# Petition — Bryner v. Security Pacific National Bank > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_1553%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1984 - **Citation:** 467 U.S. 1241 ## Text bl a) ben aneel ik “~— APR 13 1984 RPEEKENTER L. STEVAS. CLERK In the Supreme Court United States Sescius Bayner and Francis Bryne, ét al. Petitioners, vs. Security Pactric Nationa, Bank, CommerciaL Bank or San Francisco, Caprrau Reserve Leasine Corporation, C.1.T. Corporation, and Lzasco Capita, EquipMent CorPOoRATION, Respondents. PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT Arvin H. Gouperern, Jr. COUNSEL OF RECORD Lawrence A. CaLLaGHAN Goipstzin & PHIiirs A Professional Corporation Three Embarcadero Center Suite 2280 San Francisco, CA 94111 (415) 981-8855 Rosest R. ELLepos Law OFrrFices or Rosgrt R. ELLepcs A Professional Corporation P.O. Box 852 Modesto, CA 95353 Attorneys for Petitioners QUESTIONS PRESENTED 1. Whether a magistrate, lacking the essential attributes of an Article III judge, may exercise the judicial powers of the United States and enter judgment in a case over which the federal court asserts subject matter jurisdiction. 2. Whether a prevailing counterclaim- ant, entitled to an award of contractual attorneys fees on a counterclaim, can over- ride the “American Rule” and Congress and obtain attorneys fees that encompass not only the counterclaim but also the defense of Securities Act and other claims. | (a) Whether petitioners were denied due process of law when the magistrate aborted a scheduled hearing and entered judgment awarding respondent banks and leasing companies $2 million dollars in attorneys fees and non-statutory costs, without a hearing of any kind whatsoever. 3. Whether jury verdicts were coerced = 41 « by the magistrate's call for numerical division, followed by two supplemental Allen-type charges. 4. Whether the magistrate took the neces- sary steps to assure that jury verdicts were unanimous and whether, having refused to make appropriate inquiries of a question- ing juror, the magistrate should have granted the application for a post-trial hearing on that issue. 5. Whether the discovery at trial that material evidence had been reconstructed or destroyed should have been the subject of sanctions that: (a) would have affected the entry of judgment, (b) would have denied an award of attorneys fees and non-statutory costs, and (c) should have been considered on the merits before entry of judgment. 6. Whether the uncontradicted facts establish a prima facie violation of the Glass-Steagall Act. (a) Whether the trial court should have a - iii - granted respondent banks directed verdict motion. (b) Whether a private party can assert violation of the Act as an affirmative defense. PARTIES The parties to the proceeding in the court whose judgment is sought to be re- viewed are: Plaintiff and cross-defendant/appel- lants and petitioners herein: Sergius and | Francis Bryner, Calvin and Jacqueline Benton, Clarence and Louise Copeland, Howard Daniel, Alvin and Catherine Dill, John Duff, John and Patricia Dumars, Gaar Edwards, Martin | and Ruth Fish, Maurice and Ellen Fox, Gary and Karen Fry, Jared and Elsie Haight, Roy and Mary Hamaji, Robert and Betty Harrington, Ronald and Marcia Haug, Richard Jackson, | Pacific Wood Preserving Corporation, Shoge and Janet Kimura, Leo and Osie Lawrence, Bernard and Barbara Lewis, Eugene and Mary Olga Liston, Lowell and Joan Lundell, - iv- William and Marsha. McKee, Philip and Rina Milano, John and Margaret Moylan, James and Nancy Ouye, Robert and Maria Pappas, Kent and Claire Pearson, Robert and Alberta Roth, Walden and Lois Alldrin, Billy Joe and Virginia Purviance, Randol and Betty Purviance. Defendant and cross-claimant/appel- lees and respondents herein: Commercial Bank of San Francisco, Security Pacific National Bank, Capital Reserve Leasing Corporation, C.I.T. Corporation, Leasco Capital Equipment Corporation and defen- dant/appellees John Smith, William Sarsfield, Robert Temp, Alaine C. Temp, and Richard Freeman. The individual defendant/appellees are not included as respondents in this petition. - VYe-= TABLE OF CONTENTS Page QUESTIONS PRESENTED ...cccccccccccccce i PARTIES ccccccccccesscccececcscesece ALL OPINIONS AND ORDERS OF COURTS BELOW.... 1 JURISDICTION cccccccccccccccccceccccce & STATUTORY PROVISIONS INVOLVED ........ 3 STATEMENT OF THE CASE) ..ccccccccccceccs 5 District Court Jurisdiction ........ 5 Background of the Case) .....esseeeee 6 Reference to a Magistrate .......... 9 Destruction of Material Evidence .... 9 Jury Coercion and Lack of Unanimity Pe eS ee ee The Award of Contractual Attorneys Fees Encompassed Respondents' Defense of Securities Act and Other Claims, and was Assessed Without a BMOMEING cccccccecccccccccccccsesess 44 The Respondent Banks' Violations of the National Bank Act .......... 24 -vi- TABLE OF CONTENTS (CONTINUED) Page AUTHORITIES IN SUPPORT OF, AND AMPLIFICATION OF REASONS RELIED ON FOR, ALLOWANCE OF THE WRIT ....... 28 1. No person lacking the essential attributes of an Article III judge may exercise the judicial power of the United States ......eee00506- 28 2. The magistrate's award of attorneys fees and non-statutory costs was contrary to law and denied due process of law ........ 36 3. The jury verdicts were coerced ... 48 4. The verdict was not unanimous .... 