Opposition — Rokowsky v. Gordon

ae

Office- Supreme Court

© Court

Phen sia

MAY 2

3 19¢

No. 82-1735. Sean "

td . STr) =

Clin =

In the og

Supreme Court of the United States.

OcroBerR TERM, 1982.

ISAAC ROKOWSKY,

PETITIONER,

ROBERT GORDON, LOLA JACOBSON anpb

LOLA JACOBSON, as EXECUTRIX OF THE ESTATE OF

MAURICE GORDON,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIRST CIRCUIT.

Brief of Respondents in Opposition.

Davip G. HANRAHAN,”

ArTHUR M. GILMAN,

MICHAEL EBy,

GitMAN, McLaucHLin & HANRAHAN,

Ten Post Office Square,

Boston, Massachusetts 02109.

(617) 482-1900

* Counsel of Record

BATEMAN & SLADE, INC. BOSTON, MASSACHUSETTS

Questions Presented.

As the respondents set out more fully in the following state-

ment of the case, the petitioner has misstated the facts in his

' formulation of the questions presented. The trial was not sole-

ly “breach of contract actions,” but from its inception includ-

ed fraud claims.

Also, petitioner attempts to create the impression that he in-

tentionally withheld evidence in reliance on the court's denial

of the motion to amend under Fed.R.Civ.P. 15(b) without

prejudice. However, when given the opportunity on numer-

ous occasions to demonstrate what additional evidence he

would have adduced he utterly failed to do so. In fact, the

district court found his assertions of prejudice to be insubstan-

tial.

Finally, contrary to petitioner’s claim that he objected to

the assertion of the new issue at every opportunity, he injected

the new issue, admitted his fradulent conduct, failed to object

to evidence on the new issue and actively participated in direct

and cross-examination on the new issue both before and after

the motion to amend was first raised.

In these circumstances, there are simply no questions fairly

presented for this Court’s review. However, the issues which

we address in this brief are:

1. Where a party opens and injects a new issue, not inciden-

tally or as a collateral matter, directly and fully litigates it,

and fails to demonstrate undue or material prejudice, the

allowance of a Rule 15(b) motion is not an abuse of discretion.

2. Where these circumstances arise in the context of a jury-

waived trial, petitioner is neither denied a right to trial by jury

or deprived of his right to due process of law.

Table of Contents.

Statement of the case

The facts

Pretrial

The trial

The district court’s decision

Postjudgment proceedings

First Circuit Court’s decision

Reasons for denying the writ

I. There is no conflict between the circuits regarding

the standards to be applied in allowing a Rule 15(b)

amendment

Rule 15(b) standards

A. Injection of the issue by the party

B. Admissions during the trial

C. Where there is no admission and the party

against whom the motion was allowed did not

inject the new issue, the circuits require suffi-

cient facts to demonstrate that the parties had

reason to understand or were fully apprised

that the new issue was in the case

1. The circuit and district courts did consider

and correctly ruled that petitioner was not

prejudiced by the amendment

9. The cases cited by the petitioner are distin-

guishable on their facts and do not support

his contention that there is a conflict among

the circuits

3. Merely opposing a Rulel5(b) motion when

presented will not preclude trial by implied

consent when the issue was fully litigated

prior to and after opposition to the motion

oOo 13 @®OodWo Wo = =

12

14

15

ii TABLES OF AUTHORITIES CITED.

II. Petitioner was not deprived of his Seventh

Amendment right to trial by jury

III. The petitioner was not deprived of due process

by the allowance of the amendment after trial

Conclusion

Tables of Authorities Cited.

CASES.

Arber v. Essex Wine Corporation, 490 F.2d 414 (6th

Cir. 1974)

Bettes v. Stonewall Insurance Co., 480 F.2d 92 (5th

Cir. 1973)

Bowles v. Bennett, 629 F.2d 1092 (5th Cir. 1980)

Cohen Sons & Co. v. Koch, 376 F.2d (1st Cir. 1967)

deHaas v. Empire Petroleum Co., 435 F.2d 1223 (10th

Cir. 1970)

Dunn v. TWA, Inc., 589 F.2d 408 (9th Cir. 1978)

Fidelity and Deposit Co. v. Krout, 157 F.2d 912 (2d

Cir. 1946)

Hall v. National Supply Company, 270 F.2d 379 (5th

Cir. 1959)

Heyman v. Klein, 456 F.2d 123 (2d Cir. 1972)

Jakobsen v. Massachusetts Port Authority, 520 F.2d

810 (1st Cir. 1975) 12,

J.C. Millett Co. v. Distillers Distributing Corp., 258

F.2d 139 (9th Cir. 1958)

Johnson v. Harrah’s Club, 30 F.R. Serv.2d 1153 (9th

Cir. 1980)

