Cornwell Entertainment, Inc. v. Anchin, Block & Anchin, LLP ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1858
CORNWELL ENTERTAINMENT, INC., f/k/a Cornwell Enterprises, Inc.,
f/k/a CEI Enterprises, Inc.; PATRICIA D. CORNWELL;
STACI GRUBER, PH.D.,
Plaintiffs, Appellants,
v.
ANCHIN, BLOCK & ANCHIN, LLP; EVAN SNAPPER,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Lynch, Thompson, and Barron,
Circuit Judges.
Joan A. Lukey, with whom Stuart M. Glass, Justin J. Wolosz,
Kevin C. Quigley, and Choate Hall & Stewart LLP were on brief, for
appellants.
Carter G. Phillips, with whom Eric D. McArthur, Jennifer J.
Clark, Christopher A. Eiswerth, Jack W. Pirozzolo, Sidley Austin
LLP, Thomas R. Manisero, and Wilson, Elser, Moskowitz, Edelman &
Dicker, LLP were on brief, for appellees.
July 18, 2016
BARRON, Circuit Judge. This appeal arises from a
district court's decision to reverse a jury's $51 million award to
a well-known crime novelist, her spouse, and her corporation
against their former business managers. We affirm in part, reverse
in part, and remand.
I.
The following facts are not in dispute. Patricia
Cornwell is a well-known crime novelist who resides in
Massachusetts. In January 2005, Cornwell hired Anchin, Block &
Anchin, LLP ("Anchin"), an accounting firm based in New York, to
provide "concierge business management" services for her and her
corporation, Cornwell Entertainment, Inc. ("CEI"). Eventually,
Anchin was hired to provide those same services to Cornwell's
spouse, Staci Gruber.
Over the next four-and-a-half years, Anchin and one of
Anchin's principals, Evan Snapper, handled a wide array of tasks
for Cornwell, Gruber, and CEI. But on August 31, 2009, Cornwell,
Gruber, and CEI terminated their relationship with Anchin. Several
weeks later, on October 13, 2009, they initiated this suit against
the defendants, Anchin and Snapper, in federal district court in
Massachusetts based on diversity jurisdiction. After several
amendments to the complaint and various pre-trial motions, the
parties proceeded to trial on three New York state-law claims:
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negligent performance of professional services, breach of
contract, and breach of fiduciary duty.
At trial, the plaintiffs presented several theories of
liability in support of each of the three claims. The plaintiffs
alleged that the defendants had mismanaged the plaintiffs'
finances and investments by keeping shoddy records, carelessly
preparing tax returns, misplacing funds, and choosing investments
that did not fit the plaintiffs' stated risk tolerance. The
plaintiffs also alleged that the defendants mismanaged a contract
the plaintiffs had with the company NetJets for fractional
ownership of a private airplane.
In addition, the plaintiffs alleged that the defendants
had mismanaged several real estate transactions that the
plaintiffs had engaged in, including the plaintiffs' purchase of
a condo in the Renaissance building in Florida in the winter and
spring of 2006, rental of an apartment on Fifth Avenue in New York
City in the spring and summer of 2006, and purchase and renovation
of a home on Garfield Road in Concord, Massachusetts from 2005
through 2007. The plaintiffs further alleged that the damages
resulting from the defendants' mismanagement of those real estate
transactions included losses Cornwell incurred when, due to the
lack of an appropriate space in which to write, she missed her
deadline to submit her novel, "Book of the Dead." Finally, the
plaintiffs alleged that within weeks of the commencement of this
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lawsuit, the defendants falsely reported to the United States
Department of Justice ("DOJ") that Cornwell had directed Snapper
to commit a campaign contribution felony by asking Cornwell's
friends and family to contribute money to the John Gilmore for
Senator and Hillary Clinton for President campaigns and by then
reimbursing those who made the campaign contributions with
Cornwell's funds.
At the close of the evidence, the defendants moved for
judgment as a matter of law pursuant to Federal Rule of Civil
Procedure 50(a).1 The motion was a broad-based challenge to the
viability of various theories of liability for each of the
plaintiffs' three New York state-law claims. As Rule 50 permits,
the District Court reserved decision on the motion and sent the
case to the jury, thereby requiring the defendants to renew their
Rule 50(a) motion with a Rule 50(b) motion post-judgment if the
defendants wished that motion to be considered. See Fed. R. Civ.
P. 50(b).
Before releasing the jurors for their deliberations, the
District Court instructed the jury on the law. As relevant to
this appeal, the District Court instructed the jury that any
1 The defendants moved three days before the close of the
evidence to file a brief in support of their Rule 50(a) motion in
excess of the 20-page limit. But it was not until the close of
the evidence that the District Court granted that motion and
considered the defendants' Rule 50(a) motion.
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conduct that occurred prior to three years before the plaintiffs
brought the suit -- that is, before October 13, 2006 -- and which
did not continue thereafter could not support the plaintiffs'
claims of professional negligence or breach of contract. That was
because, the court explained, the statute of limitations under New
York law for those claims was three years. The District Court
gave no such instruction regarding the breach of fiduciary duty
claim. Instead, the court instructed the jury that "[t]he statute
of limitations . . . does not affect the claim for breach of
fiduciary duty." And thus, given that instruction, the jury was
permitted to rely on conduct that occurred outside the three-year
window in finding a breach of fiduciary duty.
Also relevant to this appeal, the District Court
instructed the jury that, in addition to any compensatory damages
that the jury might award, the jury could award punitive damages
for any conduct that it found was in breach of a fiduciary duty.
The District Court further instructed the jury that, in order to
award punitive damages, the jury would have to find that "the
breach was intentional or deliberate, [or] occurred under
aggravating or outrageous circumstances, including a fraudulent or
evil motive or a conscious act that willfully and wantonly
disregarded the plaintiffs' rights."
The jury returned a verdict in favor of the plaintiffs
on all three claims: professional negligence, breach of contract,
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and breach of fiduciary duty.2 The jury awarded the plaintiffs
just shy of $28.6 million in compensatory damages -- $22,405,400
for breach of fiduciary duty, $3,479,045 for professional
negligence, and $2,677,955 for breach of contract. The jury also
awarded the plaintiffs $22,405,400 in punitive damages for breach
of fiduciary duty.
The verdict form was general. It did not require the
jury to explain which theory or theories of liability it had relied
on in finding for the plaintiffs on the three claims. Nor did the
form require the jury to identify which theory or theories of
liability it had relied on in awarding compensatory or punitive
damages.
After trial, the plaintiffs petitioned the District
Court for attorneys' fees and costs under Massachusetts General
Laws Chapter 93A. The plaintiffs had included a Chapter 93A claim
in their operative complaint and the District Court had reserved
decision on that claim until after trial. The plaintiffs also
requested an award of equitable forfeiture in the amount of the
full value of all fees they had paid to the defendants over the
course of their business relationship. The District Court denied
both requests. See Cornwell Entm't, Inc. v. Anchin, Block & Anchin
2The jury also returned a verdict against the defendants on
the single counterclaim they had been asked to decide: unpaid fees.
