Petition for Writ of Certiorari — A-1 Appliance v. Deutsche Financial Services Corp.

FILED

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29% ~.131 MAY 22 1997

orriehl OFHRRE cuerk

SUPREME COURT OF THE UNITED STATES

October Term, 1997

A-1 APPLIANCE; ALBO APPLIANCE; APPLIANCE

WORLD, INC.; BLONDER’S DISCOUNT APPLIANCE

CENTER, INC.; CT’S VIDEO AND APPLIANCES;

INNERSPACE, INC.; JOHNNIES APPLIANCE;

NATASTI’S INC.; POMOLIO APPLIANCE;

WOODBURY APPLIANCE; YERKES APPLIANCE,

Petitioners

¥

DEUTSCHE FINANCIAL SERVICES CORP.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE THIRD CIRCUIT

PETITION FOR WRIT OF CERTIORARI

ROBERT L. WHITE

172 Middletown Blvd., Suite 203

Langhome, PA 19047

215.752.3535

Petitioners’ Counsel of Record

7)

ae

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i

QUESTIONS PRESENTED FOR REVIEW

1. Whether the U. S. Court of Appeals, Third Circuit,

misstated the law regarding Federal Rule of Civil Procedure 50(a\(2)

by holding that “apparent awareness” by the trial court of a party’s

position is sufficient compliance with the Rule, when there is nothing

whatever on the record supporting the party’s position?

rs Whether the U. S. Court of Appeals, Third Circuit,

abused its discretion and violated defendants’ due process rights and

may have violated defendants’ seventh amendment rights when it

reversed the lower court and entered judgment for plaintiff and failed

to order a new trial?

i.

LIST OF PARTIES TO THE PROCEEDINGS IN THE COURT

BELOW

The list of parties to the proceedings in the court below

includes: Deutsche Financial Services Corp., Blonder’s Discount

Appliance Center, Inc.; ALBO Appliances; Pomolio Appliance Sales

& Service; Johnnies Appliances; Yerkes Appliance & Service; A-1

Appliance Sales & Service; Woodbury Appliance; Nastasi’s, Inc.;

CT’s Video and Appliances, Inc.; Appliance World, Inc.; and

Innerspace, Inc.

iii.

TABLE OF CONTENTS

pages

Questions Presented for Review i

List of Parties

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Statement of Jurisdiction

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Constitutional Provisions, Treaties, Statutes, Rules

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Statement of the Case

Reasons for Granting Writ

a. Summarye eeeccecsesccccscsccccesee3s

b. a

Conclusion 7

Appendix:

Third Circuit Order, April 1, 1997 (denial of

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Third Circuit Order, March 10, 1997 (denial of

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Third Circuit Opinion, Jan. 27, 1997 &

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District Court Memorandum, February 2, 1996

& related Order 13a

| |

IV.

TABLE OF AUTHORITIES

CASES

Bonjomo v. Kaiser Aluminum & Chemical Corp., 752 F.2d 802

(3rd.Cir. 1984), cert. denied, 477 U.S. 908; 91 L.Ed.2d 572 (1986)

Chemi Tank Lines v. Aetna Cas. & Sur. Co., 89 F.3d 976

(3rd.Cir. 1996).

In re Lower Lake Erie Iron Ore Antitrust Lit., 998 F.2d 1144

(3rd.Cir. 1993), cert. denied, 114 S.Ct. 921; 127 L.Ed.2d 215

Neely v. EBY Construction Co., 386 US 317; 87 S.Ct. 1072; 18

L.Ed. 75 (1967).

Simmons v. City of Philadelphia, 947 F.2d 1042 (3rd.Cir. 1991), cert.

denied, 503 U.S. 985; 112 S.Ct. 1671; 118 L.Ed.2d 391 (1992)

RULES

Federal Rule of Civil Procedure 50

(Pes Aare eRe OS ~

OPINIONS BELOW

The January 27, 1997 opinion of the Court of Appeals, whose

judgment is herein sought to be reviewed is included with this Peti-

tion. The February 2, 1996 Memorandum of the United States Dis-

trict Court for the Eastern District of Pennsylvania, and related order

is also included with this Petition.

STATEMENT OF JURISDICTION

The judgment of the Court of Appeals was entered on January

27, 1997. A Petition for Rehearing was timely filed and the court

denied it by Order dated March 10, 1997. A Petition for Rehearing

was timely filed and the court denied it by Order dated April 1, 1997.

The jurisdiction of this Court is invoked pursuant to 28 USC §

1254(1).

CONSTITUTIONAL PROVISIONS, TREATIES, STATUTES,

RULES AND REGULATIONS INVOLVED

Federal Rule of Civil Procedure 50:

(a) Judgment as a Matter of Law.

(1) If during a trial by jury a party has been fully heard on an

issue and there is no legally sufficient evidentiary basis for a

reasonable jury to find for that party on that issue, the court

may determine the issue against that party and may grant a

motion for judgment as a matter of law against that party with

respect to a claim or defense that cannot under the controlling

law be maintained or defeated without a favorable finding on

that issue.

(2) Motions for judgment as a matter of law may be made at

any time before submission of the case to the jury. Such a

motion shall specify the judgment sought and the law and the

facts on which the moving party is entitled to the judgment.

(b) Renewing Motion for Judgment After Trial; Alternative

Motion for New Trial.

If, for any reason, the court does not grant a motion for judgment as

a matter of law made at the close of all the evidence, the court is

considered to have submitted the action to the jury subject to the

court’s later deciding the legal questions raised by the motion. The

y

movant may renew its request for judgment as a matter of law by

filing a motion no later than 10 days after entry of judgment - and

may alternatively request a new trial or join a motion for a new trial

under Rule 59. In ruling on a renewed motion, the court may:

(1) if a verdict was returned:

(A) allow the judgment to stand,

(B) order a new trial, or

(C) direct entry of judgment as a matter of law; or

(2) ifno verdict was returned:

(A) order a new trial, or

(B) direct entry of judgment as a matter of law.