52 5. Security Pacific National Bank's destruction of files and records... 55 6. Assertion of violation of the Glass-Steagall Act as an affirmative defense to bank GOUMESECLAIMS cocdvceassesosenccss OO CONCLUSION *oeeeeeeeneneeneeneeneeeeeeeeeee 65 - vii - TABLE OF AUTHORITIES CITED Page Cases A.C. Frost & Co. v. Cour D'Alene Mines Corp., 312 U.S. 38, 43 (1941) pa oe Oe 0 0060.060 6 0160 6S 050 60 ee eeee Alliance To End Repression v. The Rochford, F.R.D. 438 (N.D.I1ll. 1976) LS he er | American Society of Travel Agents v. = of America, F.Supp. 1084, SemeCOke BEF E) Soe cawe es crdecccosocaea Atchison, Topeka & Santa Fe v. Barrett, 246 F.2d 846, 849 (Sth Cir. 1957) ae weds 66080606060 60 oe Board of Governors of the Federal Reserve System v. Investment Co. Institute, 450 U.S. 46 (1981) ......61 Bowmar Instrument Corp. v. Texas Instruments, Inc., 25 Fed.R.S. 20, 423, 427 (N.D.Ind. 1977) be pi edasé Cererenus ment Brasfield v. United States, Ss P 448 (1926) ob.6¢¢6006 s80nenee 51 272 ele at 450 e*enerieeneene#eee#fee#e#e#ee#ee#ee 48 Bruce v. Chestnut Farms-Che ase Dairy, 126 F. 224, ae Cir. 1942) Sceovnéiensecrcreeee City of Detroit v. Grinnell Corp., 5 F.2d 448 (2nd Cir. 1974) .......45 - viii - TABLE OF AUTHORITIES CITED (CONTINUED) Page Cases (Continued) Collins v. Foreman, 83-7938, 52 LW 2511 (2nd Cir. 2/22/84) .......29 Cook v. Ochsner Foundation Hospital, 559 F.2d 270, 273 (5th Cir. 1977) errr rerrrrTeTiTrce Crowell v. Benson, 285 U.S. 22 (1932) WerTririvrTT tT Tt Davis v. Fletcher, 598 F.2d 469 Tn UC REPEE cc nceewbeecne ose eee Ecco-Phoenix Electric Corp. v. Howard J. White, 1 Cal.3d 266, 272 ( o+2e38, 40, 41, 42, 47 Evans v. Gore, 253 U.S. 245, 253 20) TTT TTreT TT TT Th rt ee Farmer v. Arabian American Oil Co., 379 Ucie 227 (1964) tak. cane ou Fox v. United States, 417 F.2d 84, 89 (2nd Csr. 1969) ae ¢hnt Oe General Life of Missouri Invest- ment Co. v. Shamburger, 547 F.2a 746— 784 (ath th Cir. 1976) ...62 Glidden Co. v. Sdanok, | 370 U.S.530 (1962) als ae bie e000 6am ane Goldstein v. Kelleher, 83-1411, 511 Tist Cir. 2/29/84) .......29 . ae | ij a, ae iy, S - ix - TABLE OF AUTHORITIES CITED (CONTINUED) Page Cases (Continued) Hedla v. McCool, ~~476 F.2d 1223 1227 (9th Cee. 1973) Se ee ee I.N.S. v. Chadha, 458 U.S. 1120 , 103 S.Ct. 2764, 2781 Cia es ee 6e6eeedee 34 International Industries, Inc. v. Olen, 21 Cal.3da 218 (1978) ok dat een alives aha Investment Sonbany Institute v. Camp, 01 U.S. 17 (1971) cotedeseweone Iverson v. Pacific American Fisherie, 73 Wash.2d 973, 442 P.2d 243 (1968)...49 Juhnke v. E.I.G. Corp., P.2d-i3ss, Tsse (9th Giz. 1971) iin ’ The identical issue arises in any one of several contexts. For example, in United States v. Woodley, F.2d , Slip Op.5730 (9th Cir. 12/8/83) the same principles, upon which the Pacemaker panel relied were applied to a recess appointment to the federal judiciary. The rationale sup- porting Woodley is compromised by the decision of the en banc court in Pacemaker, and Woodley conflicts with a 1962 Second Circuit decision on the same issue. United States v. Allocco, 305 F.2d 704 (2nd Cir. 1962). Allocco resolves the issue on pragmatic, rather than jurispru- o/ This constitutional question falls within Supreme Court Rule 17.1(c) governing review on certiorari, i.e., “when...a federal court of appeals has decided an important question of federal law which has not been, but should be, settled by this court, or has decided a federal question in a way in conflict with applicable decisions of this court." = 31 «- dential, grounds. In Woodley, supra, the court of ap- peals put the question thusly: Whether a person lacking the essential attributes of an Article III judge -- life tenure and protection against diminution of compensation -- may nonetheless exercise the judicial power of the United States..." Slip Op.5730. Woodley is premised on the proposition that Section 1 of Article III entitles "only judges with Article III protection [to] exercise the judicial power of the United States." Slip Op.5732. Life tenure and guaranteed compensation are "the essen- tial attributes of an Article III judge" (Slip Op.5731), and are indispensable to judicial independence which is the hallmark of an Article III judge. Clearly, a magis- trate does not fit that description. Indeed, the Woodley court, as did the Pacemaker panel and the en banc dissent, rely en- tirely upon decisions of this Court which have consistently “emphasized the overriding » $2 « importance of an inaependent judiciary." Slip Op.5736. In Evans v. Gore, 253 U.S. 245, 253 (1920), this Court held: Independence of action and judg- ment is essential to the mainte- nance of the guarantees, limita- tions and pervading principles of the Constitution and to the administration of justice with- out respect to persons and with equal concern for the poor and 6/ the rich. = The recent opinions of the First, Second, Third and Ninth Circuits, supra fn.4, upholding the constitutionality of Section 636(c), tilt heavily toward prag- matic concerns in order to sustain a practice permitting a person who lacks the at- tributes of an Article III judge to exer- S/ This pronouncement seems particularly apt in a case such as this in which a magistrate has entered judgment against private litigants in favor of the State's third largest bank (one of the Nation's ten largest) without prior review or supervision of an Article III judge, after eschewing hearings on attorneys fees, destruction of evidence and juror unanimity, and on all post-trial motions. 