That counterclaim is not at issue in this appeal.
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LLP ("Cornwell I"), No. 09-11708-GAO, 2013 WL 2367849 (D. Mass.
May 28, 2013).
The District Court held that Chapter 93A was not
applicable because New York law, not Massachusetts law, governed
the plaintiffs' claims. Id. at *2-3. The District Court
separately declined to order equitable forfeiture on the ground
that the jury's large damages award likely included disgorgement
of fees and that any further award would be inequitable. Id. at
*3-4. The District Court subsequently entered judgment in
accordance with the jury verdict and its decision on the
plaintiffs' post-trial petition for an additional monetary award.
After judgment was entered, the defendants timely
renewed their Rule 50(a) motion for judgment as a matter of law,
pursuant to Rule 50(b). The District Court granted the Rule 50(b)
motion in part and denied it in part. See Cornwell Entm't, Inc.
v. Anchin, Block & Anchin LLP ("Cornwell II"), No. 09-11708-GAO,
2014 WL 1249047 (D. Mass. Mar. 25, 2014).
The District Court first agreed with the defendants'
contention in the Rule 50(b) motion that several of the plaintiffs'
theories of liability -- including, as relevant to this appeal,
those based on the allegedly botched purchase of the Renaissance
condo in Florida and the alleged mismanagement of the rental of
the Fifth Avenue apartment -- could not support the jury's verdict
on any of the three claims. Id. at *3-5. That was because, the
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District Court held, those theories of liability accrued more than
three years before the plaintiffs brought suit, and the statute of
limitations for all three claims under New York law was three
years. Id. at *2-5. In so holding, the District Court concluded
that it had erred in instructing the jury that, under New York
law, the breach of fiduciary duty claim was not subject to a three-
year statute of limitations. Id. at *2.
The District Court then turned to the issue whether the
plaintiffs' allegations regarding the defendants' statements to
the DOJ regarding Cornwell's campaign contributions, which were
allegedly made within the three-year statute of limitations, could
support the jury's verdict on the claim of breach of fiduciary
duty. The District Court accepted the defendants' argument, made
in the Rule 50(b) motion, that those allegations could not support
the verdict on that claim because the defendants were protected by
a qualified privilege for any statements they made to the DOJ.
Id. at *4. And the District Court accepted that argument
notwithstanding the plaintiffs' contention that the argument about
qualified privilege was not raised in the defendants' Rule 50(a)
motion and for that reason was waived and could not be considered
at the Rule 50(b) stage. Id. at *1.
Finally, the District Court also considered the
defendants' argument that there was insufficient evidence to
support a non-speculative finding of damages on the NetJets theory
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of liability. Id. at *5. As to that argument, too, the District
Court agreed with the defendants' contention in their Rule 50(b)
motion, and so it held that the NetJets theory of liability could
not support the jury's verdict on any of the three claims. Id.
In partially granting the Rule 50(b) motion, the
District Court did not hold that all of the plaintiffs' theories
of liability failed as a matter of law. The District Court
nevertheless concluded that, because it could not determine from
the general verdict form whether the jury had relied on the
theories that were legally defective or on those that were not
defective, a new trial was required. Id. at *6. And so the
District Court vacated the jury verdict and ordered a new trial on
the theories that remained, id., which the District Court later
stated were "the administration of Garfield, investments, taxes,
and Anchin's invoicing practices or non-practices, and the general
handling and management of funds."
The plaintiffs decided not to retry the case. They
instead requested judgment in favor of the defendants on all the
remaining theories of liability so that they could "proceed with
their appeal." The District Court granted that motion and entered
judgment accordingly, and the plaintiffs now appeal. The
plaintiffs challenge various aspects of the District Court's Rule
50(b) decision, the District Court's decision denying the
plaintiffs' post-trial petition for equitable forfeiture and for
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attorneys' fees and costs pursuant to Chapter 93A, and other
rulings by the District Court. We address each challenged ruling
in turn.
II.
We begin with the District Court's ruling, in partially
granting the defendants' Rule 50(b) motion, that the defendants
are subject to a qualified privilege for any reports they made to
the DOJ regarding the campaign contribution activities. We then
consider the District Court's ruling, also made in partially
granting the defendants' Rule 50(b) motion, that the statute of
limitations for a breach of fiduciary duty claim under New York
law is only three years, and that, as a result, certain of the
plaintiffs' theories of liability are time-barred. Last, we
address the District Court's decision -- made, once again, in the
course of partially granting the Rule 50(b) motion -- that the
plaintiffs' NetJets theory of liability fails as a matter of law
because there was insufficient evidence at trial that would support
a non-speculative finding of damages on that theory.
Obviously, if the District Court's rulings on the
defendants' Rule 50(b) motion are correct, then they must be
affirmed and the jury verdict cannot be reinstated. But it is
arguably less clear what should happen if any of the plaintiffs'
challenges to the District Court's rulings on the defendants' Rule
50(b) motion do have merit. In particular, the parties disagree
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as to whether, in that event, the verdict must be reinstated,
either in whole or in part. We first proceed to evaluate the
merits of the District Court's decision, and we conclude that the
District Court did err in one respect. Accordingly, we also take
up the question of what should happen to the verdict in consequence
of this error.
A.
The plaintiffs contend that the District Court erred in
accepting the defendants' argument that any statements they made
to the DOJ regarding Cornwell's campaign contributions were
subject to a qualified privilege and thus could not support the
claim of fiduciary breach. The plaintiffs contend that the
District Court erred in this regard because the defendants waived
the qualified privilege argument by failing to raise it in their
Rule 50(a) motion. We agree with the plaintiffs, and thus we
reverse this aspect of the District Court's Rule 50(b) ruling.
A Rule 50(b) motion is styled a "renewed motion for
judgment as a matter of law" and, "[a]s the name implies . . . is
bounded by the movant's earlier Rule 50(a) motion." Parker v.
Gerrish, 547 F.3d 1, 12 (1st Cir. 2008) (alteration in original)
(quoting Correa v. Hosp. S.F., 69 F.3d 1184, 1196 (1st Cir. 1995)).
As a result, "[t]he movant cannot use such a motion as a vehicle
to introduce a legal theory not distinctly articulated in its [Rule
50(a) motion]." Id. (quoting Correa, 69 F.3d at 1196).
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The reason for this strict rule is simple. It "is
designed to prevent unfair surprise and to provide the responding
party with an opportunity to correct any deficiencies in her proof"
before the case is sent to the jury. Lynch v. City of Bos., 180
F.3d 1, 13 n.9 (1st Cir. 1999) (citing the Fed. R. Civ. P. 50(a)
Advisory Committee Notes to the 1991 Amendment).
