976), cert. denied, 434 U.S. 1086 (1978);

Schultz v. Cally, 528 F.2d 470, 474 (3d Cir. 1975) (discussed

infra, at 11).

In MBI Motors Co., supra, 506 F.2d 709, by contrast,

the plaintiff auto dealer alleged that defendant distributor

had defrauded him by selling used cars as new. The trial

court rejected the pleaded fraud charge on the merits, but

nevertheless ruled for plaintiff on the unpleaded theory that

defendant had breached a warranty. As in this case, the

record contained evidence that related to the unpleaded

issue. Nevertheless, the Court of Appeals reversed, holding

that the dispositive concern was whether the defendant knew

that the unpleaded issue—the breach of warranty theory—

was in the case. And it did so despite the fact that evidence

relevant to the breach of warranty theory was received

without objection.

To the same effect, and equally in collision with the First

Circuit’s ruling, is the Third Circuit’s decision in Schultz

v. Cally, 528 F.2d 470 (3d Cir. 1975). There, defendants,

who believed they were trying only common law fraud

issues, failed to object to evidence of interstate contacts

which could have been relevant only to an unpleaded federal

securities claim. The trial judge instructed the jury, and

the jury found for plaintiff, on the unpleaded federal claim.

Vacating the judgment, the Court of Appeals held that the

proper legal standard to determine consent to trial of the

federal securities law claim was not whether the record

contained unchallenged evidence bearing only on the un-

pleaded issue, but whether “the non-objecting party was

fairly apprised that the evidence went to the unpleaded

issue.” 528 F.2d at 474, quoting Niedland v. United States,

338 F.2d 254, 258 (3d Cir. 1964) (emphasis in Schultz).?

? Accord, Laffey v. Northwest Airlines, Inc., 567 F.2d 429, 478,

n.370 (D.C. Cir. 1976), cert. denied, 434 U.S. 1086 (1978) (‘“es-

sential inquiry is the understanding of the parties as to whether the

unpleaded issue was being contested”); see also Monod v. Futura,

Inc., 415 F.2d 1170, 1174 (10th Cir. 1969) (“the test of consent”

was whether defendants had “a fair opportunity and whether they

could offer any additional evidence if the case were to be retried

on a different theory”).

The First Circuit’s departure from these cases is no iso-

lated event. The rule in Fifth Circuit, on which plaintiffs

relied below, focuses as well only on the existence of evi-

dence in the record that may relate to the unpleaded issue

alone, without regard to whether the opposing party is aware

that the evidence is to be relied upon in support of an un-

pleaded claim. In Wallin v. Fuller, 476 F.2d 1204, 1210

(Sth Cir. 1973), for example, the Fifth Circuit, noting evi-

dence in the record which was “much more strongly rele-

vant” to an unpleaded issue than the one in the complaint,

overturned a trial court’s refusal to instruct the jury on the

unpleaded theory. Like the First Circuit here, the Fifth

Circuit holds that consent can be divined from snippets of

evidence alone, and that a party’s unwitting failure to object

to isolated testimony exposes the party to judgment on

unpleaded claims of which he was unaware.

Such a rule of inadvertent consent is utterly foreign to

the language and purpose of Rule 15(b). Trial “by consent”

allows parties fully and fairly to litigate unpleaded issues

which the parties agree should be resolved. But consent

connotes a voluntary and willing concurrence, which pre-

supposes knowledge. Knowledge that a claim is in the case

is an obvious condition to meeting it. That Rule 15(b) does

not require an expression of consent—that it allows a court

to find consent by implication—is no license to disregard the

parties’ understanding of the issues. “[I]t cannot be fairly

said that there is any implied consent to try an issue where

the parties do not squarely recognize it as an issue in the

trial.” 3 J. Moore, Federal Practice § 15.13[2] at 15-173

(2d ed. 1982).8

8 Precisely that standard governs the determination whether a

claim was “actually litigated” in one suit for the purpose of applying

collateral estoppel in another. Thus, there is no estoppel to re-try

(footnote continued on following page)

A party’s understanding of the issues cannot be measured

solely by unchallenged evidence bearing on the claim (a

neutral fact for which there might be numerous explana-

tions), nor from an after-the-fact view of the sufficiency of

the record (which says nothing about what the parties un-

derstood at the time). Determining consent by such

standards alone not only indulges unreasonable inferences,

but also presents a litigant with the Hobson’s choice of

offering evidence on an unpleaded issue he was not fully

prepared to address (risking a charge that he consented to

trial of the issue) or of holding back the evidence on the

assumption that the issue is not in the case (risking a later

holding that it was). The uncertainty latent in that choice

is an anachronism in modern federal procedure, a throwback

to a sporting theory of litigation.’

Certiorari should be granted to resolve the conflict among

the circuits as to the standard for determining implied con-

sent under Rule 15(b).

2. Consent Cannot Be Inferred When a Party

Explicitly Objects to the Newly-Added Cause

of Action.

Compounding the confusion is the First Circuit’s cate-

gorical declaration that an express objection to an un-

(footnote continued from preceding page)

an issue when, in the prior proceeding, “a judge has made a specific

finding on the basis of evidence that was not understood by the

parties to go to the issue found.” 18 C. Wright, A. Miller & E.

Cooper, Federal Practice and Procedure § 4419 at 177 ( 1981); see

Restatement (Second) of Judgments § 27 (1981). It cannot be that

the standard governing whether an issue can be tried again is higher

than the standard governing whether the issue was tried by consent

in the first place.

9 When constitutional rights are involved, moreover, the standard

js necessarily inconsistent with the Rules Enabling Act, 28 U.S.C.

§ 2072. See Point II infra.

pleaded claim does “not mean that implied consent could

not be found” (App. at 6a)—a ruling which occasions a

subsidiary conflict among the lower courts and which

stands the meaning of consent on its head. An explicit

objection to an unpleaded claim is the most obvious way to

the objection—at the point in trial when it makes a differ-

ence—is the most apparent indication of the parties’ lack

of knowledge that the claim was to be tried. The First Cir-

cuit’s contrary standard thus deprives litigants of the most

reliable means of assessing whether the claim is in the case.

Exactly the opposite standard was adopted in Neren-

hausen Vv. Chicago, Milwaukee, St. Paul & Pacific R.R. Co.,

479 F. Supp. 750 (D. Minn. 1979). There, plaintiff made

a mid-trial motion to add a new claim directly against a

third-party defendant. The third-party defendant, noting

that its conduct of the trial would have been different had

the claim been pleaded, objected to the amendment, and

the court denied the motion. When plaintiff later renewed

the motion at the end of trial, the court said that decision

on the post-trial motion was “inextricably bound to the

denial of its [sic] previous motion.” “When a party objects

to a proposed amendment, and such an objection is upheld,”

the court declared, “any factual issues which are raised

during trial are not tried by express or implied consent of

the objecting party.” Id. at 753-54."

* * *

10 District courts within other circuits have reached the same con-

clusion. See, e.g., McGraw v. Matthaei, 388 F. Supp. 84, 89 (E.D.

Mich. 1972) (no implied consent when “defendant strenuously ob-

jected to plaintiff's” newly-added issue) ; Locke Mfg. Cos. v. United

States, 237 F. Supp. 80, 89 (D. Conn. 1964) (no implied consent

when “plaintiff's counsel expressly objected to the introduction of

such issue”); Gaines W. Harrison & Sons, Inc. v. J. I. Case Co., 180

(footnote continued on following page)

The legal standard embraced by the First Circuit in

this case both conflicts with that of other circuits and is a

summons to trickery by litigants in search of a winning

theory. The standard allows a party who senses imminent

defeat on the pleaded issues to attempt to smuggle a dif-

ferent theory into the case with evidence that may appear

innocuous at the time. Inferring knowledge of and con-

currence in trial on that issue merely from the opposing

party’s failure to object to evidence disregards the plain

meaning of consent, fosters a constant uncertainty about the

issues to be tried, penalizes reliance on judicial rulings, and

invites trial by ambush. The result is devastating judgments

(here in the millions of dollars) that may bear no rela-

tionship to the outcome that would have prevailed had the

opposing party recognized that the issue was being tried and

been given the opportunity to contest it.

The confusion and conflict in the lower courts on this

issue signal the need for this Court’s guidance. This Court

should put an end to the disarray.

The Immediate Entry of Judgment on a Cause of

Action Added to the Pleadings After Trial Deprived

Defendant of His Seventh Amendment Right to Trial

by Jury.

This is a particularly appropriate case for certiorari be-

cause the First Circuit’s decision reflects profound con-

fusion not only about the legal standard for determining

implied consent under the Federal Rules, but also about the

(footnote continued from preceding page)

F. Supp. 243, 248 (D.S.C. 1960) (implied consent argument

“patently unsound” because “as soon as the [unpleaded defense]

was raised, the plaintiff took the position that it was not before the

court”).

standard governing waiver of a jury trial under the Seventh

Amendment.

It is not uncommon for new issues to emerge in a civil

case in which the parties had previously waived a jury trial.

And the courts uniformly hold that if the new issues other-

wise would be triable to a jury, then the parties are entitled

to demand a jury on those issues within the time set by

Rule 38, Fed. R. Civ. P., notwithstanding the prior waiver

of a jury on the old issues." The only exception to this

rule occurs when the parties waive the jury on the new

issues. The federal rules are silent on, and this Court has

never addressed, the legal standard to determine whether

such waiver has occurred.

By subsuming the question whether defendant waived a

jury on the new cause of action into an inquiry under Rule

15(b), the courts below ruled here that a party’s failure

to object to evidence that later turned out to bear on an

unpleaded cause of action was alone sufficient to constitute

a waiver of the Seventh Amendment. That ruling, which

again places the First Circuit in conflict with other courts,

raises the second question on which we seek review: did

immediate entry of judgment against defendant on the un-

pleaded cause of action deprive him of his Seventh Amend-

ment right to trial by jury in view of the fact that defendant

never waived a jury by any conventional standard?

It is basic that “{t]rial by jury is a vital and cherished

right, integral in our judicial system.” Morgantown V.

Royal Insurance Co., 337 U.S. 254, 258 (1949). The

Seventh Amendment “occupies so firm a place in our history

and jurisprudence that any seeming curtailment of the right

11 See, e.g., In re Zweibon, 565 F.2d 742, 747-48 (D. C. Cir.

1977); First Wisconsin Nat'l Bank v. Klapmeir, 526 F.2d 77, 80

(8th Cir. 1975).

to a jury trial should be scrutinized with the utmost care.”

Dimick v. Schiedt, 393 U.S. 474, 486 (1935). And be-

cause “the right of jury trial is fundamental,” courts must

“indulge every reasonable presumption against waiver.”

Aetna Insurance Co. V. Kennedy, 301 U.S. 389, 393

(1937).

The First Circuit’s standard ignores these teachings.

Plaintiffs’ common law fraud claim was triable to a jury.