19

& &

22, 23

17, 26

14,15

ll

23

TABLE OF AUTHORITIES CITED. iii

Jurinko v. Edwin L. Wiegand Company, 477 F.2d

1038 (3d Cir. 1973) 10, 11, 26

Keeler v. Hewitt, 697 F.2d 8 (1st Cir. 1982) 13n, 14, 19

Kingsley v. Baker/Beech-Nut Corp., 546 F.2d 1136

(5th Cir. 1977) 13

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

Cir. 1976) 16

Lomartira v. American Automobile Insurance Co., 371

F.2d 550 (2d Cir. 1967) 10n

MBI Motor Company, Inc. v. Lotus/East, Inc., 506

F.2d 709 (6th Cir. 1974) 13, 15

Mineral Industries & Heavy Construction Group,

Brown & Root, Inc. v. Occupational Safety and

Health Review Commission, 639 F.2d 1289 (5th

Cir. 1981) 26

Nerenhausen v. Chicago, Milwaukee, St. Paul & Pa-

cific R.R. Co., 479 F.Supp. 750 (D. Minn. 1979) 18

Niedland v. United States, 338 F.2d 254 (3d Cir. 1964) 15, 16, 18

Northern Oil Company v. Socony Mobil Oil Company,

347 F.2d 81 (2d Cir. 1965) 26

Scholl v. Scholl, 80 U.S. App. D.C. 292, 152 F.2d 672

(1945) 21

Schultz v. Cally, 528 F.2d 470 (3d Cir. 1975) 15

Smith v. Cushman Motor Works Co., 178 F.2d 953

(8th Cir. 1950) 21

T.J. Stevenson & Co., Inc. v. 81,193 Bags of Flour,

629 F.2d 338 (5th Cir. 1980) lln, 18, 26

Vargas v. McNamara, 608 F.2d 15 (1st Cir. 1979) 13n, 14

Wallin v. Fuller, 476 F.2d 1204 (5th Cir. 1973) 13

iv TABLE OF AUTHORITIES CITED.

STATUTES

United States Constitution

Seventh Amendment 19, 20, 22

Federal Rules of Civil Procedure

Rulel5(b) 3, 5, 6, 7n, 9 et seq.

Rule 16 10

MISCELLANEOUS.

3 Moore’s Federal Practice § 15.13[1] 10

5 Moore’s Federal Practice § 38.41 (1971) 21, 23

5 Moore’s Federal Practice, { 38.41 (2d ed. 1982) 21

No. 82-1735.

In the

Supreme Court of the United States.

Ocrosper TERM, 1982.

ISAAC ROKOWSKY,

PETITIONER,

v.

ROBERT GORDON, LOLA JACOBSON anpb

LOLA JACOBSON, as EXEcUTRIX OF THE EsTATE OF

MAURICE GORDON,

RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIRST CIRCUIT.

Brief of Respondents in Opposition.

Statement of the Case.

The Facts.

In early 1974, Rokowsky was negotiating a contract with

the respondents to purchase twenty-eight office buildings in

downtown Boston, owned or controlled by respondents here-

in, for a price of $42 million, to be comprised of $6 million to

be paid in cash, by assumption of an existing $20 million mort-

2

gage and a $16 million purchase money mortgage to be taken

back by the respondents (A. 3a). Because the respondents ob-

jected to taking back a purchase money mortgage, the price

was reduced to $38 million, to be comprised of $16 million in

cash and the assumption of the $22 million balance of existing

first mortgages {A. 3a). The petitioner represented to the

respondents that he had $16 million and that it was coming

from a wealthy British investor, by the name of Freshwater

(A. 4a). The respondents believed this representation, and, in

reliance thereon, removed the twenty-eight office buildings

from the market (A. 36a).

The contract for a purchase price of $38 million was execu-

ted in February, 1974 with a closing scheduled for June, 1974.

Thereafter, as the district court found:

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 that Rokowsky in fact never in-

tended 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 concerning 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 incurred considerable expense to con-

summate it, and then to take advantage of a deteriorating

real estate market to renegotiate a deal more favorable to

himself and his associates.

3

Pursuant to his fraudulent scheme, in June, 1974, and fre-

quently thereafter, Rokowsky falsely stated that Freshwater

would provide him with $6 million in cash provided that the

Gordons took back a purchase money mortgage for the $10

million balance (A. 4a). It should be noted that the respond-

ents had surrendered $4 million at the outset to avoid any pur-

chase money mortgage (A. 4a).

Relying on Rokowsky’s statement that he had the $6 million,

the respondents agreed to revise the contract by taking back a

$10 million purchase money mortgage subject to the release of

the deposit which was needed to pay real estate taxes. For

this, Rokowsky received a non-negotiable promissory note.

Thereafter Rokowsky stated he did not have the $6 million

available and requested a further modification of the cash pur-

chase price. The petitioner was never able to close the trans-

action in any modified form. Later, the Gordons found a new

purchaser but at a reduction in the purchase price of

$6,468,723 (A. 4a).

Pretrial.

Contrary to petitioner's contention, the pre-trial issues were

not limited to a claim of breach of contract to buy real estate.

The pre-trial orders clearly raised the question of petitioner's

fraudulent inducements of the renegotiated contracts, i.e.,

Rokowsky’s assertion that, although he could not get $16

million from Freshwater, he would have $6 million (A. 51a).

The Trial.

The circuit court’s summary of the trial testimony leading to

the motion to amend pursuant to Rule 15(b) is as follows:

No question was raised with respect to the $16 million

commitment. However, during trial, Rokowsky himself

4

constantly asserted it, possibly in connection with his con-

cession that from the start he sought to renegotiate the

contract by telling untruths. When this unabashed con-

duct ultimately induced the court to voice its surprise,

counsel responded,

“It is our position, it is perfectly sound business prac-

tice 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 pro-

fession 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 commit-

ment.” 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 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 un-

reasonable for the court to combine this admitted con-

5

duct 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 induce-

ment.

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.

(A. 5a-6a) (footnote omitted).

Rokowsky’s injection of the issue and his admission noted

above prompted respondents’ attorneys to move to amend the

pleadings under Rule 15(b) to conform the pleadings to the pro-

of of fraud in the inducement of the original contract which

was, by then, already in the case. This was on the sixth day.

The trial court denied the motion at that time without prej-

udice and stated “at the closing of this case, I won't preclude

you from raising it again” (A. 52a).

Notwithstanding petitioner's objection to the allowance of

the motion, counsel for both parties continued to interrogate

witnesses on Rokowsky’s precontract representations, his in-

tent and the respondents’ reliance. Petitioner failed to object

to such evidence being introduced or to move to strike or limit

such evidence (A. 6a, 7a, 32a-36a).