The District Court did not hold otherwise in addressing
the qualified privilege argument that the defendants set forth in
their Rule 50(b) motion. Rather, the District Court held that the
qualified privilege argument was "adequately subsumed in the
argument, made in the Rule 50(a) motion, that the reporting did
not, as a matter of law, constitute a breach of fiduciary duty."
Cornwell II, 2014 WL 1249047, at *1. And so the key question is
whether the District Court's conclusion that the qualified
privilege argument was made in the Rule 50(a) motion is
supportable.
It is not clear from our precedent what standard of
review we should apply in evaluating a trial court's determination
that an argument made in a Rule 50(b) motion was preserved in a
Rule 50(a) motion. See, e.g., Jones ex rel. U.S. v. Mass. Gen.
Hosp., 780 F.3d 479, 487-88 (1st Cir. 2015) (holding that the trial
court properly found that the plaintiff's Rule 50(b) arguments
were not preserved in the plaintiff's Rule 50(a) motion, but not
indicating what standard of review applied to that determination);
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Parker, 547 F.3d at 12-13 (same). But whatever the standard of
review -- de novo, abuse of discretion, or even clear error3 --
the record makes clear in this case that the District Court erred
in ruling that the defendants had preserved their qualified
privilege argument in their Rule 50(a) motion.
The defendants devoted just one paragraph of their Rule
50(a) motion to challenging the plaintiffs' theory that the
defendants breached a fiduciary duty to the plaintiffs by reporting
Cornwell's campaign contributions to the DOJ. The paragraph reads:
Plaintiffs contend that Defendants breached
their fiduciary duties to Ms. Cornwell and CEI
when they reported to the [DOJ] the conduct
surrounding the campaign contribution
reimbursement activity. As the evidence
plainly reveals, this activity occurred not
only after the Defendants had been terminated
as Plaintiffs' business managers, but also
after Plaintiffs had sued the Defendants.
Clearly, at that point, any fiduciary
obligations Defendants owed to Plaintiffs had
been terminated. See Vigoda v. DCA
Productions Plus, Inc., 293 A.D.2d 265, 267,
741 N.Y.S.2d 20 (2002). Any information that
was turned over to a third party pertaining to
Plaintiffs was pursuant to a government
subpoena. Thus, by definition, the act of
reporting the activity to the government could
not have constituted a breach of fiduciary
duty.
The District Court did not specify where in this
passage the argument in question is made, and the passage at no
3 No party contends that such a decision is entirely
discretionary such that we cannot review it.
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point makes any direct reference to a qualified privilege. In
their briefs to us, the defendants contend that the argument is
set forth in the line that reads: "by definition, the act of
reporting the activity to the government could not have constituted
a breach of fiduciary duty." But the defendants omit the fact
that this line is introduced by the word "thus." That introductory
word makes clear that this line is merely setting forth a
conclusion to the argument that is set forth in the sentences that
immediately precede it. And we do not see how any of those
sentences could fairly be read to have made an argument for
qualified privilege, nor did the defendants argue in their opening
brief to us that any of those prior sentences did make such an
argument. See Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d
288, 299 (1st Cir. 2000) (arguments not made in a party's opening
brief are waived).
At oral argument, the defendants offered an alternative
argument. They contended that the sentence that reads, "[a]ny
information that was turned over to a third party pertaining to
Plaintiffs was pursuant to a government subpoena," preserved the
qualified privilege argument by its reference to a "subpoena."
But the defendants also conceded at oral argument that this
sentence would have preserved only an argument that a qualified
privilege attached to statements that were made in response to a
subpoena. It is only statements made not in response to a
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subpoena, however, to which the District Court's qualified
privilege holding applied. See Cornwell II, 2014 WL 1249047, at
*4.4
To overcome their failure to preserve their qualified
privilege argument in their Rule 50(a) motion, the defendants argue
that the plaintiffs cannot "show any prejudice" from the District
Court having considered that argument, even accepting that it was
made for the first time after trial. But the defendants cite no
support for the seemingly novel proposition that a party must show
prejudice in this context. Cf. Hudson v. NeXus Worldwide Holdings,
Ltd., 191 F.R.D. 318, 322 (D.C. Cir. 2000) ("It is true that many
courts have noted that the princip[al] purpose of requiring [a]
defendant to move for judgment prior to the verdict is to provide
the plaintiff with a fair opportunity to cure any insufficiencies.
Notwithstanding this purpose, no circuit has held that the failure
to move at the close of the evidence is excused merely by showing
that the non-movant would not be prejudiced." (citation omitted));
see also United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)
(arguments not sufficiently developed on appeal are waived).5
The plaintiffs do not appeal the District Court's separate
4
holding that the statements the defendants made in response to a
subpoena were subject to an absolute -- not qualified -- privilege.
See Cornwell II, 2014 WL 1249047, at *5.
The only support we have found, on our own review, for the
5
proposition that a party must show prejudice from a trial court's
consideration of an argument made for the first time in a Rule
50(b) motion is a dissenting opinion from the Eleventh Circuit.
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Moreover, we have no reason to assume that there was no
prejudice, given that the plaintiffs -- at least arguably -- might
have moved to reopen the evidence in order to introduce additional
evidence on the DOJ theory of liability had they been aware of the
defendants' argument that the defendants were subject to a
qualified privilege for any statements they made to the DOJ
regarding the campaign contributions. See Sweeney v. Westvaco
Co., 926 F.2d 29, 41 (1st Cir. 1991) (refusing to look past waiver
in the Rule 50 context where "[t]here [was] no good reason for
[the defendant's] neglect," and where "[t]he unfairness [was]
obvious and aggravated [in that case] by the fact that, at least
arguably, [the plaintiff] might have tried to reshape her case"
had the argument been made earlier). In fact, qualified privilege
is an affirmative defense, see Jules Rabin Assocs., Inc. v. Landon,
345 N.E.2d 588, 588 (N.Y. 1976), and thus should have been asserted
in the defendants' answer, see Fed. R. Civ. P. 8(c); Knapp Shoes,
Inc. v. Sylvania Shoe Mfg. Corp., 15 F.3d 1222, 1226 (1st Cir.
1994) ("Fed. R. Civ. P. 8(c) requires a party to affirmatively
plead certain specified defenses, as well as 'any other matter
constituting an avoidance or affirmative defense.' Affirmative
defenses not so pleaded are waived." (quoting FDIC v. Ramírez-
Rivera, 869 F.2d 624, 626 (1st Cir. 1989))). Yet, in this case,
See McGinnis v. Am. Home Mortg. Servicing, Inc., 817 F.3d 1241,
1267 (11th Cir. 2016) (Carnes, J., dissenting).
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the argument was not raised until after the trial had ended, which
makes us especially reluctant to excuse its late articulation for
lack of prejudice.