STATEMENT OF THE CASE

The basis for federal jurisdiction in the court of first instance

was diversity of citizenship, 28 USC § 1332.

During the trial Plaintiff made a motion for directed verdict

(Rule 50a motion)’ which did not specifically raise the issue that the

evidence at trial was insufficient to support a finding of unclean hands

against plaintiff.

Although plaintiff made numerous objections, never during

the course of the trial did plaintiff raise the issue that there was

insufficient evidence to support a finding of unclean hands. After

defendants rested, plaintiff's counsel stated that he wished to move

for directed verdict. The trial judge responded unless counsel had

something new to add he would deny the motion. Plaintiff's counsel

responded: “No.”

The appellate court below concluded from these facts that

plaintiff intended to raise the issue of insufficiency of evidence re-

garding unclean hands. It further concluded that the trial judge was

“apparently aware” of plaintiff's intention to do so. However, the

appellate court below failed to explain how the record indicated that

non-moving parties were aware of plaintiff's supposed intention.

The case was submitted to the jury on special interrogatories

and a verdict was rendered by the jury in favor of defendants, the jury

having concluded that defendants proved their defense of unclean

1. See Federal Rule of Civil Procedure 50

3.

hands. Plaintiff filed a post-trial motion for judgment n.o.v. (Rule 50b

motion) arguing that the evidence at trial was insufficient to support a

finding of unclean hands. The trial court denied plaintiffs post-trial

motion because plaintiff had not raised this issue in its Rule 50(a)

motion,” although as the trial court in its opinion points out that

plaintiff's counsel had numerous opportunities to do so.

Plaintiff appealed the trial court’s denial of its JNOV motion.

The Third Circuit Court of Appeals held that if a party announces its

intention to make a motion pursuant to Federal Rule of Civil Proce-

dure 50(a)(2), and the trial judge, apparently aware of the ’s

position, indicates that nothing further is required, then the purpose

of the Rule was sufficiently served and the party’s claim on appeal

can be evaluated by an appellate court. As a result of this holding the

appellate court considered the issue of insufficiency of evidence

regarding unclean hands and reversed the jury’s verdict and entered

judgment in favor of plaintiff: No new trial was ordered.

REASONS FOR GRANTING WRIT

SUMMARY.

1.) The ruling in the present case directly conflicts with other

decisions, more specifically, but not limited to, the following cases:

Bonjomo v. Kaiser Aluminum & Chemical Corp., 752 F.2d 802

(3rd.Cir. 1984), cert. denied, 477 U.S. 908; 91 L.Ed.2d 572 (1986);

Simmons v. City of Philadelphia, 947 F.2d 1042 (3rd.Cir. 1991), cert.

denied, 503 U.S. 985; 112 S.Ct. 1671; 118 L.Ed.2d 391 (1992); In re

Lower Lake Erie Iron Ore Antitrust Lit., 998 F.2d 1144 (3rd.Cir.

1993), cert. denied, 114 S.Ct. 921; 127 L.Ed.2d 215; and Chemical

Leaman Tank Lines v. Aetna Cas. & Sur. Co., 89 F.3d 976 (3rd. Cir.

1996).

2.) The ruling directly conflicts with Neely v. EBY Construc-

2. The trial court in its denial order makes it clear that it was not aware of

plaintiff's intention to raise an issue about unclean hands. Accordingly, there is

insufficient evidence of record for the Third Circuit Court of Appeals to have

ruled the way that the trial court was “apparently aware” of plaintiff's position.

However, the asserted error in this matter is a misstatement of the law and not

erroneous factual findings or the misapplication of a properly stated rule of law.

_—

tion Co., 386 US 317; 87 S.Ct. 1072; 18 L.Ed. 75 (1967).

ARGUMENTS.

I. The trial judge in his Opinion makes it clear that he was

not aware of plaintiff's position and, therefore, denied plaintiff's post-

trial motion. Even if the trial judge was aware of plaintiff's position,

the rule was misstated by the Third Circuit Court of Appeals because

it is not critical whether the trial judge was aware of plaintiff's posi-

tion or not. What matters is whether the moving party’s position is

stated on the record.’ The purpose of the rule is to afford the non-

moving party an opportunity to reopen its case and present additional

evidence. Bonjomo, 752 F.2d @ 814. The non-moving party would

be unable to discern whether to open the record to present additional

testimony without a statement by the moving party of his position on

the record. That is why the rule requires that the moving party state

with specificity the judgment sought and the law and facts on which

the moving party is entitled to judgment. FRCP 50(a)(2). The

Bonjomo court put it best:

The requirement that the specific issue

be raised first in the motion for a

directed verdict, before the issue is

submitted to the jury, affords the non-

moving party an opportunity to reopen .

its case and present additional evi- .

dence. Lowenstein v. Pepsi-Cola |

Bottling Co., 536 F.2d 9, 11(3d.Cir.),

cert. denied, 429 US 966, 97 S.Ct.

396, 50 L.Ed.2d 334 (1976). Further,

when a trial court decides an issue after

it was properly submitted to the jury, it

may deprive the non-moving party of

his seventh amendment rights. /d.

3. Obviously a moving party must state its position on the record if the trial judge

is going to be aware of it. However, the reverse is not true: if the trial judge is

only “apparently aware” of the moving party’s position, then the moving party

must have stated its position on the record. Jn the instant matter the moving

party did not state its position on the record.

ee ee ee ee ee ee

3

Boajomo, 752 F.2d @ 814.

