Petition — U. S. Industries, Inc. v. Gregg
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IN THE
Supreme Court of the United States
OCTOBER TERM, 1983
>
U.S. INDUSTRIES, INC.,
a Delaware Corporation,
Petitioner,
—
F. BROWNE GREGG,
Respondent.
WILLIAM F. SONDERICKER, EsQ.
Attorney for Petitioner
299 Park Avenue
New York, New York 10171
(212) 207-1800
IN THE
Supreme Court of the United States
OCTOBER TERM, 1983
No. 76-2107
No. 81-5956
Petitioner,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Questions Presented
I. Should the doctrine of law of the case as applied in
Federal courts have barred retrial by a second U.S. District
Judge of plaintiff-respondent’s (“respondent”) state law claim
where respondent fully presented that claim at a first trial and
the first U.S. District Judge at the close of respondent’s case
after full review of the merits directed a verdict against re-
spondent but, pursuant to the requirements of Fed. R. Civ. P.
$4(b), the Clerk entered no judgment at that time because of
Il. Where respondent’s state law claims have been tried in
two separate trials aggregating over six months of trial time in
the U.S. District Court and where at the second trial the
District Court gave an erroneous jury instruction as to dam-
ages and erroneously excluded evidence, and both errors were
prejudicial to petitioner, is a new damage trial in favor of
respondent procedurally mandated in the federal courts by
“operation of law”, where the Court of Appeals can correct
the error by merely giving petitioner an appropriate credit by
mathematical calculation which, when properly made from the
record, will result in dismissal of the claim and will avoid a
protracted re-trial.
Ill. Did the Court below, contrary to the usual course of
judicial proceedings, and contrary to controlling authority of
this Court, and contrary to recent conflicting authority in the
Eighth Circuit improperly deny a new trial to petitioner and
improperly grant a new trial on damages to respondent, where
the district court committed reversible error, prejudicial to
petitioner, in giving erroneous jury instructions and in erro-
neously excluding evidence, where the claims and the counter-
claims, and the excluded evidence relating to the issues of
liability, impact and damages are all inextricably connected and
grow out of the same transactions.
iii
List of Subsidiaries and Affiliates, Pursuant to
-S. Sup. Ct. Rule 28.1
The list below sets forth all of USI’s principal operating
aries of subsidiaries are also listed; their names appear in-
dented beneath the parent company name. The location of
rere ae, aly eg agegneere All of the equity of
each subsidiary is owned by its immediate parent. Major
unincorporated divisions are also listed and identified as such.
Energy Equipment
; Axelson, Inc. (Tex.)
Wyatt Industries, Inc. (Tex.)
Steel Tank Construction Company (Tex.)
Industrial Products and Equipment
Jernberg Forging Co. (Ill.)
Rimco, Inc. (R.1.)
Unincorporated Divisions: Rau Fasteners; Leon Plas-
tics; USI Clearing; and Huron Tool.
Agribusiness ;
Big Dutchman (Int.) (Switzerland)
and approx. 20 sales subsidiaries
Big Dutchman (Nederland) B.V. (Netherlands)
Favorite Manufacturing Company (Pa.)
Foodcraft Equipment Company (Pa.)
Unincorporated Division: Agri-Business Company
Building Materials
Brown Moulding Company, Inc. (Ala.)
Columbia Lighting, Inc. (Wash.)
Duke City Lumber Company, Inc. (N.M.)
Dea al hh 8 oe
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si
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3
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4
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iv
Home and Commercial Furnishings
Anderson Hickey Company (Tex.)
Teters Floral Products Co. of Texas (Tex.)
Teters (Hong Kong) Ltd. (Hong Kong)
Unincorporated Divisions: M.W. Manufacturing; Pres-
colite; Columbia Lighting; Brookwood Furniture; - ,
Hammary Furniture; Belwood; and United Chair. i;
Mobile Homes, Equipment Distribution and Construction
A & S Building Systems, Inc. (Tex.)
Apparel, Footwear and Household Products ye
Oomphies, Inc. (Mass.) F
a
+, pa he, alia
USI Quebec Group, Ltd. (Quebec)
Young Squire, Inc. .
Unincorporated Divisions: Baylis Brothers; Enmont; 5
Talbott Knitting Mills; Fairmont; Shepard; Georgia 3
Boot; Poly-Tech; and Nevco.
USI Credit Corp. (N.Y.)
Credico Industrial Loan Company (Va.)
Fairfield Leasing, Inc. (N.J.)
Tide Leasing Company, Inc. (Tex.)
USI Capital and Leasing Southwest, Inc. (Tex.)
Caribbean Industrial Credit Corporation (P.R.)
Colonial American Life Insurance Company (La.)
Credico Financial, Inc. (N.J.)
City Agency, Inc. (Md.)
City Agency of Georgia, Inc. (Ga.)
City Agency of Mississippi, Inc. (Miss.)
Financial >
Diversity Insurance Company Ltd. (Bermuda) ;
TABLE OF CONTENTS
PAGE
Ceeetioms Prevented os 6 oy. cecadccewsccccscnccceses i
List of Petitioner’s Subsidiaries and Affiliates, Pursuant
to U.S. Sup. Ct. Rule 28.1.2... cc ccccccsccccccecs iii
RMT MNNNNIUD 4 p voc d csavcggtcuee coseaunnnues tis vii
Sg rrereer errr rrr rr rier ree ix
das ac ccvcebedeskbocssvececsecesse 1
I a'c'sls cv vcdbectacedibesceccbesccess I
JatioMiction TO Review........cccccccccccscvcccccess |
Statement of the Case ......iccccccccccccesescccees 1
Basis For Federal Jurisdiction In The United States
DU Comet oo o5 oc. cep iba side cb cdemesans bees -
Reasons For Allowance Of The Writ...............-. 5
POINT I. THE COURT BELOW DEPARTED
FROM THE USUAL COURSE OF JUDI-
CIAL PROCEEDINGS IN REFUSING
TO APPLY LAW OF THE CASE TO THE
7
“OPERATION OF LAW”. THE ERROR
WILL REQUIRE A THIRD TRIAL AND
WILL PREVENT THE JUST, SPEEDY
AND INEXPENSIVE DETERMINATION
oor). FF + Ry ee 11
POINT III. THE ELEVENTH CIRCUIT’S JUDG-
ING FOR RETRIAL PARTS OF B,
INTERLOCKING CLAIMS, COUNTER- a
CLAIMS AND ISSUES INVOLVING ¥
OVERLAPPING EVIDENCE IS AN UN- a
WARRANTED DEPARTURE FROM :
THE USUAL COURSE OF JUDICIAL &:
PPG PULSER dic cen od ovc.euesicvece 15
oe Seo PERE Sat RR 18 .
Appendix a
Opinion of the Court of Appeals, September 30, 1983 la “a
Seelien sf Se Comet Dees. December 15, S
PES 2 dws nc tees os se cbibek <ckstigedscesemdsabnce 35a
Judgment dated September 30, 1983 and issued Janu-
ne 3, TENG seco ccuneitnnsetnseandd (liad tes thne 37a ;
Order of District Court Directing Verdicts, February %
Fp MEE He tiden 0 biva SEdES Is ob Sedonineddiessudee 39a a
“s ; A
5 SEE 5 nos das 0. enkthe se 4ee cane -% khstemetns 40a
4 a
ix
TABLE OF AUTHORITIES
Cases PAGE
Abshire v. Seacoast Products, Inc., 668 F.2d 832 (Sth
UG DOOD Aaa Vitis eacetshe ve cnesdvends catugeeds 9
Addington v. Texas, 441 U.S. 418 (1979) ............. 6
Arizona v. California, __. U.S. ___., 103 S. Ct. 1382
INE CARE Fa SRC Sa, ale ey See Ale | Pees 9
v. Barron G. Collier, Inc., 65 F.2d 864 (8th Cir.
MET GAtGle Obes che ¢ Oban + nObabes Seceehes seeees 13
Beardshall v. Minuteman Press International, Inc., 664
a ae CR OUND cave decosbRave~d Ge'vbs wrens 6
Boeing Co. v. Shipman, 411 F.2d 365 (Sth Cir. 1969) (en
TN FOIE soo 0 ies occ hc et eign ccs eseccdctoccesvedsie 6
Canal Authority v. Ocala Mfg. Inc. and Packing Co.,
SOR Gee S51 GR RPO nde ch vepivec dcael sveces 6
Cann v. Ford Motor Co., 658 F.2d 54 (2d Cir. 1981),
cert. denied, 456 U.S. 960 (1982)... ........6.0005- 6
Commercial Credit Corp. v. Sorgel, 274 F.2d 449 (Sth
Cir.), cert. denied, 364 U.S. 834 (1960)............. 6
Danzig v. Virgin Isle Hotel, Inc., 278 F.2d 580 (3d Cir.
SOG a nb ns Moon Kbtewine ic cds 5 cet ane cbs ehee 7
Dep’t of Banking v. Pink, 317 U.S. 264 (1942)........
Disner v. Westinghouse Elec. Corp., No. 82-1078 (6th
oS ee aan as ee ey 6
Gallimore v. Missouri Pac. R.R. Co., 635 F.2d 1165 (Sth
Che. I96DD.. wvecicicp tis bie cck Seas peer Tea 9
_ Garrett v. Faust, 183 F.2d 625 (3d Cir. 1950), cert. =...
denied, 340 U.S. 931 (1951) .........-.-. é searaeee 14
Gasoline Products Co. v. Champlin Refining Co., 283
U.S. 494 (1931) ......... Koda boas margancerns: ©
Grace Lines, Inc. v. Motley, 439 F.2d 1028 (2d Cir. 1971)
Hayman Cash Register v. Sarokin, 669 F.2d 162 (3d Cir.
Index Fund, Inc. v. Ins. Co. of North America, 580 F.2d
1158 (2d Cir. 1978), cert. denied, 440 U.S. 912 (1979)
Kinnear-Weed Corp. v. Humble Oil and Refining Co.,
441 F.2d 631 (Sth Cir.), cert. denied, 404 U.S. 941
SPEER 6 Ste bs 000s sdin pan seu nate iahetia <0 céue
Loumar, Inc. v. Smith, 698 F.2d 759 (Sth Cir. 1983). ...
McDonald v. Johnson & Johnson, No. 82-1594 (8th Cir.
FEM TR WIR ow cc cdgccccccccvycduaeerenccchsdss
Marsh vy. Illinois Central R.R., 175 F.2d 498 (Sth Cir.
Mehra v. Bentz, 529 F.2d 1137 (2d Cir. 1975), cert
denied, 456 U.S. 960 (1982) ... 2.2... cece ec cceenee
Moe vy. Avions Marcel Dassault-Bregnet Aviation, No.
82-1256 (10th Cir. Jan. 30, 1984) ..........-.-0eees
Fire Ins. Co. v. Bryan & Hewgley, Inc., 195 F.2d
SOG Gis Che, 2950. on ok. ss cadens the acadevenese
New Orleans Ins. Ass’n v. Piaggo, 83 U.S. 378 (1873)
Plattner Implement Co. v. International Harvester Co.,
133 F.2d 376 (8th Cir. 1904) .........0seseeeeeeees
Price v. Greenway, 167 F.2d 196 (3d Cir. 1948) ........
Rigot v. Bucci, 245 So.2d $1 (Fla. 1971) .........-...
Roosth v. Lincoin Nat’l Life Ins. Co., 269 F.2d 171 (Sth
Cir.), cert. denied, 361 U.S. 919 (1959). ..........--
Schrader v. Prudential Ins. Co., 280 F.2d 355 (Sth Cir.
oe ee eer See Prey ET Tee re ode ovens
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PAGE
U.S. v. General Motors Corp., 323 U.S. 373 (1945). ... 1
U.S. v. United Smelting & Mining Co., 339 U.S. 186
(TDS) no ove ccccccccgescccccvcccccwseyscvececs o- 6,7
Westchester Fire Ins. Co. v. Hanley, 284 F.2d 409 (6th
Cir. 1960), cert. denied, 365 U.S. 869 (1961) ........ 14
Statutes
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BO tee © BSS fos occ ic cvcdsvecsvedcccsctvecads 4
BPR iMs BD ADED 5 cco cosccceducccccecccbscuncceven 4
Pe IOS 6.5 cog occcccccbeecwes eppemboebas- 6
FB Ate. © SOB. oc ev ccnccsctrcccccesececaccbeeces 12, 14
Treatises
C. Wright, A. Miller, E. Cooper & E. Grossman, Federal
Practice and Procedure (1981) ............+. Petes. fee Se Me
C. McCormick, Evidence (1972)...4..../ecsssssteves 6
Opinions Below
The opinions of the United States Court of Appeals for the
Eleventh Circuit are officially reported at 715 F.2d 1522 and
721 F.2d 345 (11th Cir. 1983) and are appended hereto.
Judgment Below
The judgment of the United States Court of Appeals for the
Eleventh Circuit was entered on September 30, 1983 and was
issued as a mandate on January 3, 1984, after the Court’s
ion on December 15, 1983, foliowing crosspetitions for
rehearing.