That plaintiffs waited until the middle of trial to raise that

claim, or that the court waited a year after trial to allow

the amendment, did not and constitutionally could not

waive defendant’s right to demand that the disputed facts

of that cause of action be found by a jury. Only defendant

could waive that right. Defendant asked for a jury at the

first opportunity. He was entitled to receive that jury ab-

sent evidence of an express and knowing relinquishment of

his constitutional right.

Other circuits hold that the right to trial by jury is not

waived by the sort of ambiguous conduct we have in this

case—a mere failure to object to evidence arguably relevant

only to an unpleaded cause of action.

In Heyman v. Kline, 456 F.2d 123 (2d Cir.), cert.

denied, 409 U.S. 847 (1972), for example, the trial court

had stricken a jury demand on the ground that the party

making demand had failed to object—not to unheralded

evidence supposedly related to an unpleaded issue—but to

an explicit statement by the court that trial would be to the

bench. The Second Circuit vacated the judgment, and

granted a new trial, holding that such passivity alone was

insufficient to show an express and knowing waiver:

“The right to jury trial is too important, and the

usual procedure for waiver of the right too clearly

set out by the Civil Rules for courts to find a know-

ing and voluntary relinquishment of the right in a

doubtful situation. ... We would fail to recognize

the important place of the civil jury in the pantheon

of our liberties were we to hold its use so easily

lost. Waiver, prior to the time for demanding jury

trial has begun, should be based on nothing less than

an affirmative representation by the party himself,

or by his duly authorized counsel, on representation

to the court that the matter has been discussed with

the client and that the client has determined not to

exercise his right to jury trial.” 456 F.2d at 129-30

(emphasis added).

Accord, Bruce v. Bohanon, 436 F.2d 733, 736-37 (10th

Cir. 1970), cert. denied, 403 U.S. 918 (1971) (on similar

facts, Tenth Circuit reversed, holding that waiver can only

be achieved by “expressed assent by counsel that the trial

be to the court and not to the jury”).”

The Fifth Circuit has adopted the same view. In Bowles

v. Bennett, 629 F.2d 1092 (Sth Cir. 1980), the trial court

had combined a hearing on preliminary injunction with a

trial on the merits, including damages issues. Following

the hearing, the court entered judgment denying the in-

junction and dismissing the damages claim. Plaintiff moved

for a new trial, and demanded a jury trial as part of the

motion (as defendant here did). The trial court rejected

12 The requirement that a waiver of constitutional right be “know-

ing and intelligent” has been applied to civil contexts involving a

variety of constitutional rights. E.g., Sambo’s Restaurants, Inc. v.

Ann Arbor, 663 F.2d 686, 690 (6th Cir. 1981) (right of free

speech); Mosley v. St. Louis Southwestern Ry., 634 F.2d 942, 946

(5th Cir.), cert. denied, 452 U.S. 906 (1981) (right to counsel in

administrative proceedings); Illinois State Employees Union v.

Lewis, 473 F.2d 561, 571 (7th Cir. 1972), cert. denied, 410 U.S.

943 (1973) (right of association). Cf. Johnson v. Zerbst, 304 US..

458, 464 (1938) (“A waiver is ordinarily an intentional relinquish-

ment or abandonment of a known right”).

the demand, finding that plaintiff had consented to the

combined hearing, but the Court of Appeals reversed:

“The essential inquiry before us is whether the plain-

tiffs expressly or impliedly waived their right to jury

trial. A waiver occurs only by the passage of the

time limitation or, prior to that time, by some ex-

press action by the party or his attorney which evi-

dences his decision not to exercise the right. Neither

occurred in this case. Even assuming that plaintiffs’

counsel had agreed to consolidate the injunction

hearing with the trial on the merits, that, alone,

would not be an express waiver of the right to jury

trial.” 629 F.2d at 1095 (emphasis added).

The standard can be no different in the context of Rule

15(b). The Rules Enabling Act, 28 U.S.C. § 2072, pre-

scribes that rules of procedure “shall preserve the right to

trial by jury,” and thus any implication of “trial by consent”

must be made in harmony with Seventh Amendment prin-

ciples. Fidelity to those principles requires that a trial of

an unpleaded claim to the court be accompanied by an

express waiver of the right to a jury. And when a party

expressly objects to a newly-added cause of action triable

to a jury, and demands a jury upon the court’s allowance

of the new cause of action, then the court must give him one.

Directly on point, and squarely in conflict with the First

Circuit’s decision, is Johnson v. Harrah's Club, 30 Fed.

R. Serv. 2d 1153, 1153-54 (9th Cir. 1980). In that case,

the trial judge permitted plaintiff, over defendant’s objec-

tion, to add an unpleaded claim, on which the court

promptly entered judgment. The Court of Appeals re-

versed, holding that defendant was thereby denied his

Seventh Amendment right to a jury. The Ninth Circuit

said that, even if defendant’s objection to the newly-added

claim was not sufficient to constitute a demand for a jury,

“the basic and fundamental nature of the right to a trial

by jury” required that defendant be afforded the right to

jury trial."

This Court’s direction is needed to resolve the conflict

over the interplay between Rule 15(b) and the right to

jury trial, and, more generally, the conflict over the legal

standard governing waiver of the Seventh Amendment.

“The federal policy favoring jury trials is of historic and

continuing strength,” and “uniformity in its exercise is

demanded by the Seventh Amendment.” Simler v. Conner,

372 U.S. 221, 222 (1963) (per curiam). The First Cir-

cuit’s standard devalues that right by resting a party’s en-

titlement to a jury, not on that party’s informed judgment

about who should find the facts, but on the trial judge’s

perception about what the facts show. That standard

should be corrected, and the conflict in the circuits resolved.

Il.

The Immediate Entry of Judgment on a Cause of

Action Added to the Pleadings After Trial Deprived

Defendant of Due Process.

The third and final question on which we seek review

is whether entry of judgment on an unpleaded cause of

action, without affording defendant the opportunity to

discover and present evidence on critical elements of the

claim, deprived defendant of due process.

Defendant completed his discovery in this case before

the fraud cause of action was even mentioned. During

the trial, defendant nevertheless possessed some evidence

13 By local rule, the Johnson decision may not be cited as prece-

dent in the Ninth Circuit.

tending to negate any finding of reliance by plaintiffs, and

to show that plaintiffs had not been damaged at all by the

adjudged fraudulent inducement of the contracts. Not

knowing that the court would change its mind and allow

the amendment, and unaware that an unpleaded claim that

could spell his financial ruin might be determined without

any opportuninty to present his evidence, defendant did not

offer the evidence. It is logically unsound and constitu-

tionally untenable to presume adequate notice of the claim

in such circumstances.

The most abiding tenet of our jurisprudence is that a

party cannot be deprived of property without notice or

opportunity to be heard. “ ‘Parties whose rights are to

be affected are entitled to be heard; and in order that they

enjoy that right they must first be notified.’ ” Fuentes V.

Shevin, 407 U.S. 67, 80 (1972) (quoting Baldwin v. Hale,

68 U.S. [1 Wall.] 223, 233 (1863)). “The right to a

hearing embraces not only the right to present evidence

but also a reasonable opportunity to know the claims of

the opposing party and to meet them.” Morgan Vv. United

States, 304 U.S. 1, 18 (1938).

The First Circuit’s ruling here—that defendant received

sufficient notice of an unpleaded cause of action because

there were two scraps of evidence amid a two-week trial

which defendant reasonably believed were related to the

claims already in issue—reduces due process to a game of

hide-and-seek. Yet notice, “to be legally meaningful, must

be sufficiently explicit to inform a reasonably prudent

person of the legal consequences,” Central Illinois Public

Service Co. Vv. United States, 435 U.S. 21, 38 (1978)

(Powell, J., concurring). And because actual prejudice

inheres in the denial of such notice, no constitutionally-

proper judgment may be entered against defendant absent

an opportunity to be heard on the newly-added claim.

Cf. Armstrong v. Manzo, 380 U.S. 545, 552 (1961)

(vacating judgment entered without notice, notwithstand-

ing merits of claim); Wuchter v. Pizzutti, 276 U.S. 13, 24

(1928) (same).

The First Circuit’s ruling promises untoward conse-

quences that extend far beyond the injustice of this case.

Civil litigants will be at constant risk that an adversary

will introduce evidence which might be relevant to an un-

pleaded claim and which a court might later deem a full

trial by consent. And litigants will have every incentive

not to plead a related cause of action, lest notice of the

claim and an opportunity to be heard expose the claim to

defeat. That ruling cannot be condoned.

Conclusion

Defendant was sandbagged. He prepared and tried a

defense to a contract claim. He won. Plaintiffs saw the

loss coming, and they attempted to switch gears at mid-

point. The trial court initially rejected the attempt, and

defendant tried the rest of his case relying on that ruling.

When the trial court changed its mind a year later, its rush

to judgment disregarded defendant’s understanding of the

issues to be tried, deprived him of his right to a jury trial,

and denied him the opportunity to be heard in opposition to

a staggering liability.

The First Circuit’s blessing of the judgment presents

the model for granting certiorari under this Court’s Rule

17. The conflict among the circuits about the appro-

priate standards for inferring consent under Rule 15(b)

and for finding a waiver of the Seventh Amendment rights

is likely not only to increase the confusion among courts

and litigants over basic issues of federal practice, but also

to invite litigants to prolong disputes in an extended search

for a palatable result. Unless this Court intervenes, de-

fendant here will be the victim of federal rules invoked,

not to achieve a just result within an orderly system of

dispute resolution, but to obtain a catch-as-catch-can judg-

ment in derogation of constitutional norms.

We ask this Court to grant certiorari in order to resolve

the conflicts here raised, and to provide instruction on im-

portant and recurring questions of constitutional procedure.

Dated: New York, New York

April 25, 1983

Respectfully submitted,

Lewis A. KAPLAN

(Counsel of Record)

GERARD E. HARPER

PAUL, WEISS, RIFKIND, WHARTON

& GARRISON

A partnership including professional

corporations

345 Park Avenue

New York, New York 10154

(212) 644-8000

Attorneys for Petitioner Isaac Rokowsky

APPENDIX

First Circuit’s Opinion [Unpublished]

UNITED STATES COURT OF APPEALS

For THE First CIRCUIT

No. 81-1021

IsAAC ROKOWSKY,

Plaintiff, Appellant,

Vv.

ROBERT GORDON, ef al.,

Defendants, Appellees.

Nos. 82-1106, 82-1107 and 82-1187

ROBERT GORDON, et al.,

Plaintiffs, Appellees,

Vv.

AuipA REALTY, INC., et al.,

Defendants, Appeilees.

IsAAC ROKOWSKY,

Defendant, Appellant.

No. 82-1186

Lots JACOBSON, ef al.,

Plaintiffs, Appellees,

Vv.

Aiwa REALTY, INC., et al.,

Defendants, Appellees.

IsAAC ROKOWSKY,

Defendant, Appellant.

First Circuit’s Opinion

APPEALS FROM THE UNITED STATES

DISTRICT COURT

FoR THE DISTRICT OF MASSACHUSETTS

[Hon. Walter Jay Skinner, U.S. District Judge]

Before:

Coffin, Chief Judge,

Aldrich and Swygert*, Senior Circuit Judges.