A review of the entire record does not disclose any reference

to the plaintiff's intention to raise the insufficiency of evidence to

support the defense of unclean hands. The trial court could find no

such reference. The plaintiff admits that he never raised the issue at

trial.

The Third Circuit’s holding that there is sufficient compliance

with FRCP 50 when the trial judge is “apparently aware” of a party’s

position is a misstatement of the law. “Apparent awareness” by the

trial judge is not the standard by which Rule 50 motions have been

govemed. To allow such a standard would open the door to all kinds

of misapplications of the Rule. For example the appellate courts

would in each instance be able to guess what was in the mind of the

trial judge without making any reference to the record whatever. To

allow the “apparent awareness” standard to be the standard by which

Rule 50 motions may be governed would have the effect of defeating

the very purpose and clear language of the Rule. It would render the

Rule meaningless.

Il. The U. S. Court of Appeals for the Third Circuit entered a

judgment reversing the jury’s verdict and entered judgment for the

plaintiff.

In Neely v. EBY Construction Co., supra, this Court stated:

Rule 50(d) is applicable to cases such

as this one where the trial court has

denied a motion for judgment n.o.v.

Rule 50(d) expressly preserves to the

party who prevailed in the district court

the right to urge that the court of

appeals grant a new trial should the

jury’s verdict be set aside on appeal...

...there is nothing in Rule 50(d) indicat-

ing that the court of appeals may not

direct entry of judgment n.o.v. in

appropriate cases. (emphasis supplied)

The Court in Neely indicated that “appropriate cases”

are situations where the defendant’s

ESE

6.

grounds for setting aside the jury’s

verdict raise questions of subject

matter jurisdiction or disposition issues

of law which, if resolved in defendant’s

favor, must necessarily terminate the

litigation...In such situations, and

others like them, there can be no

reason whatsoever to prevent the court

of appeals from ordering dismissal of

the action on the entry of judgment for

the defendant.

- On the other hand, where the court

of appeals sets aside the jury’s

verdict because the evidence was

insufficient to send the case to the

jury, it is not so clear that the litiga-

tion should be terminated. (emphasis

supplied) Neely, L.Ed. 2d @ 83.

This court went on to poimt out rulings by the trial court

causing the insufficiency of evidence, i.e., erroneous exclusion of

evidence are important factors to consider in granting a new trial

rather than reversal.

In this case, the fact that the plaintiff never stated on the

record that there was insufficient evidence on the defense of unclean

hands, left the defendants mm a position of not knowing that insuffi-

cient evidence on unclean hands was even a consideration for the

Court.

This Court points out in Neely, 18 L.Ed 2d. @84 that “If

appellee presents no new trial issue in his brief or in a petition for

rehearing, the court of appeals may, in any event, order a new trial on

its Own motion, or refer the question to the district court based on

factors encountered in its own review of the case.”

The Court of Appeals below ignored its duty in this respect

because its opinion never expressly dealt with the new trial question.

As this Court has poimted out, insufficiency of evidence is not

an “appropriate case” for granting a reversal of the jury’s verdict. The

court of appeals erred by not granting a new trial.

CONCLUSION

For the foregoing reasons, the petitioner respectfully prays

that its petition for a writ of certiorari be granted.

Robert L. White

172 Middletown Boulevard,

Ste. 203

Langhome, PA 19047

215.752.3535

Petitioners’ Counsel of Record

la.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1150

DEUTSCHE FINANCIAL SERVICES CORPORATION

(f/k/a ITT COMMERCIAL FINANCE CORPORATION)

Appellant

V.

MARTA GROUP, INC.

Appellees

SUR PETITION FOR PANEL REHEARING

BEFORE: STAPLETON, ROTH and WEIS, Circuit Judges

The joint petition for panel rehearing filed by appellees Albo

Appliance, Pomolio Appliance, Johnnies Appliance, Yerkes Appli-

ance, Al Appliance, Woodbury Appliance, Nastasi’s Inc., CT’s Video

and Appliances, Appliance World, Inc., and Innerspace Inc., in the

above-entitled case having been submitted to the judges who partici-

pated in the decision of this court and no judge who concurred in the

decision having asked for panel rehearing, the petition for panel

rehearing is denied.

By the Court,

/s/

Walter K. Stapleton, Circuit Judge

Dated: April 1, 1997

2a.

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 96-1150

DEUTSCHE FINANCIAL SERVICES CORP.

Appellant

Vv.

MARTA GROUP, INC., ET AL.

Blonder’s Discount Appliance Center, Inc.,

Appellee

SUR PETITION FOR REHEARING

BEFORE: BECKER, STAPLETON, MANSMANN, GREENBERG,

SCIRICA, COWEN, NYGAARD, ALITO, ROTH,

LEWIS, MCKEE and WEIS,* Circuit Judges

The petition for rehearing filed by appellee Blonder’s Dis-

count Appliance Center, Inc., in the above-entitled case having been

submitted to the judges who participated in the decision of this court

and to all the other available circuit judges of the circuit in regular

active service, and no judge who concurred in the decision having

asked for rehearing, and a majority of the circuit judges of the circuit

in regular active service not having voted for rehearing by the court in

banc, the petition for rehearing is denied.

By the Court,

/s/

Walter K. Stapleton, Circuit Judge

Dated: March 10, 1997

* Hon. Joseph F. Weis, Jr., Senior Circuit Judge, was a member of

the original panel. His vote is limited to panel rehearing only.

3a.

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-1150

DEUTSCHE FINANCIAL SERVICES CORP.,

Appellant

VS.