Jurisdiction To Review
The judgment of the Court of Appeals for the Eleventh
Circuit was entered on September 30, 1983. A timely petition
for rehearing was granted and, after rehearing, the Court
amended its opinion and the case was remanded for a new trial
in an opinion dated December 15, 1983.
. This petition for certiorari was filed within 90 days of the
date of the decision on rehearing and is timely. Department of
Banking v. Pink, 317 U.S. 264, 266 (1942). This Court may
review the judgment of a Court of Appeals remanding a case
373, 377 (1945); see American Society of Mechanical Engi-
neers, Inc. v. Hydrolevel Corp., 456 U.S. 556 (1982).
The jurisdiction of this Court is invoked under 28 U.S.C.
2
The facts and background of the litigation are reported in
the main opinion of the Court below (715 F.2d at 1526-1530).
Petitioner initiated litigation against respondent in June 1972
in the Delaware state court. Respondent removed the Delaware
action to the U.S. District Court in Delaware and in July 1972
filed his complaint herein in the U.S. District Court for the
Middle District of Florida—Ocala Division. The Delaware
litigation was ultimately dismissed in 1977 for want of jurisdic-
tion (see summary, 715 F.2d at 1527-1528).
This case first went to trial in Ocala, Florida in January,
1974 before Hon. C. William Kraft, Senior Judge of the
Eastern District of Pennsylvania sitting by designation. At the
first trial, respondent in a period of 15 days put in his full case
in chief. Respondent called numerous witnesses, introduced
over 200 trial exhibits, read extensively from pretrial deposi-
tions and submitted four supplemental trial memoranda. Re-
spondent had a full opportunity to present his entire case.
At the end of the 16th day of trial, respondent rested.
Petitioner thereupon moved for a directed verdict purspant to
Fed. R. Civ. P. 50(a) and submitted its written motion in
support thereof.
On the next day, February 6, 1974, Judge Kraft heard oral
argument for over four hours.
The following day, February 7, 1974, after due consideration
Judge Kraft granted petitioner’s motion and signed an order to
that effect which was duly docketed and entered.
Thereafter until February 15, 1974, petitioner presented its
defense to the remainder of respondent’s case. On February
19, 1974 the Clerk announced that the trial judge was unex-
pectedly ill and on February 26, fee pts oy ry
ordered a mistrial because of his to resume the trial.
Judge Kraft’s written order did not gf hn
ce ing red etm eo
- + _. Ad
Se le ee ee ee ee
3
counterclaims were yet unresolved, no judgment was entered at
that time. Fed. R. Civ. P. 54(b).
Over 18 months later, another U.S. District Judge took over
the case. Shortly before the commencement of the second trial
the second trial judge’s Clerk notified the parties by telephone
that the Court would retry the entire case, thus by implication
nullifying Judge Kraft’s order at the first trial granting peti-
tioner’s motion for a directed verdict.
The second trial began on September 15, 1975 and con-
cluded on February 19, 1976. The second trial judge, contrary
to Judge Kraft’s order, denied petitioner’s motions for a
directed verdict and refused to follow the “law of the case”
doctrine that once an issue is judicially determined it should
not be overturned by another judge of coordinate jurisdiction
in the same litigation.
Tins ‘cacusah sited baila chin euidndeied the gunn ‘eb, ub tore:
The jury returned a verdict in favor of respondent on one of
respondent’s previously dismissed counts (Count I of the
complaint).
The Court below refers only briefly to this aspect of the
case. In the one paragraph of the Court’s opinion devoted to
the point, the Court found that the second trial judge “was not
- 20ag— each sega cngesgerdbamecs 8 nett
that “[o}rdinarily law of the case only applies where there has
en gem emp ener gps
a
inp
4
additional consideration for respondent’s business that peti- a
tioner purchased. The jury’s verdict shows mathematically and u
conclusively that had petitioner been given the above stated
additional credit to which the Court below found it is entitled,
respondent was paid more than he gave up and hence sustained |
no damage. *
As to the third question presented, at the first trial, peti-
tioner did not complete the presentation of its counterclaim
because of the mistrial. At the second trial, petitioner com-
pleted its case, but the jury found against petitioner. The Court
of Appeals held that the second trial judge gave an erroneous
jury instruction (that respondent requested and to which peti- ‘
tioner objected) and had erroneously excluded or limited peti-
tioner’s evidence showing post-closing developments in the
business. Those developments relate both to petitioner’s de-
fenses of respondent’s claims of alleged liability and damage .
for fraud and to the issues of liability and damages raised by 4
petitioner’s counterclaims of fraud, all arising out of the same
transactions. The erroneous damage instruction and the district
court’s exclusion or limiting the use of material evidence of
what transpired in the businesses after the closing severely
hampered petitioner in proving fraud and fraud damages. The
Court of Appeals by separating these closely intertwined and
closely connected issues and by purporting to separate overlap-
ping proof relating to the issues of misrepresentation, impact
or liability, and damage has inequitably graiited respondent a
new trial on compensatory fraud damages alone and has at
once inequitably deprived petitioner of a fair trial of its
counterclaims for fraud arising out of the same transactions.
Basis For Federal Jurisdiction In the
United States District Court
’s complaint predicates jurisdiction on federal
laws (28 U.S.C. § 1331), The Federal Securities Act, 15 U.S.C.
§§ 77a et seq. and the Securities Exchange Act of 1934, 15
U.S.C. §§ 78a ef seg., and diversity of citizenship of the
parties, 28 U.S.C. § 1332. .
Reasons for Allowance of the Writ
POINT I
THE COURT BELOW DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS IN REFUSING
TO APPLY LAW OF THE CASE TO THE FIRST TRIAL
JUDGE’S DIRECTED VERDICT ON
COMMON LAW FRAUD.
The opinion below discloses the restrictive and erroneous
view that law of the case can only be applied in the federal
courts where a final judgment has been entered. That restric-
tive view is incorrect and is, in any case, inapplicable in the
present situation.
The doctrine of the law of the case is traditionally applied in
four different sets of circumstances:
Although a common label is used, at least four distinc-
tive sets of problems are caught up in law of the case
terminology. [1] Perhaps the most distinctive problems
arise from the desire of a single court to adhere to its own
prior rulings without need for repeated reconsideration.
[2] Another set of problems arises from the obligation of
every court to honor the rulings of a court that stands
higher in a hierarchical judicial structure; this obligation
is so fundamental that quite different principles must be
applied. [3] Still different problems emerge in regulating
the respect that one judge or court owes the rulings of
another judge or court in the same case or closely related
cases. [4] Finally, law of the case phrases «re occasionally
used to describe the consequences of failure to appeal an
issue or to preserve it for appeal. Each of these four sets
of problems requires separate exposition and analysis.
18 C. Wrigt, A. Miller, E. Cooper & E. Gressman, Federal
Practice and Procedure, § 4478 (1981) {hereinafter cited as
Wright\. The present case may be placed in the third of those
categories. In the instant case the second trial judge, by
NS ee si en
vi
4
*
4
‘
6
proceeding with a full and entire second trial including the
claims previously dismissed on directed verdicts, or-nly de-
clined to pay heed to the rulings of the first trial jadge in the
exact same case.* The Court of Appeals affirmance of these
actions is inconsistent with and departs from law of case
principles as interpreted by our federal court system.
First, the Court of Appeals clearly erred in interpreting U.S.
v. United Smelting & Mining Co., 339 U.S. 186, 198, 199
(1950), to require a final judgment before law of the case will
be applied. This interpretation does not make sense in light of
the numerous cases, only a few of which are cited below, in
which law of the case has been applied to ‘‘interlocutory’”’
rulings made during the course of a single suit.
As stated above, Judge Kraft’s directed verdict was a final
judgment on the common law fraud issue made after a full
* A related concern is the evidentiary standard which should have
been applied to respondent’s common law fraud claim. Boeing Co. v.
Shipman, 411 F.2d 365 (Sth Cir. 1969) (en banc) governs sufficiency of
evidence in the then Fifth Circuit courts. Judge Kraft must be pre-
sumed to have followed that standard. Similarly, a clear and convinc-
ing standard governs fraud cases in the Fifth Circuit. Kinnear Weed
Corp. v. Humb/e Oil and Refining Co., 441 F.2d 631 (Sth Cir.), cert.
denied, 404 U.S. 941 (1971); Roasth v. Lincoin Nat'l Life Ins. Co., 269
171 (Sth Cir.), cert. denied, 361 U.S. 919 (1959); Commercial
Corp. v. Sorgel, 274 F.2d 449, 455 (Sth Cir.), cert. denied,
’
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instructed
So.2d Rigot v. Bucci, see
Addington v. Texas, 441 U.S. 418, 424 (1979). the
decisions of the courts of appeals to and
FE3cok
7
presentation of Gregg’s claims, and, in any event, can in no
way be considered an interlocutory ruling under the definition
intended by the United Smelting Court. Because the case
involves multiple claims and counterclaims under Rule 54(b)
and because one of those claims (respondent’s contract claim)
and petitioner’s counterclaims were unresolved due to the first
trial judge’s illness, no judgment could be entered at that time.
Obviously, however, if the claims as to which orders granting
directed verdicts were entered were the only claims presented,
and there had been no other unresolved claims, the Clerk
would have been required to enter a judgment pursuant to Rule
58 of the Federal Rules of Civil Procedure. Danzig v. Virgin
Isle Hotel, Inc., 278 F.2d 580 (3d Cir. 1960).
In contrast, two factors in United Smelting militated against
a finding of finality: (i) “‘when the case was first remanded,
nothing was finally decided . . . the whole proceeding was
thereafter in fieri. . . when finally decided, all questions were
still open and could be presented’’ and (ii) the district court
granted a temporary injunction, the granting of which does not
amount to an adjudication of the ultimate rights in con-
troversy.
The rule defined in United Smelting can be appropriately
stated as follows:
A range of questions can be identified that cut across
the three aspects of law of the case doctrine summarized
above. One set of questions involves the quality of the
ruling that should stand as the law of the case. At times it
is said that only a “‘final’”’ ruling will do, but it is clear
that this concept cannot refer to the technical concepts of
finality applied to preclusion by judgment or appellate
jurisdiction. Instead, the concept is a functional one that
seeks to identify a determination intended to put a matter
at rest. Rulings that simply deny extraordinary relief for
want of a clear and strong showing on the merits, or that
are avowedly preliminary or tentative, do not trigger law
of the case consequences.
18 Wright, supra page 5 at § 4478.
Judge Kraft’s directed verdict was intended to put the
common law fraud issue at rest.
The Court of Appeals further erred in that it equated law of
the case with res judicata. The two are not the same especially
in the present context where respondent presented his full case
at a trial, and an order granting a directed verdict was entered
against respondent.
The ‘‘former Fifth Circuit’? has stated emphatically that
judges of courts of coordinate jurisdictions owe unlimited
respect to their fellow judges’ rulings in the same case.
The rule in most of the national courts that have passed
on the question [the court cites to Third, Seventh, Eighth
and Tenth Circuit cases] is that where a judge of the
United States District Court or judge assigned to a United
States District Court, while a case is on his calendar,
renders a decision and makes a judicial order in such case,
and thereafter the case is transferred to the calendar of
another judge of such District Court, the latter judge
should respect and not overrule such decision and order.
Stevenson v. Four Winds Travel, Inc., 462 F.2d 899, 904-905
(Sth Cir. 1972). This rule of deference is ‘‘essential to the
Plattner Implement Co. v, International Harvester Co., 133 F.
376, 378-379 (8th Cir. 1904).
.
me,
=,
,
9
kin, 669 F.2d 162, 169 (3d Cir. 1982) (‘‘[aJdherence to law of
the case principles is even more important where the transferor
judge and the transferee judge are not members of the same
court’’; district judge’s decision to transfer case was said to be
binding on transferee judge).
The Supreme Court has most recently defined law of the
case as follows:
[T]he doctrine posits that when a court decides upon a
rule of law, that decision should continue to govern the
same issues in subsequent stages of the same case. . .
under law of the case doctrine, as now most commonly
understood, it is not improper for a court to depart from
the prior holding if convinced that it is clearly erroneous
and would work a manifest injustice. See, e.g., White v.
Murtha, 377 F.2d 428, 431-432 (CA 5 1956).
Arizona v. California, __. U.S. ___., 103 S. Ct. 1382, 1391,
n. 8 (1983). The Supreme Court statement clearly reveals its
position that: (i) law of the case governs interlocutory decisions
made within a case; a final judgment is not necessary, (ii) the
successor judge cannot depart from a prior ruling unless
convinced that the prior ruling is ‘‘clearly erroneous and would
work a manifest injustice.’’ See also Loumar, Inc. v. Smith,
698 F.2d 759, 763 (Sth Cir. 1983) (Court allowed a second
District Court Judge to overturn the jurisdictional ruling made
by the first judge, but wrote as follows: “‘If the facts presented
10
party to the action had introduced a new Fifth Circuit prece-
dent).