Lewis A. KAPLAN, with whom ARYEH S. FRIEDMAN, and

PAUL, WEISS, RIFKIND, WHARTON & GARRISON were on

brief, for appellant.

ARTHUR M. GILMAN, with whom Davip G. HANRAHAN,

MICHAEL EBy, and GILMAN, MCLAUGHLIN & HANRAHAN

were on brief, for appellees.

January 27, 1983

* Of the Seventh Circuit, sitting by designation.

First Circuit’s Opinion

ALDRICH, Senior Circuit Judge. These appeals are the

result of three actions, the first instituted by Isaac Rokowsky

on a promissory note, with cross actions for breach of

contract, hereinafter the counterclaim, arising out of a

contract to purchase, as a group, 28 downtown Boston

buildings. We would say at the outset that the case has

been a lesson in real estate practices that we might hope

are sufficiently atypical to be of no future use. Except as

to damages, we affirm.

The case was tried to the court, and its extensive findings

in two opinions, Rokowsky v. Gordon, D.Mass., 1980,

501 F.Supp. 1114; s.c. 1982, 531 F.Supp. 435, need not

be repeated in detail. The principal issues on appeal

revolve around the court’s permitting, under F.R.Civ.P.

15(b), an amendment to the counterclaim, after the close

of all the evidence, to allege that Rokowsky fraudulently

induced the execution of the contract. The motion to

amend, first made on the sixth day of an eleven day trial

and renewed at the end of trial, was based on evidence

that tended to show a misrepresentation that Rokowsky

had available, and intended to pay as part of the purchase

price, $16 million in cash. The court credited this evidence

and ruled that fraud in the inducement had been estab-

lished. This finding, factually, presents no debatable

question.

In brief, the contract, initially negotiated to call for a

payment of $42 million, $6 million in cash, $20 million

by assumption of existing mortgages, and a $16 million

purchase money mortgage to be taken back by the Gordons,

was modified before final agreement, because of objections

to a purchase money mortgage, to call for a total payment

of $38 million by assumption of the $22 million balance

of existing first mortgages and $16 million in cash. The

First Circuit’s Opinion

$16 million was represented to be forthcoming from a

wealthy British investor, one Freshwater. A deposit was

made into escrow of $600,000, $540,000 with respect to

26 and $60,000 with respect to the remaining 2 buildings,

separately owned. This amount was specified in the con-

tract to be liquidated damages in case of the buyer’s default.

The contract was entered into in February, 1974, closing

to take place in June. Following execution, everything

was down hill. When the closing date was approaching,

Rokowsky stated that because of a world-wide depression

Freshwater was unable to meet his commitment. Rokowsky

stated then, however, and repeated frequently thereafter,

that Freshwater would provide him with $6 million in cash

and proposed that the Gordons take back purchase money

mortgages for the $10 million balance, the avoidance of

which had caused, at least in part, the Gordons to surrender

$4 million at the outset. Believing the Freshwater explana-

tion, the Gordons agreed to revise the contract, subject

to release of the deposit in escrow, because needed to pay

taxes. For this Rokowsky negotiated for, and received, a

non-negotiable promissory note from the Gordons to him

for $540,000, the amount of the primary deposit, the

$60,000 was arranged for differently.

Thereafter it appeared that Rokowsky could not get the

$6 million, either; there was talk of subordinating the

$10 million purchase money mortgage to a $3.5 million

bank mortgage, and, eventually. as Rokowsky’s counsel

stated graphically in his opening, “It just sort of negotiated

itself into the dust,” from whence, we might add, it came.

Later the Gordons found a new purchaser, but at a reduc-

tion of $6,468,273, for which loss, by finding the ultimate

purchasers paid the fair market value at the date of breach,

the court held Rokowsky accountable on the added fraud

First Circuit’s Opinion

count. 501 F.Supp. at 1123-24; 531 F.Supp. at 439. On

the contract counterclaim the court entered judgment for

Rokowsky, the Gordons having already received, as the

initial deposit, the specified amounts of liquidated damages.

One of the issues noted in the pretrial memoranda was

whether Rokowsky’s representation, in connection with

revising the agreement, that he had $6 million available

was fraudulent. No question was raised with respect to

the $16 million commitment. However, during trial,

Rokowsky himself constantly asserted it, possibly in con-

nection with his concession that from the start he sought

to renegotiate the contract by telling untruths. When this

unabashed conduct ultimately induced the court to voice

its surprise, counsel responded,

“It is our position, it is perfectly sound business

practice and prevalent in the area from which my

client comes to negotiate a contract to the very

last moment.”

For reasons of his own Rokowsky contended that this was

not inconsistent with the $16 million commitment. In his

main brief he stated that the purpose of this profession

was an attempt “to harmonize his renegotiation efforts with

his contention that he had a commitment from Freshwater

by explaining that he felt under a duty to minimize the

amount of cash necessary to close the transaction . .

notwithstanding the Freshwater commitment.” In this it

would appear that he was fleeing from a charge that had

never been made.

Rokowsky’s admitted practice, amply supported by the

evidence, was that once the contract was made, with a

small deposit, the buyer, rather than stopping at the con-

tract, continues to negotiate the seller into a corner; cost,

nothing, so long as it works; nothing more than the deposit

First Circuit's Opinion

if it does not work, and even then, as this case demonstrates,

the buyer may seek to recover the deposit. The reason

for this conduct, Rokowsky explained, is that it is always

to the buyer’s advantage to negotiate down and keep the

sellers involved in the properties, viz., as purchase money

mortgagees, reducing the agreed cash payment as much

as possible.

While Rokowsky’s logic, as distinguished from his ethics,

may have been sound, we consider it was not unreasonable

for the court to combine this admitted conduct with the

fact of no semblance or prospect of a commitment to begin

with and conclude that there were misrepresentations as

to ability and intent to perform, both material matters as

constituting fraud in the inducement.

Whatever may have been the purpose of Rokowsky’s

opening the issue of the contract's initiation and the $16

million commitment,* the fact is he did, not incidentally

and collaterally, but as a direct and fully litigated matter.

The fact that he objected to the amendment to conform

with what it led to did not mean that implied consent could

not be found from his conduct. See, e.g., Dunn v. TWA,

* In his reply brief counsel state,

“Mr. Rokowsky’s position was that the Gordons knew

that Freshwater had agreed to put up the $16 million in cash

[which, Rokowsky testified ‘[a]t all times,’ he told them ‘I

know that Mr. Freshwater will come forward with . . . any-

time I asked him,’] but nevertheless did not call for a closing;

they instead acquiesced in Mr. Rokowsky’s request to re-

negotiate the deal in order to accomodate his desire to obtain

outside financing,”

—a project based on $6 million in cash and that ultimately included

purchase money mortgages. Having in mind that the Gordons had

no discernable interest in delay (the contract stating time to be of

the essence), and had reduced their original price by $4 million for

the very purpose of avoiding purchase money mortgages, this is

kindness that even Rokowsky’s introducing his main brief with quota-

tions from Alice’s Adventures in Wonder did not prepare us for.

First Circuit's Opinion

Inc., 9 Cir., 1978, 589 F.2d 408, 412-13; deHaas Vv.

Empire Petroleum Co., 10 Cir. 1970, 435 F.2d 1223,

1228-29; Cohen Sons & Co. V. Koch, 1 Cir., 1967, 376

F.2d 629, 632-33. This leaves two questions: whether

evidence was introduced that went only, as distinguished

from incidentally, cf. Vargas V. McNamara, 1 Cir., 1979,

608 F.2d 15, 18 n.3, to the issue of fraud in the induce-

ment, and, since the court did not reopen, whether that

issue had been fully tried.

As to the first, the question of the $16 million commit-

ment probably, and of the Gordons’ reliance necessarily,

went only to the issue of fraud in the inducement. Passing

the fact that Rokowsky failed to object to the Gordons’

inquiry as to his intention not to perform the original

agreement—which he denied—Rokowsky raised no objec-

tion to, and, indeed, actually elicited affirmative testimony

that the Gordons relied on the Freshwater commitment.

In his reply brief he says that this testimony was relevant

to the original case as tending to rebut his claim that Alida,

Inc., a promiscuous straw of Rokowsky’s real estate counsel

that signed the contract, was the principal rather than

Rokowsky’s agent. This is no answer. From the stand-

point of ordinary breach of contract, if there is a liquidated

damage clause and the full damages have been placed in

escrow, the identity of the buyer is irrelevant. The seller,

however, may be more interested in performance than

he is in recovering damages. In that connection he has

an initial concern with the buyer’s ability and intent.

A material misrepresentation in this respect is, precisely,

fraud in the inducement. For a seller to contend that he

relied upon such representations is to raise that issue, and

that issue only. Rokowsky is evading the point in arguing

the issue addressed was the straw’s position. Rokowsky’s

financial backing related to inducement.

First Circuit’s Opinion

As to whether he had a fair trial thereon, Rokowsky

asserts that if he had realized that initial fraud was in the

case he would have offered certain deposition testimony

to the effect that the Gordons did not, in fact, rely upon

the Freshwater commitment. However, having allowed

Robert Gordon to testify, without objection, that he did

rely, the time for Rokowsky to act was then, by cross-

examination, rather than now by claiming the issue was

not in the case.

Next, he argues the court should not have excluded his

testimony as to a conversation with Freshwater prior to

making the contract. Passing the fact that no offer of proof

was made, a normally necessary requirement, Fed. Ev. R.

103(a)(2), we may assume the correctness of the claim

that it would “show Mr. Rokowsky’s state of mind to

negate the charge of knowing misrepresentation.” This

contention overlooks the elementary principle that a mis-

representation of a positive fact, capable of being known,

and which is relied on, is not saved by subjective good

faith. Pietrazak v. McDermott, 1960, 341 Mass. 107, 110.

Nor are we moved by the complaint that Rokowsky

was deprived of a jury trial on the added issue. A waiver

takes place in the framework in which it is made. This

is not a case where the amendment called for a further

trial. See post. Compare Arber v. Essex Wire Corp., 6 Cir.

1974, 490 F.2d 414, 423-24, cert. denied, 419 U.S. 830,

with In re Zweibon, D.C.Cir., 1977, 565 F.2d 742, 747-48

& n.20. See, generally, 5 Moore, Federal Practice q 38.41

(2d ed. 1982).

As a last stand Rokowsky argues that even if fraud was

raised and litigated at trial, the court did not find that the

Gordons relied on his representation as to the commitment.

While there was no express finding in the court's first

First Circuit's Opinion

opinion, we agree with what it said in the second, that

taking the properties off the market raised a “monumental

presumption of reliance.” 531 F.Supp. at 439. Reliance

was too plain not to admit of an implicit finding in the

court’s general finding, even if it did not state it explicitly.