MARTA GROUP, INC.; THE PATANE GROUP, INC. t/a

APPLIANCELAND, ETC. d/b/a APPLIANCE LAND ETC.; CB

JOE TV & APPLIANCE CO.; FRANK DEFRANK d/b/a

DEFRANK’S APPLIANCES; DELAWARE VALLEY APPLI-

ANCES INCORPORATED; DONAT, INC. t/a DONATUCCI

KITCHENS & APPLIANCES; LESLIE S. GEISSEL d/b/a

JENKINTOWN ELECTRIC CO.; LAKES APPLIANCE & TV,

INC.; ROB STEVENS, INC. f/k/a ROBERT STEVEN, INC.;

EDWARD P. PETRILLO d/b/a PETRILLO’S APPLIANCES;

STEVE & ART KRUPNICK, INCORPORATED d/b/a

SCHNEIDER’S NORTHEAST APPLIANCES; C.K. SEIDMAN,

INC.; SINGER’S APPLIANCE INCORPQRATED; A-! APPLI-

ANCE SALES & SERVICES; A&A APPLIANCE; ABC SALES &

SERVICE, INC.; ALBO; ALCO ELECTRONICS, INC.; AMERI-

CAN APPLIANCE AND REFRIGERATION CO., INC.; ANGELO

NERI, INC.; APPL. ELECTRONIC VILLAGE, INC.; APPLIANCE

LAND, ETC.; APPLIANCE PLUS; APPLIANCE WORLD, INC.;

ARRAY APPLIANCE CTR., INC.; ASSOCIATED APPLIANCES,

INC.; BLONDER’S DISCOUNT APPL. CENTER, INC.; BOB

LANG, INC.; BUTCH’S DISCOUNT APPLLANCE; C. K.

SEIDMAN; CB JOE TV & APPL., CO.; CENTRAL DISCOUNT

CTR., INC.; CHERTOK’S; COLIN F. TAIT, INC.; COLLEGE TV,

INC.; CONLAND’S SERVICE CO.; CT’S VIDEO & APPLI-

ANCES, INC.; CUMMINS APPLIANCE COMPANY; DAWSON

FACTORY DIRECT; DEFRANK’S APPLIANCE & TV; DEAL;

DEAVERS APPL. CO., INC.; DELAWARE VALLEY APPL.,

INC.; DOLAN’S, INC.; DOMINIC’S APPLIANCES, INC. ;

DONATUCCI KITCHENS & APPL.; EASTERN TV & APPL.,

INC.; ELKAY ELECTRICAL APPLIANCE, INC.; EMPIRE

BLDG. & HOME; FRANK FENDEL’S APPLIANCES; GLBERT’S

VIDEO AND APPL., INC.; H&H DISCOUNT APPLIANCE CO.,

INC.; INNERSPACE, INC.; INTERNATIONAL TRADING CO.,

INC.; JENKINTOWN ELECTRIC CO.; JERRY PLAVIN, INC.;

JOHNNIES APPLIANCES; KIEFER’S APPLIANCES, INC. ;

LAKES APPLIANCES & T.V., INC.; LAPLATA TV & APPLI-

ANCE, INC.; LIEB’S APPLIANCES; LONG LANE APPLI-

ANCES; M & L APPLIANCE; M S SENSENIG & SON, INC. ;

MAIDEN CREEK TV & APPL., INC.; MAIN STREET A/V;

) MICHAEL’S APPLIANCE AND FURNITURE, INC.; MILLNER

) LUMBER CO.; MRS. G’S APPLIANCE; NASTATI’S; NICHOLAS

) HARDWARE, INC.; NICKS DISCOUNT Ty & APPL., INC.;

OSBORNE TV & APPL., INC; OTTO FAULHABER, INC.;

PETRILLO’S APPLIANCE; POMOLIO APPLIANCE SALES &

) SERV.; POSITIVE, INC.; REED’S REFRIGERATION; ROBERT

: STEVENS; ROUTZAHN & SONS, INC.; ROXY ELECTRIC,

INC.; SAMUEL R. GOODMAN, INC.; SCHNEIDER’S ART’S

: APPL. AND KITCHEN DESIGN CENTER; SEIDMAN, C.K.,

INC.; SHORE APPLIANCES, INC.; SINGER’S APPLIANCE CO.,

INC.; SPENCER T.V. & APPL. SALES; SUJON ENTERPRISES,

INC. d/b/a QUEEN TV AND APPL.; SUPERK CORPORATION t/

a ABC DISCOUNT; TED’S APPLIANCE OUTLET, INC.; TONY

FERRARA, INC.; UNITED PROPANE, INC.; VIDEO & APPL.

UNLMTD., INC.; WOODBURY APPLIANCE; YERKES APPLI-

ANCE & PARTS

ABC SALES AND SERVICE, INC.; APPL. ELECTRONIC

VLLAGE, INC.; APPLIANCE LAND, ETC.; PETRILLO’S APPLI-

ANCE

ThirdParty Plaintiffs

V.

ABC DISCOUNT; AIRS APPLIANCE, INC.; APPLIANCE CON-

NECTION; APPLIANCE DIFFERENCE; B.B. MORRIS & SON;

Sa.

CARL LEHMAN & SON

Third P. endants

ABC SALES AND SERVICE, INC.; APPL. ELECTRONIC VIL-

LAGE, INC.; APPLIANCE LAND, ETC.; ARRAY APPLIANCES

CTR., INC.; BOB LANG, INC.; C. K SEIDMAN; CB JOE TV &

APPL., CO.; CENTRAL DISCOUNT CTR., INC.; CUMMINS

APPLIANCE COMPANY; DEFRANK’S APPLIANCE & TV;

DEAVERS APPL. CO., INC.; DELAWARE VALLEY APPL.,

INC.; DOLAN’S INC.; DOMINIC’S APPLIANCES, INC.;

DONATUCCI KITCHENS & APPL.; JENKINTOWN ELECTRIC

CO.; KIEFER’S APPLIANCES, INC.; LAKES APPLIANCES &

T.V., INC.; MAIDEN CREEK TV & APPL., INC.; MAIN STREET

A/V; MICHAEL’S APPLIANCE AND FURNITURE, INC.; NI-

CHOLAS HARDWARE, INC.; ROBERT STEVENS; ROUTZAHN

& SONS, INC.; ROXY ELECTRIC, INC.; SAMUEL R.