Thus, while law of the case is not an inexorable, unbending
command, the second trial judge should not overrule the first
judge of coordinate jurisdiction unless the first judge’s ruling
is ‘‘clearly erroneous and would work a manifest injustice.’’
That is not the case here. The Court below recognizes impli-
citly that this is at best a close case. This petition is not the
place, of course, to argue the facts, but suffice to say that
respondent’s fraud claim is weak and barren of support. That
is why Judge Kraft dismissed it. Indeed the opinion of the
Court below on its face indicates the blatant inconsistency in
the major thrust’of respondent’s fraud claim. That claim is
that petitioner never intended to put working capital into
respondent’s former companies after petitioner acquired them.
**self-defeating’’ motive. In all events, the fact of the Court of
Appeals’s opinion shows on its face that respondent added $14
to $16 million in capital to respondent’s former companies and
that respondent earned almost one million dollars in con-
tingent stock in the first year from resulting profits of respond-
ent’s former companies. This was done with a business that the
jury valued at $4 million. Despite the jury verdict Judge Kraft
nevertheless found no fraud and the Court’s opinion below
virtually confirms that finding.
There should be a logical termination point to dispute
resolution. That point should be after the plaintiff has had the
opportunity to present his case and be heard. The respondent
here had that opportunity, took it and lost. In tax law and in
other areas of the law form will never prevail over substance.
The same rule should apply here. The fact that judgment was
not entered is a mere formality. Law of the case should have
barred the second retrial of the same claim, and it should bar a
third retrial of the damage portion of that claim hereafter. The
resources of the already overtaxed judicial system should not
be further used to retry a claim which was presented and
resolved twice adversely to respondent.
~ Veen eS a ee
a
, nail re
na)
POINT Il
THE COURT BELOW DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS IN HOLDING
THAT A NEW TRIAL ON COMPENSATORY DAMAGES
WAS REQUIRED BY “OPERATION OF LAW”. THE
ERROR WILL REQUIRE A THIRD TRIAL AND WILL
PREVENT THE JUST, SPEEDY AND INEXPENSIVE
DETERMINATION OF THIS ACTION.
At the second trial the Court gave verbatim the jury instruc-
tion in question that respondent requested concerning damages
(715 F.2d at 1531, 1532). Petitioner repeatedly insisted that the
Court further instruct the jury to give respondent credit for
$871,484 in contingent stock petitioner paid a few months after
the closing of the transaction to respondent as additional
consideration for the purchase of respondent’s stock for his
companies. The Court denied petitioner’s request. Since the
parties agreed that petitioner paid respondent $3.5 million of
its stock at the closing in exchange for respondent’s stock, the
jury’s sole function was merely to determine the value of
respondent’s stock, i.e. the value of the business respondent
sold petitioner (715 F.2d at 1531-32). The jury returned a
verdict for respondent of $500,000. Thus it is a mathematical
certainty that the jury valued respondent’s stock at $4.0 mil-
lion ($3.5 million plus $500,000). But the $4.0 million in stock
that respondent delivered to petitioner is $371,484 less than the
aggregate consideration petitioner paid respondent ($3.5 mil-
lion plus $871,484). Respondent therefore suffered no loss in
the exchange.
By its decision the Court below ignores that petitioner is the
aggrieved party. The Court gave respondent’s requested charge
which led to the error. Petitioner’s requested instruction to the
jury which would have corrected that error was improperly and
eee ceicitnes ine ateetasl amie at ais If petitioner’s
requested instruction were given the effect it deserves (and to — ~
which the Court of Appeals held petitioner was peor i
respondent suffered no loss and was not damaged. In other,
12
words, respondent received $4,371,484 for his stock that the
jury valued at $4.0 million. Instead of dismissal, however,
respondent will benefit by being given the opportunity for
another, third trial after petitioner has prevailed on this very
point in two previous trials. By the same token, petitioner will
suffer further prejudice by the expense (and risk) of a third
unnecessary trial.
There is substantial precedent for the proposition that when
a certain identifiable sum must be excluded from a jury award
as a matter of law, the appellate court may make the calcula-
tion itself and simply direct that a judgment be entered as
modified rather than remand the case for a new trial on
damages. 11 Wright, supra page 5 at § 2815.
A number of courts have followed precisely this procedure,
ee ee § 2106, which
holds in relevant part that:
[t]he Supreme Court or any other court of appellate
jurisdiction may. . . modify. . . any judgment, decree,
or order of a court lawfully brought before it for review,
and may remand the cause and direct the entry of such
appropriate judgment. . . .
This procedure comports, as these courts have noted, with
the policy of conserving judicial resources. Moreover, such a
procedure does not violate the Seventh Amendment because
factoring undisputed facts or facts as found by a jury into an
arithmetical equation does not entail finding any new facts. As
the Supreme Court held in Gasoline Products Co. v. Champlin
Refining Co., 283 U.S. 494, 498 (1931), “The Seventh Amend-
ment does not . . . require that an issue once correctly deter-
mined, in accordance with the constitutional command, be
tried a second time. . . .” “t
In New Orleans Ins. Ass’n v. Piaggio, 83 U.S. 378, 21_L.Ed.
358 (1873), the Supreme Court took all of these factors into
account in modifying a jury award to exclude an identifiable
amount of special damages included by the jury pursuant to an
.
,
13
erroneous instruction. The Court held specifically that such a
modification could be made at the appellate level and should
be made there to preclude the expense of a new trial:
Errors of this kind, it is insisted by the defendants,
necessarily require that a new venire shall be ordered, but
the Act of Congress to further the administration of
justice, provides that the appellate court may affirm,
modify, or reverse the judgment decree or order brought :
before it for review, or may direct such judgment decree
or order to be rendered . . . and in view of that provision
the court is not inclined to adopt the course suggested by
defendants, as it would lead to unnecessary delay and
expense.
All the facts are found in this case, and they are all
apparent in the record, and in as much as the question to
be determined is what judgment ought to be rendered on
those facts, the court is of the opinion that it is not
necessary to order a new venire.
83 U.S. at 387-88, 21 L. Ed. at 360.
Similarly, in Barnebey v. Barron G. Collier, Inc., 65 F.2d 864
(8th Cir. 1933), the Eighth Circuit itself modified a jury award
and directed entry of the modified judgment. The court stated
that making such an arithmetical calculation at the appellate
level did not violate the Seventh Amendment because the
calculation involved no new finding of facts. The court noted, “a
moreover, the waste involved in impanelling a new jury simply 4
for the purpose of directing the calculation at the trial level: 4
To hold in the instant case that a new trial must be a
granted where only questions of law are involved, and z
where the only error committed was an error of law in ;
directing the jury as to the amount of damage which
plaintiff was entitled under the undisputed evidence to
recover, would be to sacrifice substance to ancient form.
If form is to be regarded as sacred, we should direct the
lower court to impanel a jury, and then instruct the jury
14
so impaneled, upon the record as it now stands, to return
; a verdict of plaintiff for the full contract price. This
would surely be an idle ceremony.
65 F.2d at 870.
In Westchester Fire Ins. Co. v. Hanley, 284 F.2d 409 (6th Cir.
1960), cert. denied, 365 U.S. 869 (1961), as well, the Court of
Appeals exercised its power to reduce an amount of damages
found by a jury by the twenty-five percent held on appeal to be
nonrecoverable under the disputed insurance contract:
The amount of the verdict represented the jury’s find-
ings of plaintiffs’ total damages. Under our holding, such
damages should be reduced by twenty-five percent.
Rather than send this cause back for a new trial, we think ©
it is better practice to reduce the verdict by twenty-five
percent and give judgment for plaintiffs in the reduced
amount. . . . Such disposition of the matter comports
with proper procedure under Section 2106, Title 28
8? Noga
284 F.2d at 418. See also Niagara Fire Ins. Co. v. Bryan &
Hewgley, Inc., 195 F.2d 154, 157 (6th Cir. 1952) (penalty
component of damages awarded by jury not allowable: “We
have no doubt of our power to modify a judgment instead of
remanding the cause for a new trial . . . in view of the
provisions of Title 28 U.S.C.A. § 2106”); Garrett v. Faust, 183
F.2d 625, 629 (3d Cir. 1950), cert. denied, 340 U.S. 931 (1951)
(identifiable component of damages disallowed as a matter of
law: “[W]e will exercise our power to direct that the amount of
judgment be reduced [by] that figure,” citing 28 U.S.C. § 2106
and Piaggio).
The present suit falls precisely into this line of cases. The
jury instruction as corrected by this Court requires only that an
undisputed amount be factored into an arithmetical computa-
tion, the other factors of.which are undisputed or have already
been found by a jury. It is respectfully submitted that a
recalculation of compensatory demages by the Court below
according to an arithmetical equation mandated by this Court
» bye ” me IWS The
ee i OB Bas 5 “ane
Se en Re Fee Ee 6 ee See. > a eee ah ee OF eee
15
would not invade the province of the jury and require a new
trial. The sole disputed fact necessary to this equation, the
value of respondent’s business, has been found by the jury.
Subtracting an undisputed amount as a matter of law involves
no redetermination of any disputed fact, as would, for exam-
ple, a corrected instruction on the method of evaluating the
business.
Respondent is not entitled, having had this fact determined
without error, to a redetermination. Indeed, considering the
length and expense of the trial required to make that deter-
mination, and the fact that this trial was the second lengthy
trial in this action, yet a third trial would constitute an
egregious waste of both the parties’ and the courts’ resources.
In this era of massive litigation and of overtaxed courts and
judicial resources, the judicial system should not afford a
‘litigant three chances to succeed on the same claim particularly
where respondent lost at the first trial on directed verdict after
fully presenting, introducing and arguing his case and as a
mathematical certainty by the jury’s verdict lost at the second
trial because respondent suffered no damage.
POINT Il
THE ELEVENTH CIRCUIT’S JUDGMENT SEPARATING
AND REMANDING FOR RETRIAL PARTS OF IN-
TERLOCKING CLAIMS, COUNTERCLAIMS AND IS-
SUES INVOLVING OVERLAPPING EVIDENCE IS AN
UNWARRANTED DEPARTURE FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS.
In Gasoline Products Co. v. Champlin Refining Co., 283
U.S. 494, 500 (1931), this Court stated:
Where the practice permits a partial new trial, it may
not properly be resorted to unless it clearly appears that
the issue to be retried is so distinct and separable from the
anaes thes 0 fee Case eee oe eee
tice. . . . Here the question of damages on the counter-
16
claim is so interwoven with that of liability that the
former cannot be submitted to the jury independently of
the latter without confusion and uncertainty, which would
amount to a denial of a fair trial.
In the instant case the Court of Appeals has held that the
jury instructions the District Court gave were erroneous and
that the jury should have been allowed to consider evidence of
post-closing developments. While the Court in its opinion
below does not deal with the matter head on, manifestly
petitioner’s evidence showing the disastrous state and perform-
ance of respondent’s businesses immediately after the closing is
relevant and probative of respondent’s intention and of the
condition and value of respondent’s business at the time of its
sale to petitioner.
For example, petitioner showed at the trial that respondent
furnished petitioner’s accountants with information on which
they relied, concerning the “time” and “cost to complete” a
major dredging contract that respondent had underway before
and at the time of the closing. The data respondent furnished
were that it would take approximately “four months” and
would cost approximately “$12,000” to complete. Petitioner
further showed, however, that the actual time and actual cost z
to complete were 19 months and over $3 million, a drastic :
departure from respondent’s preclosing statements. Petitioner s
argued that these items were evidence of loss, but the District |
Court refused to allow their use as such evidence. Petitioner
submits that it is unrealistic to dismiss that error with the :
comment in the opinion below that nothing supports peti- a
tioner’s contention that the verdict on liability in favor of :
respondent may have been based on the jury’s conclusion that E
petitioner suffered no damage. ef
In the the second trial judge viewed the contract 2
from the as illusory, unenforceable and part of an
allaged trend. Yot tndh Uibeatic wilt bo the url af ampoule
considered the contract binding and enforceable. The District
Court’s views of the contract were prejudicial to petitioner and
17
adversely influenced the entire treatment and consideration of
the case. Petitioner thus was precluded from arguing the
enforceability of the contract to counter the charge of fraud
(the District Court’s directed verdicts having eliminated it from
the case), an argument that could well have caused the jury to
view the case in a different light.
The above short recital of but two aspects of the proof make
self-evident the inextricable connection between the claims, the
counterclaims and the issues and the overlapping nature of the
evidence. The Court below is unrealistic and unfair in its
opinion that these matters can be divided into separate compo-
nents and isolated into separate compartments and in remand-
ing respondent’s damage claims alone for retrial and at the
same time denying petitioner relief as to its dismissed counter-
claim arising out of the same transaction.