The defendants also argue that we should affirm the
District Court's ruling concerning the DOJ statements on a
different ground: that the statements the defendants made to the
DOJ regarding Cornwell's campaign contributions were true and thus
could not support a breach of fiduciary duty claim under New York
law. But even assuming true statements could not support the claim
under New York law, the defendants also failed to make this
argument in their Rule 50(a) motion. And, again, this failure is
not one that in this case we may overlook, even had defendants
made any argument as to why we should. If the plaintiffs had been
aware of this argument prior to the case going to the jury, the
plaintiffs, at least arguably, might have moved to reopen the
evidence in order to introduce additional evidence to prove that
the defendants' statements to the DOJ were false. See Sweeney,
926 F.2d at 41 (refusing to look past waiver in similar
circumstances).6
6The plaintiffs do not argue that a "miscarriage of justice"
would result were we not to look past their failure to preserve in
their Rule 50(a) motion the qualified privilege argument or the
argument regarding the truth of the statements they made to the
DOJ. See Parker, 547 F.3d at 13 (noting that courts have
discretion to look past waiver in the Rule 50 context where doing
so would "prevent a 'miscarriage of justice'" (quoting Correa, 69
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Thus, we reject the District Court's decision entering
judgment as a matter of law for the defendants on the DOJ issue.
In doing so, we make no judgment as to the merits of the defendants'
argument that they did not breach a fiduciary duty in making
statements to the DOJ. We simply hold that those arguments were
not preserved in the defendants' Rule 50(a) motion and so could
not provide a basis, post-verdict, for the District Court's holding
rejecting the DOJ theory of liability as a matter of law. Whether
the reversal of the District Court on this issue means the verdict
should be reinstated is a separate question that depends, at least
in part, on how we decide the plaintiffs' remaining challenges to
the District Court's Rule 50(b) decision. And so we now address
those challenges.
B.
The plaintiffs contend that the District Court also
erred in partially granting the defendants' Rule 50(b) motion
because the District Court wrongly concluded in doing so that some
of the plaintiffs' theories of liability were barred by the statute
of limitations applicable to the three claims that were tried. In
reaching this conclusion, the District Court determined that it
had been wrong to instruct the jury that the claim of fiduciary
breach was not, like the claims for breach of contract and
F.3d at 1196)). Nor do we think, for the reasons we have already
given, that such a miscarriage of justice would result.
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professional negligence, subject to a three-year statute of
limitations. But we conclude that the District Court committed no
error in reversing course in this respect. And, moreover, we are
not persuaded by the plaintiffs' contention that, due to other
doctrines of New York law, the three-year statute of limitations
poses no obstacle to the theories of liability that the District
Court held were time-barred.
1.
The plaintiffs first contend that the District Court
erred in holding that New York's statute of limitations for a
breach of fiduciary duty claim is three years. Our review of this
purely legal issue is de novo, see Quality Cleaning Prods. R.C.,
Inc. v. SCA Tissue N.Am., LLC, 794 F.3d 200, 203 (1st Cir. 2015),
and we agree with the District Court.
In ultimately concluding that the statute of limitations
for breach of fiduciary duty under New York law is three years,
the District Court relied on IDT Corp. v. Morgan Stanley Dean
Witter & Co., 907 N.E.2d 268 (N.Y. 2009). See Cornwell II, 2014
WL 1249047, at *3. There, New York's highest court explained that
there is no "single statute of limitations" under New York law for
breach of fiduciary duty claims, and that "the choice of the
applicable limitations period depends on the substantive remedy
the plaintiff seeks." IDT Corp., 907 N.E.2d at 272. "Where the
remedy sought is purely monetary in nature," the New York Court of
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Appeals went on to hold, the statute of limitations is three years,
whereas where "the relief sought is equitable in nature, the six-
year limitations period . . . applies."7 Id. The District Court
thus concluded that, under IDT Corp., the applicable statute of
limitations for the breach of fiduciary duty claim at issue here
is three years, as the relief sought at trial for the alleged
breach of fiduciary duty was monetary in nature. Cornwell II,
2014 WL 1249047, at *3.
The plaintiffs contend that despite IDT Corp.'s clear
holding, "a fiduciary duty claim seeking damages is subject to a
six-year limitations period if the claim has its genesis in the
parties' contractual relationship." But we are not persuaded by
the non-binding case law that the plaintiffs point to in support
of this proposition, as those cases either themselves pre-date IDT
Corp. or rely on other cases that pre-date IDT Corp. Nor do the
plaintiffs dispute that the relief they sought at trial was
monetary in nature. We thus conclude that IDT Corp. requires us
to hold, as the District Court did, that the statute of limitations
for the breach of fiduciary duty claim is three years.
7 The New York Court of Appeals did provide an exception where
"an allegation of fraud is essential to a breach of fiduciary duty
claim," in which case a six-year statute of limitations applies.
IDT Corp., 907 N.E.2d at 272. But the plaintiffs do not argue
that the fraud exception is applicable here.
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2.
The plaintiffs next contend that, even assuming the
statute of limitations under New York law for breach of fiduciary
duty is, like the statute of limitations for breach of contract
and professional negligence claims, only three years, that shorter
statute of limitations is not as consequential as the District
Court concluded that it was. To make this argument, the plaintiffs
rely on New York's "continuous representation doctrine." They
contend that this doctrine renders timely those theories of
liability (whether for breach of contract, professional
negligence, or fiduciary breach) that are based on the alleged
mismanagement of the real estate transactions involving the
Renaissance condo and the Fifth Avenue apartment, even though these
transactions occurred outside the three-year statute of
limitations that applies to those claims.
In partially granting the Rule 50(b) motion, the
District Court rejected that argument on the ground that the
continuous representation doctrine does not function in the way
that the plaintiffs contend that it does. Cornwell II, 2014 WL
1249047, at *3. Reviewing the District Court's interpretation of
this aspect of New York law de novo, see Quality Cleaning Prods.
R.C., Inc., 794 F.3d at 203, we agree with the District Court.
Contrary to the plaintiffs' contention, New York's
continuous representation doctrine does not automatically toll the
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statute of limitations for the entire period of those professional
relationships to which it applies. Rather, that doctrine tolls
the statute of limitations "only so long as the defendant continues
to advise the client in connection with the particular transaction
which is the subject of the action and not merely during the
continuation of a general professional relationship." Booth v.