GOODMAN, INC.; SCHNEIDER’S ART’S APPL. AND

KITCHEN DESIGN CENTER; SIGNER’S APPLIANCE CO.,

INC.; TED’S APPLIANCE OUTLET, INC.

Third Party Plaintiffs

V.

ABC DISCOUNT; AIRS APPLIANCE, INC.; APPLIANCE CON-

NECTION; APPLIANCE DIFFERENCE; B.B. MORRIS & SON;

CARL LEHMAN & SON; HOME APPLIANCE CENTER:

McGUIRE APPLIANCE, INC.; QUEEN DISCOUNT CENTER,

SANATOGA CORP.; UNITED BUYING GROUP

Third Party Defendants

DEUTSCHE FINANCIAL SERVICES CORP., formerly known as

ITT Commercial Finance Corp., Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(D.C. Civ. No. 94-cv-04592)

6a.

Argued December 20, 1996

Before: STAPLETON, ROTH, and WEIS, Circuit Judges.

Filed: January 27, 1997

Charles M. Tatelbaum, Esquire (ARGUED)

James W. Humann

Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.

P.O. Box 1368

Clearwater. FL 34617-1368

Roberta D. Liebenberg, Esquire

Mager, Liebenberg & White

2 Penn Center, 10th Floor

Philadelphia, PA 19102

Attomies for appellant Deutsche Financial Services Co Finance

Corp., formerly known as ITT Commercial Finance Corp.

Christopher E. Kaltenbach, Esquire (ARGUED)

Matteo & Belko

502 Pleasant Valley Avenue

Moorestown, NJ 08057

Attomey for Albo Appliances, Pomilio Appliances, Johnnie’s Appli-

ances, Yerkes Appliances and Parts, A-1 Appliance, Woodbury

Appliance and Nastasi’s Inc.

Robert L. White, Esquire (ARGUED)

172 Middletown Boulevard

Langhome, PA 19047

Attomey for Blonder’s Discount Appliance Center Inc.

Ronald F. Brien, Esquire

808 Westfield Avenue

Spring City, PA 19475

7a.

Attomey for Appliance World. Inc.

Michael R. Bradley, Esquire

Brooks, Bradley & Kenney

Second & Plum Streets

Media, PA 19063

Attomey for Innerspace. Inc.

OPINION OF THE COURT

WEIS, Circuit Judge

In this diversity action, plaintiff sought to recover secured

property taken by defendants. The jury returned answers to interroga-

tories favorable to plaintiff on three of four counts, but also found

that plaintiff had unclean hands. The district court entered judgment

in favor of defendants. Because there was insufficient evidence of

unclean hands, we will reverse.

Plaintiff ITT (presently known as Deutsche Financial Services

Corp.),’ provided financing to Marta Group, Inc., a member-only

cooperative buying group. Through Marta, defendants were able to

obtain mass purchase discounts on wholesale appliances. To secure

its financing, ITT had a first perfected security interest in all of

Marta’s assets.

In late 1993, Marta began experiencing serious cash flow

difficulties. On July 27, 1994, ITT received an anonymous fax advis-

ing the company that there was a problem at the Marta warehouse.

When ITT representatives arrived, they found defendants loading at

least sixty-five trucks with inventory from the warehouse. The raid on

the warehouse had been initiated by Marta’s executive director, who

had advised defendants that the warehouse was going to close down

and that they should retrieve the value of their initial deposit in Marta

by taking the inventory.

In the present action, ITT asserted four claims. First, ITT was

1. Plaintiff was referred to as ITT throughout the proceedings in the district

court. For the sake of clarity, we will continue that practice here.

8a.

entitled to recover on accounts receivable due by defendants to

Marta. Second, ITT’s security interest granted it a right to recover

the value of the inventory taken because defendants acted outside the

course of business. Third. Marta’s transfer of cash and credit to

defendants as membership benefits violated Pennsylvania’s Uniform

Fraudulent Conveyance Act and the Uniform Fraudulent Transfer

Act. Fourth, the defendants’ use of offsetting credits to reduce their

debts to Marta was a fraudulent conveyance or transfer under state

law.

The trial was bifurcated and the case on liability was submit-

ted to the jury on interrogatories. The jury found against ITT on the

first count and decided that ITT was barred from recovering on the

other counts because it was guilty of unclean hands. ITT does not

appeal the jury’s verdict as to the first count.

ITT subsequently moved for judgment as a matter of law,

arguing that the equitable defense of unclean hands was unavailable in

actions at law. ITT also asserted that the trial court’s jury instructions

were erroneous and that there was insufficient evidence to support a

finding of unclean hands. The district court denied ITT’s motion,

finding that it had failed to object to the jury instructions at trial. As

to the sufficiency of the evidence issue, the court found that ITT had

waived that issue by failing to move for judgment as a matter of law

on that ground at the conclusion of all the evidence.

A.

We first address ITT’s challenge to the unclean hands instruc-

tion. Federal Rule of Civil Procedure 51 provides: “No party may

assign as error the giving [of] ... an instruction unless that party

objects thereto before the jury retires to consider its verdict, stating

distinctly the matter objected to and the grounds of the objection.”

Although we recognize an exception to this rule for “plain errors,”

see Beardshall v. Minuteman Press Int’] Inc., 664 F.2d 23, 27 (3d Cir.

1981), we cannot conclude that the district court committed one

here.

B.