Moreover, by its decision the Court below once again disre-
gards the fact that petitioner is the aggrieved party. The District
Court, by its emasculation of petitioner’s case through the
Court’s conception that the contract was illusory and unen-
forceable, its conception that the only measure of damges was
the values the parties exchanged at the closing and its concep-
tion that post-closing payments and developments were inad-
It is respectfully submitted that the opinion of the Court
below is thus in conflict with Gasoline Products Co. v. Champ-
lin Refining Co., supra, and also is in conflict with McDonald
v. Johnson & Johnson, No. 82-1594 (8th Cir. Jan. 12, 1984). In
that case the Court of Appeals on rehearing agreed with
petitioner Johnson & Johnson that the Court had “severed
issues that are effectively intertwined” .
\
Given the long history of the present case, the Court below
has an obvious interest in preserving, to the extent possible,
what has gone before. Its treatment of the prior trial proceed-
ings, however, we submit is unfair. The Court declined to
follow “law of the case” despite the lack of any substantial
reason for departing from it. At the same time, the Court of
Appeals strains awkwardly not to interfere with the jury’s
conclusions by rationalizing the separation of interwoven is-
sues. We submit that the rationalization will not withstand
scrutiny and analysis.
Conclusion
For all of the foregoing reasons, petitioner requests that this
Court grant this petition for review.
Dated: New York, New York
March 14, 1984
Respectfully submitted,
WILLIAM F. SONDERICKER, Esq.
Attorney for Petitioner
299 Park Avenue
New York, New York 10171
(212) 207-1800
ANN M. REED, Esq.
Of Counsel
ey Es -
APPENDIX
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 76-2107, 81-5956
Sept. 30, 1983
+
F. BROWNE GREGG,
Plaintiff-Appellee, Cross-Appellant,
v.
U.S. INDUSTRIES, INC., a Delaware Corporation,
Defendant-Appellant, Cross-Appellee.
+
F. BROWNE GREGG,
Plaintiff-Appellant, Cross-Appellee,
Vv.
U.S. INDUSTRIES, INC., a Delaware Corporation,
Defendant-Appellee, Cross-Appellant.
i
Plaintiff brought action against defendant arising out of
transaction in which plaintiff sold stock in his former busi-
nesses and gave note to defendant corporation in exchange for
stock in, and employment with, defendant. The United States
District Court for the Middle District of Florida, Gerald Bard
Tjoflat, J., entered judgment in part for both plaintiff and
defendant, and both parties appealed. The Court of Appeals,
tenth ye
ee SS Os tle at i
2a
Godbold, Chief Judge, held that: (1) plaintiff's evidence of
fraudulent inducement to enter written contract was not barred
by statute of frauds or parol evidence rule; (2) evidence was
sufficient to support judgment in plaintiff’s favor on common-
law fraud claim; (3) jury instructions on damages relative to
fraud claims were erroneous, and therefore award of compen-
satory damages could not stand; (4) overall agreement between
parties was ncither illusory nor vague and indefinite under New
York law; (5) defendant was not entitled to judgment as a
matter of law on plaintiff’s conversion claim; and (6) defen-
dant was entitled to judgment on promissory note.
Affirmed in part, vacated in part, reversed in part and
remanded.
aol
Appeals from the United States District Court for the
Middle District of Florida.
Before:
GODBOLD, Chief Judge,
HENDERSON and CLARK, Circuit Judges.
oe
GODBOLD, Chief Judge:
In 1969 Gregg owned corporate businesses in Florida
engaged in construction, sand mining, and design of dredging
equipment. The businesses were hard pressed for working
capital. August 27, 1969 Gregg entered into an “Agreement
and Plan of Reorganization” with U.S. Industries, Inc., a
conglomerate, providing for a tax free transfer of his compa-
nies to USI, for which Gregg would receive for the stock of his
companies $3.5 million in common and preferred USI stock.
3a
could receive up to $6.5 million more in USI stock if the
former Gregg companies met specified profitability levels over
the next five years.
As part of the Agreement, to strengthen the net worth of his
companies Gregg contributed $1 million in capital and, in
addition, gave a promissory note from him and his wife for
$500,000, which USI acquired along with other assets of the
Gregg companies.
A separate “Employment Agreement” was signed October 1,
1969 the date of closing, under which Gregg was employed to
stay on for five years as president and chief operating officer
of the former Gregg companies. As part of this agreement
Gregg agreed not to compete with USI.
During the five years after the acquisition, USI put some $12
million-$14 million into the former Gregg companies and
guaranteed some $2 million in loans. Initially the operations
were successful. Gregg received one distribution of USI stock
(called by the parties “earnout stock”), valued at $871,484 and
based upon 1969 profits. However, relations between Gregg
and USI began to sour soon after the transaction was closed.
The former Gregg businesses became less and less successful.
USI began cutting back on Gregg’s authority, and both parties
began thinking of litigation.
During 1971 Gregg paid the first installment, $100,000 plus
interest, on the $500,000 note. In May 1971 USI proposed that
Gregg be removed as president and chief operating officer and
become a consultant, and it would continue his salary plus an
expense account. Gregg agreed under protest but was given
little work to perform.
In April 1970 USI considered acquiring Camp Concrete
Rock Company, a Florida company, to expand the sand mining
operation it had acquired from Gregg. Gregg told USI that
Camp Concrete was an excellent company and that it would
complement the USI sand mining operation. USI told Gregg it
was not interested in acquiring Camp Concrete at the time.
Later, in 1971, shortly after Gregg had been removed as
president and operating officer, he learned that Camp Concrete
was for sale, and he bid on it without informing USI of his
4a
decision. USI learned of the proposed sale through other
sources and it too bid. Gregg was high bidder. He acquired
Camp Concrete and engaged in production competitive with
the USI-acquired operation.
On April 20, 1972 Gregg failed to pay the second installment
on the $500,000 note and told USI he was not going to pay the
note but instead would set it off against obligations USI had to
him. USI stopped paying his salary. On May 24 USI requested
Chemical Bank in New York, its stock transfer and dividend
disbursing agent, to stop payment on Gregg’s USI dividends.
Under instructions from USI to the bank, described more fully
in Part V below, Chemical Bank delivered to USI Gregg’s
dividend checks. USI ended up holding six dividend checks
totaling around $65,000. These events led io iwo of Gregg’s
claims, a claim sounding in contract for the dividends and a
tort claim for conversion.
Gregg called USI on June 15, 1972 and inquired about his
missing June | dividend check but was given no information.
The same day he borrowed $135,000 from the First National
Bank of Leesburg, Florida, and as security assigned all divi-
dends from his USI stock. Both Gregg and the Leesburg bank
mailed to USI notice of the assignment. Earlier, in 1971, Gregg
had made another loan from the same bank and pledged his
USI stock as collateral; it is not clear whether USI knew of this
pledge before June 1972, though for purposes of this case the
court assumed that it did.
On June 19 USI sued Gregg in Delaware state court on the
$500,000 note, also charging him with common law deceit and
breaches of contract, of warranty, of the covenant not to
compete, and of fiduciary duty. On USI’s motion the Delaware
court entered a sequestration order, pursuant to Del.Code
Ann., title 8, Sec. 169 and title 10, Sec. 366 (1975), which
authorized seizure of Gregg’s USI stock by a court-appointed
sequestrator as a means of securing Gregg’s appearance in
court. Three days later USI notified Chemical Bank of the
order and asked it to make appropriate entries in its stock
transfer books.
le >
. \.."a
Sa
Under Delaware sequestration procedures, Gregg could ap-
pear in court and contest the claim against him, thereby
subjecting himself to in personam jurisdiction, or he could
default and the sequestered property then could be used to
satisfy any default judgment entered. He could appear spe-
cially only to contest the sequestration.
On June 19, the same day that USI sued Gregg in Delaware,
it received notice that he had assigned his USI dividends to the
Leesburg bank. USI notified the bank of the suit and the
sequestration order and notified the court of the bank’s in-
terest. The bank moved to intervene and to quash the seques-
tration order. Gregg removed tlie case to the federal district
court in Delaware, which denied the motion to quash the
sequestration order but noted that dividends were not included
in the sequestration. The court declined to order USI to send
the Leesburg bank the dividends withheld from Gregg. The
district court also held that the Leesburg bank could register
the stock in its name or a street name and sell it, apply the
proceeds to Gregg’s indebtedness as provided by the agreement
pledging the stock to it, and pay any excess to the sequestrator.
The Leesburg bank did eventually register the stock in a street
name and sel! substantial amounts of it because its value had
fallen below the margin requirements for securing the loan.' A
small amount of money left over from these sales was turned
over to the sequestrator by the Leesburg bank.
On three occasions Gregg appeared in the Delaware court.
He contested the validity and constitutionality of the Delaware
sequestration procedures. Each time the court, relying on a
long line of authority, upheld the validity of the Delaware
procedures. U.S. Industries, Inc. v. Gregg (D.Del., April 24,
1975) (memorandum opinion and order), U.S. Industries, Inc.
v. Gregg, 58 F.R.D. 469, 478-81 (D.Del. 1973); U.S. Industries,
Inc. v. Gregg, 348 F.Supp. 1004, 1018-23 (D.Del. 1972).
In June 1973 Gregg demanded of Chemical Bank that it
reissue his checks for June, September and December 1972
1 After the registration was changed the dividends thereafter payable
were paid by USI to the street name holder, which endorsed them over to
6a
dividends. On USI’s instruction Chemical Bank refused. At
one point Chemical Bank was told that the Leesburg bank
would postpone selling Gregg’s stock if Chemical would send
to it Gregg’s withheld dividends. Chemical, on USI’s instruc-
tion, refused. At some point Chemical Bank was given a letter
from USI indemnifying it from any loss it might suffer as a
result of withholding the dividends.
The district court in Delaware eventually entered a default
judgment against Gregg on the note and directed that the rest
of the sequestered stock be sold. After the sequestrator’s fees
and costs were paid, USI was paid the balance, some $18,000.
Gregg appealed from this judgment to the United States Court
of Appeals for the Third Circuit which held Delaware’s seques-
tration statute unconstitutional. U.S. Industries, Inc. v. Gregg,
$40 F.2d 142 (3d Cir.1976), cert denied, 433 U.S. 908, 97 S.Ct.
2972, 53 L.Ed.2d 1091 (1977). USI filed in the Supreme Court
for certiorari. Shortly afterwards the Supreme Court held in
another case that the Delaware sequestration procedures were
unconstitutional, in so doing overruling its prior decisions. The
Court denied certiorari on the Third Circuit case, and the
district court dismissed the USI proceedings against Gregg for
want of jurisdiction over the person.
Gregg then moved in federal court in Delaware for restitu-
tion for not only the amount USI had received but also the
value of his stock at the time it was seized, less its value at sale,
which was drastically less. The court held that the only relief
Gregg was entitled to as restitution was the amount USI had
realized plus costs. Also it held that Gregg could have avoided
loss by selling the sequestered stock and depositing the pro-
ceeds in its place, as permitted by the sequestration order. The
Third Circuit affirmed. U.S. Industries, Inc. v. Gregg, 605
F.2d 1199 (3d Cir.1979), cert denied, 444 U.S. 1076, 100 S.Ct.
1023, 62 L.Ed.2d 758 (1980).
The present suit was filed in Florida by Gregg in July 1972,
soon after USI filed its suit in Delaware. The case first went to
trial in 1974. After Gregg completed his case in chief the court
directed verdicts in favor of USI on several of Gregg’s claims.
lit Me ea Be ee ee noth yy
7a
The judge became ill, however, and a mistrial was declared and
no judgment ever entered.
The case was assigned to another district judge. Following
are the claims and counterclaims presented to and disposed of
before this district judge:
Greggs claims
Count I: Common law fraud. Jury verdict for Gregg.
$500,000 compensatory damages and $500,000 punitive dam-
ages.
Count II: Securities fraud. Jury verdict for USI.
Count III: Breach of contract. Directed verdict for USI.
Count IIIA: Quantum meruit. Directed verdict for USI.
Count IV: Action of debt for unpaid dividends on Gregg’s
USI stock. Withdrawn from jury. Post-trial decision by court
on merits for Gregg.
Count V: Conversion of dividends on Gregg’s USI stock.
Severed from jury trial. Post-trial, dismissed on merits by
court.
Count VI: Interference by USI with Gregg’s business rela-
tions with Leesburg, Florida bank. Same.
Count VII: Abuse of process by USI in Delaware proceed-
ings against Gregg. Same.
USI’s counterclaims
First: Common law fraud. Jury verdict for Gregg.
Second: Securities fraud (1933 Act). Same.
Third: Securities fraud (1934 Act). Same.
Fourth: Breach of contract. Directed verdict for Gregg.
Fourth-A: Strict liability for breach of warranties. Same.
Fifth: Suit for rescission of Gregg’s employment contract
with USI. Same.
Sixth: Breach of Gregg’s fiduciary duty to USI and mis-
management. Same.