In sum, we find no abuse of discretion in the court's

allowance of the amendment under Rule 15(b), nor in the

making of an immediate finding without reopening. As

to this latter, Rokowsky had his chance. When, at the

close of the case, the court took the motion to amend under

advisement, his only answer to the court’s question of what

was omitted, in which it said, “You have climbed up one

side and down the other on every aspect of this case,” was

that “this came too late in the proceeding for me to have

to take that question.” Rokowsky claims that he “awoke

[eleven months later] to discover that a $6.5 million judg-

ment had been entered against him.” By the same token

he had allowed eleven months to pass without answering

the court’s question.

As to the measure of damages, we find no error in law

or in fact. We affirm on the opinions below. 501 F.Supp.

at 1123, 531 F.Supp. at 439. The $540,000 note traceable

to the deposit, however, is a different matter. On its face,

the obligation was unconditional. If parol evidence was

admissible to make it conditional, a matter briefed at length

by both sides, it was to the effect that the note should be

payable “only (1) by way of a credit against purchase

price at a closing of the real estate agreement or (2) in

the event of a default by the Gordons.” 501 F.Supp. at

1122. Admittedly there was no default by the Gordons.

However, if the first condition is read into the note the

Gordons gain nothing by it. They cannot recover full

damages for fraudulent inducement of the contract and,

10a

First Circuit's Opinion

at the same time, retain the liquidated damages for breach.

This duplication of recovery suggests that the court was

so concerned over Rokowsky’s conduct that it lost sight

of the fact that overreaching is a game that two can play.

Parol evidence or no, Rokowsky must be credited with

the note; the judgment on the fraud counterclaim on the

26 buildings must be reduced by the amount already re-

ceived on the purchase price, viz., $540,000. While this

reasoning would entitle Rokowsky to a further credit of

the $60,000 deposit with respect to the remaining two

buildings, he did not make this claim, either below, see

501 F.Supp. at 1120, or here, and we do not consider it

before us. As thus modified, the judgments are affirmed.

Costs to appellees.

lla

District Court’s Original Opinion

[501 F. Supp. 1114]

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

IsAAC ROKOWSKY, et al.,

Plaintiffs,

RoBERT GORDON, et al.,

Defendants.

Civ. A. Nos. 78-3316, 3259 and 3260

November 19, 1980

Barry I. Fredericks, Goldschmidt, Fredericks, Kurzman

Oshatz, New York City, for Isaac Rokowsky, Michael

Swerdlow & Alida Realty, Inc.

David Hanrahan, Gilman, McLaughlin & Hanrahan,

Boston, Mass., for Dorothy Gordon, Lola, Jacobson as

executrices of Estate of Maurice Gordon.

Arthur M. Gilman, Boston, Mass., for Robert Gordon

and Lola Jacobson.

FINDING, RULINGS, AND ORDER

FOR JUDGMENT

SKINNER, District Judge.

These three consolidated cases arise out of an aborted

agreement to sell commercial real estate in Massachusetts.

In the first case, Rokowsky, one of the prospective pur-

chasers, seeks to recover on a promissory note in the amount

of $540,000 issued in the course of the deterioration of the

12a

District Court’s Original Opinion

transaction. In the second and third cases, Robert Gordon

and his sister Lola H. Jacobson, owners of the beneficial

interest in 26 of the 28 parcels to be sold, and the execu-

trices of the Estate of Maurice Gordon, which owned the

cther two parcels, claim damages for breach of contract

against Alida Realty, Inc., the nominal purchaser, and its

disclosed principals Isaac Rokowsky and Michael Swerdlow.

By amendment, they also seek damages for fraud in the

inducement of the agreement.

In the second and third cases, Rokowsky and the other

defendants have counterclaimed for fraudulent misrepre-

sentation concerning the outstanding leases of some of the

properties and their operating costs.

FINDINGS OF FACT

Swerdlow, a New York lawyer, learned that the Gordon

properties were for sale sometime in 1973. He entered into

preliminary negotiations with representatives of the Gor-

dons. He then contacted Isaac Rokowsky, also of New

York, who was and is a broker and dealer in real estate and

real estate financing. Mr. Rokowsky was originally brought

into the deal to provide the money and to negotiate the

financial aspects of the transaction. In fact, all of the sub-

sequent negotiations were conducted for the buyers prin-

cipally by Rokowsky, with the assistance of his lawyer,

Edward Breger, Esq.

Mr. Rokowsky in turn contacted Mr. Ben Zion Schalom

Eliazor Freshwater, an English financier, who was at that

time assisting his father Osias Mayer Freshwater, the man-

aging director of the Freshwater Group of companies, a

complex of over 200 public or private companies with very

large real estate holdings. Rokowsky represented the Fresh-

water Group in many of its transactions in the United States.

13a

District Court's Original Opinion

Since the death of his father, Mr. Ben Zion Schalom Eliazor

Freshwater has been the managing director of the Fresh-

water Group. I find that Mr. Freshwater put up the initial

deposit of $600,000 and expressed an interest in putting up

additional funds, in return for some shares in the properties

purchased. I find that Mr. Freshwater never committed him-

self or his companies to put up any specific amount of cash

over and above the initial $600,000 and that the size of

his share in the property to be purchased was never settled.

I find, however, that he was an undisclosed principal in this

transaction, that he anticipated sharing in the property, and

that he instructed Mr. Rokowsky to proceed with efforts to

secure the property.

After considerable negotiation, two parallel purchase and

sale contracts were exercised, the first between the various

real estate corporations owned by Robert Gordon and Lola

H. Jacobson as sellers, and Alida Realty, Inc. as buyer,

and the second between the executrices of the Estate of

Maurice Gordon as sellers and Alida Realty, Inc. as buyer.

I find that the two contracts were treated by all concerned

as parts of a single transaction. These contracts were exe-

cuted February 12, 1974, and called for a closing on June

28, 1974. They specify that they “shall be construed and

enforced in accordance with the laws of Massachusetts.”

[1] I find that Alida Realty, Inc. was a dummy corpora-

tion created by Attorney Breger for the convenience of his

clients. At the beginning of each year he created such a

corporation to act as a straw or conduit for his clients. At

the end of the year the corporation would be dissolved. The

office dummy for 1974 was Alida Realty, Inc. It had no

assets, no capital stock and no stockholders. During 1974

it acted as a straw or conduit for over 100 of Mr. Breger’s

clients in over 200 transactions. It was contemplated that

after the closing, the property would immediately be trans-

l4a

District Court’s Original Opinion

ferred to Rokowsky, Swerdlow and Freshwater in whatever

proportion was eventually worked out among theni. All

the contract negotiations were conducted or controlled by

Rokowsky, who was not an officer of Alida Realty, Inc.

[2] Rokowsky and Swerdlow now assert that Alida

Realty, Inc. was known to all parties to be the purchaser

and that the sellers knew that they could only look to the

corporation for any damages. I reject this contention. I

find that the sellers justifiably considered Rokowsky and

Swerdlow to be the principals in the transaction, that they

looked to them personally to raise the necessary financing,

and that Alida Realty, Inc. was treated by all parties as a

device of convenience, to hold title temporarily as a straw

or conduit. I find and rule that Rokowsky and Swerdlow

are not protected from whatever liability there may be

under the February 12 contracts by reason of the use of

Alida Realty, Inc. as a nominee. My Bread Baking Co. v.

Cumberland Farms, Inc., 353 Mass. 614, 233 N.E.2d 748

(1968).

Both contracts contained provisions for liquidated dam-

ages, however, in effect limiting the liability of the pur-

chasers for breach of contract to the amount of the deposit

on each contract, which was $540,000 in the corporation’s

contract and $60,000 in the estate contract. The deposit

and the liquidated damages provision were both incorpo-

rated in Paragraph R of each agreement, which were iden-

tical.!. This provision reinforces the conclusion reached

1R. The Escrow Agents join herein to acknowledge their receipt

of the deposit, in whatever form it takes, in accordance with the pro-

visions of Paragraph E hereof, and their undertaking to hold and

dispose of the same as follows:

(footnote continued on following page)

15a

District Court’s Original Opinion

above that the parties did not rely on the corporate nominee

to limit liability.

Prior to the execution of the contract, various lawyers

and real estate management experts had viewed all the

Gordon buildings and had examined many of the leases.

After February 12, 1974, this activity intensified. Moe

Bordwin, an associate of Swerdlow, took up permanent

residence outside of Boston, and with a small legal and

clerical staff proceeded to go through all the leases, con-

tracts, payrolls and other documents relating to the various

properties. Robert Gordon provided office space to Mr.

Bordwin for this purpose and gave him unrestricted access

to the pertinent files.

On June 12, 1974, Attorney Breger wrote a letter to the

sellers’ attorney containing a long list of alleged discrepan-

cies in descriptions of the properties as recited in the con-

tract documents and alleged deficiencies in documentation.

In a rare moment of candor, however, Mr. Rokowsky con-

ceded at the trial that the true extent of the property was

known to him and that he never intended to purchase the

areas erroneously included in the contract descriptions.

The other matters were either of no consequence or were

corrected in due course.

(footnote continued from preceding page)

(i) At the closing to deliver the same to the Sellers and the

interest thereon, if any, to the Buyer;

(ii) If, at the time and place for closing, the Buyer shall de-

fault in the performance of its obligations hereunder, to deliver

the same and interest thereon, if any, to the Sellers, as liquidated

damages;

(iii) If, at the time and place for closing, the Sellers shall

default in the performance of their obligations hereunder, to

deliver the same to the Buyer, without prejudice to such default;

subject, in all of such cases, to instructions to the contrary signed by

all of the Sellers and by the Buyer.

* * *

l6a

District Court's Original Opinion

I find that there were a number of errors in the descrip-

tion of the properties, their income and operating costs

in the contract documents. There is no evidence whatsoever

of a fraudulent intent on the part of the Gordons, however,

and, in fact, Gordon’s grant of access to Bordwin was in-

consistent with a fraudulent intent. I find that the errors

resulted from the size and haphazard recordkeeping of the

Gordon operation, and were unintentional. I find that the

evidence in no way sustains the allegation of fraud in the

counterclaims of Rokowsky, et al.

In early June of 1974, Rokowsky informed the sellers

that he could not raise the $16 million in cash required by

the February 12 contract and that the deal would have to

be restructured. I find, however, that Rokowsky never made

any serious effort to raise $16 million, nor did he call on

Mr. Freshwater to do so. I find that Rokowsky in fact

never intended to pay $16 million in cash, even at the time

the contract was executed. His representation to the Gor-

dons that if he could not raise the amount through banks

he could get it from Freshwater was a lie. I further find that

Rokowsky consistently and continuously lied to the Gordons

and subsequently lied to this court concerning his intention

to pay $16 million of the purchase price in cash and con-

cerning the availability of cash for that purpose. I find that

Rokowsky had intended from the first to wait until the

Gordons were firmly committed to the sale, and had in-

curred considerable expense to consummate it, and then

to take advantage of a deteriorating real estate market to

renegotiate a deal more favorable to himself and his asso-

Ciates.

In any case, Rokowsky was successful in persuading the

sellers to renegotiate the agreements so that the buyers

would come up with $6 million cash and give a purchase

17a

District Court’s Original Opinion

money mortgage for $10 million, with a “take-out” pro-

vision after three years. A “take-out” is an arrangement by

which a financial institution or other financing source would

agree to buy the purchase money mortgage for the principal

balance remaining after the agreed period.