The motion for judgment as a matter of law on the sufficiency

9a.

of the evidence, on the sufficiency of the evidence, on the other hand,

presents a different situation. The district court denied this motion

because ITT had failed to move for a judgment as a matter of law at

trial. However, we believe that ITT adequately complied with the

Rule’s requirements.

After defendants rested, ITT’s counsel stated that he wished

to move for a directed verdict. The trial judge responded that unless

counsel had something new to add, the motion was noted, but denied.

ITT’s counsel moved again for directed verdict after rebuttal, but the

court declined to hear an elaboration of the grounds.

Federal Rule of Civil Procedure 50(a)(2) directs parties to

“specify the judgment sought and the law and the facts on which the

moving party is entitled to the judgment.” Here, When ITT’s counsel

announced his intention to make the appropriate motion, the able and

experienced trial judge, apparently aware of ITT’s position, indicated

that nothing further was required. Under these circumstances, we

conclude that the purpose of the Rule was served and we are not

barred from evaluating ITT’s claim on appeal. See Miller v. American

President Lines, Ltd., 989 F.2d 1450, 1465 (6th Cir. 1993). Rather

than remand for tile district court to evaluate the sufficiency of the

evidence, in the interest of judicial economy, we will consider the

merits.

Under Pennsylvania law, the affirmative defense of unclean

hands arises when the “wrongdoing directly affects tile relationship

subsisting between the parties and is directly connected with the

matter in controversy.” Estate of Pedrick, 482 A.2d 215, 223

(Pa. 1984). The defense does not bar recovery merely because the

other party has not been blameless. Id. at 222-23. It is applicable

when “the party seeking affirmative relief is guilty of fraud, uncon-

scionable conduct or bad faith directly related to the matter at issue

which injures the other party and affects the balance of equities

between the litigants.” Equibank v. Adle, Inc., 595 A.2d 1284, 1287

(Pa. Super. Ct. 1991). In the present case, defendants rely on testi-

mony produced during cross-examination of ITT’s witnesses. That

evidence, however, fails to establish a case of unclean hands.

Courtland Morris, Marta’s president, testified that his organi-

zation did not notify ITT of its cash flow problems until a week

before the run on the warehouse because of fears that ITT would

close down Marta. Defendants assert that ITT engaged in collusion

rl - 7

10a.

because at various times in 1993 and 1994, Marta’s debt was under

collateralized by $1 million and Marta was past due in its payments.

Yet, ITT’s senior vice president, Robert Incollingo, testified that

despite these acknowledged deficiencies, ITT continued to work with

Marta during this period because the company believed that the

security interest in Marta’s total assets was sufficient protection.

Defendants also argue that ITT had a cozy relationship with

Marta’s executive director, and was in a better position to fully

comprehend Mart a’s financial situation than they. We fail to see how

evidence of two or three business lunches with the executive director

in a twelve-year period constitutes a basis for finding unclean hands.

In addition, defendants, as members of Marta, had the opportunity to

inform themselves about Marta’s financial situation by attending

membership or executive committee meetings. ITT, on the other

hand, relied on the audited financial statements, which were later

found to have been improperly prepared. In sum, although there

appears to have been some questionable conduct on the part of Marta

towards its members, ITT’s willingness to “work things out” with

Marta does not mean that ITT had unclean hands in its dealings with

defendants.

Consequently, because there was insufficient evidence to support a

finding of unclean hands, judgment should have been entered in favor

of ITT and the case should have proceeded to damages.

C.

Finally, we also note that ITT asserts that the defendants’

made improper remarks during closing argument. Specifically, ITT

points to statements attributed to non-testifying parties, comments

about the financial disparity between ITT and defendants, appeals to

the jury’s sympathy and opinions given about the evidence.

Although we agree that these comments were inappropriate,

lla.

ITT failed to timely object to them at trial, thus it has waived this

issue on appeal. Dunn v. HOVIC, | F.3d 1371, 1377 (3d Cir. 1993)

(en banc).

D.

Accordingly, the judgment of the district court will be re-

versed and the case will be remanded with directions that judgment

be entered in favor of ITT on counts two, three and four, and that the

matter proceed to an assessment of damages.

TO THE CLERK:

Please file the foregoing Opinion.

/s/

Joseph F. Weis, Jr.,

United States Circuit Judge

APPEAL FROM THE UNITED STATED DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

(D.C. Civ. No. 94-cv-04592)

Present: Stapleton, Roth and Weis, Circuit Judges

JUDGMENT

This cause came on to be heard on the record from the United

States District Court for the Eastern District of Pennsylvania and was

argued by counsel on December 20 1996.

On consideration whereof, it is now here ordered and ad-

judged by this Court that the judgment of the said District Court

entered February 5, 1996, be, and the same is hereby reversed and the

cause is remanded to the District Court with instructions to enter

judgment in favor or ITT on counts two, three and four and that the

matter proceed to an assessment of damages. Costs taxed against

appellees. All of the above in accordance with the opinion of this

Court.

ATTEST:

/s/

P. Douglas Sisk, Clerk

Dated: January 27, 1997

13a.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Civil Action; No. 94-4592

DEUTSCHE FINANCIAL SERVICES CORP.

Plaintiff,

v.

MARTA GROUP, INC .., et al.

Defendants,

Newcomer, J.

February 2, 1996

MEMORANDUM

Presently before the Court is plaintiffs Motion for Judgment

Notwithstanding the Verdict, defendants’ responses thereto, and

plaintiff's reply thereto. For the reasons that follow, plaintiff's Motion

will be denied.