Seventh: Breach of Gregg’s covenant not to compete with
USI. Severed from jury trial. Post-trial dismissed on merits by
ee eee Se re a
8a
Eighth: Preemption of corporate opportunity by Gregg.
Same.
Ninth: Action of debt for unpsid balance on Gregg’s
$500,000 note to USI. Withdrawn from jury. Post-trial deci-
sion by court on merits in favor of USI.
Tenth: Quantum meruit. Directed verdict for Gregg.
Eleventh: Procurement of watered stock by Gregg (Gregg’s
causing USI to issue him stock without adequate considera-
tion). Directed verdict for Gregg.
The thrust of each party’s overall case was to sue for fraud
in the inducement and stand on the contract and sue for its
breach, except that USI also sought rescission (Fifth counter-
claim).
Before trial the district judge rejected USI’s argument that
the court was bound by the directed verdicts ordered in the
aborted jury trial. Pre-trial he severed Gregg’s claim for
conversion of his USI dividends (Count V), interference with
his business relations with the Leesburg bank (Count VI), and
USI’s counterclaims for breach of covenant not to compete
(Seventh) and for preemption of corporate opportunity
(Eighth).
Before trial the court told the parties that the measure of
damages on the fraud claims would be the difference in fair
market value, on the closing date, between stock transferred
and stock received.
A jury trial was held in late 1975 and early 1976, extending
over three months and consuming more than 50 trial days. At
trial the court held that the contract between the parties was
illusory and directed verdicts against both parties on their
breach of contract claims, i.e., Gregg’s Count III and USI’s
fourth counterclaim. It also directed verdicts against Gregg on
his quantum meruit claim (Count IIIA), and against USI on its
counterclaims for breach of warranties (Fourth-A), rescission
(Fifth), breach of fiduciary duty and mismanagement (Sixth),
quantum meruit (Tenth) and procurement of watered stock ©
(Eleventh). At the close of all the evidence the court withdrew
from the jury, and announced that it would decide post-ver-
dict, USI’s Ninth counterclaim on Gregg’s $500,000 note and
‘
&
é
3
9a
Gregg’s contract claim for unpaid dividends on his USI stock
(Count IV).
The rulings of the court before and during trial left for
submission to the jury only the reciprocal fraud claims of each
party against the other asserting common law fraud and
securities fraud. Submission was by a series of verdicts, each
general in form, directed to the claims and counterclaims. On
Gregg’s common law fraud claim, the jury found for him and
awarded $500,000 compensatory and $500,000 punitive dam-
ages. On Gregg’s securities fraud claim (Count II), the jury
returned a verdict for USI. On USI’s fraud counterclaims
(First, Second and Third), the jury found for Gregg. A Rule
$4(b) judgment was entered on these verdicts. USI appealed
and Gregg cross-appealed. We ordered the appeal not calen-
dared until the remainder of the case was decided.
In August 1980 the judge entered findings and an opinion
holding for USI on the two claims withdrawn from the jury at
the end of the trial (Gregg’s Count IV and USI’s Ninth
counterclaim). He found in favor of Gregg on his Count IV
claim, sounding in contract, for the unpaid dividends on his
USI stock. He held for USI on its Ninth counterclaim for the
balance on the $500,000 note but denied it attorney fees and
costs as provided by the note.
Following additional amendments to the pleadings, the
court, in July 1981, entered an 80 page opinion deciding all
remaining issues on summary judgment and directed verdict
grounds and giving its reasons for the directed verdicts it had
ordered at trial. The court held against Gregg on his conver-
sion of dividends claim (Count V), malicious interference with
business relations with his bank (Count VI), and abuse of
process in the Delaware suit (Count VII). Gregg appealed and
USI cross-appealed. We consolidated the two appeals.
I. Introductory issues
The court was not required under law of the case principles
to adhere to directed verdicts ordered by the first judge at the
aborted trial. Ordinarily law of the case applies only where
10a
there has been a final judgment and not to interlocutory
rulings. U.S. v. United Smeiting, Refining & Mining Co., 339
U.S. 186, 199, 70 S.Ct. 537, 544-45, 94 L.Ed. 750 (1949).
Following the abortive first trial there was no final judgment.
Moreover, in his post-trial orders the district judge states that
he agreed with some of the directed verdicts ordered by the
first judge; he ordered judgment entered on some claims based
upon his own examination of the record (on directed verdict
grounds or summary judgment grounds) as well as upon the
first judge’s directed verdict on those claims. He was not
bound to give absolute effect to the first judge’s rulings, and
he did not do so. Nor was he precluded from accepting them as
part of the persuasion process. In any event, in each instance,
as an alternative, he carefully exercised his own power and
duty of independent decision.
Gregg demanded a jury trial, but there was no Seventh
Amendment violation. Each post-verdict ruling was within
either the power of the court to enter a directed verdict or
summary judgment under Rule 56.
II. The validity of the jury verdicts
(A) The statute of frauds and the parol evidence rule
On Gregg’s common law fraud claim the jury awarded him
$500,000 compensatory and $500,000 punitive damages. The
crux of this claim is fraudulent inducement: that USI fraudu-
lently promised to provide Gregg’s former businesses with
capital required for their successful operation, when in fact
USI’s established financial policies severely limited the cash
that it could make available to him for additional working
capital; and that USI fraudulently promised to employ him to
operate and manage the former Gregg companies when it did
not intend to continue him in this position. USI contends on
numerous grounds that the trial court erred in denying its
motions for directed verdict and for judgment n.o.v. on this
fraud claim.
USI’s undertaking to provide additional working capital is in
paragraph 3(g) of the reorganization agreement:
(g) USI agrees to add such additional working capital
as may reasonably be required for the expansion of the
business. It is further contemplated that USI will make
available an amount approximating $400,000 in 1969 and
$800,000 in 1970 for additions to plant and equipment.
However, consistent with USI’s obligations to share-
holders, all of the foregoing shall be done within and
subject to the normal operating financial policies of USI.
USI asserts that Gregg’s fraudulent inducement claim with
respect to working capital is barred as a matter of law because
it is based solely on oral statements that are within the Florida
statute of frauds. Fla.Stat. Sec. 725.01, because they concern
promises that could not take place within one year.? The
purpose of the statute of frauds is to prevent fraud and perjury
by requiring specified transactions to be evidenced by a writing
signed by the party to be charged. Rowland v. Ewell, 174
So.2d 78 (Fla.Dist.Ct.App.1965). USI maintains that Gregg,
under the guise of a fraud claim, is seeking to enforce an oral
agreement concerning working capital that is unenforceable
under the statute of frauds.
Under Florida law a fraud action may not be used to recover
for breach of an unenforceable oral contract. Canell v. Arcola
Housing Corp., 65 So.2d 849, 851 (Fla.1953). Nor may recov-
ery be had for fraudulent inducement to enter an unenforce-
able oral contract. Ashland Oil, Inc. v. Pickard, 269 So.2d
714, 721 (Fla.Dist.Ct.App.1972), cert. denied, 285 So.2d 18
(Fla. 1973). But if an enforceable contract is entered, prior oral
agreements and other representations that caused the party to
enter the written agreement may be used to prove fraud. See
id.; see e.g:, Nantell v. Lim-Wick Construction Co., 228 So.2d
2 Fla.Stat. Section 725.01 provides in pertinent part:
12a
634 (Fla. Dist.Ct.App.1970) (oral agreement admitted into evi-
dence to show fraudulent inducement to enter a written real
estate transaction); North Dade Imported Motors, Inc. v.
Brundage Motors, Inc., 221 So.2d 170, 177 (Fla.Dist.
Ct.App.1969), (oral inducement to enter franchise agree-
ment must be evaluated in interpreting the written instru-
ment), cert, denied, 226 So.2d 817 (Fla.1969); Associated
Heavy Equipment Schools, Inc. v. Masiello, 219 So.2d 465
(Fla.Dist.Ct.App.1969) (fraudulent advertising inducing stu-
dent to enter written contract to take correspondence course
admitted into evidence to prove fraud). Here the parties
entered into a written contract sufficient under the statute of
frauds. Gregg’s evidence of fraudulent inducement to enter
that contract is not barred by the statute.
Nor is there any merit in USI’s argument that the parol
evidence rule prohibits admission of the evidence. The parol
evidence rule precludes the admission of parol or extrinsic
evidence to contradict or vary the terms of a written instru-
ment. Greenwald v. Food Fair Stores Corp., 100 So.2d 200,
202 (Fla.Dist.Ct.App.1958). Although a party cannot use a
claim of fraud to contradict or vary the terms of a written
contract, id., the parol evidence rule has no application where
the claim is for fraudulently inducing a party to enter into the
writing. Ashland Oil, Inc., 269 So.2d at 722. The rule in
Bank of Palm Beach & Trust Co., 215 So.2d 336, 338
(Fla. Dist.Ct.App.1968); cf. Tobias v. Lynch, 192 A.D. 54, 182
N.Y.S. 643, 644-45 (1920), aff'd, 233 N.Y. 515, 135 N.E. 898
(1922). The evidence here is admissible both for the purpose of
showing fraud in the inducement and for the purpose of
explaining the intent of paragraph 3(g).
13a
(B) Sufficiency of the evidence
USI also contends that the judgment against it for fraud
should be reversed because the promises claimed to be fraudu-
lent were never made, and if made were performed, and in any
event were not relied upon by Gregg, and if Gregg did rely he
did not prove that he was damaged. These contentions are
developed in the briefs of the parties at great length. There is a
succinct answer. All of these were jury issues, and no basis is
shown for this court to interfere with the jury’s conclusions.
(C) Exclusion of the “earnout stock” from the calculation
of damages
Before trial the court informed counsel that the measure of
damages on the fraud claims would be the difference in the fair
market value, on the closing date, of the stock the prevailing
party gave up and the stock the prevailing party received. At
trial the court instructed:
Damages under the common law of fraud and the Federal
Securities Law are measured the same way. The prevailing
claimant is entitled to receive in money the difference in
value between what he gave up and what he received at
the closing of the acquisition on October 20, 1969. For
example, in assessing money damages in Gregg’s favor,
you would determine the difference in value between the
stock he gave USI and the USI stock he received in
exchange. In assessing money damages in USI’s favor,
you would make the same calculation, determining the
difference in value between the stock USI gave Gregg at
closing and what it received in return from him. In
summary, what you are called upon to do in the event you
find either party entitled to recover against the other, is to
determine the value of Gregg’s stock and USI’s stock—
that is the exchange of stock—at closing.
Therefore, in calculating Gregg’s damages, measured as of the
date of closing, the jury could not treat as consideration
flowing to him, and thus as an element decreasing his damages,
l4a
the value of his right to earn and receive “earnout stock.” USI
requested, and was refused, a jury instruction that this stock
was to be deducted from any damages suffered by Gregg.
We hold that the jury instructions were erroneous. The
parties agreed that Gregg’s right to receive additional USI
stock based on profits of his transferred companies was addi-
tional consideration for the Gregg shares that he transferred to
USI. Paragraph 3 of the Plan and Agreement, titled “Consid-
eration for Shares” provides in subparagraph (b){i) that “as
further consideration for the [Gregg] shares to be transferred
to USI [on the closing date],” USI shall issue and deliver to
Gregg “an additional number of shares of [USI] common
stock,” determined on the basis of a prescribed formula, if
pre-tax profits of the former Gregg companies for 1969 exceed
$800,000. A method of valuing the USI stock to be issued is
included, based on average daily closing price of USI! stock
during a prescribed month. Gregg cannot receive more than
$500,000 worth of common stock under this subparagraph.
Subparagraph (ii), in like language, provides for additional
USI stock “as further consideration” for Gregg’s shares to be
transferred, based upon 1970 pre-tax profits exceeding $1.2
million, with a maximum of $1 million worth of common
stock.
Paragraph (c) covers a somewhat different calculation of
stock as further consideration for Gregg shares transferred,
based on pre-tax profits for 1969 and 1970 and also for 1971
ments if any of the former Gregg companies is sold.
:
i
;
:
if
EF
3s The interreiationship between this caicuiation for 1969 and 1970 and
the calculations provided in (b) for the same years is not apparent to us. But
this is not relevant to our decision.
15a
Agreement, executed approximately two months later at clos-
ing, does not purport to attribute the right to receive USI stock
to consideration for Gregg’s employment. Gregg is authorized
a salary of $50,000 per year, participation in USI’s bonus and
stock option plans, and death and disability benefits. He
agrees not to compete. The only reference to the earnout stock
is this:
12. Referring to the Agreement, at such time as USI
shall have issued and delivered to or for the benefit of
Executive the maximum amount of additional shares of
USI stock and any other consideration as may be paid
under the Agreement, Executive or Seller or USI at any
time thereafter may on ninety days’ advance written
notice terminate his employment agreement.