The sellers were concerned that the new arrangement

would not produce sufficient cash to pay anticipated capital

gains taxes. They were willing to explore the possibility of

converting the sale of the corporately-owned parcels to a

sale of corporate stocks, which might alleviate the capital

gain impact. For this purpose the closing date of the

February 12 agreement was extended to permit the con-

struction of an alternate arrangement. The first extension

was to July 8, 1974 and then to July 17, 1974.

On July 16, 1974, Swerdlow, Rokowsky and Breger met

with attorneys for the sellers at Swerdlow’s office in Great

Neck, Long Island. The sellers’ lawyers were Stanley Rud-

man, representing the corporation, Jordan Ring, represent-

ing the estate, and Norman Byrnes, a real estate expert en-

gaged to prepare the documents of sale for all the sellers.

Rokowsky and Swerdlow reported that they could not

arrange the “take-out” provision and that the sellers would

have to take a straight purchase money mortgage. They

also asked for an additional extension of time. Rudman

and Ring agreed to the new deal, subject to the condition

that the $600,000 of deposit money be released so that the

Gordon interests could pay real estate taxes. Rokowsky

agreed, but required that Robert Gordon and Lola Jacobson

give him a negotiable promissory note for $540,000. He

demanded the same of the estate for $60,000, but Ring

refused, and Rokowsky accepted the personal guarantee of

the executrices to repay the money in the event of a default

by the estate. Rudman refused on behalf of Robert Gordon

18a

District Court’s Original Opinion

and Lola Jacobson to give a negotiable note but agreed to

a nonnegotiable note. The extension of time, the release

of the deposit and the grant of the note were made in specific

express reliance on Rokowsky’s unequivocal statement that

he had at that time an absolute commitment for $6 million.

This was another lie by Rokowsky.

Rudman testified that at the time of this agreement, he

said to Rokowsky, “I will not give a negotiable note for

$540,000. On your representation that you have $6 million

available, I’ll give you a nonnegotiable noninterest bearing

note for $540,000 and with a clear understanding that there

is no way you're ever going to be paid that $540,000 except

as a credit of that note for 540 [sic] against the purchase

price pursuant to the termination of our agreement.” (Tr.

7-24).

It was also agreed, however, that Rokowsky would be

entitled to the $540,000 if the sale did not go through be-

cause of the sellers’ default. (Tr. 7-27).

This testimony is denied by Rokowsky, who claims in

substance that the amount of the note was to be either

credited to the purchase price or paid to him if the deal

fell through for any reason. I be eve Rudman and dis-

believe Rokowsky’s testimony insofar as it conflicts with

Rudman’s testimony.

Under date of July 16, 1974, a release of the escrow was

executed by Alida Realty, Inc., together with an amend-

ment of the February 12, agreement between the corporate

sellers and Alida Realty, Inc. This amendment provided

as follows:

2 There are two transcripts for the seventh day of trial, each with

this pagination. The quoted testimony or in the transcript of

the afternoon session of December 13, 1979.

19a

District Court’s Original Opinion

“1. The date for closing is extended to August

1, 1974.

2. The deposit heretofore held by the escrow

agents is to be returned to Edward E. Breger, Esq.,

attorney for the buyer, and all provisions for escrow

set forth in paragraph R are hereby terminated and.

the deposit shall not serve as a credit to purchasers.

Except as thus amended, said agreement [of Feb-

ruary 12, 1974] will remain in full force and effect

in accordance with its original terms.”

The amendment further recited that it was executed as a

sealed instrument.

On July 18, 1974, a promissory note in the amount of

$540,000, non-negotiable, without interest and in form

unconditional, was executed in Massachusetts by Robert

Gordon and Lola Jacobson individually, payable to Isaac

Rokowsky individually. $540,000 of the escrow funds was

transferred by the escrow holder to Breger, who paid it over

to Rokowsky, who in turn paid it out of his own account

to Gordon.

The escrow provisions in Paragraph R of the February

12 agreement also contain the limitation of liability relied

upon by Swerdlow and Rokowsky. The Gordons now as-

sert that the quoted amendment eliminated the limitation

of liability by its purported termination of Paragraph R.

(See n. |, supra). Such a result was never discussed or

contemplated by the participants at the July 16th confer-

ence, and I find that none of the parties intended to eliminate

the limitation of liability contained in the original agree-

ment. I find that the quoted amendment was drawn on

the spot (and indeed part of it is handwritten), that it is

ambiguous in this respect and that its arguable elimination

20a

District Court’s Original Opinion

of the limitation of liability was the inadvertent result of

careless draftmanship.

Thereafter, the closing date was further extended by

oral agreement to August 28, 1974, and August 26 was set

for a rehearsal, at which all of the closing documents would

be reviewed and approved for delivery on the 28th.? I find

that by August 26, Attorney Byrnes had produced all the

necessary documents, resolved all the title questions, and

either had secured all the necessary releases or was in a

position to secure them by August 28th. It is the testimony

of Byrnes, Rudman, and to an extent Ring, that on August

26 Rokowsky and Breger appeared at Byrnes’ office and

advised them that Rokowsky was unable to raise $6 million

cash, and that they could not go through with the purchase

unless the sellers subordinated their $10 million purchase

money mortgage to a $3.5 million bank mortgage. Ring

rejected the new proposal on the spot. Rudman left to

present this new proposal to Robert Gordon. After discus-

sion with Gordon he made a telephone call to Byrnes’ office

and told Byrnes that the new proposal was unacceptable

and the deal was dead. Byrnes was not positive but testified

that it was his best recollection that Rokowsky and Breger

were still in his office when the call came in, and that he

informed them of Gordon’s response.

Rokowsky and Breger relate a totally different version

of this meeting. They say they spent about five hours dis-

cussing documents, that they informed Byrnes, Rudman and

Ring of the necessity of subordinating the purchase money

3 The parties contemplated not only the execution of deeds, but

the execution of new agreements in substitution for the agreements

of February 12. Up to this point, the February 12 agreements were

the only written agreements between the parties, and were still in

force.

2la

District Court’s Original Opinion

mortgage to a $3.5 million bank loan, and that they left

the meeting with the understanding that the three attorneys

would consult with their clients and get back to Breger with

their response. Rokowsky was impeached so many times

and in so many ways during the trial that his credibility was

totally destroyed, and I would not accept any disputed testi-

money of his. Breger was not directly impeached, and his

version of the meeting is supported by a letter which he

sent the following day to Byrnes, Rudman and Ring con-

taining the following two paragraphs:

I am sorry that Stanley [Rudman] was obliged to leave

before we completed our discussion. However, in view

of the fact that you are submitting the proposal to your

respective clients, I am certain that we will be able

to reach some accord. We are also discussing the pro-

posal with other sources with a view toward an expedi-

tious closing.

In support of the other view is the uncontested fact that

Ring made a formal appearance at Byrnes’ office on August

28, 1974 for the purpose of tendering the required deeds.

On the same day he wrote Breger and Rokowsky that “the

Buyer” (presumably under the February 12 Agreement)

was in default. Rokowsky has not challenged this notice of

default and has never sought to recover his $60,000 deposit

from the estate of Maurice Gordon.

Neither Byrnes nor Rudman replied to Breger’s letter of

August 27. Robert Gordon did list the properties with a

broker immediately after being informed on August 26 that

Rokowsky could not go forward with the deal as proposed

4Breger admitted that Ring initially rejected the proposal, but

testified that Ring always responded that way to any suggestion, and

that he expected Ring to discuss it with his clients.

22a

District Court's Original Opinion

on July 16. Thereafter he sought to interest other pur-

chasers in the properties and eventually sold them off, most

of them to William Kent as trustee for purported Kuwaiti

interests.

The lawyers for Gordon also continued sporadically to

negotiate with Rokowsky and Breger for the sale of the

properties throughout the remainder of 1974 and the first

half of 1975. Some of those negotiations did contemplate

a subordinated purchase money mortgage along the lines

proposed by Rokowsky on August 26. I find that in the

deteriorating real estate market of late 1974 and 1975

the Gordons were ready and willing to sell to anyone, includ-

ing Rokowsky. In their dealings with Rokowsky I find

that Rudman and other representatives of the Gordons made

it clear that there would be no new deal (or adjustment of

the old deal, as the case may be) until Rokowsky could

demonstrate that he had actual, enforceable commitments

for his financing.

I find that Rokowsky never at any time came up with

firm financing of any kind sufficient to enable him to pur-

chase the Gordon properties under any of the arrangements

discussed by the parties.

During the sporadic discussions with Rokowsky in late

1974 and early 1975, Gordon sold off several of the real

estate parcels included in the February 12 agreement. In

mid-1975, Rokowsky apparently faded out of the picture

and the sale of the remaining properties to Kent took place

in August 1975. The aggregate price received by the

Gordon corporations was $4,977,258 and by the Gordon

estate $1,491,015 less than the prices established by the

two agreements of February 12, 1974.

When he learned of the sale to Kent, Rokowsky brought

the instant suit on the $540,000 note. He also brought

23a

District Court's Original Opinion

a suit in the state court seeking an injunction of the sale

to Kent on the ground that he had a right of first refusal as

to the properties. The Gordons were forced to pay him

$75,000 to clear the record of the lis pendens filed in con-

nection with that suit. Rokowsky admits that the sworn

petition in that case contained false statements and his testi-

mony in this case makes it clear that his assertion of a right

of first refusal was a sham. (Tr. 2-103 through 2-114).

RULINGS OF LAW

[3-7] 1. In the first case, in which Rokowsky seeks re-

covery of the $540,000 promissory note, the key legal issue

is the application of the parol evidence rule, which in turn

depends upon whether the note is an integrated contract.

Rokowsky argues that the law of New York applies. I

disagree. The note was executed in Massachusetts by Massa-

chusetts residents in aid of protracted negotiations concern-

ing Massachusetts real estate owned by Massachusetts cor-

porations. Furthermore, the note was given in connection

with a releasing of escrow and extension of time which

was in the form of an amendment to an agreement which

provided that the law of Massachusetts would apply. In a

diversity case, we are to apply the conflicts rule which is

most likely to be applied by the Supreme Judicial Court of

Massachusetts on similar facts. Klaxon Co. v. Stentor

Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020,

85 L.Ed. 1477 (1941). Under Massachusetts law, the par-

ties, choice of law will be given effect if it bears a reasonable

relationship to the transaction and does not violate public

policy. Steranko v. Inforex, Inc., 5 Mass.App. 253, 362

N.E.2d 222 (1977). The two documents represented the

several aspects of a single transaction, and it would be

absurd to have them governed by different law. Further-

24a

District Court's Original Opinion

more, the law applicable to a note is the law of the place

where the note is payable. Walling v. Cushman, 238

Mass. 62, 65, 130 N.E. 175 (1921). A demand note is

payable at the place of residence of the maker if no place

of payment is named in the note. 11 Am.Jur.2d, Bills and

Notes § 89. Under all of these circumstances, the law of

Massachusetts clearly governs.