L. Background

The trial of the instant action commenced on November 27,

1995 and resulted in the entry of judgment for defendants on all

counts on December 4, 1995. Plaintiff proceeded against defendants

at trial on four counts. First, plaintiff claimed that it was entitled to

recover on accounts receivable due by defendants to Marta Group,

Inc. (“Marta”), a Pennsylvania non-profit corporation operating as a

members only buying group. Second, plaintiff claimed Marta’s ware- —

house to defendants on July 27, 1994 were out of the ordinary course

of business and thus that plaintiffs lien on Marta’s inventory re-

mained in place entitling plaintiff to recover the value of the inventory

taken. Third, plaintiff claimed that the transfers of cash and credits, in

the nature of membership benefits, by Marta to defendants were

fraudulent conveyances or transfers under the Pennsylvania Uniform

Fraudulent Conveyance Act and the Pennsylvania Uniform Fraudu-

lent Transfer Act. Finally, plaintiff claimed that defendants’ use of

offsetting credits to reduce their debts to Marta was a fraudulent

conveyance or transfer under the Pennsylvania Uniform Fraudulent

14a.

Conveyance Act and the Pennsylvania Uniform Fraudulent Transfer

Act.

The case was submitted to the jury on special imterrogatories.

On the first count, the jury found that plaintiff did not prove by a

preponderance of the evidence that defendants owed accounts receiv-

able to Marta. On the remaining counts, the jury found that plaintiff

did prove by a preponderance of the evidence the elements of its

claims, but found further that plaintiff was barred from recovering on

those claims due to the defendants having proved by a preponderance

of the evidence the defense of unclean hands. Plaintiff moves for

judgment notwithstanding the verdict (“judgment n.o.v.”’), pursuant

to Federal Rule of Civil Procedure 50(b),’ on these latter three claims.

The basis for plaintiff's Motion is its assertion that the defense of

unclean hands is available only in an action seeking equitable relief,

not an action at law; that the instant action is one at law; that there-

fore as a matter of law the defense of unclean hands is unavailable to

defendants in this case; and thus that this Court’s inclusion of a jury

instruction and jury interrogatories on the defense of unclean hands

was erroneous. In the alternative, plaintiff contends that even if the

defense of unclean hands is available in the instant action, the evi-

dence at trial is insufficient to support it.

I. Discussion

A. Availability of the Defense of Unclean Hands

The first ground on which plaintiff seeks judgment n.o.v. is

that the defense of unclean hands is unavailable to defendants as a

matter of law. Defendants contend that plaintiff's motion for judg-

ment n.o.v. should not be granted on this ground because, inter alia,

plaintiff failed to object to this Court’s jury instruction on unclean

hands during trial as required under Federal Rule of Civil Procedure

51 (“Rule 51”). Because of this failure, defendants argue, plaintiff has

waived its right to assert this theory now. This Court concurs with

defendants and therefore will not grant plaintiff s Motion on this

l. Plaintiff erroneously states that the instant Motion is brought pursuant to

Federal Rule of Civil Procedure 59(e). In fact, a motion for judgment notwith-

standing the verdict is properly brought pursuant to Federal Rule of Civil Proce-

dure 50(b). See Fed. R. Civ. P. 50 advisory committee’s note.

15a.

ground.

Rule 51 provides as follows:

No party may assign as error the giving

or failure to give an instruction unless

the party objects thereto before the jury

retires to consider its verdict, stating

distinctly the matter objected to and the

grounds of the objection.

A review of the record reveals that plaintiff did not object to

the giving of the instruction on the defense of unclean hands at any

time during trial, despite this Court having provided plaintiff's coun-

sel with numerous opportunities to do so. The first opportunity arose

in connection with this Court’s direction to all counsel to prepare

joimt proposed jury instructions on all points for trial. For those pomts

on which counsel could not agree, counsel were instructed to submit

independent supplemental instructions. The proposed instructions

submitted to this Court included one on the defense of unclean hands.

Upon submission of the proposed points, plaintiff's counsel did not

indicate in any way to this Court that plaintiff objected to the inclu-

sion of the point on unclean hands.? The second opportunity arose

one day prior to this Court’s charging of the jury, when this Court

distributed to all counsel a draft of the jury instructions and interroga-

tories, which were based in large part upon the joint proposed in-

structions submitted to this Court by all counsel. On that day, this

2. In fact, this failure to object occurred despite this Court having put plaintiff on

notice that it would instruct the jury on the defense of unclean hands. On the third

day of trial, while counsel were still working on the proposed jury instructions,

this Court gave notice to plaintiff that evidence pertaining to the defense of

unclean hands was admissible at trial, and thereby implied that the jury would be

instructed on that defense. By Order dated November 29, 1995, this Court granted

plaintiff's Motion in Limine and Supporting Memorandum of Law to Exclude the

Defendants from Introducing Any Evidence Relating to the Defense of Equitable

Subordination, but with one qualification. This Court stated that “to the extent

that any evidence pertaining to a defense of unclean hands is identical to that

pertaining to a defense of equitable subordination, defendants are not precluded

from offering such evidence.” Plaintiff did not object to the inclusion of evidence

relating to the defense of unclean hands in its Motion in Limine, nor did it object

after receiving this Court’s November 29, 1995 Order.

16a.

Court held a charging conference at which time all counsel were

given the opportunity to present their objections to the mstructions

and interrogatories. While plaintiff's counsel made numerous objec-

tions to both the instructions and the interrogatories,’ none involved

the defense of unclean hands. The final opportunity arose the day the

jury was charged, when this Court distributed to all counsel a copy of

the final mstructions and interrogatories and again asked if counsel

had any objections. Plaintiff's counsel responded at that time that he

had no objections.

Under Rule 51, “{n]o party may assign as error the giving ...

[of] an struction unless he objects thereto before the jury retires to

consider its verdict.” City of Springfield v. Kibbe, 480 U.S. 257, 259

(1987); see also, City of Newport v. Fact Concerts, Inc., 453 U.S.