USI’s Tenth counterclaim asserted that Gregg was unjustly
enriched because he transferred stock in Gregg companies
having a negative net worth and received from USI stock
valued at $4,771,484 (consisting of $3,500,000 of stock at
closing and $871,484 of stock thereafter), “as additional con-
sideration.” To this Gregg answered: “[Gregg] admits that USI
16a
include it within the consideration would be inconsistent with
testimony by USI officers that Gregg earned the stock by
achieving the required profitability levels in 1969. But using
earnings as a device for measuring the amount of stock, if any,
to which Gregg would be entitled, does not alter or limit the
bargain struck.
Gregg’s argument to us that as a matter of law nothing that
occurred after the closing date could affect the damages
confuses the separate substantive issues of what the parties
agreed to and what the valuation is of the bargain. Moreover,
the earnout provision is not too speculative and uncertain to be
considered in calculating damages. The valuation of the right
to receive more stock is not necessarily any more speculative
than establishing anticipated profits, which are recoverable in
both tort and contract actions in Flordia if the amount of the
Watrous Insurance Agency, Inc. v. Tucker, 120 Fla. 895, 163
So. 284 (1935); Talisman Sugar Corp. v. Farmland Develop-
ment Co., 156 So.2d 392 (Fla.Dist.Ct.App.1963); see also
Innkeepers International, Inc. v. McCoy Motels, Lid., 324
17a
(later developments could be considered in valuing stock of a
closely held corporation in a fraud suit), cert. denied, 434 U.S.
911, 98 S.Ct. 312, 54 L.Ed.2d 197 (1977); Titan Group, Inc. v.
Faggen, 513 F.2d 234, 239-40 (2d Cir.1975), cert. denied 423
U.S. 840, 96 S.Ct. 70, 46 L.Ed.2d 59 (1975) (a note that
included valuable conversion rights was properly valued at its
later value, the amount eventually paid, though the cash value
of the note at the time of closing was substantially less).
The correctness of the jury instruction on damages was
adequately raised by USI. See Marshall v. Isthmian Lines,
Inc., 334 F.2d 131, 137 n. 13 (Sth Cir.1964). The court had
announced before trial what its instruction on measure of
damages would be, and it adhered to its announcement. Under
the instruction given the right to receive earnout stock could
not be considered as part of a payment for Gregg’s stock. USI
requested, and the court denied, an instruction that it must be
considered.‘
Ill. The effect of the jury verdicts
The jury verdict for Gregg on the issue of common law
fraud stands, but, because of the error in instructions, the
assessment of compensatory damages cannot stand. However,
USI’s argument that once it is recognized that the damages
were calculated under an incorrect instruction, Gregg as a
matter of law was not injured, therefore he no longer had a
cause of action for common law fraud, is frivolous. The basis
of Gregg’s fraud claim is USI’s alleged fraudulent promises to
reciprocally transferred, or to be transfered, is unrelated to
Gregg’s allegations of fraud.
This leaves the question of what happens to the $500,000
18a
Florida law punitive damages are not recoverable in a tort
action unless the jury finds the defendant liable for compensa-
tory, or at least nominal, damages. McLain v. Pensacola
Coach Corp., 152 Fla. 876, 13 So.2d 221 (1943); Hanft v.
Southern Bell Telephone & Telegraph Co., 402 So.2d 453
(Fla.Dist.Ct.App.1981); Hauser Motor Co. v. Byrd, 377 So.2d
773, 775 (Fla.Dist.Ct.App.1979). We are now not certain. In
Eglin Federal Credit Union v. Curfman, 386 So.2d 860, 862
(Fla. Dist.Ct. App. 1980) the District Court of Appeals held that
the jury’s failure to assess compensatory damages did not
preclude award of punitive damages where the special verdict
form used by the jury expressly found the party liable for the
tort. The jury verdict here found that USI defrauded Gregg,
and we have held that this verdict stands. We remand to the
district court for it to give first consideration to the viability of
the award of punitive damages, an issue of Florida law that has
been neither briefed nor argued to us.
USI contends that the faulty instruction on damages revers-
ibly affected its counterclaims asserting common law fraud
(First) and securities fraud (Second and Third), on which the
jury found in favor of Gregg. It argues that the basis for the
jury’s verdict might be that although Gregg committed fraud
USI suffered no injury, and such a finding of no injury might
have been brought about by the court’s incorrectly excluding
the right to receive earnout stock from calculation of the -
consideration given wp by USI on the closing date. The several a
possible verdicts submitted to the jury included in each a unit
covering liability and a second component assessing damages
(with a blank for the amount of damages). The verdict re-
turned on USI’s counterclaims was only the liability compo- F
nent, “We find for Gregg on USI’s counterclaim against Fe
Gregg.” As the case was presented to and decided by the jury, :
nothing supports USI’s contention that this verdict on liability
in favor of Gregg was based upon a jury conclusion that Gregg
had committed fraud but USI had suffered no damages.
19a Ps
IV. The holding that the overall agreement between
the parties was illusory
At trial the court directed a verdict against both parties on
their breach of contract claims(Gregg Count III, USI’s Fourth
counterclaim), on the ground that paragraph 3(g) of the
Agreement, quoted above, was illusory (or unenforceable, see
discussion below), which rendered the entire contract between
the parties, both the Plan and Agreement and the Employment
Agreement, unenforceable. We hold that this was error.
Speaking from the bench when it directed a verdict, the
court described paragraph 3(g) as unambiguous in its language
but vague and illusory; also the court stated that 3(g) was
ambiguous in its legal effect. In its opinion filed in July 1981
the court held that the two agreements were part of a single
transaction and constituted an indivisible contract. It found
that the working capital provision of paragraph 3(g) was
illusory and rendered the indivisible contract unenforceable,
with the result that USI could not recover for breach of
warranties given by Gregg in the Plan and Agreement or for
breach of Gregg’s covenant not to compete contained in the
Employment Agreement.
Reading together the court’s statements from the bench and
the 1981 opinion, the court appears to have intermingled two
concepts: the traditional concept of illusoriness, that is, that a
promisor having complete discretion whether or not to per-
form has in fact made no promise at all, therefore there is no
contract; and the concept of vagueness and indefiniteness, that
is, a promisor has made an identifiable promise so that a .
contract exists, but the content of the promise is so vague and ,
uncertain that it cannot be enforced, therefore the entire
contract is unenforceable. Before us the parties have also
intermingled these concepts. From the colloquy between court
and counsel at trial and the 1981 opinion, we tend to think that
the court had in mind only illusoriness, that is, that USI was
not obligated at all to contribute capital under paragraph 3(g),
so that no contract existed. However, neither in its statements
from the bench nor in its written opinion did the court
20a
explicitly explain why it reached its conclusion that the under-
takings between the parties were illusory. Since the parties have
discussed both illusoriness and vague and indefinite contracts,
we do also.
With respect to illusoriness, Gregg points to the last sentence
of 3(g):
However, consistent with USI’s obligations to share-
holders, all of the foregoing shall be done within and
subject to the normal operating financial policies of USI.
and says that this gives USI complete discretion whether to
perform; that is, USI has not bound itself at all by a promise.
This argument is not consistent with New York law. New York
has taken the lead in recognizing that an obligation of good
faith is implied in every contract. See Corbin on Contracts,
Sec. 654A (Kaufman Supp.1982). An employment contract
that included no expression binding the plaintiff to do any
work for the defendant was not illusory, because the contract
contained an implied promise that plaintiff would use reason-
able efforts to fulfill the business intent of the contract, which
was to market defendant’s fashion endorsements and designs.
Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214
(1917). See also Kirke La Shelle Co. v. Paul Armstrong Co.,
263 N.Y. 79, 188 N.E. 163, 167 (1933) (every contract contains
an implied covenant of good faith and fair dealing). There may
be a valid contract even where the contract expressly gives one
party “absolute discretion” to perform. Richard Bruce & Co.
v. J. Simpson & Co., 40 Misc.2d 501, 243 N.Y.S.2d 503, 506
(Sup.Ct. 1963) (“absolute discretion” means a discretion based
on fair dealing and good faith—a reasonable discretion). See
also A.W. Fiur Co. v. Ataka & Co., 71 A.D.2d 370, 422
N.Y.S.2d 419, 422 (1979) (a provision giving “absolute and
exclusive right to reject any order for any reason whatsoever”
does not give the defendant the right to arbitrarily refuse to
perform).
We must give the last sentence of paragraph 3(g) a reason-
able interpretation consonant with the overall purpose of the
provision. See Mandel v. Liebman, 303 N.Y. 88, 100 N.E.2d
2la
149, 153 (1951). The sentence can reasonably be interpreted as
an attempt on USI’s part to limit its obligation to provide
working capital by taking into account its own overall financial
condition and obligations rather than an attempt to avoid all
duty to provide working capital to the Gregg businesses. Thus
we conclude that under New York law paragraph 3(g) is not
illusory.°
Turning to vagueness and uncertainty, finding a contract
unenforceable for indefiniteness is “at best a last resort.”
Heyman Cohen & Sons v. M. Lurie Woolen Co., 232 N.Y. 112,
133 N.E. 370, 371 (1921). A promise to be enforceable must be
sufficiently certain and specific so that what was promised can
be ascertained, Joseph Martin, Jr., Delicatessen, Inc. v. Schu-
macher, 52 N.Y.2d 105, 436 N.Y.S.2d 247, 417 N.E.2d 541, 543
(1981). Indefiniteness must reach the point where construction
becomes futile. Heyman Cohen, 133 N.E. at 371. The test of
definiteness is whether the intent of the parties may be ascer-
tained to a reasonable degree of certainty. Varney v. Ditmars,
217 N.Y. 223, 111 N.E. 822, 824 (1916); Banker’s Trust Co. of
Western New York v. Steenburn, 95 Misc.2d 967, 409 N.Y.S.2d
51, 62 (Sup.Ct.1978). Reasonable certainty can be derived by
reference to outside matters and surrounding circumstances.
Id. The courts give a practical construction to the parties’
expressed intent.
In Stern v. Premier Shirt Corp., 260 N.Y. 201, 183 N.E. 363
(1932), a provision for the seller of a business to provide the
buyer with working capital “sufficient . . . to carry on the
business” was upheld. The court noted that this type of
agreement is common enough among business men to have
ascertainable meaning and concluded that:
[A]ll the parties—and particularly the defendants [sellers]
were familiar with the financial requirements of the busi-
ness and knew well what would be sufficient to carry it
5 This conclusion makes it unnecessary for us to consider USI’s
alternative argument that even if 3(g) is illusory the deficiency is remedied by
the additional, and finitely measured, consideration flowing to Gregg from
the earnout stock provisions.
22a
it on. That required amount is susceptible of proof and
hence the agreement may not be said to have been
indefinite.
Id. at 364.
Here, as in Stern, the buyer and seller of a business have
included a provision for injecting working capital into the
business without stating a precise amount of capital to be
provided. Although the parties in Stern had previously worked
together in the business, that element was not critical in the
court’s reasoning. See Banker’s Trust Co. of Western New
York v. Steenburn, 95 Misc.2d 967, 409 N.Y.S.2d 51, 62
(Sup.Ct.1978) (the parties’ mutual knowledge of the business’
financial needs is critical rather than the means by which they
acquire that knowledge). In Steenburn, the challenged agree-
ment was between a bank and its borrowers. The bank agreed
to lend start-up money for the borrowers’ new business.
Relying on Stern, the court held the agreement not indefinite.
Id. at 62. The court emphasized that the bank had examined
the cash flow projections of the business and the parties had
discussed the anticipated needs of the business even though no
exact amount was decided upon. /d. This created “sufficient
frames of reference that could, with reasonable certainty, fix
the bank’s obligation.” /d. at 63. Here too the parties discussed
at length the working capital needs of the business, and USI
examined the financial records of the business. Both parties
had business experience. They negotiated over the language of
3(g) with both sides represented by counsel and reached agree-
ment on the language to be used. These circumstances pro-
vided the requisite frames of reference that a factfinder could
use to fix the obligation.
New York cases that Gregg relies on in urging indefiniteness
are distinguishable. Most involve disputed oral contracts where
there was substantial doubt about whether the parties even
reached an agreement. See e.g., Varney v. Ditmars, 217 N.Y.