At the conclusion of the trial, respondents reinstated their

motion to amend under Rule 15(b). The court heard argu-

ment from both sides and notified counsel that it was taking

the matter under advisement. Despite petitioner's belated

contention below and in his petition to this Court that he was

denied an opportunity to be heard, it is clear that the trial

judge notified him at the conclusion of the case that:

6

I think that the whole area of whether he had the

money, and when he had the money, was addressed by

you in your principal case.

. . . What would you have discovered that you didn’t

discover? You have climbed up one side and down the

other in every aspect of this case.

(A. 9a, 52a.)

Not only did petitioner's counsel not offer any substantive re-

ply, but he said nothing on the issue for the eleven months be-

tween the trial’s conclusion and the court's decision (A. 9a).

The istrict Court's Decision.

In light of the ample evidence cf fraud introduced by peti-

tioner concerning his false statements regarding his present in-

tention to pay $16 million in cash and his capacity to raise that

sum, the district court permitted the respondents’ amendment

in order to conform to the evidence under Federal Rules of

Civil Procedure 15(b) (A. 28a).

Postjudgment Proceedings.

Following judgment, petitioner's new counsel filed motions

for a new trial. The district court found that the issue of fraud

in the inducement had been fully tried and recognized as an

issue in the case by petitioner's attorney. With respect to peti-

tioner’s contention that he was prejudiced because he would

have offered additional evidence and conducted additional

discovery on the issue of reliance, the district court carefully

7

considered the proferred evidence and after a careful analysis,

found it to be insubstantial (A. 35a-36a).'

First Circuit Court’s Decision.

The petitioner at pages 7 and 8 contends that the First Cir-

cuit in affirming the judgment held that the sole test for deter-

mining implied consent was whether evidence was introduced

that went only, as distinguished from incidentally, to the new

issue, and whether that issue had been fully tried. Petitioner

further states that the court declined to consider whether addi-

tional evidence might have been offered had the issue been

pleaded and that an unpleaded cause of action may be in-

ferred solely on the basis of scraps of evidence gleaned from

the record and without regard to whether the opposing party

squarely recognized the claim was in issue. These contentions

are untrue.

The circuit court's opinion demonstrates that:

a. There was no debatable question presented that

fraud in the inducement had been established (A. 3a);

b. Rokowsky opened up and injected the new issue re-

garding the $16 million commitment into the trial

(A. 5a);

c. Rokowsky admitted his fradulent plan and scheme.

Indeed, his attorney attempted to defend his conduct as a

perfectly sound business practice (A. 5a, 6a);

'It is of interest that petitioner suggests that because the court initially

denied the motion to amend, he was somehow precluded from offering

evidence which he claims was then in his possession and which would have

resulted in dismissal of the fraudulent inducement claim. If there were such

evidence requiring dismissal it is beyond belief that petitioner never once

mentioned it either at the conclusion of the case when the Rule 15(b) motion

was argued fully by both sides, or in the post trial memorandum.

8

d. Rokowsky’s opening the issue was done as a fully

litigated matter and not incidentally or collaterally

(A. 6a);

e. Having ruled that the petitioner fully litigated an

issue raised first by him at trial and, further admitted by

him, the court went on to consider additional criteria

from which implied consent may also be found, i.e.,

whether evidence was introduced that went only, as

distinguished from incidentally, to the new issue. The

court ruled that evidence was introduced which only

went to the new issue. Rokowsky failed to object to

respondents’ inquiry into his intention not to perform the

original agreement and respondents’ reliance upon his

misrepresentation, and he affirmatively elicited

testimony on the new issue (A. 7a).

In addition to the district court's extensive treatment of the

issue of prejudice and its finding of lack of material prejudice,

the circuit court also recognized these issues. The circuit court

specifically stated that Rokowsky failed to respond to the

district court’s inquiry as to what additional evidence he might

have introduced, a failure that lasted for eleven months

(A. 9a, 52a).

The circuit court further noted that the petitioner did not

object at the time Robert Gordon testified that he had relied

on Rokowsky’s representations. The time to object was then

and not now. Of course, as pointed out by the district court,

this line of inquiry was pursued by petitioner at the trial (A.

33a, 34a).

9

Reasons for Denying the Writ.

I. THERE 1s No CONFLICT BETWEEN THE CIRCUITS REGARDING

THE STANDARDS TO BE APPLIED IN ALLow1NG A Rute 15(b)

AMENDMENT.

In an effort to create a conflict where there is none, the peti-

tioner contends that the First and Fifth Circuits, contrary to

other circuits, have adopted a principle that in Rule 15(b)

cases, consent can be “divined from snippets of evidence” in

the record that may relate to the unpleaded issue alone and

from a party’s unwitting failure to object to such isolated

testimony. The petitioner characterizes this alleged principle

as “a rule of inadvertent consent.” However, neither the First

Circuit nor the Fifth Circuit have adopted such a holding and

the suggestion that these circuits apply a rule of inadvertent

consent is wholly without foundation.

In order to make this point, petitioner intentionally dis-

regards the fact that the First Circuit found that petitioner had

introduced the new issue, admitted his fraudulent scheme and

that the new issue was fully litigated.

Moreover, in his disengenious attempt to create conflict,

petitioner has cited cases which are distinguishable on their

particular facts. Rather than conflict, there is uniformity

among the circuits on the factual basis necessary to support a

finding under Rule 15(b) that an unpleaded claim was tried by

express or implied consent of the parties.

Rule 15(b) Standards.