2 eae = 33 - cise the judicial power of the United States by entering judgment in cases over which the federal courts have subject matter jurisdiction. In Glidden Co. v. Sdanok, 370 U.S. 530 (1962) and Northern Pipeline, supra, 458 U.S. 50, this Court held unconstitu- tional statutory schemes designed to promote judicial efficiency. Section 636(c) is an expedient that, more often than not, is forced upon litigants and should fall of its own weight in accord with decisions of this Court. In I.N.S. v. Chadha, 458 U.S. 1120 (1983), 103 S.Ct. 2764, 2781, this Court held that “convenience and efficiency are not the primary objectives--or the hall- marks of democratic government..." In Woodley, supra, the Ninth Circuit found that: The teaching of Chadha is clear. Historical acceptance and governmental efficiency are not unimportant. They will not, however, “save [a practice] if it is contrary to the Consti- tution. " Slip Op.5741 quoting Chadha, 103 S.Ct. at 2781. The dissent to the Ninth Circuit en banc decision in Pacemaker concludes that the majority: Disrupts the proper operation of our constitutional system including the independent exer- cise of judicial power by indi- viduals free of outside con- straints... 725 F.2d 547. The dissenters, as did the original Pacemaker panel, 712 F.2d 1305, concluded that the exercise of the judicial power of the United States by Article III judges cannot be allowed to depend upon stipula- tions of the litigants. 725 F.2d 547, 548-553. In United States v. Raddatz, 447 U.S. 667 (1980), this Court suggests the limits of a magistrate's delegated authority holding that delegation in that case (permitting a magistrate to conduct an evidentiary hearing on a suppression motion) did not violate Article III "so long as the - 35 - ultimate decision is made by the district court." 447 U.S. at 683, emphasis added. Thus, in the instant case, the ultimate decision on issues raised in the post- trial motions which were threshold to the entry of judgment, should have been made by an Article III judge.’ The original Pacemaker decision, supra, the dissent to the en banc decision, supra, and Woodley, supra, decision are all in accord with this Court's decisions in the Crowell, Raddatz, Northern Pipeline Petitioners do not agree with the additional dissent of Judge Pregerson, 725 F.2d 556-557. There is no justification for extending Article III protections to magistrates. If we need more Article III judges then they should be appointed, but the assumption that magistrates are qualified to exercise Article III powers is unsupportable. The case below, for example, was a judicial shambles, the magnitude of which is obfuscated by a court of appeals “memorandum” that omits most of the material facts (limited to two paragraphs) and neglects to discuss in any depth the issues raised on appeal. This Court should see through that memorandum which im- plicitly sanctions such “a departure by a lower court from the usual course of judicial proceed- ings” as to call for “an exercise of this Court's power of supervision." Supreme Court Rule 17.1(a). @ 36 - trilogy. The Ninth Circuit's en banc decision in Pacemaker is not. This Court has never deviated from the constitutional principle that Congress may not delegate power that properly belongs with Article III judges (even if Article III judges are willing to permit that to happen). When the delegation includes the ultimate power to make final decisions, the Constitution mandates that such delegation be annulled. 2. The magistrate's award of attorneys fees and non-statutory costs was contrary to law and denied due process of law: The magistrate's award of $2 million dollars attorneys fees and non-statutory costs that paid for respondents' defense of se- curities act claims. Such an award offends controlling principles established by this Court and the Supreme Court of California. The issue falls within Supreme Court Rule 17.1(c) in that a federal court of appeals has decided an important question of law » 37 « which has not been, but should be, settled by this Court, and has decided a federal question in a way that appears to conflict with applicable decisions of this Court. Attorneys fees may not be awarded in securities act litigation absent a finding that such litigation was undertaken in bad faith, or was meritless. Junker v. Crory, 650 F.2d 1349, 1364-5 (5th Cir. 1981) .2/ An award of contractual fees requires that a court ascertain the intent of the parties when they entered the contract. Pacific Oil & Cement Co. v. Food Machinery Chemical Corp., 178 F.2d 541, 552 (9th Cir. 1949); Calif.Civ.C. §1636. A trial court shall exercise its discretion in accord with equitable principles United States v. Mountain State Construction Co., 588 F.2d 259, 263 (9th Cir. 1978); Krause v. Rhodes, 640 F.2d 214, 218, 220 (6th Cir. 1981); 8/ No such contention has been or could be rea- sonably asserted in this case. = 38 « shall consider national policy Farmer v. Arabian American Oil Co., 379 U.S. 227 (1964), and the public policy of the State of California. Ecco-Phoenix Electric Corp. v. Howard J. White, 1 Cal.3d 266, 272 (1969) .2/ In the instant case, the trial court and the court of appeals ignore all of the above, pushing to one side threshold questions of contract interpretation, equitable con- siderations, public policy, pertinent pro- visions of the securities acts, and due process of law. In lieu of the exercise of discretion, staggering attorneys fees and non-statutory litigation costs, amount- ing to punitive damages, have been awarded the banks and leasing companies without a hearing. 