[8, 9] Under Massachusetts law, whether a writing con-

stitues an integrated contract is a question of the intention

of the parties. Caputo v. Continental Construction Corp.,

340 Mass. 15, 18, 162 N.E.2d 813, 816 (1959). This is

a preliminary question of fact for the court. Carlo Bianchi

& Co., Inc. v. Builders’ Equipment & Supplies Co., 347

Mass. 636, 643, 199 N.E.2d 519, 524 (1964). A writing

which appears on its face to be complete is presumed to be

an integrated contract, in the absence of contrary evidence.

Robert Industries, Inc. v. Spence, 362 Mass. 751, 754, 291

N.E.2d 407, 409 (1973).

[10] The same principle applies to promissory notes.

Trustees of Tufts College v. Parlane Sportswear Co. Inc.,

4 Mass.App. 783, 342 N.E.2d 727, 728 (1976), citing

Robert Industries, Inc. v. Spence, supra.

[11] The note in this case represents but one aspect of

a complex transaction. It is clear from all of the contem-

porary and subsequent drafts of contract amendments that

the note was part of a restructuring of the deposit arrange-

ment, exacted as a condition of present use of the deposit

by the sellers. It was contemplated by all the parties that

the note would be satisfied by a credit at the closing unless

the deal fell through, an understanding that does not appear

on the face of the instrument, and is inconsistent with its

“demand” provision.

25a

District Court’s Original Opinion

I find and rule that the promissory note dated July 18,

1974 was not an integrated contract. Consequently, the

parol evidence rule does not apply, and the note is subject

to the oral conditions imposed at the conference on July

16, 1974 between Rudman and Rokowsky, namely, that the

note would be paid only (1) by way of a credit against

purchase price at a closing of the real estate agreement or

(2) in the event of a default by the Gordons. Since neither

of these conditions were fulfilled, Rokowsky is not entitled

to payment of the note. Accordingly, judgment shall be

entered for the defendant in the first case (CA #78-3316-

S), with costs.

[12] 2. In the second and third cases, Robert Gordon

and Lola Jacobson, as assignees of the original selling cor-

porations, and Dorothy Gordon and Lola J acobson, execu-

trices of the estate of Maurice Gordon seek damages for

breach of contract. Rokowsky, Swerdlow and Alida Realty,

Inc., who are the defendants, claim that the two agree-

ments of February 12, were abandoned by both parties. I

find and rule, however, that performance under those agree-

ments was conditionally waived by the Gordons, subject to

the condition that parties execute and perform a substitute

agreement. This conclusion is supported by the recitation

in the July 16 release of escrow and purported deletion of

Paragraph R that the February 12 agreement otherwise

rcmain in full force and effect.

As to the claim of the executrices, the resolution of the

issues is relatively simple. When the time agreed for per-

formance, August 28, 1974, arrived, Mr. Ring tendered

performance on behalf of the estate. The purchasers neither

tendered performance nor satisfied the condition upon which

performance had been waived. Mr. Ring immediately no-

tified them that they were in default. I rule that the de-

26a

District Court’s Original Opinion

fendants were in default as of August 28, 1974, and that

all further negotiations between the estate and Rokowsky

looked toward a new agreement and not a revival of the

oid one.

The position of Robert Gordon and Lola Jacobson as

successors to the corporate sellers is less clear. The de-

fendants in this case, the purchasers, argue that there was

an unequivocal notice of default such as to put them in

default as of August 28, 1974, and under the various nego-

tiated extensions of time, time was not of the essence.

Those considerations would be important in determining

whether the purchasers were in default as of August 28,

1974, and that in turn would be an important question if

the purchasers had tendered performance at some later date

and been refused. In this case, however, the purchasers

never secured the financing to perform under the original

agreement of February 12, the proposed modification of

June 1974, the further proposed modification of July 16,

1974, or even under any of the arrangements subsequently

discussed. I find and rule that the sellers’ waiver of per-

formance under the February 12 agreement, to the extent

that it continued after August 28, 1974, continued to be

conditioned on the execution and performance of a mutually

satisfactory substituted agreement either by August 28,

1974 or within a reasonable time thereafter. I rule that

completion of the deal within a reasonable time was implicit,

and that a reasonable time had clearly expired by the sum-

mer of 1975. In view of the purchasers’ ultimate breach of

contract, there is no need for me to decide the difficult ques-

tion of whether the purchasers were in default on August

28, 1974.

[13] Defendants claim that they cannot be held in default

and held liable for breach of the corporate agreements of

27a

District Court's Original Opinion

February 12, 1974, because the sellers were not ready at

any time to perform in accordance with those agreements.

This is true, and ordinarily one party may not hold the

other in default unless it is ready to perform. The sellers,

however, with considerable effort, had made themselves

ready to perform according to the proposed amendments

to the agreements negotiated on July 16. This was done

at the instance of the purchasers, who had failed to produce

the purchase price as originally agreed. Not only was the

altered performance prepared at the request of the pur-

chasers, it was done in reliance on Rokowsky’s out and out

flat lie to Rudman that the $6 million cash payment was

actually available. Under these circumstances, to permit

the purchasers to take advantage of the fact that the pro-

fered performance of the sellers was not in accordance with

the original contract would be unconscionable, and a gross

misapplication of the rule.

Notwithstanding all of the foregoing, the plaintiffs in

the two cases, the two groups of sellers, are not entitled to

recover damages for breach of contract. I have found that

the document of July 16, 1974 releasing the escrow was

not effective to eliminate the provision for liquidated dam-

ages. I find and rule that the transfer of funds to the

sellers on or about July 18, 1974 was an advance of the

funds theretofore segregated as liquidated damages, and

was not intended to be an additional penalty. The plain-

tiffs have therefore received everything to which they are

entitled, and judgment will be entered for the defendants

on Count J in C.A. 3259-S and Count 1 in C.A. 3260-S.

Because of the reprehensible conduct of Rokowsky in

conducing the negotiations and his lack of candor at trial,

the defendants shall not recover their costs. Fed.R.Civ.P.

54(d).

28a

District Court's Original Opinion

3. The facts found on page 1118, supra, require the

dismissal of the defendants’ counterclaims in cases C.A.

3259-S and 3260-S.

[14] 4. During the trial, the plaintiffs in the second and

third cases moved to amend their complaints to add a

second count for fraud in the inducement of the agreement

of February 12, 1974. A late amendment to conform to

the evidence is permissible under the Fed.R.Civ.P. 15(b),

and there is ample evidence of fraud in Rokowsky’s false

statements concerning his present intention to pay $16 mil-

lion in cash and his capacity to raise such a sum.

Accordingly, the metions to amend the complaints in

the second and third case are ALLOWED.

[15] The measure of damages for misrepresentation

(even in the absence of proof of intent to deceive) is the

benefit of the bargain which the plaintiffs would have had

if the representation had been true. Robichaud v. Athol

Credit Union, 352 Mass. 351, 225 N.E.2d 347 (1967).

In this case the damages are reduced by the eventual sales

of the properties to others, and are in effect the same as the

contract damages. As stated in the findings of fact the

damages to Robert Gordon and Lola H. Jacobson, as suc-

cessors to the Gordon corporation, are $4,977,258, and the

damages to Dorothy Gordon and Lole H. Jacobson as

executrices of the Estate of Maurice Gordon are $1,491 015.

It does not appear that Swerdlow made any of the false

representations concerning the financing, or that he knew

that they were false. Alida Realty, Inc. was a cipher in this

whole transaction. It was Rokowsky’s device rather than

Rokowsky’s principal. Accordingly, judgment shall enter

for the defendants, Alida Realty, Inc. and Swerdlow on

Count 2 in cases No. C.A. 3259-S and C.A. 3260-S, without

29a

District Court’s Original Opinion

costs. Judgment shall enter for the plaintiffs against Isaac

Rokowsky on Count 2 in the amount of $4,977,258 in case

No. C.A. 3259-S and in the amount of $1,491,015 in case

No. C.A. 3260-S, with interest from June 28, 1974 and

costs in each case.

30a

District Court’s Opinion Denying

Motion for New Trial

[531 F. Supp. 435]

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Civ. A. Nos. 78-3316-S, 78-3259-S and 78-3260-S.

IsAAC ROKOWSKY, et al.,

Plaintiffs,

ROBERT GORDON, ef al.,

Defendants.

January 18, 1982

. 4

Barry I. Fredericks, Goldschmidt, Fredericks, Kurzman

Oshatz, Lewis A. Kaplan, Paul, Weiss, Rifkind, Wharton

& Garrison, New York City, for plaintiffs.

Arthur M. Gilman and David G. Hanrahan, Gilman,

McLaughlin & Hanrahan, Boston, Mass., for defendants.

MEMORANDUM ON MOTION FOR NEW TRIAL

AND OTHER RELIEF

SKINNER, District Judge.

These three consolidated cases arise out of an aborted

agreement to sell commercial real estate in Massachusetts.

In the first case, Rokowsky, one of the prospective pur-

chasers, seeks to recover on a promissory note in the amount

of $540,000 issued in the course of the deterioration of the

transaction. In the second and third cases, Robert Gordon

3la

District Court’s Opinion Denying Motion for New Trial

and his sister Lola H. Jacobson, owners of the beneficial

interest in 26 of the 28 parcels to be sold, and the executrices

of the estate of Maurice Gordon, which owned the other two

parcels, claim damages for breach of contract against Alida

Realty, Inc., the nominal purchasers, and its disclosed prin-

cipals Isaac Rokowsky and Michael Swerdlow. By amend-

ment, they also seek damages for fraud in the inducement

of the agreement.

The motions to amend the complaint in the second and

third cases were originally made on the sixth day of the

nonjury trial. I denied them without prejudice. They were

thereafter renewed at the close of the trial, and I took them

under advisement. After reviewing the transcript of the

trial, I determined that the issue of fraud in the inducement

had been fully tried and allowed the motions to amend

under Fed.R.Civ.P.15(b). I then found for the plaintiff

(the Gordons) on the added count in the aggregate of

$6,468,273 against the defendant Rokowsky with interest

from June 28, 1974.’ 501 F.Supp. 1114 (1980).

Rokowsky now moves for a new trial in the second and

third cases on four grounds:

1. The amendment deprived him of his right to a jury

trial under the Seventh Amendment to the Constitu-

tion.

2. The amendment was not proper under Fed.R.Civ.P.

15(b).

3. An incorrect measure of damages was employed.

4. Interest on the award should not be allowed.

1. Right to Jury Trial.

11 found for the defendants (the Gordons) in the first case.

32a

District Court’s Opinion Denying Motion for New Trial

[1] In my opinion, the jury trial issue is subsumed under

the issue of “express or implied consent”, the prerequisite

for a post-trial amendment under Fed.R.Civ.P. 15(b). If

the defendant expressly or impliedly gave his consent to

the trial of the issue of fraud in the inducement, it was in

the trial then going forward, that is, a nonjury trial. Both

sides had waived a jury before trial and never mentioned a

jury again until this present motion was filed. Accordingly,

I reject the constitutional issue of trial by jury as a separate

ground for a new trial and shall consider only the question

of express or implied consent.