247, 255 (1981) (stating that the district court could have declined to

rule on the merits of a motion for a new trial due to petitioner’s

procedural default under Rule 51); Dubose v. Kansas City Souther

Railway Co., 729 F.2d 1026, 1032 (Sth Cir. 1984), cert. denied, 469

U.S. 854 (1984) (stating that the failure to object to a jury instruction

ordinarily bars a later challenge to that instruction). “The purpose of

Rule 51 ... is to afford the trial judge an opportunity to correct the

error in his charge before the jury retires to consider its verdict.”

Porter v. Amer. Export Lines, Inc., 387 F.2d 409, 412 (3d Cir.

1968). “Thus, a district court should not grant a motion for posttrial

judgment or a new trial where the losing party requests the trial judge

to consider a new theory which could have been raised during the

original proceedings.” GBS Meat Industry Pty. Ltd. v. Kress-Dobkin

Co., Inc., 474 F.Supp. 1357, 1362(W.D.Pa. 1979), aff'd without op.,

622 F.2d 578 (3rd Cir. 1980).

Plaintiff is asking this Court to do just that, to “consider a

new theory which could have been raised during the original proceed-

ings,” namely, that the defense of unclean hands is unavailable to

defendants as a matter of law. Because plaintiff did not raise this

theory during the original proceedings as is required under Rule 51,

this Court will not consider it now. Accordingly, plaintiff s Motion

for judgment n.o.v. will not be granted on this ground.

3. Plaintiff made approximately twelve (12) objections to the instructions and

interrogatories.

17a.

B. Sufficiency of the Evidence in Support of the Jury’s Finding of

ncle

Because this Court does not grant plaintiff's Motion on the

ground that the defense of unclean hands is unavailable to defendants

as a matter of law, this Court must now address plaintiff's alternative

ground, that is, that the evidence at trial is insufficient to support the

jury’s finding of unclean hands.

Defendants contend that plaintiff's motion fcr judgment n.o.v.

should not be granted on this ground because, inter alia, plaintiff

failed to move for a directed verdict ‘ on this ground at trial. This

Court concurs with defendants and therefore will not grant plaintiff's

Motion on this ground.

“In order to preserve an issue for judgment n.o.v., the moving

party must timely move for a directed verdict and specify the grounds

for that motion.” Fineman v. Armstrong World Industries. Inc., 980

F.2d 171, 183 (3rd Cir. 1992), cert. denied, 507 U.S. 921 (1993)

(citations omitted); see also, Orlando v. Billcon Int’l, Inc., 822 F.2d

1294, 1298 (3d Cir. 1987) (stating that Federal Rule of Civil Proce-

dure 50(b) permits consideration of a motion for judgment n.o.v. only

when a motion for a directed verdict has been made at the close of

the evidence offered by an opponent); Fed. R. Civ. P. 50(b) advisory

committee’s note (stating that the post-verdict motion is a renewal of

an earlier motion made at the close of the evidence). A Rule 50(b)

post-trial motion for judgment can be granted only “on grounds

specifically advanced” in the motion for a directed verdict. Kutner

Buick. Inc. mm Am. Motors Corp., 868 F.2d 614 (3rd Cir. 1989); see

also Orlando, 822 F.2d at 1298 (citing Bonjourno v. Kaiser Alumi-

num & penal Corp., 752 F.2d 802, 814 (3rd Cir. 1984), cert.

denied, 477 U.S. 908 (1986)); Fed.R.Civ.P. 50(b) advisory

committee’s note. “[T]he purpose of the requirement that a party

4. The terms “directed verdict” and “Rule 50(a) judgment as a matter of law’ are

used interchangeably throughout this Memorandum, as are the terms “judgment

notwithstanding the verdict” and “Rule 50(b) renewed motion for judgment as a

matter of law.” While the 1991 Amendments to the Federal Rules of Civil

Procedure adopted the latter terms in place of the former, the amendments were

of name only and effected no change in the substantive standards relating to the

motions. See Fed. R. Civ. P. 50 advisory committee’s note.

—

18a.

move for a directed verdict before moving for a judgment notwith-

standing the verdict is to provide the opposing party an opportunity

to cure defects in his proofs which could not be remedied except by a

new trial if first raised on a motion for a judgment notwithstanding

the verdict.” Levinson v. Prentice-Hall, Inc., 868 F.2d 558, 562 (3rd

Cir. 1989) (citing Orlando, 822 F.2d at 1298). Thus, any argument

omitted from the motion made at the close of all the evidence is

waived as a ground for judgment under Rule 50(b). Sweeney v.

Westvaco Co., 926 F.2d 29, 37 (1st Cir. 1991), cert. denied, 502

U.S. 899(1991); see also SA James W. Moore et al., Moore’s Fed-

eral Practice J 50.05-50.08 (2d ed.).

A review of the record in the instant case reveals that plaintiff

did not move for a directed verdict on the ground that the evidence

was insufficient to support a finding of unclean hands. As such, this

Court will not consider this argument now and thus will not grant

plaintiff s Motion for judgment n.o.v. on this ground.

I. Conclusion

Because this Court will consider neither the argument that the

defense of unclean hands is unavailable to defendants as a matter of

law, nor the argument that the evidence at trial is insufficient to

support the jury’s finding of unclean hands, plaintiff's Motion will be

denied.

An appropriate Order follows.

/s/

Clarence C. Newcomer, J.

19a.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Civil Action; No. 94-4592

DEUTSCHE FINANCIAL SERVICES CORP.

Plaintiff

V.

MARTA GROUP, INC ., et al.

Defendants,

ORDER

AND NOW, this 2nd day of February, 1996, upon consider-

ation of Plaintiff's Motion for Judgment Notwithstanding the Verdict,

and defendants’ responses thereto, and consistent with the foregoing

Memorandum, it is hereby ORDERED that said Motion is DENIED.

AND IT IS SO ORDERED

/s/

Clarence C. Newcomer, J.