2/ The Ninth Circuit memorandum concedes that this is the law, but does not apply it to the magistrate's refusal to conduct a hearing or to exercise discretion under California law. The magistrate's post-trial Orders 9, 10, ll (Appendix) are silent on California law and ignore what the Ninth Circuit memorandum refers to as California's “flexible approach”. = 39 « Under California law, it is the parties' intent, at the time they enter into a contract, that controls: It is the aim of courts, in inter- preting a written contract, to give the effect to the mutual intention of the parties as it existed at the time of the exe- cution of the contract. Pacific Oil & Cement Co. v. Food Machinery & Chemical Corp., 178 F.2 , 552 (Sth Cir. 1949). The standard, says the Ninth Circuit quoting Judge Learned Hand, is “what a normally constituted person would have understood [the words] to mean, when used in their actual setting." Id. In Krause v. Rhodes, supra, the Sixth Circuit emphasizes the "broad equity powers" fees authorized by contract and holds: That what was in the first instance a fair contract becomes unfair in its enforcement" and that “however reasonable and appropriate, the instant fee contracts were, when signed, the situation now existing differs drastically from that which the contractin arties originall contemplated. 640 F.2d at 550, emphasis added. ' i = 40 « The magistrate ignored opinions of California's highest court interpreting contracts in accord with public policy and recognizing "the oppressive nature of a literal interpretation” of a fee provision. Ecco-Phoenix Electric Corp. v. Howard J. White, Inc., supra, 1 Cal.3d at 272. In International Industries, Inc. v. Olen, 21 Cal.3d 218 (1978), the California Supreme Court reaffirmed that equitable principles and policy considerations that underlie judicial interpretation of at- torneys fees clauses. 21 Cal.3d at 223-4. In Sciarrotta v. Teeford Construction Co., 110 Cal.App.3d 444 (1980), the California Court of Appeals, citing International Industries, Inc., supra and Ecco-Phoenix, supra, noted: The Supreme Court has taken a more narrow View of attorneys fee clauses precisely because of the possibility that litigation might ensue for its own sake if a simplistic and inflexible con- » 4) « struction of attorneys fees clauses is followed. 110 Cal.App.3d at 451, emphasis added. The instant case reveals the other side of the same coin, i.e., that a "simplistic and inflexible construction of attorneys fee clauses" has a chilling effect on bona fide litigation. See Schaulis v. C.T.B./McGraw Hill Inc., 496 F.Supp. 666, 680 (N.D.Cal. 1980). "To do so in this context could only chill individual litigants..." The central holding of Sciarrotta is that "an attorneys fee provision in a form contract must be limited to the actions included in that clause" 110 Cal.App.3d at 450. California does not permit an interpre- tation of a fee clause “that could not have been reasonably contemplated or intended by the parties at the time of = ., ‘ Fi i -? a = 4 - 42 - contracting." 110 Cal.App.3d at 452, accord Krause v. Rhodes, supra, 640 F.2d at 218, 220. No attempt was made by the Magistrate to interpret the fee clause or even consider the contemplation of the parties at the time they entered the con- tract. To cast upon petitioners the burden of compensating respondents banks' and leasing companies' attorneys for conduct- ing a defense against bona fide securities act claims is against federal policy and will unquestionably chill private litigants who have bona fide securities act claims involving economically powerful financial institutions. (a) The award of attorneys fees and non-statutory costs, without a hearing, denied petitioners due process of law: This point is raised on appeal (see Appendix, p.l1) but is ignored in the Ninth Circuit ie @ 43 - memorandum. 22/ Appellants requested a hearing on all post-trial motions. CR 2037. (Respondent Security Pacific's fee application set a hearing date of August 7, 1981. ER 54. The Court reset a hearing for August 28, 1981, on all post- trial motions and circulated an agenda that included attorneys fee motions. However, on August 28, the magistrate stated that he had communicated ex parte with "various lawyers" (not including petitioners) and had resolved "the confusions". RT 2, 8/28/81. He then entered judgment noting that "oral argument will not be either required or permitted." Id. The controlling principle is set out by this Court in Perkins v. Standard Oil of California, 399 U.S. 222 (1969) holding 10/ The Ninth Circuit states that it does not dis- cuss certain points on appeal because, though “not lacking in merit", they are “not pivotal." (Memorandum, Appendix) How can an award of $2 million dollars constituting 40% of the total judgment awarded without a hearing and applying an erroneous standard; be “not pivotal"? » 44 < that attorneys fees should be "fixed in the first instance by the district court, after hearing evidence as to the extent _ and nature of the services rendered." 