Kriegel, 36 A.D.3d 312, 314 (N.Y. App. Div. 2006); see also In re
Lawrence, 23 N.E.3d 965, 980 (N.Y. 2014) (holding that the
continuous representation doctrine tolls the limitations period
only during an "ongoing provision of professional services with
respect to the contested matter or transaction" and does not apply
"to a continuing general relationship between a client and
professional").8
8The plaintiffs argue that "[a] long line of cases, which
the trial court chose to ignore in its Rule 50(b) Order, recognizes
that the limitations period for a breach of fiduciary duty claim
will typically be tolled until either the fiduciary openly
repudiates the relationship or the relationship otherwise ends,
without any requirement that the claim concerns a 'particular
transaction.'" The plaintiffs' argument concerns the fiduciary
tolling rule, not the continuous representation doctrine. The
District Court did not address the plaintiffs' fiduciary tolling
argument below, which the plaintiffs made by citing to cases that
applied the continuous representation doctrine, not the fiduciary
tolling rule. Given the plaintiffs' limited development of a
state-law issue that "raises complexities that defy an easy
answer," "the district court was 'free to disregard'" that
argument, and the argument "cannot now be 'resurrected on appeal.'"
Coons v. Indus. Knife Co., 620 F.3d 38, 44 (1st Cir. 2010) (quoting
Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st
Cir. 1999)).
- 22 -
The plaintiffs argue on appeal that if such a "particular
transaction" is required, then the "'particular transaction' in
this case would be" the plaintiffs' enlisting the defendants to
"manage real estate in a manner that permitted Cornwell to complete
Book of the Dead." This argument does have some initial appeal,
assuming this professional relationship is of a kind to which the
doctrine applies at all.9 The continuous representation doctrine
was adopted in part on the understanding that someone who becomes
aware of an error should not be required to sue immediately since
that would only "interrupt corrective efforts." Borgia v. City of
N.Y., 187 N.E.2d 777, 779 (N.Y. 1962). And, arguably, if the
defendants were obliged to find Cornwell a place in which she could
complete Book of the Dead, a requirement that the plaintiffs bring
suit after any particular real estate transaction had occurred
would interrupt corrective efforts by the defendants to find a
suitable place for Cornwell to write that book.
But the plaintiffs did not make this argument to the
District Court. The plaintiffs argued only that the continuous
representation doctrine tolled the limitations period for the
entirety of the "[d]efendants' mismanagement of real estate," and
not for the shorter period of the defendants' mismanagement of
9 The defendants do not challenge the doctrine's application
to real estate services but the plaintiffs have not identified any
case applying the doctrine to such services, and our own review
has not turned up any such case.
- 23 -
handling the plaintiffs' real estate in a manner that would permit
Cornwell to complete Book of the Dead. Because the plaintiffs
failed to argue below that the particular transaction to which the
continuous representation doctrine applied was the defendants'
management of the plaintiffs' real estate in a manner that would
permit Cornwell to complete Book of the Dead, that argument "cannot
be surfaced for the first time on appeal." McCoy v. Mass. Inst.
of Tech., 950 F.2d 13, 22 (1st Cir. 1991); see also Rocafort v.
IBM Corp., 334 F.3d 115, 122 (1st Cir. 2003) ("[A] party has a
duty 'to incorporate all relevant arguments in the papers that
directly address a pending motion.'" (quoting CMM Cable Rep, Inc.
v. Ocean Coast Props., Inc., 97 F.3d 1504, 1526 (1st Cir. 1996))).
Moreover, we are skeptical that, assuming that the
plaintiffs enlisted the defendants to manage the plaintiffs' real
estate in a manner that permitted Cornwell to complete Book of the
Dead, and assuming further that the defendants therefore
participated in the kind of particular transaction to which New
York's continuous representation doctrine applies, the plaintiffs'
real-estate-related claims would thus be rendered timely by that
doctrine. The evidence at trial was that the defendants fulfilled
any obligation to manage the plaintiffs' real estate in a way that
permitted Cornwell to complete Book of the Dead more than three
years before this suit was brought. Specifically, Cornwell does
not dispute what the evidence appears to show, which is that the
- 24 -
defendants had secured her a property where she could write as of
August 2006, namely the "Monument" property. The evidence further
shows that she resided there in 2007, when she completed her book.
And while the evidence shows that there were problems with the
Monument property in 2008 and 2009, the book was completed in 2007.
We thus affirm the District Court's decision that the
statute of limitations applicable to the plaintiffs' fiduciary
duty claim under New York law is three years and that the
plaintiffs' theories of liability based on the Renaissance condo
and the Fifth Avenue apartment are not made timely by New York's
continuous representation doctrine.
C.
The plaintiffs' last challenge to the District Court's
ruling partially granting the Rule 50(b) motion concerns the
District Court's decision that, on this record, only "conjecture
or speculation" could support a finding of damages on the NetJets
theory of liability. See Cornwell II, 2014 WL 1249047, at *5.
Our review of the District Court's ruling about the lack of
evidentiary support for this theory of liability is de novo, though
we must construe all reasonable inferences from the trial record
in the light most favorable to the plaintiffs. Malone v. Lockheed
Martin Corp., 610 F.3d 16, 19-20 (1st Cir. 2010).
The plaintiffs contend that they introduced evidence at
trial from which a juror could reasonably find that the plaintiffs
- 25 -
were due $532,000 in damages on account of Snapper's mismanagement
of the contracts with NetJets for fractional ownership in a private
jet. The plaintiffs point to Gruber's testimony that, four years
after Snapper negotiated the contract with NetJets, she managed to
negotiate "a five-year contract with [NetJets with] savings of
$232,000 and 'perks' worth over $300,000, for a total value of
$532,000."
But there was no evidence at trial regarding whether
Snapper could have negotiated the same deal four years earlier.
In fact, the evidence suggested the conditions were markedly
different at the time Gruber reached her deal. The evidence at
trial was that the economy went into a recession between when
Snapper negotiated with NetJets and when Gruber negotiated with
NetJets and that Gruber's contract with NetJets was for a smaller
plane than the one Cornwell had requested four years earlier, when
Snapper negotiated the contract. And so we agree with the District
Court that only speculation could permit a reasonable juror to
calculate an estimate of damages from Snapper's alleged
mismanagement of the contract with NetJets by comparing the value
of Gruber's contract with NetJets to the value of Snapper's
contract.
D.
Having resolved all of the plaintiffs' challenges to the
District Court's Rule 50(b) decision, and having found in the
- 26 -
plaintiffs' favor on only one of those challenges -- the challenge
to the ruling that a qualified privilege applies to the statements
the defendants made to the DOJ -- we now must decide what to do
about the jury verdict. The plaintiffs suggested in their briefing
that we should remand for a new trial rather than reinstate the
verdict. The defendants agreed and argued that the plaintiffs had
waived any argument to the contrary.
At oral argument, however, the plaintiffs for the first
time raised the possibility that, if we reversed the District
Court's Rule 50(b) qualified privilege holding, then we could
reinstate the jury's verdict that there was a breach of fiduciary
duty, and then remand for a new trial on damages on that claim
only. The plaintiffs reasoned that they had argued for punitive
damages during closing argument with respect to only the DOJ
investigation theory of breach of fiduciary duty. Thus, because
the jury awarded punitive damages, the plaintiffs suggested, it
must be the case that the jury found a breach of fiduciary duty
with respect to that theory.