The circuit courts have constantly relied on the presence of

one or more of the following factors:

10

A. Injection of the Issue by the Party.

When the party against whom a Rule 15(b) motion has been

allowed has himself injected the new issue, the courts of ap-

peals uniformly uphold the allowance of the motion. The

Third Circuit equates injection of the issue by a party with

that party’s having given implied consent to the trial of that

issue. Thus in Jurinko v. Edwin L. Wiegand Company, 477

F.2d 1038 (3d Cir. 1973), a decision wholly ignored by peti-

tioners, the court at the appellate level amended the pleadings

under Rule 15(b), where the defendant during the course of

presenting its defense injected the new issue. The Third Cir-

cuit said at 1045 n.18:

We do not think that we are foreclosed from consider-

ing this theory of recovery for the issue of discrimination

against women as a class was injected into the case by

Wiegand and was therefore tried below with Wiegand’s

implied consent. By its own admission and evidence,

Wiegand discriminated against women by employing a

stereotyped characterization that women were physically

unqualified for the jobs the plaintiffs had applied for.

See, note 11, supra. See F.R.Civ.P. 15(b) and 16. Rule

16 should be read in light of Rule 15(b). See 3 Moore’s

Federal Practice §15.13[1], at 982 and note 11 cited to

that text. (Emphasis supplied.) ?

The Third Circuit was persuaded that implied consent

flowed from defendant’s having raised the issue in the first in-

stance and having introduced evidence on it.

* Accord, Hall v. National Supply Company, 270 F.2d 379, 382-383 (5th

Cir. 1959); Lomartira v. American Automobile Insurance Co., 371 F.2d 550

(2d Cir. 1967).

11

B. Admissions During the Trial.

A party’s admitting to illegal or improper conduct on an un-

pleaded issue mandates an amendment of the pleadings under

Rule 15(b). In the case of J.C. Millett Co. v. Distillers

Distributing Corp., 258 F.2d 139, 144 (9th Cir. 1958), the

court stated as follows:

However, at the trial on a long and pressing examina-

tion, one of the Importer’s ex-specialty men, who con-

tacted retailers to advertise the Distributor’s products,

admitted that he was ordered by the Importer to dis-

courage these retailers from placing orders with the

Distributor. This evidence is uncontradicted. Such

damaging action is a clear breach of paragraph 6 of the

contract in which the agent agrees to “promote the sales

of its products,” a provision necessarily implying an

agreement that the agent would not engage in activities

hurtful to the Distributor.

The Distributor moved for an amendment of para-

graph IX of its complaint to conform to this proof which

the court denied. We hold this was error.*

When a party injects the new issue into the case and/or ad-

mits to improper conduct, all the circuits addressing these

facts deem such conduct to be sufficient evidence of implied

consent. In Weigand and other cases cited above, the circuit

courts make no mention of whether the defendant “under-

stood” that the new issue was in the case. Introducing the

issue into the case and making admissions are the equivalent of

notice and knowledge.

*See also, T.j. Stevenson & Co., Inc. v. 81,193 Bags of Flour, 629 F.2d

338, 370 (Sth Cir. 1980).

12

C. Where There is No Admission and the Party Against

Whom the Motion was Allowed did Not Inject the New

Issue, the Circuits Require Sufficient Facts to Demon-

strate that the Parties had Reason to Understand or were

Fairly Apprised that the New Issue was in the Case.

The petitioner argues that the First and Fifth Circuits have

adopted a principle that consent can be “divined from snippets

of evidence” in the record that may relate to the unpleaded

issue alone and from a party's unwitting failure to object to

such isolated testimony. The petitioner characterizes this as

“a rule of inadvertent consent.” Unfortunately for petitioner's

argument, neither the First Circuit nor the Fifth Circuit have

adopted such a holding and the suggestion that these circuits

apply a rule of inadvertent consent is wholly without founda-

tion. This thesis is disproven when decisions of the First Cir-

cuit and Fifth Circuit are scrutinized in light of the particular

facts involved in each decision. An example of this is found in

Jakobsen v. Massachusetts Port Authority, 520 F.2d 810, 813

(1st Cir. 1975), where the First Circuit affirmed the trial

court’s refusal to allow a new defense by motion after the

presentation of evidence because there was insufficient

evidence that the parties had reason to understand the new de-

fense was in the case. On that point, the First Circuit said:

Doubtless, when there is no prejudice and when fair-

ness dictates, the strictures of this rule may be relaxed.

Under Rule 15 the district court may and should liberally

allow an amendment to the pleadings if prejudice does

not result. And if an affirmative defense is actually tried

by implied consent, the pleadings may be later made to

conform. Fed.R.Civ.P. 15(b). But the defense in ques-

tion was not tried by implied consent. Some of the

evidence received at trial was relevant to it as well as to

13

other issues — for example, exhibits showing the layout of

roads at the terminal and of the spot where plaintiff fell.

But plaintiff had no reason to understand that this issue

was in the process of being tried. Consent cannot

possibly be implied under such circumstances.‘ (Em-

phasis supplied.)

The Fifth Circuit is also clearly in accord with the Third,

Sixth and District of Columbia Circuits on similar facts. This

is demonstrated in Bettes v. Stonewall Insurance Co., 480

F.2d 92, 94 (5th Cir. 1973), and Kingsley v. Baker/Beech-Nut

Corp., 546 F.2d 1136, 1142 (5th Cir. 1977). These cases

establish that, in the absence of introducing the issue or admis-

sions, the First and Fifth Circuits scrutinize the record to

ascertain that the issue was litigated and that the parties had

reason to understand that the issue was in fact being tried. It

cannot fairly be said that there is any conflict between the

First, Fifth and the Third or any other circuits. Moreover,

whether the parties had reason to understand flows from fail-

ing to object to evidence going only to the new issue and from

participation by both parties in direct and cross-examination

on the new issue.