399 U.S. at 223, and, in this case we would add, interpreting the contract in accord with federal policy and California law. In Leeds v. Watson, 630 F.2d 674 (9th Cir.’ 1980), the Ninth Circuit applied the Perkins principle by remanding the attorneys fee issue to the district court "for the purpose of determining the appropriate counsel fee to be awarded, subsequent to an evidentiary hearing." 630 F.2d at 677, emphasis added. In Cook v. Ochsner Foundation Hospital, 559 F.2d 270, 273 (5th Cir. 1977), the court of appeals refers to the necessity for a "due process" hearing followed by "specific findings and conclusions” which set forth the basis of the trial court's ruling. Emphasis added. In Lindy Brothers Builders, etc. v. American Radiators, etc., @ 45 « 487 F.2d 161 (3rd Cir. 1973), citing this Court's dictum in Perkins, supra, the Third Circuit concludes that the failure of the trial court to hold an evidentiary hearing was “inconsistent'with the sound exercise of discretion." 487 F.2d at 170. In City of Detroit v. Grinnell Corp., 495 F.2d 448 (2nd Cir. 1974), the Court of Appeals, also citing Perkins, holds that a fee award should be fixed by the district court "after hearing evidence as to the extent and nature of services rendered." 495 F.2d at 472,14/ In King v. McCord, 621 F.2d 205, 206 (Sth Cir. 1980), the Fifth Circuit, also citing Perkins, holds that "appellants 11/ in Grinnell, the trial court had followed a procedure strikingly similar to what occurred in the instant case. After notifying the parties that a hearing was to be held, the Court limited the hearing to oral argument, not allowed by the trial court in the instant case. 495 F.2d at 472. The court characterizes an evidentiary hearing “complete with cross-examination [as] imperative.” 495 F.2d at 473. « 66 « should have been provided an evidentiary hearing to resolve the disputes and supple- ment its insufficient affidavits." Unim- pressed with the trial court's order as "nothing more than a ceremonial obedience to Johnson,” The court held that the manner in which these elements influenced the attorneys fee award must be elucidated by the trial court." Attorneys fee awards should not be based on the arbitrary and conclusionary predispositions of the trial judge. The failure of the district court ¢ 59 hold an evidentiary hearin n this case was inconsistent =e exer- cise of sound judicial discre- tion. 621 F.2d 20 emphasis added. In Davis v. Fletcher, 598 F.2d 469 (Sth Cir. 1979), the court emphasizes the necessity for assuring that fee awards are "based upon appropriate standards" and are not simply “a meaningless exercise in parroting and answering each of Johnson's twelve criteria." 598 F.2d at 470-71, emphasis added. fo » 49 « In the instant case, "appropriate standards” for the award of contractual attorneys fees were ignored and the Ninth Circuit's reliance upon Wagner v. Benson, 101 Cal.App.3d 27 (1980) in its memorandum Opinion is misplaced. Wagner, decided by an intermediate appellate court does not cite Ecco-Phoenix, supra, or International Industries, supra, and either totally ig- nores the principles enunciated by the California Supreme Court in those cases or sub silentio followed those cases by determining that the action against a note-holding bank was meritless. Otherwise, Wagner v. Benson is inconsistent with Ecco-Phoenix and International Industries .22/ 32/ The Wagner opinion suggests as much by implying that plaintiffs did not have a prima facie claim. 101 Cal.App.3d at 35. Sciarrotta, supra, decided nine months after Wagner cites both Ecco-Phoenix and International Industries and exercises discretion against a ee and inflexible interpretation of “atto fee clauses” where the result would be Eeead to | lic policy. --" 110 Cal.App.3d at m=. s . - 48 - It is noteworthy that Wagner does not cite Ecco-Phoenix or International Industries. 3 The jury verdicts were coerced: Inquiry about the numerical division of a deliberating jury is plain error. United States v. Noah, 594 F.2d 1303, 1304 (9th Cie. i079). In Brasfield v. United States, 272 U.S. 448 (1926): Such procedure serves no useful purpose...its effect upon a divided jury will often depend upon circum- stances which cannot properly be known to the trial judge or the appellate courts and may vary widely in different situations, but in general its tendency is coercive. 272 U.S. at 450. In Brasfield, this Court held that “the inguiry itself should be regarded as ground for reversal.” Id., emphasis @ 49 «- added .23/ This question falls within the purview of Supreme Court Rule 17.1(a), and (c). Even without an inquiry about numer~ ical division of the jury, the giving of a single Allen charge, without more, stands at the brink of "impermissible coercion." United States v. Seawall, 550 F.2d 1159, 1163, n.8 (9th Cir. 1977) and it has been the law of the Ninth Circuit (ignored here) since Seawall that having given it once, the trial judge "may not repeat the Allen charge or ask minority jurors to re-examine their standing.” 550 F.2d at 1163-4, n.1ll. See also Iverson v. Pacific American Fisherie, 73 Wash.2d 973, 442 P.2d 243 (1968). The Ninth Circuit said in Seawall that “problems arising from the inherently 43/ The Ninth Circuit memorandum implies, without holding, that a different test may apply in a civil case. No court has so held and no reason- ing will support such a conclusion. - 50 - coercive effect of the Allen charge have caused other courts of appeal and state courts to prohibit or to restrict severely its use", and that, given a second time, "it becomes a lecture sounding in reproof." 