2. Propriety of the Amendment Under Fed.R.Civ.P. 15(b).

[2] The test of consent to the trial of an issue appears

to be whether a party permitted the introduction of evidence,

without objection, or himself introduced evidence, which

was relevant only to that issue. Marston v. American Em-

ployers Insurance Co., 439 F.2d 1035, 1042 (Ist Cir.,

1971); cf. Vargas v. McNamara, 608 F.2d 15, 18 n.3 (Ist

Cir., 1979).

[3] The particular issue was this: did Rokowsky enter

into an agreement to buy real estate for $16 million cash

plus assumption of existing mortgages at a time when he

never intended to carry out the agreement, but intended

from the very beginning to “negotiate” it down so that he

need not provide any cash. There was considerable testi-

mony, introduced by Rokowsky, concerning his ability to

come up with the money, and the availability of cash from

his backer, Mr. Freshwater. Most of this testimony revealed

the fact that neither he nor Freshwater ever had the capacity

to raise $16 million, that Rokowsky never made a serious

effort to do so, and that he proceeded to try to renegotiate

33a

District Court’s Opinion Denying Motion for New Trial

the contract very soon after it was executed. Arguably,

most of that evidence was relevant to other issues.

There were two instances of evidence, however, one in-

troduced without objection and one introduced by Rokow-

sky’s own lawyer, which clearly related to the added issue

and no other, and make it clear that much of the other

evidence was understood by the parties to bear on this

point. The first occurred during the cross-examination of

Rokowsky by Atty. Gilman, counsel for the Gordons, at

T. 3-48, 49.

Q. Now, as a matter of fact, your plan from the

very beginning was never to come up with any cash

at all of your own or Freshwater’s, isn’t that so?

Can you answer that question?

A. No, that’s not so.

Q. It’s not so. And, in fact, sir—

A. I could come up with 600. [the $600,000 de-

posit under the purchase and sale agreement]

It was a plain inference from this response that Rokowsky

from the beginning intended the deposit to be his only con-

tribution of cash.

The second occurred during the cross-examination of

Robert Gordon by Attorney Suzman, one of Rokowsky’s

lawyers at T. 9-162, 163:

Q. And you testified this morning, you believed

that Mr. Rokowsky was going to be able to come up

with the money?

A. Yes.

Q. And you testified that you were told by Ryan

Elliott that they had checked out Mr. Rokowsky?

A. Well, I don’t know if I used the word “checked

out”.

34a

District Court’s Opinion Denying Motion for New Trial

Q. What did Ryan Elliott tell you?

A. Ryan Elliott were the brokers who brought

us together, and based upon information that we

received from Ryan Elliott sources, from attorneys,

and from Mr. Swerdlow, Mr. Rokowsky, themselves,

who they were, what business, how large they

were, et cetera, I surely did believe they could come

up with the money, because, I took this property off

the market for over a year and tied everything up,

based upon the fact they would come up with the

money.

Q. What did Ryan Elliott tell you?

A. I don’t remember.

Q. You don’t recall, as we sit here today, what

they told you?

A. Specifically, no.

This would appear on the face of it to have relevance

only to the issue of reliance, and to suggest very strongly

that Rokowsky’s attorneys were aware that the fraud issue

had been introduced into the case. In particular, Mr. Gor-

don’s statement about taking the property off the market in

reliance on Rokowsky’s representations was not challenged,

although it was clearly unresponsive.

Later on, however, the following colloquy occurs, on

which Rokowsky apparently relies to explain the foregoing,

at T. 9-164, 165:

A. I didn’t ask them where they got the money

from. I mean, I was told—It would be kind of

absurd for me to think otherwise. I entered into a

deal with individuals, of course thinking they had

the money to go through with the deal.

Q. Thinking it. I’m trying to find out whether

you took any steps to check them out?

—————————_————<——

35a

District Court’s Opinion Denying Motion for New Trial

A. Yes.

Mr. Gilman: I’m going to object to this line

of questioning.

The Court: What relevance does that have?

Mr. Suzman: Let me go on with it, your

Honor.

The Court: If you what?

Mr. Suzman: If you permit me to go on with

it?

The Court: No, tell me why.

Mr. Suzman: The question of who he was

dealing with which is one of the issues in this case.

The Court: I didn’t think there was any ques-

tion about who he was dealing with. He was

dealing with Rokowsky and Swerdlow.

Mr. Suzman: I don’t know that for a fact.

Notwithstanding the last colloquy, I am persuaded on a

second review of the transcript, as | was on the first, that

the issue of Rokowsky’s fraudulent representation was in

fact fully tried and inferentially recognized as an issue in

the case by Rokowsky’s attorneys.

The next inquiry concerns prejudice to the defendant

because of the late allowance of the amendment. Rokow-

sky’s attorney alleges two instances of prejudice:

First, he says that if he had known that the issue of

fraud in the inducement were to be brought into the case,

he would have introduced a release given by the Gordons

to Rokowsky in connection with a parallel case in the

state court (described at 501 F.Supp. 1121). The release

is not a general release, however. The releasing language

is as follows:

3. RG, LJ and the Corporations hereby waive and

relinquish any claim or right which they or each

36a

District Court's Opinion Denying Motion for New Trial

of them may have against IR or William F. Cowin

or the firm of Friedman & Atherton for the bring-

ing of the said suit or the filing of Lis Pendens in

connection therewith including without limitation

any claims for abuse or process or for malicious

prosecution or otherwise.

Rokowsky submits an affidavit by his lawyer that the

Gordons intended to give a general release by this docu-

ment. Even if he were a competent witness, the release

is not ambiguous and his testimony would not be allowed.

The words “or otherwise” clearly refer to claims “for the

bringing of said suit or the filing of /is pendens”. This

release would have availed him nothing in the present case.’

Second, Rokowsky claims that he would have conducted

further discovery on the subject of the Gordons’ reliance

on Rokowsky’s statements. In support of this assertion, he

offers the transcript of a deposition of Attorney Ring in

which Ring describes Robert Gordon during the contract

negotiations as stating that Rokowsky was a phony and

would never come up with the money. As pointed out, that

line of inquiry was in fact pursued at trial. The overwhelm-

ing fact is that Gordon did indeed execute the purchase

and sale contract by which he withdrew real estate worth

over $30 million from the market for four months, later

extended an additional two months. It is not uncommon

for a contractor to enter into a contract with doubts as

to the other contracting party's capacity to perform. It

strains belief, however, to assert that Gordon would have

executed the contract if he had known that Rokowsky

2 Furthermore, if it was a general release, it would have been a

complete defense in the contract action against Rokowsky personally.

The attorney's claim that he was relying on the shield of the dummy

corporation is not in the least credible.

37a

District Court's Opinion Denying Motion for New Trial

never intended to perform his end of the bargain. The fact

of Gordon’s execution of the contract raises a monumental

presumption of reliance. There is, in my opinion, no sub-

stantial likelihood that it could have been overcome.

Accordingly, I find the assertions of prejudice to

Rokowsky to be insubstantial, and no basis for denying

the motions to amend or to grant a new trial on the issue

of liability.

3. Measure of Damages.

Rokowsky attacks the award on two grounds: first, that

the wrong measure of damages was used, and second, that

the measure of damages was wrongly applied. The second

issue being the simplest, I shall address it first. The measure

of damages which I used was the Gordons’ loss of the

benefit of their bargain. I took the difference between

the contract price and the price at which the Gordons

eventually sold the property as representing the dollar value

of damages. The eventual sale was in the summer of 1975.

Rokowsky says the true measure is the difference between

the contract price and the market value of the property in

the fall of 1974 when Rokowsky failed to perform either

the original or the proposed substitute purchase and sale

agreement.

[4] Rokowsky is correct in this respect but in fact the

eventual sale in 1975 is a measure of the value of the

property in the fall of 1974 which is most favorable to

Rokowsky. I have found that the Gordons were actively

trying to sell the property from August 26, 1974 on. If

there had been a market for the property at any better price

than they sold it for in 1975, they would have sold it at that

price. I conclude that there was no market in the fall of

1975 any higher than the price at which the property was

38a

District Court’s Opinion Denying Motion for New Trial

sold in 1975. It may well be that there was no market at

all in 1974, in which case Rokowsky has had the advantage

of the 1975 figure. I conclude that if loss of the benefit of

the bargain was the proper measure of damages, the measure

of damages was properly applied.

[5] The general rule of damages in fraud cases under

Massachusetts law is that the plaintiff is entitled to recover

the benefit of his bargain. Robichaud v. Athol Credit

Union, 352 Mass. 351, 225 N.E.2d 347 (1967). The de-

fendant is correct in asserting that the rule may be varied

in order to achieve a more just result. Rice v. Price, 340

Mass. 502, 164 N.E.2d 891 (1960). The cited case does

not stand for the proposition, however, that it is ever error

to apply the general rule. It is true that at one of the hear-

ings in this case I stated that I would prefer to impose

damages based on opportunity costs plus out-of-pocket ex-

pense, and so I would. It is also true that the benefit of

the bargain rule produces a very large award which may

not be the economic equivalent of the actual loss created

by the defendant’s fraud. On reflection, however, I con-

clude that opportunity cost could be developed only on

evidence of the existence of an alternate market for the

28 commercial buildings involved in this case during the

period February-August, 1974. Such a collection of real

estate is rarely offered in wholesale lots, and reliable evi-

dence of an alternate market or the lack of it would be

difficult, if not impossible, to establish. As I read the

Massachusetts cases, there is little justification for substi-

tuting such a speculative measure of damages for the rea-

sonably certain one of loss of the benefit of the bargain.

If, as defendant suggests, however, there is some resolu-

tion of this matter which would lead to settlement of this

controversy, I would be glad to confer with counsel and

39a

District Court’s Opinion Denying Motion for New Trial

listen to any suggestions. In the meantime, my award of

damages stands.

4. Interest on the Award.

[6] After urging upon me a Massachusetts rule of dam-

ages ,the defendant argues that the law of Florida should

apply with respect to interest on the award. I will not be-

labor the anomaly of this position. In any case, I have

treated the entire case as being governed by the law of

Massachusetts, and I shall do the same with regard to in-

terest. The award of interest contained in my order of

November 19, 1980 is erroneous. The true rule in Massa-

chusetts is that in actions for deceit, and indeed in all tort

actions other than those enumerated in M.G.L. c. 231,

§ 6B, interest runs from the time that damages are liqui-

dated by award or verdict. Connelly v. Fellsway Motor

Mart, Inc., 270 Mass. 386, 170 N.E. 467 (1930); M.G.L.

c. 235, § 8. Accordingly, interest shall run on the award

only from November 19, 1980.

5. Conclusion.

The order for judgment of November 19, 1980 is

amended to provide that interest shall run from November

19, 1980 rather than June 28, 1974, and the judgments

entered December 1, 1980 shall be amended accordingly.