The Sixth Circuit, in MBI Motor Company, Inc. v.

Lotus/East, Inc., 506 F.2d 709, 711 (6th Cir. 1974), utilized

by petitioner in attempting to fabricate a conflict, cited the

Fifth Circuit cases of Wallin v. Fuller, 476 F.2d 1204, 1210

(Sth Cir. 1973) and Bettes v. Stonewall Ins. Company, supra,

for the proposition that a trial court may not base its decision

upon an issue that was tried inadvertently. Further, the Sixth

Circuit specifically relied upon Bettes for the principle that

*See also, Vargas v. McNamara, 608 F.2d 15, 17, 19 (1st Cir. 1979) and

Keeler v. Hewitt, 697 F.2d 8 (Ist Cir. 1982).

14

1. The Circuit and District Courts Did Consider and

Correctly Ruled that Petitioner was Not Prejudiced

by the Amendment.

The petitioner further contends that the First Circuit gives

no consideration to whether a Party could have offered addi-

tiona! probative evidence. In essence, petitioner appears to be

contending that the First Circuit ignores the issue of prejudice

when reviewing a Rule 15(b) case.

This contention is completely false. The First Circuit rul-

Moreover, the district court in the case at bar made an ex-

tensive inquiry into the issue of prejudice, i.e,. whether the

petitioner had additional evidence it could have introduced on

15

2. The Cases Cited by the Petitioner are Distinguishable on

their Facts and do Not Support his Contention that there

is a Conflict Among the Circuits.

The cases relied on by petitioner in an effort to create a con-

flict have absolutely no factual similarity with the case at bar

or the Fifth Circuit cases selected by him for comparison.

For example, in MBI Motors, supra, the court found that

the testimony that was adduced and relied upon by the plain-

tiff was relevant also to the pleaded issue, that the parties in

direct and cross-examination of witnesses concentrated only on

the pleaded issues and that such conduct along with the state-

ments made by counsel to the court during the trial persuaded

the Sixth Circuit that neither the plaintiff nor the defendant

believed that they were trying the new issue.

Similarly, the Third Circuit’s decision in Schultz v. Cally,

528 F.2d 470 (3d Cir. 1975), is not in collision with the First

Circuit’s ruling in this case.

In Cally, the parties tried a state common law claim. There

was in fact no diversity of citizenship and substantive facts

necessary to support federal question jurisdiction were neither

pleaded nor tried. On an incomplete record the circuit court

remanded the case for further hearings on the question of the

existence of federal jurisdiction and the propriety of exercising

pendant jurisdiction. There was simply no adequate basis on

this limited record for the appeals court to make a determina-

tion under Rule 15(b). Cally, therefore, is in marked contrast

to the case at bar.

Moreover, it is apparent that on similar facts the First Cir-

cuit would have reached the same result as the Third Circuit

in Cally. Compare Jakobsen v. Massachusetts Port Authority,

supra at 12. Also compare Cally with Niedland v. United

States, 338 F.2d 254, 258 (3d Cir. 1964) cited by Cally. In

Neidland the court found that the unpleaded issue had been

16

litigated. It did so because “the defendant not only stood

silently by when the evidence was offered on behalf of the

plaintiff, but also vigorously defended on this issue.” Jd. at

259.

Similarly, plaintiff’s reliance on Laffey v. Northwest Air-

lines, Inc., 567 F.2d 429, 478 & n.370 (D.C. Cir. 1976), is mis-

placed. In a five-week trial, the party against whom the Rule

15(b) motion was sought had only appeared in court on two

occasions and had not even introduced evidence. Moreover,

the plaintiff had been joined as a nominal party originally and

the record was devoid of any facts which could have placed

that defendant on notice that a new issue was in the case. On

that factual basis, the District of Columbia Circuit found that

there was absolutely no basis for allowing a Rule 15{b) motion.

It is misleading in the extreme for petitioner to have selec-

tively culled cases having absolutely no factual similarity with

the facts before the First Circuit in the case at bar. It is

manifestly clear that the First and Fifth Circuits would, and

have, reached the same results on similar facts.

3. Merely Opposing a Rule 15(b) Motion when Presented

will Not Preclude Trial by Implied Consent when the

New Issue was Fully Litigated Prior to and After Op-

position to the Motion.

Prior to the filing of the Rule 15(b) motion on the sixth day

of trial, the petitioner had injected the new issue, had ad-

mitted his fraudulent scheme and practice, had failed to object

to respondents’ inquiry as to his intention not to perform and,

indeed, actually elicited affirmative testimony to the effect

that the respondents relied on the so-called Freshwater com-

mitment (A. 5a-7a). When the motion to add the issue of

fraud in the inducement of the original contract was made,

the court, in denying it without prejudice, stated “at the close

17

of this case, I won’t preclude you from raising it again.”

(A. 52a.)

Thereafter, the petitioner failed to object, and, indeed par-

ticipated in interrogation of witnesses on the new issue (A. 7a,

33a-35a, 36a). In reply to petitioner’s argument below that

the mere fact of their opposition to the motion to amend pre-

cluded the allowance of a 15(b) motion, the First Circuit said:

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

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

1228-29; Cohen Sons ¢> Co. v. Koch, 1 Cir., 1967, 376

F.2d 529, 632-33. (A. 6a-7a) (emphasis supplied) (foot-

note omitted).

From the above language, it is clear that the court does not

“stand the meaning of consent on its head” as petitioner

argues. Rather, it is the petitioner who is confusing the issue

and intentionally misinterpreting the meaning of implied con-

sent.