550 F.2d at 1162-3. In the instant case, the “reproof" explicit in the magistrate's remarks to a minority juror is striking. RT 21961-2. In United States v. Rogers, 489 F.2d 433, 436 (4th Cir. 1961), the court found that the kind of procedure the magistrate utilized here "may readily be construed by those jurors in the minority as requiring a deferential surrender to the views, however unreasoned, of the majority." In Kesley v. United States, 47 F.2d 453, 454 (5th Cir. 1931), the court holds that “comments, not upon the evidence but reflecting on the jurors, are not permissible”: Because of the impatation of stubbornness or worse which is likely to arise if the numerical division of the jury is publicly e Bi « revealed, to require disclosure of it is held error per se in the courts of the United States. Brasfield v. United States, 272 pi S. 448. much more serious is imputation by the e fo that some of the Le Fe forget ise ting nei? oaths. 14/ ist emphasis ba — The Ninth Circuit memorandum incorrectly states that the coercion issue was raised for the first time on appeal. (Appendix) The issue was squarely raised in the trial court in motions for judgment n.o.v. and new trial, and as the record reflects, the magistrate provided no opportunity to object. "I don't...need advice...so I didn't discuss this with you ahead of time", and that he wanted to talk to the jury “unaffected by the thoughts of attorneys." RT 21962. Attorneys are not required to engage in futile exercises. The bell had already been rung and the issue was raised at the first meaningful opportunity prior to appeal. 2f/ That very “imputation” is compelled from the magistrate's remarks here: “Whoever is re- sponsible for that kind of conduct [is] not being observant of the oath that you took to discharge your responsibility.” RT 21961-2. ° §2 «- 4. The verdict was not unanimous: Unless otherwise stipulated, a verdict in a civil case must be unanimous. Fox v. United States, 417 F.2d 84, 89 (2nd Cir. 1969); Rule 48 Fed.R.Civ.P. An "affidavit of a juror is admissible to show the true verdict or that no verdict was reached at all." Fox v. United States, supra, 417 F.2d at 89. The Ninth Circuit memorandum is contra (see Appendix) and is wrong. It is appropriate for the trial court on motion for new trial to set aside the verdict where it appears that a juror, who seemingly agreed to the verdict before it was signed, in fact dissented therefrom. Id., see also Matisse v. Maryland Casualty Co., 5 F.2d 233, 234 (D.C.Wash. 1925). In Fox, a juror was silent when polled. In the instant case, the juror expressly stated during the jury poll that “in order to get a unanimous vote” he had voted "yes". RT 21982. The Second Circuit held that » $3 « the trial judge had a duty to "eliminate all doubt as to whether the verdict of the jury is unanimous." 417 F.2d at 89. This is precisely what petitioners' counsel asked the magistrate to do on three occasions and he refused. RT 21984, 21985, 21986. Where there is uncertainty or contin- gency as to the finality of a jury verdict, the legal effect is the same as if there had been no verdict. Sincox v. United States, 571 F.2d 876, 878 (lst Cir. 1978). The California Supreme Court has stated: Acquiescence simply because the verdict has been reached by the majority is not an independent judgment, and if permitted, would undermine the right to a unanimous cuss a? Cao 925, SIE 11867) . It is error to require a juror, after an ambiguous response, to make up his mind in open court. United States v. Sexton, 456 F.2d 961, 967 (Sth Cir. 1972); see also Bruce v. Chestnut Farms-Chevy Chase Dairy, @ 84 126 F.2d 224, 225 (D.C. Cir. 1942) "The jury should be required to retire and give further consideration." In United States v. Morris, 612 F.2d 483 (10th Cir. 1979), the court held: [I]n any case upon the appearance of any uncertainty or contin- ency in a jury's verdict, it a the det of the trial judge to resolve that doubt, for "there is no verdict as long as there is any uncertainty or contingency to the finality of the jury's determination." 612 F.2d at 489, emphasis added. The magistrate had the opportunity to re- solve the ambiguity at a later point by conducting a hearing on that subject. Petitioners’ motion for an evidentiary hearing (ER 64) was denied (ER 75). Pc *t- trial evidentiary hearings requiring the attendance of jurors are allowed. Morgan v. United States, 399 F.2d 93, 97 (5th Cir. 1968) cert.denied 393 U.S. 1025 (1969); Remmer v. United States, 347 U.S. 227, 230-231 (1954). = §§ « S. Security Pacific National Bank's destruction of files and records: Security Pacific destroyed, altered and otherwise mishandled material evidence .42/ The Ninth Circuit memorandum ignores this issue although expressly raised. (See Appendix, p.l, Issue No. 3) .28/ The point was also raised in the trial court in motions for judgment n.o.v. and new trial but a scheduled hearing on post-trial motions was annulled. F.R.Civ.P. 59, 60(b) (3). A court may relieve a party from a final judgment, order, or proceeding for the fraud, misrepresentation, or other misconduct of an adverse party. 