But we do not believe this late-breaking contention
provides a basis for us to reinstate any portion of the jury's
verdict. The plaintiffs' argument that the jury verdict on
liability be reinstated was not included in the plaintiffs' opening
brief, see Waste Mgmt. Holdings, Inc., 208 F.3d at 299 (an argument
not included in an opening brief is waived), nor was it developed
- 27 -
on appeal, see Zannino, 895 F.2d at 17 (arguments not sufficiently
developed on appeal are waived). On the merits, moreover, we
cannot be "reasonably sure" that the jury relied on a theory of
liability that does not fail as a matter of law in finding for the
plaintiffs on the fiduciary duty claim, as opposed to the various
other theories that do fail as a matter of law. See Gillespie v.
Sears, Roebuck & Co., 386 F.3d 21, 30 (1st Cir. 2004) (explaining
that "we have generously applied the harmless error concept to
rescue verdicts where we could be reasonably sure that the jury in
fact relied upon a theory with adequate evidentiary support" rather
than a theory that failed as a matter of law).
The trial in this case spanned twenty-six days and
involved a number of theories of liability. No effort was made by
the plaintiffs to indicate to the jury that certain theories and
not others applied to certain claims, and nothing about the verdict
form suggested to the jury that the claims were so limited. It is
also not clear to us from the record that the theories of liability
that fail as a matter of law were less supported by the evidence
than the other theories of liability such that we can conclude
that the jury did not rely on the former in finding for the
plaintiffs on the breach of fiduciary duty claim. See id.(explaining that the harmless error concept applies to rescue
general verdicts because we "[r]ecogniz[e] that a jury is likely
to prefer a better supported theory to one less supported").
- 28 -
Nor are we convinced by the plaintiffs' argument that
the jury's punitive damages award shows that the jury found a
breach of fiduciary duty with respect to the DOJ investigation
issue. The jury was not instructed that it could award punitive
damages only on the basis of that theory of liability. Rather,
the jury was instructed that it could award punitive damages for
any conduct that it concluded was in breach of a fiduciary duty if
it found "the breach was intentional or deliberate, [or] occurred
under aggravating or outrageous circumstances, including a
fraudulent or evil motive or a conscious act that willfully and
wantonly disregarded the plaintiffs' rights."
To be sure, the plaintiffs are correct that their trial
counsel limited her punitive damages argument at the end of trial
to the DOJ issue. But parties' closing arguments are not evidence,
as the jury in this case was instructed. There also was no more
focus, in the presentation of the evidence, on the "intentional"
or "aggravating or outrageous" nature of the breach with respect
to the DOJ investigation than with respect to the other theories
of liability, such that we can be "reasonably sure" that the jury's
award of punitive damages was an award for the DOJ issue. See id.In fact, consistent with the District Court's general
instruction on punitive damages, the plaintiffs argued before the
District Court that the jury's large punitive damages award was
supported not only by the DOJ investigation theory of liability,
- 29 -
but also by "the entire breadth of Defendants' blatant violations
of their fiduciary duties, such as: concealing fees they paid
themselves, repeatedly mismanaging Plaintiffs' real estate and
investment accounts, and -- in dealing with Plaintiffs' service
providers -- putting their own interests before Plaintiffs'
[interests]." And the plaintiffs opposed the defendants' argument
that the "only ground for punitive damages [was the defendants']
disclosures to the DOJ," insisting to the District Court that such
an argument "rings hollow." In light of that contention below, we
do not see how we can say, especially with no briefing from the
parties, that we are reasonably sure that the punitive damages
award indicates that the jury found that the defendants were liable
for breach of fiduciary duty with respect to the DOJ issue simply
because the plaintiffs' trial counsel limited her closing argument
to the jury regarding punitive damages to that issue.
We thus conclude that our "usual[]" approach is the
correct one in this case. Id. at 29. Under that approach, where
"a single verdict question encompasses multiple theories, one of
which is defective," "a new trial is usually warranted." Id. at
29-30 (quoting Kerkhof v. MCI WorldCom, Inc., 282 F.3d 44, 52 (1st
Cir. 2002)).10
10 We reject the plaintiffs' request that they be permitted
to retry not just the DOJ issue, but also any theory of liability
that remained after the District Court rendered its decision on
the defendants' Rule 50(b) motion. The plaintiffs waived their
- 30 -
III.
The plaintiffs' next challenge concerns the District
Court's denial of their post-trial petition for reasonable
attorneys' fees and costs under Massachusetts General Laws Chapter
93A and for equitable forfeiture. The District Court ruled on
that petition almost a year before the District Court granted the
defendants' Rule 50(b) motion. In doing so, the District Court
held that the plaintiffs' claim under Massachusetts General Laws
Chapter 93A was "inapplicable" to this case. See Cornwell I, 2013
WL 2367849, *4. The plaintiffs challenge that decision. The
plaintiffs also challenge the District Court's denial of their
request for equitable forfeiture. We take each argument in turn.
A.
The District Court concluded that Chapter 93A was not
applicable to this case for two reasons. First, the District Court
held that it was "inconsistent and illogical" for the plaintiffs
to argue that New York law applied to "all the other claims" while
at the same time contending that "Massachusetts law also applies,
simply because it offers distinctive remedies." Id. at *1. The
District Court separately held that "[e]ven if the plaintiffs'
right to try those remaining theories when they requested that the
District Court enter final judgment for the defendants on those
theories. See Johnson v. Zerbst, 304 U.S. 458, 464 (1938)
(defining waiver as "an intentional relinquishment or abandonment
of a known right or privilege").
- 31 -
positions were not inconsistent . . . conventional choice-of-law
analysis would yield the same result." Id. at *2. Applying
Massachusetts's choice-of-law framework, the District Court held
that New York law, and not Massachusetts law, applied to all the
plaintiffs' theories of Chapter 93A liability. Id. at *2-3. As
a result, the District Court held, the Chapter 93A claim could not
proceed and so could not provide a basis for awarding the
plaintiffs the costs and attorneys' fees that they requested. Id.
at *3.
The plaintiffs' sole argument against this ruling on
appeal is that "[t]he states' relative interest in the adjudication
of the claims is a paramount factor" in Massachusetts' choice-of-
law analysis, and that "Massachusetts' interest in ensuring that
its consumer residents are protected against unfair acts or
practices of out-of-state product and service providers surely
outweighs New York's interest in protecting a local accounting
firm from its own willful, wanton or egregious malfeasance in
providing services to Massachusetts residents." For that reason,
the plaintiffs contend, Massachusetts law governs the conduct they
identified as violating Chapter 93A.