In the face of a litigant’s having injected the new issue, hav-

ing admitted an intent to defraud, failing to object to evidence

bearing only upon the new issue and himself participating in

direct and cross-examination on the unpleaded issue, the sim-

ple act of opposing the motion can never be deemed to relieve

petitioner from the consequences of his conduct prior to and

after the motion to amend was raised. To hold otherwise

would render Rule 15(b) a nullity.

18

In accord with this manifestly proper view of Rule 15(b) are

not only the cases cited by the First Circuit from the Ninth

Circuit and Tenth Circuit, but also Niedland v. United States,

supra, and T.J. Stevenson and Co., Inc. v. 81,193 Bags of

Flour, supra at 629 F.2d 370, the Third and Fifth Circuits

respectively.

The petitioner has intentionally confused this issue by citing

cases in which parties have consistently objected to introduc-

tion of evidence on the new issue, thus negating any implied

consent. In the case at bar, as the district court and the circuit

court have found, there was full participation in the actual

trial of the new issue throughout the case. Petitioner can cite

no case in which a party, having fully litigated the new issue,

has defeated the application of Rule 15(b) by the simple expe-

dient of subsequently objecting to the allowance of the motion

to conform to the proof already in the case.

Petitioner's reliance on Nerenhausen v. Chicago,

Milwaukee, Si. Paul & Pacific R.R. Co., 479 F. Supp. 750 (D.

Minn. 1979) is wholly misplaced and underscores their

desperate attempt to create conflict where there is none.

Nerenhausen was an employee suit against the railroad under

the Federal Employers Liability Act. Because the injury in-

volved equipment manufactured by Westinghouse, the rail-

road impleaded Westinghouse as a third-party defendant. Not

until after opening arguments did the plaintiff seek to move in

accordance with Rule 15(a) to join Westinghouse as a direct

party defendant. That motion was denied and the trial went

forward with Westinghouse relying on the fact that its only

potential liability was to the third-party plaintiff as an indem-

nitor. After the jury rendered a verdict in the amount of

$150,000 to the plaintiff and in the amount of $75,000 against

Westinghouse as an indemnitor, plaintiff moved under Rule

15(b) to seek a claim directly against Westinghouse. That mo-

tion was properly denied by the district court and we believe it

is obvious that those circumstances have absolutely no bearing

19

upon the case at bar. The entire trial proceeded on the basis

that Westinghouse need only defend on the third-party action.

The remaining district court cases cited are of no assistance

to petitioner. They all contain factual situations wherein the

opposing party immediately objected to any evidence relating

to the new issue, thus negating any potential finding of im-

plied consent. In Keeler v. Hewitt, supra, the First Circuit

demonstrates that it is in accord with all of the cases cited by

petitioner. There, the First Circuit did not find implied con-

sent when the defendant repeatedly objected to the introduc-

tion of any evidence bearing upon the new issue.

The suggestion that the First Circuit ruling in all the cir-

cumstances of this case “is a summons to trickery by litigants in

search of a winning theory” is an unfounded affront to that

court, especially where petitioner blatently introduced evi-

dence at the trial which showed that he had consistently and

continuously lied to the respondents and subsequently lied to

the district court concerning his intention to pay $16 million of

the purchase price in cash and concerning the availability of

cash for that purpose (A. 16a). To contend, as petitioner does,

that he should be relieved of the consequences of his admitted

fraud and scheme because he subsequently objected to the

allowance of a Rule 15(b) motion designed to conform the

pleadings to the evidence of his fraud is ludicrous and deserves

no judicial consideration whatsoever.

Il. Perrrioner was Not DepriveD OF HIS SEVENTH AMENDMENT

RicHt To TRIAL BY JuRY.

In setting the tone for his Seventh Amendment argument,

petitioner does not proceed from the facts in this case. Rather,

deliberately ignoring them, he postulates at page 16 of his peti-

tion that the district and circuit courts ruled that a party’s fail-

20

ure to object to evidence that later turned out to bear upon an

unpleaded cause of action was alone sufficient to constitute a

waiver of the Seventh Amendment and that that ruling placed

the First Circuit in conflict with other circuits.

The petitioner again deliberately ignores the findings and

rulings of the district court and the First Circuit that he in-

jected the new issue, admitted his fraudulent scheme, failed to

object to evidence on the new issue and in fact vigorously par-

ticipated in both direct and cross examination on the new

issue. It is so plain from a simple reading of both the district

court’s and circuit court’s opinions that one wonders why peti-

tioner insists on trying to force this case into a set of facts

which are not in accordance with reality. The case before the

First Circuit was one in which a litigant at the outset waived a

trial by jury on acontract claim and an issue of fraud in the in-

ducement of the renegotiated contract. In that context, he

blatently admitted that he committed fraud in the inducement

of the original contract. That admission further led to direct

and cross-examination on every aspect of the new fraud issue

both before and after respondents made their motion under

Rule 15(b).

The petitioner did not raise the question of a jury trial when

the judge said he would permit the Rule 15(b) motion to be

raised again at the end of the case. The petitioner did not

raise the issue of a jury trial when, at the close of the case, the

trial judge heard argument on the Rule 15(b) motion and ad-

vised counsel that he was taking the matter under advisement.

Moreover, the petitioner never raised the question of a jury

trial in his post-trial memorandum. In short, the First

Circuit’s ruling that “this is not a case where the amendment

called for a further trial” and hence there was no deprivation

of a jury trial, is fully in accord with the authorities.