3/ This is within the purview of Sup.Ct. Rule 17.1(a) in that a federal court of appeals has so far departed from the accepted usual course of judicial proceedings, or so far sanctioned such a departure by a lower court, as to call for an exercise of this Court's power of supervision. The point is presumably encompassed in the memorandum's closing paragraph. This issue, not lacking in merit, is pivotal, as the cited cases indicate. 16/ - 56 - Rule 60(b) (3) Fed.R.Civ.P., Rozier v. Ford Motor Co., 573 F.2d 1332, 1339 (5th Cir. 1978); Atchison, Topeka & Santa Fe v. Barrett, 246 F.2d 846, 849 (9th Cir. 1957); Toledo Scales Co. v. Computing Scales Co., 261 U.S. 399, 421 (1923). The application of Rule 60(b) (3) does not require that the information withheld, or destroyed, be of such nature as to alter the result in the case and "a litigant who has engaged in misconduct is not entitled to the benefit of calculation, which can be little better than speculation, as to the extent of the wrong inflicted upon his opponent.” Rozier v. Ford Motor Co., supra, 573 F.2d at 1346, citing Minneapolis St. Paul and S.S. Marie Rwy. Co. v. Moquin, 283 U.S. 530, 521-522 (1931). A party may prevail without showing that the alleged fraud affected the outcome of the trial. i Wilson v. Thompson, 638 F.2d 801, 804 (Sth ; Cir. 1981) | A defendant who destroys documents in » §7 « anticipation of litigation thereby rendering useless plaintiffs' attempt to obtain meaning- ful discovery is subject to sanctions. Alliance To End Repression v. The Rochford, 75 F.R.D. 438 (N.D.I11. 1976) It has long been recognized that sanctions may be proper where a party, before a lawsuit is insti- tuted, willfully places himself in such a position that he is unable to comply with a subsequent discovery order. Bowmar Instrument Corp. v. Texas Instruments, Inc., 25 Fed.R.S. 2d, 423, 427 (N.D.Ind. 1977). See also National Hockey Leaque Vv. Metropoittan Hockey = ’ 427 U.S. 6) 7 Rule 26(e) (2) Fed.R.Civ.P. requires that when interrogatory responses are incorrect, there is a duty “seasonably to amend." None of the interrogatory responses were amended. See "Statement of Case,” supra. It was an abuse of discretion for the district court not to conduct a hearing on this issue and, having failed to do so, the court of appeals should have examined = 88 - the uncontradicted evidence and provided relief pursuant to Rule 60(b) (3). Fed.R.Civ.P. 6. Assertion of violation of the Glass- Steagall Act as an affirmative defense to bank counterclaims: First, the trial court should not have directed a verdict on the issue. ER 39. There was substan- tial uncontradicted evidence of a viola- tion, accompanied by the bank's own ad- missions. See P1.Ex.95-2. Appendix. Second, private litigants are entitled to assert a violation of Glass-Steagall as an affirmative defense. The latter is an "important question of federal law, which has not been, but should be, settled by this Court.” Sup.Ct. Rule 17.1l(c). A directed verdict should be granted only when the court can say “as a matter of law the evidence was capable of only one interpretation." Juhnke v. E.I1.G. Corp., @ §9 - 444 F.2d 1323, 1325 (9th Cir. 1971). The opposite was true here. The purpose of the National Bank Act is to confine national banks to the exercise of only “such incidental powers as shall be necessary to carry on the business of banking." 12 U.S.C. §24(7). Investment Company Institute v. Camp, 401 U.S. 617 (1971) In Camp, this Court citing the congressional record notes: Senator Glass made it plain that it was ‘the fixed purpose of Congress' not to see the facilities of commercial banking diverted into speculative operations by the aggressive and promotional character of the investment bank- ing business. 401 U.S. at 632. * + + Our great banking system was diverted from its original pur- poses into investment activi- ties...the purpose of the regula- tory provisions of this bill is to call back to the service of agriculture and commerce and industry the bank credit and the bank service designed by the » 66 « framers of the Federal Reserve 17/ Act. 401 U.S. at 633, n.29. — Although “lending” is directly related to a national bank's express powers, it violates the act when it is integral to a relationship with a securities promoter and designed to increase bank profits by facilitating the 17/ Security Pacific's internal memorandum (P1.Ex.95-2) admits that the bank was engaged in acts prohibited by Glass-Steagall. The Security Pacific officer who prepared that document viewed the dangers of the bank's partici- pation in the program in the same way as Congress and the Supreme Court perceived them, 401 U.S. at 633, but the bank for profit went ahead anyway and advanced another $9 million. The memorandum sets out three hazards that this Court considered the very evils prohibited by Glass-Steagall: (1) identification of the bank with the promoter in the mind of the bor- rower; (2) loans intended to “facilitate” a particular investment; and (3) loss of confi- dence, with the result that "disenchanted" customers would become litigants. The memorandum tracks this Court's recitation of congressional purpose as expressed in Camp: "There was also perceived the danger that when commercial banks were subject to the promotional demands of investment banking, they might be tempted to make loans to cus- tomers with the expectation that the loan would facilitate the purchase of stocks securities.” 