The Motion for New Trial and Other Relief is otherwise

DENIED.

40a

First Circuit’s Judgment

UNITED STATES COURT OF APPEALS

FoR THE FIRST CIRCUIT

No. 81-1021

ach

IsAAC ROKOWSKY,

Plaintiff, Appellant,

ROBERT GORDON, ef al.,

Defendants, Appellees.

No. 82-1106

ROBERT GORDON, ef al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

IsAAC ROKOWSKY,

Defendant, Appellant.

No. 82-1107

ROBERT GORDON, ef al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

4la

First Circuit’s Judgment

IsAAC ROKOWSKy,

Defendant, Appellant.

No. 82-1186

Lois JACOBSON, et al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef ai.,

Defendants, Appellees.

ISAAC ROKOWSKy,

Defendant, Appellant.

ROBERT GORDON, ef ai.,

Plaintiffs, Appellees,

Vv.

ALIDA REALTY, INC., ef ai.,

Defendants, Appellees.

ISAAC ROKOWSKY,

Defendant, Appellant.

JUDGMENT

Entered January 27, 1983

These causes came on to be heard on appeals from the

United States District Court for the District of Massachu-

setts and was argued by counsel.

42a

First Circuit’s Judgment

Upon consideration whereof, It is now here ordered,

adjudged and decreed as follows:

The judgments of the District Court as modified by the

opinion of this Court filed this day are affirmed.

Costs to appellees.

By the Court:

/s/ DANA H. GALLUP

Clerk.

{[cc: Messrs. Kaplan & Gilman.]

43a

District Court’s Amended Judgments

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Civil Action No. 78-3259-S

ROBERT GoRDON and LOLA JACOBSON,

Plaintiffs,

ALIDA REALTY, INC., BENJAMIN FRESHWATER,

Isaac RoKOwsky and MICHAEL SWERDLOw,

Defendants.

This action came on for trial before the Court, Honorable

Walter Jay Skinner, District Judge presiding, and a deci-

sion having been duly rendered, it is hereby

ORDERED, ADJUDGED AND DECREED that:

1) Judgment is awarded Plaintiffs in the amount of

$4,977,258 against the Defendant, Isaac Rokowsky, plus

$580,680.10 representing interest at the rate of ten (10)

percent per annum from November 19, 1980 as provided by

law, and their costs of action on Count II.

2) Judgment for Defendants, Alida Realty, Inc., Isaac

Rokowsky and Michael Swerdlow on Count I, without costs,

3) The counterclaims of the Defendants, Alida Realty,

Inc., Isaac Rokowsky and Michael Swerdlow be and the

Same are hereby dismissed.

/s/ Putte J. Lyons

Deputy Clerk

Dated: January 21, 1982

44a

District Court’s Amended Judgments

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Civil Action No. 78-3260-S

DoroTHY GORDON and LoLa H. JACOBSON,

Co-EXECUTRICES OF THE ESTATE OF MAURICE GORDON,

Plaintiffs,

Vv.

Awa REALTY, INC., ISAAC Rokowsky and

MICHAEL SWERDLOW,

Defendants.

This action came on for trial before Court, Honorable

Walter Jay Skinner, District Judge presiding, and a decision

having been duly rendered, it is hereby

ORDERED, ADJUDGED AND DECREED that:

1) Judgment is awarded plaintiffs in the amount of

$1,491,015 against the Defendant, Isaac Rokowsky, plus

$173,951.00 representing interest at the rate of ten (10)

percent per annum from November 19, 1980, as provided

by law, and their costs of action on Count II.

2) Judgment for the Defendants, Alida Realty, Inc.,

Isaac Rokowsky and Michael Swerdlow on Count I, without

costs.

3) The counterclaims of the Defendants, Alida Realty,

Inc., Isaac Rokowsky and Michael Swerdlow be and the

same are hereby dismissed.

/s/ Puiie J. Lyons

Deputy Clerk

Dated: January 21, 1982

45a

District Court’s Original Judgments

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Civil Action No. 78-3259-S

ROBERT GORDON and LoLa JACOBSON,

Plaintiffs,

ALIDA REALTY, INc., BENJAMIN FRESHWATER,

IsAAC ROKOWSKY and MICHAEL SWERDLOW,

Defendants.

This action came on for trial before the Court, Honor-

able Walter Jay Skinner, District Judge, presiding and a

decision having been duly rendered, it is hereby.

ORDERED, ADJUDGED AND DECREED that:

1) Judgement in the amount of $4,977,258 against the

Defendant, Isaac Rokowsky, together with interest at the

rate of eight (8) percent per annum until September ‘7,

1980 and thereafter at the rate of ten (10) percent per

annum as provided by law, and their costs of action on

Count II.

2) Judgement for the Defendants, Alida Realty, Inc.,

and Michael Swerdlow on Count II, without costs.

3) Judgement for the Defendants, Alida Realty, Inc.,

Isaac Rokowsky and Michael Swerdlow on Count I, with-

out costs.

4) The counterclaims of the Defendants, Alida Realty,

Inc., Isaac Rokowsky and Michael Swerdlow be and the

same are hereby dismissed.

Dated: December 1, 1980

46a

District Court’s Original Judgments

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

Civil Action No. 78-3260-S

DoroTHY GORDON and LoLa H. JACOBSON,

Co-EXECUTRICES OF THE ESTATE OF MAURICE GORDON,

Plaintiffs,

ALIDA REALTY, INC., ISAAC ROKOWSKY and

MICHAEL SWERDLOW,

Defendants.

This action came on for trial before the Court, Honor-

able Walter Jay Skinner, District Judge, presiding and a

decision having been duly rendered, it is hereby

ORDERED, ADJUDGED AND DECREED that:

1) Judgement in the amount of $1,491,015 against the

Defendant, Isaac Rokowsky, together with interest at the

rate of eight (8) percent per annum until September 17,

1980 and thereafter at the rate of ten (10) percent per

annum as provided by law, and their costs of action on

Count I.

2) Judgement for the Defendants, Alida Realty, Inc.,

and Michael Swerdlow on Count II, without costs.

3) Judgement for the Defendants, Alida Realty, Inc.,

Isaac Rokowsky and Michael Swerdlow on Count I, with-

out costs.

4) The counterclaims of the Defendants, Alida Realty,

Inc., Isaac Rokowsky and Michael Swerdlow be and the

same are hereby dismissed.

Dated: December 1, 1980

47a

First Circuit’s Order Denying Rehearing

UNITED STATES COURT OF APPEALS

FoR THE First CIRCUIT

No. 81-1021

ISAAC ROKOWSKY,

Plaintiff-A ppellant,

ROBERT GORDON, ef al.,

Defendants, Appellees.

No. 82-1106

ROBERT GORDON, ef al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

ISAAC ROKOWSKY,

Defendant, Appellant.

No. 82-1107

ROBERT GORDON, ef al.,

Plaintiffs, Appellees,

Vv.

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

48a

First Circuit's Order Denying Rehearing

No. 82-1186

Lois JACOBSON, ef al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

IsAAC ROKOWSKY,

Defendant, Appellant.

No. 82-1187

ROBERT GORDON, ef al.,

Plaintij/s, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

ISAAC ROKOWSKY,

Defendant, Appellant.

Before:

CoFFIN, Chief Judge,

ALDRICH, SWYGERT*, CAMPBELL, BOWNES and

BREYER, Circuit Judges.

ORDER OF COURT

Entered February 28, 1983

Upon consideration of the “Petition for Rehearing and

Suggestion for Rehearing en Banc”, which document was

49a

First Circuit's Order Denying Rehearing

submitted to the members of the panel and to the judges

of the Court who are in regular active service; and

The judges of the panel having voted to deny the petition

for rehearing, and the judges of the Court who are in regu-

lar active service having voted against rehearing en banc,

It is ordered that said suggestion for hearing en banc

is hereby denied.

By the Court:

/s/ DANA H. GALLUP

Clerk.

[cc: Messrs. Gilman, Kaplan & Hanrahan.]

* Of the Seventh Circuit, sitting by designation.

50a

First Circuit’s Order & Opinion

Staying the Mandate [Unpublished]

UNITED STATES COURT OF APPEALS

FoR THE First CIRCUIT

No. 81-1021

ISAAC ROKOWSKY,

Plaintiff, Appellant,

Vv.

ROBERT GORDON, ef al.,

Defendants, Appellees.

Nos. 82-1106, 82-1107 and 82-1187

ROBERT GORDON, ef al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

ISAAC ROKOWSKY,

Defendant, Appellant.

No. 82-1186

Lois JACOBSON, et al.,

Plaintiffs, Appellees,

ALIDA REALTY, INC., ef al.,

Defendants, Appellees.

ISAAC ROKOWSKY,

Defendant, Appellant.

5la

First Circuit's Order & Opinion Staying the Mandate

ORDER ON MOTION FOR

ORDER STAYING MANDATE

MEMORANDUM AND ORDER

Entered: March 4, 1983

The court grants the motion to stay mandate, inasmuch

as it is assented to, but, since it wrote no opinion on the

motion for rehearing, it feels called upon to make a brief

response to paragraph 5 of counsel's affidavit, filed in sup-

port of the motion, on the assumption that petitioner may

later see fit to repeat some of its underlying allegations as

made in the petition for rehearing.

(1) Petitioner alleged in that petition,

“. . . the only claims asserted against Mr.

Rokowsky were for breach of contracts to buy real

estate.”

This is a flat misstatement; the Gordons also alleged, at

the start, fraud in the inducement of the renegotiated

contracts. (Rokowsky’s asserted access to $6 million).

(2) In the petition for rehearing petitioner asked why

he should accuse himself of fraud.

Petitioner’s counsel asked the district court the same

question, and the court replied, “[Y]Jou tried to pull your-

self out of the hole with some additional aspects of fraudu-

lent conduct.” What this meant was that petitioner, finding

himself in serious trouble with respect to the $6 million,

sought to show he originally had the $16 million as repre-

sented, but lost it, due to shrinking real estate market.

This, too, proved to be false. The court warrantably found

52a

First Circuit’s Order & Opinion Staying the Mandate

that fraud in respect to both sets of contracts had becc

at issue.

(3) In the petition for rehearing petitioner asserted

had been “tried by ambush;” a contention now phrased

paragraph 5(a) of the motion, “... the newly-added cli

[was] without prior notice.”

In point of fact, when the motion to add the issue

fraud in respect to the original contract was made n

trial, the court, in denying it without prejudice, stated

“At the closing of this case I won’t preclude

from raising it again.”

Surely this was full warning.

(4) Petitioner says in paragraph 5(a) of his mot

that he was denied “opportunity to be heard.”

In fact, at the close of the case, when the motion

amend was renewed, the court said to Rokowsky’s coun:

with reference to the $16 million,

“Tl think that the whole area of whether he |

the money, and when he had the money, Vv

addressed by you in your principal case.

“ |. What would you have discovered that

didn’t discover? You have climbed up one s

and down the other in every aspect of this cas

To this counsel offered no substantive reply.

By the Court:

/s/ DANA H. GALLUP

Cle

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.