But the plaintiffs do not challenge the District Court's
decision to analyze the Chapter 93A claim as a claim sounding in
tort and contract. In determining which state's law governs claims
that sound in contract, Massachusetts courts consider "a variety
- 32 -
of factors," Bushkin Assoc., Inc. v. Raytheon Co., 473 N.E.2d 662,
668 (Mass. 1985), including "the place of contracting," "the place
of negotiation of the contract," "the place of performance," "the
location of the subject matter of the contract," and "the domicil,
residence, nationality, place of incorporation and place of
business of the parties," id. at 669 (quoting Restatement (Second)
Conflict of Laws § 188 (1971)). And where claims sound in tort,
Massachusetts courts consider, among other things, "the place
where the injury occurred," "the place where the conduct causing
the injury occurred," "the domicil, residence, nationality, place
of incorporation and place of business of the parties," and "the
place where the relationship, if any, between the parties is
centered." Cosme v. Whitin Mach. Works, Inc., 632 N.E.2d 832,
834-35 & n.3 (Mass. 1994) (quoting Restatement (Second) Conflict
of Laws § 145 (1971)); see also Robidoux v. Muholland, 642 F.3d
20, 25 (1st Cir. 2011) (explaining that although, "[h]istorically,
in tort cases, Massachusetts applied the substantive law of the
state where the alleged wrong occurred . . . Massachusetts has
moved to a 'functional' approach for addressing choice of law
issues" under which it assesses "various choice-influencing
considerations, including those provided in the Restatement
(Second) of Conflict of Laws (1971)").
Thus, the plaintiffs' residence is just one factor among
many that Massachusetts courts consider in determining which state
- 33 -
has the most significant relationship to a claim sounding in
contract or tort. And, in this case, the other factors generally
do not support the conclusion that Massachusetts law applies here.
The plaintiffs do not dispute the District Court's findings that
the defendants are located in New York, that the contract between
the parties was negotiated and executed in New York, and that the
relationship between the parties was centered in New York. See
Cornwell I, 2013 WL 2367849, at *2-3. Moreover, most of the
plaintiffs' theories of liability are based on events that occurred
in New York or Florida, not in Massachusetts.11
Given that the plaintiffs make no developed argument on
the choice-of-law issue beyond the contention that their residence
in Massachusetts requires the application of Massachusetts law, we
need go no further. See Zannino, 895 F.2d at 17. The plaintiffs
have not made the case that the District Court erred in the choice-
of-law analysis it performed in rejecting the Chapter 93A claim.
11As for the one theory of liability that was based on events
that occurred in Massachusetts -- the defendants' alleged
mismanagement of the purchase and renovation of Cornwell's
residence on Garfield Road in Concord, Massachusetts -- the
District Court held that even if Massachusetts law applied to that
theory of liability, there was no evidence at trial that the
defendants "acted in any unethical or deceptive way with respect
to [that] renovation project" such that the defendants' conduct
could be said to violate Chapter 93A. Cornwell I, 2013 WL 2367849,
at *3. The plaintiffs do not challenge that alternate holding.
- 34 -
B.
The plaintiffs' argument that the District Court erred
in denying their post-trial petition for an award of equitable
forfeiture is also unavailing. The plaintiffs contend that the
jury verdict "compel[s]" an award of equitable forfeiture in this
case. But because we have concluded that the verdict cannot be
reinstated, we cannot say that the verdict compels any such award.
We note, however, that after the District Court vacated the verdict
below, it held that "the question of whether equitable forfeiture
is appropriate is left open for [re]trial." The defendants make
no argument that the same should not be true upon remand from this
appeal, and we see no reason why it should not.12
IV.
Notwithstanding that we are not reinstating the verdict,
we must address two additional issues. Each pertains to any new
trial that may occur. The first concerns the counsel who may
participate in it. The second concerns whether certain records
from the first trial may be unsealed.
12We need not address whether the District Court's post-trial
award of interest on the jury verdict was erroneous, as the
plaintiffs ask us to address that issue only in the event that we
reinstate the jury verdict, which we have not done. Nor need we
reach the defendants' argument that the District Court erred in
not instructing the jury on comparative causation. The parties
are free to raise the issue whether a jury instruction on
comparative causation is warranted in this case in the event there
is a new trial.
- 35 -
A.
We start with the plaintiffs' contention that Sidley
Austin LLP, the defendants' counsel at present, should not be
permitted to continue to represent the defendants on remand. The
plaintiffs moved below to "disqualify" Sidley as counsel for the
defendants "or, in the alternative for expedited discovery to
determine whether such disqualification is mandated and/or for an
evidentiary hearing regarding [the] same." The plaintiffs request
that we "[r]einstate[]" that motion and order the District Court,
on remand, to permit discovery on the issue prior to retrial.
"Because the district court is vested with the power and
responsibility of supervising the professional conduct of
attorneys appearing before it," we review the District Court's
decision regarding disqualification of counsel for an abuse of
discretion. Kevlik v. Goldstein, 724 F.2d 844, 847 (1st Cir.
1984). That same standard applies to a trial court's decision
regarding discovery and whether to hold an evidentiary hearing.
See Braga v. Hodson, 605 F.3d 58, 59 (1st Cir. 2010) (discovery);
Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 527 (1st Cir.
1991) (evidentiary hearing). We conclude that there was a
"reasonable basis" for the District Court's decision and thus that
there was no abuse of discretion in this case. Kevlik, 724 F.2d
at 847.
- 36 -
The plaintiffs sought to disqualify Sidley on the ground
that James Cole had recently joined that firm as partner and that
Cole had previously served as Deputy Attorney General of the United
States. As Deputy Attorney General, the plaintiffs contended,
Cole likely obtained information regarding the DOJ investigation
of Anchin and Cornwell. Thus, the plaintiffs contended, Sidley,
due to Cole's membership in the firm, gave the defendants a
"strategic advantage" with respect to any issues in the case
concerning the DOJ investigation. That advantage, the plaintiffs
argued to the District Court, required that Sidley be disqualified
as counsel under both Federal Rule of Criminal Procedure 6 and
Massachusetts Rule of Professional Conduct 1.11.
The District Court held that the plaintiffs' argument
that Cole had received information about the Anchin and Cornwell
investigation while at the DOJ relied on "speculation" and was
contradicted by a sworn affidavit submitted by Cole. We see no
grounds for reversing that ruling.
Cole states in his affidavit that "[a]t no time -- either
while [his] nomination was pending, after [he] was sworn in, or at
any point thereafter -- did [he] receive any confidential
government information relating to the investigation into the
campaign bundling scheme involving Anchin and Patricia Cornwell."
Thus, notwithstanding the plaintiffs' contention that "the
investigation" did not include "what happened at the Grand Jury,"
- 37 -
Cole's statement that he received no information "relating to the
investigation" indicates that he did not receive any information
concerning what happened at the grand jury. Moreover, one of the
defendants' exhibits below -- an email that appears to have been
circulated at the DOJ -- indicates that Cole was "recused" from
"all matters that involve, or have a direct and predictable effect
on" Anchin. The plaintiffs do not explain why such a broadly-
worded recusal would not extend to obtaining information
concerning grand jury proceedings.