The 6th Circuit’s opinion in Arber v. Essex Wire Corpora-

tion, 490 F.2d 414, 423-424 (6th Cir. 1974) is squarely in point

21

on this question. After the close of the evidence in that case,

the court indicated to the parties that the federal cause of ac-

tion was still open, that he had heard evidence on the matter,

and that the parties should submit briefs addressing the merits

of the federal cause of action because, in his final judgment, he

would consider whether to reinstate the federal action or limit

the case to the state claim. In affirming the trial court, the cir-

cuit court stated that by so advising the parties, trial court was

not obligated to impanel a jury when it decided to reinstate

the federal claim after the case had been tried.

In reaching its conclusion, the Sixth Circuit held:

When new legal issues arise during the course of a non-

jury trial, they can certainly be determined by the court

with the express or implied consent of the parties. Scholl

v. Scholl, 80 U.S.App.D.C. 292, 152 F.2d 672 (1945);

Fidelity and Deposit Co. v. Krout, 157 F.2d 912 (2d Cir.

1946); Smith v. Cushman Motor Works Co., 178 F.2d

953 (8th Cir. 1950). See generally, 5 Moore’s Federal

Practice § 38.41, 329 (1971). Here appellants’ counsel

not only failed to suggest to the court that the revived

federal claims raised new legal issues, but also appears to

have agreed to trial by the judge alone of all issues on the

10b-5 claim.

Id. at 423.

In 5 Moore’s Federal Practice, $38.41 (2d ed. 1982) at

38-371, the following comment and analysis is made:

If the new issue, although not raised by the pleadings, is

legal, but is tried to the court by the express or implied

22

consent of the parties and without any demand for jury

trial having been made at the time the new issue was in-

jected into the case, any right of jury trial has been

waived and a party may not thereafter properly contend

that he was denied his constitutional right of a jury trial.

(Footnote omitted.)

It is critical in the consideration of this issue to distinguish

between an amendment to conform pleadings to the evidence

already introduced, and an amendment to permit the propo-

nent to thereafter introduce evidence on a new factual issue.

The express or implied consent which permits an amendment,

subsequent to trial, to conform to the evidence is also held to

bar the defendant from subsequently demanding a jury trial

on those same issues. 5 Moore’s Federal Practice, supra.

It is difficult to conceive of a more apparent waiver of a jury

claim in a Rule 15(b) context than in the case at bar. Rokow-

sky was on notice that his fraudulent conduct was an issue in

the case, and, having waived a jury, opened the door on his

plan to defraud the Gordons by his own admissions.

As with the prior issues, petitioner seeks certiorari by citing

cases which on their facts have no applicability to the case at

bar.

The suggestion by petitioner that the First Circuit in this

case ignores basic Seventh Amendment teachings is unfound-

ed. Their own cases support the First Circuit’s decision.

Thus, for example, in Bowles v. Bennett, 629 F.2d 1092 (5th

Cir. 1980) the Fifth Circuit acknowledges that a jury trial can

indeed be waived by implication. In the particular facts of

that case, a trial judge tried to convince counsel to participate

in a combined hearing on an injunction and a trial on the

merits. Counsel continually refused to do so and after a

lengthy dialogue, flatly informed the court that he was not in a

23

position to agree to combining the hearing on the injunction

with a final submission. Notwithstanding this clear refusal to

a trial on the merits, the court rendered a final judgment.

Under these circumstances, the rule in Bowles has no ap-

plicability to this case.

In Heyman v. Klein, 456 F.2d 123 (2d Cir. 1972) a trial

judge intent upon expediting a jury-waived trial, on motion,

struck the defendant’s demand for jury which had been timely

filed as part of the defendant’s answer. At a time when his

answer was not yet due to be filed, defendant’s counsel stood

silent when the trial judge said t’iat he would try the case

without a jury. However, in his answer, the defendant timely

claimed a jury. The Second Circuit held that under these cir-

cumstances, waiver prior to the time for demanding jury trial

must be based upon nothing less than an affirmative repre-

sentation that the client has determined not to claim a jury

trial. The particular facts in Heyman have no bearing on the

case at bar and the principles enunciated therein do not apply

to the facts in this case.

Similarly inapposite is petitioner’s contention that the case of

Johnson v. Harrah’s Club, 30 F. R. Serv. 2d 1153, 1154 (9th

Cir. 1980) is squarely in conflict with the First Circuit's deci-

sion. There is absolutely no conflict between these two deci-

sions.

In that case,* the 9th Circuit found it was an abuse of discre-

tion for the district court to have allowed the amendment of

the complaint because it found the issue had not been tried by

express or implied consent of the parties. The Court said at

1153: “In the instant case, A Title VII action was tried. The

breach of employment contract issue was only inferentially

suggested by the evidence adduced by the parties. It was an

abuse of discretion to allow amendment of the complaint.”

‘By local rule, the Johnson decision may not be cited as precedent in the

Ninth Circuit.

24

Accordingly, when the court ruled that the party had not

impliedly consented to the trial of the new issue, a fortiori the

party had not expressly or impliedly waived a jury trial on that

issue.

When a litigant during a non-jury trial introduces a new

issue, fully litigates that issue, makes admissions regarding it,

and fails to demand a jury trial despite numerous oppor-

tunities to do so, he has waived his right to a jury trial. It is

just this set of facts that the First Circuit dealt with.

IJ]. THe Perrrioner was Not Deprivep or Due Process BY

THE ALLOWANCE OF THE AMENDMENT AFTER TRIAL.

Petitioner claims that the First Circuit’s decision deprived

him of the right to due process of law. As with the other issues

raised in his petition, the facts are simply misstated and the

court’s decision distorted.