223, 111 N.E. 822 (1916) (an alleged oral promise by an
employer to provide an employee with a “fair share” of the
profits); Trimmer v. Van Bomel, 107 Misc.2d 201, 434
23a
N.Y.S.2d 82 (Sup.Ct.1980) (a “palimony” case concerning an
alleged oral agreement by which a wealthy widow was to pay
her former male companion “costs and expenses for sumptu-
ous living and maintenance for the remainder of his life”);
Silvera v. Safra, 79 Misc.2d 919, 361 N.Y.S.2d 250
(Sup.Ct.1974) (an admittedly illusory oral promise to “add
capital or arrange for additional financing” with defendant to
retain an unlimited right to decide on the nature and extent of
performance; this contract also had an illegal objective); Gar
cin v. Granville Iron Corp., 137 Misc. 648, 244 N.Y.S. 145
(Sup.Ct. 1930) (an alleged oral contract to provide “large sums
of money as might be required” to the defendant which was
inconsistent with terms of a written contract between the
parties providing for specific amounts to be loaned and also
was found by the court to be a sham interposed only to delay
judgment). We conclude, therefore, that the contract was not
unenforceable because too vague and indefinite.*
In his July 1981 order the trial judge referred to his having
directed verdicts against Gregg on his quantum meruit claim
(Count IIIA), and against USI on its counterclaims for breach
of warranty (Fourth-A), rescission (Fifth), breach of fiduciary
duty and mismanagement (Sixth), quantum meruit (Tenth) and
procurement of watered stock (Eleventh). He did not, however,
give his reasons for these directed verdicts. Possibly the rulings
on USI’s breach of warranty counterclaim, and its counter-
claim for breach of fiduciary duty and mismanagement, are
based upon the conclusion that the contract was illusory. We
are in the dark as to the reasons for the rulings on the
reciprocal quantum meruit claims,’ the rescission claim,’ and
the procurement of watered stock claim. We therefore vacate
6 USI also contends that even if 3g) was indefinite the contract
became enforceable by USI's part performance consisting of substantial
infusions of capital.
7 We leave to the district court whether these two survive our finding
that there was a non-illusory express contract.
g Possibly it fell out as a remedy inconsistent with the other remedies
that USI sought.
aati
24a
all of these directed verdicts set out in this paragraph, without
prejudice to the district court’s reconsidering them.
V. Gregg’s claim for conversion of his dividends
Gregg alleged that USI converted his dividend checks, and
alternatively the funds they represented, for June, September
and December 1972. The court in its July 1981 order granted
summary judgment for USI on this claim. The claim has been
extinguished to the extent of compensatory damages by the
judgment entered for Gregg on his breach of contract claim for
his withheld dividends, but the claim for punitive damages was
not extinguished. Gregg asserts he was entitled to have the
punitive damages issue submitted to the jury. Punitive damages
are available for conversion under both Florida law and New
York law.’
Beginning with the USI dividend payable June 1, 1972 and
continuing through dividends payable December 1972, a total
of six dividends, UIS intercepted from the channels of pay-
ment the dividends payable to Gregg and held them under its
control. To cover each dividend declared USI transferred from
its account in Chemical Bank, in New York, to a special
dividend account in the same bank, sufficient funds to pay the
dividend to all stockholders including Gregg.
USI first requested Chemical Bank on May 24, 1972 to stop
payment of the dividend payable to Gregg on June 1. Divi-
dends had been declared and were due June | on preferred
stock and June 19 on common stock. The bank told USI that
checks already had been prepared for both payments and that
so long as Gregg was a shareholder of record checks would
continue to be made to him automatically by the bank’s
computer. USI then instructed the bank to cancel Gregg’s June
9 Adustment Specialists, In. v. Collection Bureau of Orlando, Inc.,
1 So.2d 443, 445 (Fla.Dist.Ct.App.1969); Doral Country Club inc. v.
Lindgren Plumbing Co., 175 So.2d $70" 571 (Fla.Dist.Ct.App.1965), cert.
denied, 179 So.2d 212 (Fla.1965), aff'd on other grounds, 196 So.2d 242
(Fla. Dist.Ct.App.1967); Goodrich v. Malowney, 157 So.2d 829, 834
(Fla. Dist.Ct.App.1963); Manekas v. Allied Discount Co., 6 Misc.2d 1079,
166 N.Y.S.2d 366, 369 (Sup.Ct. 1957).
25a
checks, to send them to USI, and to change Gregg’s mailing
address so that future dividend checks payable to him would
come to USI rather than to him. The bank “pulled” the June |
check and later the June 19 check, placed both in its vault, and
several months later marked them “void” and sent them to
USI. On June 15 Gregg called USI and inquired about his
missing June 1 check but USI gave him no information of its
whereabouts. Two checks for September dividends and two for
December, payable to Gregg, were “pulled” by the bank and
sent to USI, which ended up in possession of six checks
totaling about $65,000.'° Officers of USI discussed ways that it
could realize the funds represented by the checks, but it made
no effort to carry through. Until trial the funds out of which
the checks were payable remained in the special dividend
accounts at Chemical Bank, and USI maintained possession of
Gregg’s checks. As already described, Gregg demanded of
Chemical Bank that it reissue his dividend checks, and on
USI’s instruction the bank refused. Also the Leesburg Bank
offered to postpone selling Gregg’s pledged stock if Chemical
would send it Gregg’s withheld dividends, and Chemical, on
USI’s instruction, refused. In summary, USI exercised control
over where Gregg’s dividend checks would be sent, over the
checks themselves, and over the dividend accounts and the
funds in the accounts.
In granting summary judgment the district court applied
New York law to define conversion" as follows:
Any unjustified exercise of dominion over property by
one who is not the owner of the property and who is not
entitled to possession of the property which interferes
with the right to possession of another who is lawfully
entitled to such possession.
In measuring whether there was a conversion under New York
law, the court held that under New York [conflict of laws]
10 Whether Gregg’s address was changed as USI requested is not clear.
11 Gregg says that Florida law should have been applied but acknowl-
. edged that it is “essentially identical” to New York law.
eg ¥ my ae
Dodd, i aa ee ee
26a
rules, the law of the state in which a corporation is incorpo-
rated governs the fiduciary obligations of the corporate offi-
cers and the general relations between shareholders and
management. Thus the court looked to the law of Delaware,
where USI was incorporated, to determine if the corporation
had committed acts with respect to Gregg that were within the
New York definition of conversion.
USI asserts, and Gregg does not dispute, that its declaration
of each dividend created a debtor-creditor relationship between
it and Gregg. It says that Gregg owed it a liquidated sum on
the $500,000 note, that it could properly withhold Gregg’s
dividends as an offset, and that its doing so was not, in the
words of the New York law, an “unjustified exercise of
dominion over property which Gregg was lawfully entitled to
possess.” USI puts forward no other legal basis for its actions
than its assertion that it was entitled to and did offset the
dividends against Gregg’s obligation on the note.
As the predicate for his conversion theory Gregg relies upon
cases holding that once a corporation that has declared a
dividend sets aside an identified fund for the payment of the
dividend, it becomes a trustee for the benefit of the share-
holders entitled to the dividend.'? Gregg asserts that USI, as
trustee, exercised dominion over trust assets of which he was
the beneficiary and that he was entitled to possess, and claimed
the same adversely to him as beneficiary, and thereby USI
became a converter.
12 See e.g., Sherry v. Union Gas Utilities, 171 A. 188 (Del.Ch.1934);
accord In re Interborough Consolidated Corp., 267 F. 914 (S.D.N.Y.1920);
Ford v. Easthampton Rubber Thread Co., 158 Mass. 84, 32 N.E. 1036
(1893); Hunt v. O'Shea, 69 N.H. 600, 45 A. 480 (1899). The rule has been
codified in the Uniform Trusts Act, Section 2(1):
27a
The district court did not address the viability under New
York law of Gregg’s theory that a trust relationship was
created. Rather, accepting the trust theory arguendo, the court
adopted USI’s position that it acted justifiably because it
withheld Gregg’s dividends as an offset against his liability on
the note. There no such justification. Under the undisputed
facts USI did not engage in an offset at all. Under New York
law setoff is complete when three steps have been taken: a
decision to exercise the right, some action that accomplishes
the setoff, and some record evidencing that the right of setoff
has been exercised. Clarkson Co. Ltd. v. Shaheen, 533 F.Supp.
905, 925 (S.D.N.Y.1982); see also Aspen Industries, Inc. v.
Marine Midland Bank, 74 A.D.2d 59, 426 N.Y.S.2d 620, 622
(1980), rev’d on other grounds, 52 N.Y.2d 575, 439 N.Y.S.2d
316, 421 N.E.2d 808 (1981) (setoff does not automatically
occur each time a bank holds a matured debt of the depositor;
a binding overt act must actually be made).
USI failed on all three prongs of the New York requirement.
It directed that Gregg’s checks be held and turned over to it,
and it held control of the checks and of the funds in the
dividend accounts that consisted of Gregg’s dividends. But it
did not offset. It merely exercised—and retained—control
pending hostilities,’ while reserving to itself the right to
assert—and asserting—at 100 cents on the dollar the very
claims that it now says the dividends were offset against. In the
abortive Delaware suit USI claimed $400,000, the full principal
amount of Gregg’s note, plus interest, and in an ex parte
hearing proved up its claim in this amount. U.S. Industries,
Inc. v. Gregg, 348 F.Supp. 1004, 1009 (D.Del.1972). The
Leesburg bank intervened in the Delaware case seeking to
protect its interest in the withheld dividends and to quash the
sequestration order. The court declined to protect the bank but
clarified that no dividends were included in the sequestration. -
USI never paid the withheld dividends to the bank.
13 See USI’s brief in No. 81-5956, p. 6: “USI decided to leave the
funds represented by the checks with Chemical in the dividend disbursing
accounts awaiting the outcome of this litigation.”
28a
When later sued in this case by Gregg, USI asserted its rights
under the note without recognizing any offset. To the contrary
its claim excluded the possibility of an offset. USI counter-
claimed for the full principal amount of the note (less the
initial $100,000 payment) and alleged that no part of this
indebtedness had been paid. While not evidencing any reduc-
tion in Gregg’s note through applying the withheld dividends,
when USI answered Gregg’s contract claim it denied that it
owed him the dividends he claimed. USI secured a judgment
for the full $400,000 of unpaid principal plus interest from the
due date with no credit for either the principal of the withheld
dividends or the interest thereon. Gregg did not secure the
economic value of his dividends by an offset but through suing
USI for his dividends on a contract theory and obtaining a
judgment. USI’s course of conduct is the antithesis of offset."
Because the court erred in accepting USI’s offset theory, the
conclusion that USI was not guilty of conversion must be
reversed. Whether, with this contention out of the way, USI is
guilty of converting either checks or dividends, or both, is an
issue for the district court."
14 Compare USI’s failure to offset in this case with its actions several
years later, in a controversy between USI and other persons who had sold
control of a company to it through an exchange of stock. U.S. Industries,
Inc. v. Anderson, 579 F.2d 1227 (10th Cir.1978). USI sued the sellers
charging fraud, breach of employment obligations, and breach of fiduciary
duties. Thereafter USI sent defendants a letter saying:
The amount of the dividends due you or to become due you on your
Special Preference Stock, Series O, will be paid by offsetting the same
against the amount due from you to USI as alleged in its complaint in
the action which is now pending against you in the U.S. District Court
for the District of Utah—Central Division. Of course, if the amounts
thus offset should exceed your liability to USI as finally determined,
the balance will be paid to you with interest.
Id. at 1228.
15 Ordinarily a trustee cannot set off claims owed to it in its individual
capacity against assets held in trust. See Alvord v. Ryan, 212 F. 83 (8th
Cir.1914); accord Garrison v. Edward Brown & Sons, 25 Cal.2d 473, 154
P.2d 377 (1944); Goodwillie v. City of Bayonne, 2 N.J. 88, 65 A.2d 742
(1949); Harris v. Elliott, 24 A.D. 133, 48 N.Y.S. 1020 (1897).
-
|
Pe?
29a
VI. Gregg’s claim for interference with
contract relations
Gregg claims (Count VI) that USI maliciously interfered
with contractual relations between him and the Leesburg bank
by interrupting the dividend checks that had been assigned to
the bank. The district judge entered judgment for USI on
alternative summary judgment and directed verdict grounds.
His basis was that, assuming USI’s actions in withholding
Gregg’s dividend checks were an interference with relations
between Gregg and the bank, USI’s action was justified as a
matter of law because it was exercising its right to setoff. The
district court noted that there was evidence of ill will between
the parties and “allegations by Gregg” that the officers of USI
were harassing him. But, the court held, the corporation
officers had good reason to act to protect the company’s
interest and they exercised a legally recognized right of setoff.
USI was not entitled to judgment as a matter of law on this
claim. The district court’s theory that as a matter of law USI
was “reasonably justified” is fatally flawed by its erroneous
conclusion that USI was exercising a legally recognized right of
offset. See Part V, above. Moreover, the court noted that there
was evidence of ill will between the parties and “allegations by
Gregg” that officers of USI were harassing him; there were not
merely allegations that USI was harassing Gregg but actual
testimony to this effect.
Both USI and the district court appear to say that because
Gregg in an election of remedies “affirmed” the overall trans-
action, and because it could not be unscrambled by rescission,
he could not recover on the interference with business relations
claim. Election of remedies concerning the transaction between
Gregg and USI and difficulties of restoring the status quo are
unrelated to any right to recover for allegedly tortious acts
done by USI and affecting Gregg’s relations with his bank.