401 U.S. at 631-632, emphasis added. B = 61 « sale of securities to the general public, "notwithstanding that it may be convenient and useful in attracting customers who may also become depositors and borrowers." American Society of Travel Agents v. Bank of America, 385 F.Supp. 1084, 1087 (N.D.Cal. 1974), emphasis added. In Board of Governors of the Federal Reserve System v. Investment Co. Institute, 450 U.S. 46 (1981), this Court reviewed the congressional purpose for Glass-Steagall and noted that the kind of bank services the Court was considering in that case were not significantly different from the traditional fiduciary functions of commercial banks, i.e., to manage the investment portfolio of customers in the form of trusts, estates, and agency accounts. 450 U.S. at 55. However, the extension of unsecured bank loans to promoter recruited customers for speculative investment purposes is not one i pally shee . e 62 « of the “traditione! fiduciary functions of commercial banks". This Court has not ruled upon the efficacy of either a private claim under Glass-Steagall or an affirmative defense to a Glass-Steagall violation. The sparse legal authority to date is to the effect that the Act does not give rise to a private damage claim. See Stein v. Galitz, 478 F.Supp. 517 (N.D.I11. 1978); Russell v. Continental Illinois National Bank & Trust Co., 479 F.2d 131 (7th Cir. 1973). Here, however, the violation is asserted as an affirmative defense to enforcement of bank promissory notes. The notes facilitated the unlawful sale of unregistered securities and were integral to the banks' promotion of new business. See P1.Ex.95-2, Appendix. It is a general rule that a court will not allow recovery on an illegal con- | tract. Hedla v. McCool, 476 F.2d 1223, % 1227 (9th Cir. 1973). Where violative F J conduct undermines the purpose of legisla- ‘ @ 63 tion and congressional intent, the contract will not be enforced. {[F])ederal public policy requires such annulment in order to secure observance, effectuate the legis- lative purpose, and prevent noxious consequences. General Life of Missouri Investment Co. v. Shamburger, 546 F.2d 746, 784 (8th Cir. 1976). In Kaiser Frazier Corp. v. Otis & Co., 195 F.2d 838 (2nd Cir. 1962) cert.denied 344 U.S. 856 (1962), the court of appeals voided a contract which would not itself have been illegal because it was closely related to acts that were. [A] contract which violates the laws of the United States and contravenes the public policy as expressed in those laws is unen- forceable...this is so, regard- less of the equities as between the parties, for ‘the very mean- ing of public policy is the interest of others than the parties, and that interest is not to be at the mercy of the defendant alone'...(Wle are Satistied that the contrac was | so closely close pany & te he per rformance © of oA forbidde by Taw as to egal." 5 F.2d at 844, we te otis, The promissory notes here were central to the banks' violation of Glass-Steagall. < @ 64 « Enforcement of these notes defeats congressional purpose and permits the banks to profit from their wrongdoing. A contractual obligation arising in the course of securities violations is "“voidable when the purposes of the [securities] acts are thereby furthered." Byrnes v. Faulkner, Dawkins & Sullivan, 550 F.2d 1303, 1313 (2nd Cir. 1977). Conversely, if non-enforcement of a contract would frustrate legislative purpose, the contract will be enforced. A.C. Frost & Co. v. Cour D'Alene Mines Corp., 312 U.S. 38, 43 (1941): The ultimate issue is whether the result in the particular case would effectuate SE frus- trate the se of the act. Emphasis adted Dai See also Serzysco v. Chase Manhattan Bank, 290 F.Supp. 74, 90 (S.D.N.Y. 1968) aff'd 409 F.2d 1360 (2nd Cir. 1969) wherein the court barred the bank's enforcement of promissory notes because of violation of “ 4. «*% | Zo » » 65 - Regulation U, margin requirements .22/ CONCLUSION For the reasons set forth above, the Petition for Writ of Certiorari should be granted. DATED: April ll, 1984. Respectfully submitted, GOLDSTEIN & PHILLIPS A Professional Corporation LAW OFFICES OF ROBERT R. ELLEDGE A Professional Corporation By ALVIN H. GOLDSTEIN, JR. Attorneys for Petitioners 8/ Had these investment contracts been listed securities, all of the bank loans would have violated Regulation U. A suit to collect on the promissory notes would have been barred by illegality. "Under the provisions of 15 U.S.C.A. §77(c) (b)...contracts which are in violation of Regulation U are declared void.” Serzysco v. Chase Manhattan Bank, 290 F.Supp. 74, 90 (S.D.N.Y¥. 1968), aff'd 409 F.2d 1360 (2a Cir. 1969). Regulation U was promulgated pursuant to the Securities Exchange Act of 1934, in part, to protect investors from excessive trading and relates to listed (and, therefore, registered) securities. It is illogical to hold t Congress intended to penalize commercial banks that illegally finance the purchase of listed securities, but gave carte blanche to banks that facilitate the sale of unlisted (and, here unregistered) securities. The former is within the purview of the securities acts, the latter within the purview of the National Bank Act. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_1553%3A1. Public record. Not legal advice.