This evidence indicates that Cole had no exposure to the
information that the plaintiffs contend requires his firm's
disqualification. The plaintiffs therefore appear to rely on
nothing more than speculation in contending that Cole might have
been involved in the DOJ investigation of Anchin and Cornwell. We
thus conclude that the District Court did not abuse its discretion
in denying the plaintiffs' motion.
B.
We come, then, to the final issue on appeal. The
plaintiffs have asked us to order the District Court to permanently
seal certain trial court records that the District Court ordered
be unsealed. We review the District Court's decision to unseal
the records in question "only for mistake of law or abuse of
discretion," and we give the District Court "considerable leeway
- 38 -
in making [such a] decision[]." Siedle v. Putnam Invests., Inc.,
147 F.3d 7, 10 (1st Cir. 1998).
1.
We begin with the relevant background. After the trial,
two jurors, after hearing media reports about the size of the jury
award in this case, notified the District Court that the jury had
intended to award a smaller amount of damages. The District Court
held a hearing at which it questioned the two jurors separately
under oath. Each juror testified that the jury had agreed to award
the plaintiffs a total of approximately $28.6 million in damages,
not $51 million. The jury had erred, the two jurors testified, in
awarding $22.4 million for the fiduciary duty claim for both
compensatory damages and for punitive damages, because the jury
had actually intended to award $22.4 million on that claim for
compensatory and punitive damages combined.
In light of that testimony, the District Court
determined that the damages award on the verdict form did not
reflect the jury's agreement as to damages, and that the jury
intended to award $28.6 million, not $51 million. But the District
Court nevertheless concluded that it could not amend the judgment.
That was because, the District Court held, it was barred from
considering the jurors' testimony under Federal Rule of Evidence
606(b), which prohibits a juror from testifying, "[d]uring an
inquiry into the validity of a verdict," "about any statement made
- 39 -
or incident that occurred during the jury's deliberations; the
effect of anything on that juror's or another juror's vote; or any
juror's mental processes concerning the verdict."13 The District
Court concluded that "further juror inquiry regarding the
discrepancy is inappropriate, and the jury verdict will not be
altered on account of the discrepancy."
The District Court then ordered that the records
relating to the question of the jury verdict -- the transcript of
the jurors' testimony, the parties' briefing, and the District
Court's decision on the issue -- remain under seal until the later
of 28 days after entry of final judgment or the entry of any order
disposing of any motion under Federal Rules of Civil Procedure
50(b), 52(b), 59, or 60. This Court ordered, however, that the
materials remain sealed "pending further order of this court," and
asked the parties to brief the issue whether the records should
remain sealed.
13The District Court acknowledged that Rule 606(b) provides
an exception for testimony about "a mistake . . . made in entering
the verdict on the verdict form," see Fed. R. Evid. 606(b)(2)(C),
but held that the exception did not apply in this case. The
District Court stated that "the discrepancy" between what the
jurors discussed and decided on damages and what they put on the
verdict form was "likely the result of a misunderstanding or
misinterpretation by the jury or its foreman of either the Court's
instructions or the verdict form, or both, and not the result of
a simple clerical error in the recording of the verdict."
- 40 -
2.
"The common law presumes a right of public access to
jury records."14 Siedle, 147 F.3d at 9. This presumption "stems
from the premise that public monitoring of the judicial system
fosters the important values of 'quality, honesty and respect for
our legal system.'" Id. at 9-10 (quoting FTC v. Standard Fin.
Mgmt. Corp., 830 F.2d 404, 410 (1st Cir. 1987)). "The presumption
extends to records of civil proceedings." Id. at 10.
In this case, the plaintiffs contend, those values run
up against another value: the sanctity of jury deliberations. See,
e.g., United States v. Olano, 507 U.S. 725, 737 (1993) (referring
to "the cardinal principle that the deliberations of the jury shall
remain private and secret" (quoting the Advisory Committee Notes
to Fed. R. Crim. Proc. 23(b))); Cabral v. Sullivan, 961 F.2d 998,
1001-02 & 1001 n.3 (1st Cir. 1992) (discussing the "sanctity of
the jury" in civil trials). The plaintiffs argue that the sanctity
of the jury deliberations regarding the damages award in this case
outweighs the interest the public has in access to the information
in question.
We cannot say, however, that the District Court abused
its discretion in concluding otherwise. First, "[t]he primary if
14The defendants do not argue that sealing the records would
violate any public right to access to judicial materials under the
First Amendment. And so we do not consider that issue. See
Siedle, 147 F.3d at 9 n.4 (taking the same approach).
- 41 -
not exclusive purpose of jury privacy and secrecy is to protect
the jury's deliberations from improper influence." Olano, 507
U.S. at 737-38. This purpose is not implicated here, where the
testimony at issue was received after the jury had finished
deliberating and was not considered by the District Court in
evaluating the validity of the verdict. Cf. In re Globe Newspaper
Co., 920 F.2d 88, 91 (1st Cir. 1990) (stating that "stronger
reasons to withhold juror names and addresses will often exist
during trial than after a verdict is rendered").
Nor do we agree with the plaintiffs that Rule 606(b) --
the Rule the District Court cited in concluding that it could not
consider the jurors' testimony in evaluating the validity of the
verdict -- requires that the records be sealed. That Rule does
not state that if the District Court receives juror testimony and
then determines that it may not consider it in adjudging the
validity of the verdict -- as was the case here -- the court must
seal the testimony that it received. In fact, the Advisory
Committee Notes to the Rule expressly note that the Rule "does not
relate to secrecy and disclosure but to the competency of certain
witnesses and evidence." Consistent with that statement, at least
two other circuits have quoted in published opinions juror
testimony even where they concluded, as the District Court did
here, that Rule 606(b) prohibited the trial court from considering
that testimony in evaluating the validity of the verdict. See
- 42 -
Munafo v. Metro. Transp. Auth., 381 F.3d 99, 102-04 (2d Cir. 2004);
Robles v. Exxon Corp., 862 F.2d 1201, 1203-04 (5th Cir. 1989).
The plaintiffs' last argument is that the records at
issue should be sealed to avoid "embarrass[ing] the judge and the
jury." But "[t]he mere fact that judicial records may reveal
potentially embarrassing information is not in itself sufficient
reason to block public access" to judicial records. Siedle, 147
F.3d at 10.
3.
In sum, the District Court did not abuse its discretion
in ordering the records at issue unsealed in this case. We leave
the question whether the two jurors' names should be redacted from
the relevant records for the District Court to decide in the first
instance.
V.
The District Court's decision is affirmed in part,
reversed in part, and remanded for further proceedings consistent
with this opinion. Each party shall bear its own costs.
- 43 -