VII. Gregg’s abuse of process claim
The district court correctly found that Gregg failed as a
matter of law on this claim that USI abused Delaware process
30a
by the sequestration suit. Delaware has adopted Prosser’s test,
W. Prosser Law of Torts, Sec. 121 at 856, 857 (4th Edition
1971), requiring an ulterior purpose and a willful act in the use
of the process not proper in the regular conduct of the
proceedings. Unit, Inc. v. Kentucky Fried Chicken Corp., 304
A.2d 320, 331 (Del.Super.1973).'° The acts relied upon must
occur after the proceeding is filed. Prosser at 856; Blue Goose
Growers, Inc. v. Yuma Groves, Inc., 641 F.2d 695, 697 (9th
Cir. 1981) (applying Arizona law); Weiss v. Hunna, 312 F.2d
711, 717 (2d Cir.), cert. denied 374 U.S. 853, 83 S.Ct. 1920, 10
L.Ed.2d 1073 (1963) (applying New York law). Gregg relies
upon pre-suit actions by USI. Alleged misrepresentations by
USI made in the Delaware suit do not provide the necessary
willful act. Prosser at 856 n.66.
VIII. USI’s claim for preemption of
corporate opportunity
One of the claims severed for non-jury disposition was USI’s
counterclaim for Gregg’s alleged preemption of corporate
opportunity by purchasing Camp Concrete Rock Company.
The court, applying Florida law (no party contends this choice
is incorrect), held that once Gregg was removed as president
and chief operating officer'’ of his former companies and
made only a consultant he no longer had fiduciary duties of
such nature that they would be breached by his purchase of
Camp Concrete. Gregg had no specific fiduciary obligation
concerning acquisitions; his new duties as consultant had no
relation to acquisitions. We agree with the district court that,
under Florida law, Gregg had no general fiduciary obligation
16 Gregg asserts that Florida law governs but concedes that Florida
uses the same test. Blue v. Weinstein, 381 So.2d 308, 310 (Fla.Dist.Ct.
App. 1980).
17 —- The court did not base its ruling on its conclusion that the indivisible
agreement was illusory but rather, presumably assuming arguendo that the
agreement was valid, held that Gregg’s fiduciary obligations as president and
ee
3la
to USI. Connelly v. Special Road & Bridge District No. 5, 99
Fla. 456, 126 So. 794, 798 (1930); Renpak, Inc. v. Op-
penheimer, 104 So.2d 642, 644 (Fla.Dist.Ct.App.1958). Gregg
had been removed from management against his will, his
authority taken away, forbidden to communicate with employ-
ees or to maintain an office on company premises, and re-
quired to surrender possession of company property. He had
no regular duties but was subject to being called upon by USI
for narrow and specialized purposes (primarily to consult
concerning outstanding claims against the Corps of Engineers).
IX. USI’s claim for breach of
covenant not to compete
This was severed from the jury trial and dismissed post-trial
on the merits because the covenant, contained in the Employ-
ment Agreement, was part of the indivisible contract that the
court held illusory. This must be reversed. See Part IV, above.'®
X. The $500,000 note and its spinoffs
Before trial the court told the parties that USI’s counter-
claim on the note would be tried. However, at the conclusion
of the evidence the court removed this counterclaim as an issue
for the jury and reserved it for post-trial consideration. Post-
trial the court granted judgment for USI on the note. This is
due to be affirmed.
Gregg contends that, under his invocation of a fraud and
duress defense to the note counterclaim, he was entitled to
judgment as a matter of law once the jury found that USI
committed fraud. We cannot accept this argument. Gregg did
not seek rescission of the transaction, including the note, but
rather alleged fraud in the inducement and sought breach of
contract damages. He could not affirm the contract and at the
same time disaffirm it by asserting fraud and duress in diminu-
tion of his liability on the consideration that he gave. See Baill
18 We have not reached USI’s alternative argument that the covenant is
enforceable as part of a separate document that the parties signed in June
1971.
32a
v. Ball, 160 Fla. 601, 36 So.2d 172, 177 (1948); Storrs v.
Storrs, 130 Fla. 711, 178 So. 841, 843 (1937); Hustad v. Edwin
K. Williams & Co.—East, 321 So.2d 601, 603 (Fla.Dist.
Ct.App.1975), cert denied, 333 So.2d 41 (Fla.1976).
Gregg makes another argument that the court committed
reversible error in its handling of issues arising out of the note.
His argument seems to run this way. Because the court an-
nounced that the note counterclaim would be tried, he omitted
presentation of evidence concerning the value of the note as an
asset of the Gregg companies (which would have increased the
value of assets that he gave up). Rather, he elected to defend
the note counterclaim on grounds of fraud and duress."* And,
when the court removed the counterclaim as an issue for the
jury and reserved it for post-trial consideration, he lost his
right to a jury trial on the fraud and duress defense. As we
have already pointed out, Gregg was not entitled to a fraud
and duress defense. He sued for fraud in the inducement, did
not disaffirm the contract, retained the benefits, and sued for
breach. He was free to present his case with the note included
as an asset. Moreover, the premise for Gregg’s argument is
unfounded. His contentions were presented to the court post-
trial, and it held that in fact the note had not been excluded
from calculation of the Gregg assets. We have examined the
testimony of Gregg and of the experts for both sides, the
documentary evidence, and the arguments to the jury. There is
adequate evidentiary basis for the jury to infer that the note
was an asset of the Gregg companies and to use it as a factor in
reaching its valuation.
The note contained a provision for attorney fees on default.
The court denied fees to USI on the ground that both parties
had prolonged the litigation unnecessarily and had made its
19 = Brief of Gregg, No. 81-3956, p. 10: “Because Gregg contended that
the note was valueless due to his defenses to its payment, counsel refrained
from arpuing [to the jury] that Gregg was entitled to (damages that included]
the face value of the note.”
Reply brief of Gregg, No. 81-5956, p. 9: “Gregg’s counsel consistently
maintained that the note was veluciess because it was procured by duress and
33a
resolution difficult, and that the legal services attributable to
the note were minimal compared to the overall services by
USI’s attorneys. We decline to disturb this discretionary deci-
sion. Cable Marine, Inc. v. M/V Trust Me II, 632 F.2d 1344
(Sth Cir.1980).
XI. Improper jury argument
USI maintained that Gregg misrepresented the financial
status of a contract Gregg had with the Corps of Engineers. At
the time of trial USI had pending before the Army Corps of
Engineers Board of Contract Appeals a claim for equitable
adjustment of this contract. The court instructed both parties
that jury argument about USI’s prospects for recovering on
this pending claim would be improper. USI maintains that it is
entitled to a new trial on its fraud counterclaims because Gregg
improperly argued to the jury that USI had favorable pros-
pects for recovering on this claim. This contention was raised
by motion for mistrial and motion for new trial, and the trial
judge denied both. We have considered the arguments made by
Gregg and those by USI to which Gregg was responding, and
we find no error in the trial court’s rulings.
Conclusion
Summarizing, we hold:
Gregg’s claims
Count I: Common law fraud. Judgment that USI committed
34a
Count VI: Interference with Gregg’s business relations with
bank. Judgment for USI REVERSED.
Count VII: Abuse of process by USI. Judgment for USI
AFFIRMED.
USI’s counterclaims
First: Common law fraud. Judgment for Gregg AFFIRMED.
Second: Securities fraud (1933 Act). Judgment for Gregg
AFFIRMED.
Third: Securities fraud (1934 Act). Judgment for Gregg
AFFIRMED.
Fourth: Breach of contract. Judgment for Gregg REVERSED.
Fourth-A: Breach of warranty. Judgment for Gregg VA
CATED.
Fifth: Rescission. Judgment for Gregg VACATED.
Sixth: Breach of fiduciary duty and mismanagement. Judg-
ment for Gregg VACATED.
Seventh: Breach of covenant not to compete. Judgment for
Gregg REVERSED.
Eighth: Preemption of corporate opportunity. Judgment for
Gregg AFFIRMED.
Ninth: on note. Judgment for USI AFFIRMED. Judgment
denying attorney fees AFFIRMED.
Tenth: Quantum meruit. Judgment for Gregg VACATED.
Eleventh: Procurement of watered stock. Judgment for
Gregg VACATED.
AFFIRMED in part, VACATED in part, REVERSED in part, and
REMANDED. Each party shall bear its own costs.
35a
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 76-2107, 81-5956
Dec. 15, 1983
+
F. BROWNE GREGG,
Plaintiff-Appellee, Cross-Appellant,
—
U.S. INDUSTRIES, INC., a Delaware Corporation,
Defendant-Appellant, Cross-Appellee.
—
F. BROWNE GREGG,
Plaintiff-Appellant, Cross-Appellee,
—Vv.—
U.S. INDUSTRIES, INC., a Delaware Corporation, 4
Defendant-Appellee, Cross-Appellant. '
-
Appeals from the United States District Court for the
Middle District of Florida; Gerald Bard Tjoflat, Judge.
7
, . 4
ON PETITIONS FOR REHEARING AND GREGG’S
PETITION FOR CLARIFICATION
(Opinion September 30, 1983, 11th Cir., 1983, 715 F.2d 1522)
Before:
GODBOLD, Chief Judge,
HENDERSON and CLARK, Circuit Judges.
>
PER CURIAM:
With respect to Gregg’s petition for rehearing and for
clarification, we affirmed the judgment as it related to Gregg’s
Count I to the extent that USI was found to have committed
fraud. We reversed the award of compensatory damages to
Gregg under Count I because of erroneous instructions to the
jury. As to the judgment for $500,000 punitive damages for
Gregg under Count I, we remanded to the district court for it
to determine whether this award stands.
Gregg’s petition for clarification is GRANTED to the extent
that we specifically confirm what occurs by operation of law,
that is, the issue of the amount of compensatory damages, if
any, to which Gregg is entitled under Count | is to be es-
tablished by a properly instructed jury which is not to retry the
issue of USI’s liability under Count I.
We again decline to address whether, with the compensatory
damage award to Gregg under Count I reversed, the judgment -
for punitive damages for Gregg under Count I remains in
effect. This issue was not briefed or argued, and we leave it to
the district court. i
As to Gregg’s Count III, the petition for rehearing is
GRANTED to the extent that in the summary of the disposition
of the claims, at 715 F.2d at 1543, the provision concerning
Gregg’s claim under Count III is amended to read:
'
Count III: Breach of contract. Judgment for USI RE- ‘
VERSED.
In all other respects Gregg’s petition for rehearing and
: clarification is DENIED. :
> USI’s petition for rehearing is DENIED.
37a
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 76-2107, 81-5956
D.C. Docket No. CA72-25-OC
—-
F. BROWNE GREGG,
Plaintiff-Appellee, Cross-Appellant,
—Vvi
U.S. INDUSTRIES, INC., a Delaware Corporation,
Defendant-Appellant, Cross-Appellee.
++—
F. BROWNE GREGG,
Plaintiff-Appellant, Cross-Appellee,
—vi—
U.S. INDUSTRIES, INC., a Delaware Corporation,
Defendant-Appellee, Cross-Appellant.
7
a
. Appeals from the United States District Court for the Be!
Middle District of Florida "
a rs 7 7
Before:
38a
JUDGMENT
This cause came on to be heard on the transcript of the
record from the United States District Court for the Middle
District of Florida, and was argued by counsel;
ON CONSIDERATION WHEREOF, it is now here ordered and
adjudged by this Court that the judgment of the said District
Court in this cause be and the same is hereby AFFIRMED IN
PART, VACATED IN PART and REVERSED IN PART; and that this
cause be, and the same is hereby, REMANDED to said District
Court in accordance with the opinion of this Court;
It is further ordered that each party bear their own costs on
appeal to be taxed by the Clerk of this Court.
September 30, 1983
ISSUED AS MANDATE: Jan 3, 1984
39a
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION
No. 72-25-Civ-Oc
+
F. BROWNE GREGG,
Plaintiff, ‘
—vs.—
U. S. INDUSTRIES, INC.,
Defendant.
-
ORDER
Now, February 7, 1984, after consideration of the motion of :
defendant, U. S. Industries, Inc., for a directed verdict at the
close of plaintiff’s evidence upon counts 1, 2, 3, 4, 6 and 7 and
upon careful consideration of the reasOhs assigned in support :
thereof, the arguments of counsel and the memoranda of :
counsel theretofore filed, y
%
IT IS ORDERED that the defendant’s motion for directed
verdict is granted as to counts 1, 2, 6 and 7; and
IT IS FURTHER ORDERED that defendant’s motion for a
directed verdict is denied as to counts 3 and 4.
| /s/_C. WILLIAM KRAFT JR.
4 Judge
gS |
40a
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION
No. 72-25-Civ-Oc
+
F. BROWNE GREGG,
Plaintiff,
—Vvs.—
U. S. INDUSTRIES, INC., A Delaware Corporation,
Defendant.
>
ORDER
Now, February 25, 1984, by reason of the continuing illness
of the Trial Judge and his inability to resume the trial,
IT IS ORDERED that a mistrial be, and it is, declared and the
jury is discharged from further consideration of this action.
By THE CouRr, r
/s/_C. WILLIAM KRAFT JR. a
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.