Despite the clear showing in both the district court's and cir-

cuit court’s opinions that this is a case in which petitioner first

injected the issue, made admissions concerning his fraud in the

inducement and fully litigated the matter, petitioner insists

that the only notice he received at trial were “two scraps of

evidence which he reasonably believed related to claims

already in issue.” That contention is an absolute misstatement

of fact.® Petitioner was put on notice in the pre-trial state-

® The petition for certiorari is not the first time that petitioner has taken the

opportunity to misstate the facts in the case. His previous attempt prompted

the First Circuit to comment:

“(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).” (A. 5a).

25

ment that the respondents were claiming fraud in the induce-

ment of the non-negotiable promissory note and renegotiated

contracts in July, 1974.

At the trial he injected the issue of fraudulent inducement of

the original contract and made admissions which disclosed that

his fraudulent scheme had commenced prior to the execution of

the original contract. It is of extreme importance that peti-

tioner’s counsel did not attempt to retreat from the admission

but rather brazenly told the court that it was petitioner's stand-

ard practice, that after executing a contract promising to pay

cash, he negotiated the cash price down by telling untruths to

the sellers (A. 5a). If this were not notice enough, when the

motion to add the issue of fraud with respect to the original con-

tract as well as the renegotiated contracts was made mid-trial to

conform the pleadings to the proof, the court, in denying the

motion without prejudice stated “at the closing of this case I

won't preclude you from raising it again.” (A. 52a.)

As the First Circuit stated, “surely, this was full warning.”

(A. 52a.)

Moreover, petitioner’s assertion that he possessed evidence

which he did not introduce and which would have led to a dis-

missal of the respondent’s claim, is without basis in the record.

Neither at the close of the trial, when queried by the district

court, nor in the post-trial memorandum did the petitioner

suggest any additional probative evidence that he would have

introduced on the new issue (A. 52a). In ruling on the peti-

tioner’s motion for a new trial based upon the alleged conten-

tion that he had additional evidence that was not introduced,

the district court found his assertion of prejudice to be in-

substantial and no basis for denying the motion to amend or

for granting a new trial on the issue.

The petitioner utterly failed to demonstrate any prejudice at

all, let alone any undue or material prejudice required by the

decisions of the various circuit courts on Rule 15(b) motions.

26

T.J. Stevenson & Co., Inc. v. 81,193 Bags of Flour, supra;

deHaas v. Empire Petroleum Co., supra; Mineral Industries ©

Heavy Construction Group, Brown ¢> Root, Inc. v. Occupa-

tional Safety and Health Review Commission, 039 F.2d 1280,

1294 (5th Cir. 1981); Northern Oil Company v. Socony Mobil

Oil Company, 347 F.2d 81 (2d Cir. 1965); Jurinko v. Edwin

L. Wiegand Co., supra.

At the conclusion of the case, the trial court told petitioner

that it wanted full argument on the Rule 15(b) motion. After

full argument by both sides, it informed counsel that it was

taking the motion under advisement and would decide it as a

part of the final decision. At that time petitioner should have

informed the court that he had additional evidence not yet ad-

duced, or that a continuance was necessary for such purpose.

See, Northern Oil Company v. Socony Mobil Oil Company,

supra at 83, 84.

It is too late for petitioner to say he was precluded from rais-

ing additional evidence because he did not know that the court

would change its mind and allow the amendment. The

fallacy of this argument lies in petitionez’s attempt to make it

appear that the court changed its mind. It is apparent from

the record that the court never changed its mind. The denial

without prejudice and with the clear warning that the matter

would be reconsidered at the conclusion of the trial placed

everyone present on notice. Petitioner’s contention of depri-

vation of due process because of lack of notice is absurd when

he opened the issue, admitted the fraud and fully litigated that

issue and utterly failed to demonstrate any prejudice.

Conclusion.

Based upon the pleadings and the pre-trial statement, peti-

tioner was on notice that he would have to prepare for and

27

meet at trial a claim that he had made fraudulent misrepresen-

tations of fact which induced respondents to renegotiate the

original contract and deliver a non-negotiable note in the

amount of $640,000. During his direct testimony, petitioner

constantly referred to his admitted practice of making a con-

tract with a small deposit with the intention of ultimately

renegotiating that contract by telling lies to the seller in an ef-

’ fort to cause the seller to reduce the cash purchase price and

take back a purchase money mortgage.

After the trial court gave notice that respondents’ motion to

amend could be raised at the conclusion of the case, petitioner

continued by direct and cross-examination to litigate the new

issue. The trial court gave petitioner every opportunity to ar-

ticulate substantive objections to his considering as an issue in

the case the question of fraud in the inducement which peti-

tioner had fully tried. He failed to so do.

On these facts, there is unanimity among the courts of ap-

peals and not one would have reversed the trial judge’s find-

ings that the new issue was tried by the implied consent of the

parties. Furthermore, there is no conflict among the circuit

courts on any aspect of the judicial administration of Rule

15(b). Rather, all of the decisions relied upon by petitioner

can be clearly distinguished on their particular facts.

Where petitioner’s trial of the new issue resulted from his in-

jection of that issue and admissions of his fraudulent conduct

the First Circuit did not err in deeming that conduct to be a

clear waiver of a right to trial by jury. Petitioner was hardly a

victim of “federal rules invoked . . . in derogation of constitu-

tional norms.” If he were a victim at all, it was from self-

inflicted wounds.

28

We respectfully submit there is no basis upon which to grant

certiorari in this case and we ask the court to deny the petition.

Respectfully submitted,

DAVID G. HANRAHAN, *

ARTHUR M. GILMAN,

MICHAEL EBY,

GILMAN, McLAUGHLIN

& HANRAHAN,

Ten Post Office Square,

Boston, Massachusetts 02109.

(617) 482-1900

* Counsel of Record