Bullock v. SC Ventures Inc ( 1997 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SEA MARSH GROUP, INCORPORATED;
ELIZABETH R. BULLOCK, in her
capacity as personal representative
of the Estate of R. Gregory Bullock,
Plaintiffs-Appellants,
v.
SC VENTURES, INCORPORATED; EAST
SEABROOK LIMITED PARTNERSHIP; MJ
PROPERTY NORTH AMERICA, LIMITED;
HUGHES & LUCE, a Texas general
partnership; DANIEL K. HENNESSY,
individually and as partners in
Hughes & Luce; JOHN D.
HUTCHINSON, individually and as
partners in Hughes & Luce; ALLAN
B. DIAMOND, individually and as No. 94-1140
partners in Hughes & Luce; DAVID
K. HAEDT,
Defendants-Appellees,
and
SCOTT TUCKER; YORKBRANCH,
CORPORATION, N.V.; EVANS 28,
INCORPORATED, N.V.; MJ PROPERTIES
(U.S.A.), INCORPORATED, a Delaware
Corporation; MUWAFFAK AL-
HARITHY; JALEELAH AL-HARITHY;
NAYIL AL-HARITHY; ADEL AL-
HARITHY; NABILA AL-HARITHY;
LALYA AL-HARITHY; REEM AL-
HARITHY,
Defendants.
SEA MARSH GROUP, INCORPORATED;
ELIZABETH R. BULLOCK, in her
capacity as personal representative
of the Estate of R. Gregory Bullock,
Plaintiffs-Appellants,
v.
SC VENTURES, INCORPORATED; EAST
SEABROOK LIMITED PARTNERSHIP; MJ
PROPERTY NORTH AMERICA, LIMITED;
HUGHES & LUCE, a Texas general
partnership; DANIEL K. HENNESSY,
individually and as partners in
Hughes & Luce; JOHN D.
HUTCHINSON, individually and as
partners in Hughes & Luce; ALLAN
B. DIAMOND, individually and as No. 96-1524
partners in Hughes & Luce; DAVID
K. HAEDT,
Defendants-Appellees,
and
SCOTT TUCKER; YORKBRANCH,
CORPORATION, N.V.; EVANS 28,
INCORPORATED, N.V.; MJ PROPERTIES
(U.S.A.), INCORPORATED, a Delaware
Corporation; MUWAFFAK AL-
HARITHY; JALEELAH AL-HARITHY;
NAYIL AL-HARITHY; ADEL AL-
HARITHY; NABILA AL-HARITHY;
LALYA AL-HARITHY; REEM AL-
HARITHY,
Defendants.
2
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
C. Weston Houck, Chief District Judge.
(CA-90-1124-2)
Argued: November 2, 1994
Decided: April 11, 1997
Before HALL and HAMILTON, Circuit Judges, and
MACKENZIE, Senior United States District Judge for the Eastern
District of Virginia, sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Allan Riley Holmes, GIBBES & HOLMES, Charleston,
South Carolina, for Appellants. Robert Holmes Hood, John K. Blin-
cow, Jr., HOOD LAW FIRM, Charleston, South Carolina; John Phil-
lips Linton, SINKLER & BOYD, P.A., Charleston, South Carolina,
for Appellees. ON BRIEF: P. Steven Barkowitz, GIBBES &
HOLMES, Charleston, South Carolina, for Appellants. Joseph C.
Wilson, IV, HOOD LAW FIRM, Charleston, South Carolina; Charles
H. Gibbs, Jr., SINKLER & BOYD, P.A., Charleston, South Carolina,
for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
3
OPINION
PER CURIAM:
Elizabeth R. Bullock, in her capacity as the personal representative
of the estate of R. Gregory Bullock, and Sea Marsh Group, Inc.,
appeal the judgment of the district court entered in favor of SC Ven-
tures, Inc. (SCV), and others that were alleged by Mr. Bullock and
Sea Marsh, the plaintiffs below, to have improperly interfered with
their efforts to obtain financing to purchase SCV's share of the pri-
mary parties' common enterprise, East Seabrook Limited Partnership
(ESLP). After all of the evidence had been presented to the jury, the
district court granted the defendants' motion for judgment as a matter
of law.
During the oral argument of the underlying appeal, a substantial
question arose as to whether diversity of citizenship existed between
the plaintiffs, both of whom were citizens of South Carolina, and
SCV. We therefore remanded the case to the district court for it to
determine, in the first instance, whether it had properly exercised its
subject matter jurisdiction over the dispute.
On remand, the district court found that, for diversity purposes,
SCV was a citizen of both Texas and New York, and, thus, that its
assertion of jurisdiction had been appropriate. This ruling has also
been appealed by Ms. Bullock and Sea Marsh, and the two appeals
have been consolidated for disposition.1 We now affirm the judgment
of the district court in all respects.
I.
Mr. Bullock operated a financial planning business from his office
on Seabrook Island, South Carolina. In 1984, he was contacted by
three sisters who wished to sell approximately 1,100 acres of undevel-
oped real estate, known as the "Andell tract," situated between the
Kiawah Island and Seabrook Island resorts.
_________________________________________________________________
1 The parties have filed supplemental briefs, which we deem sufficient
to permit us to decide the jurisdictional issue without further oral argu-
ment.
4
Bullock himself became interested in purchasing and developing
the property. In partnership with others, Bullock entered into an
option agreement to acquire the Andell tract; in 1987, the option
rights were transferred to Sea Marsh, which was owned almost
entirely by Bullock. In late 1988, Bullock and Sea Marsh formed a
limited partnership with SCV in order to obtain sufficient capital to
complete the purchase. Forty-nine percent of the resultant entity,
which ultimately became ESLP, was owned by Sea Marsh; Bullock
personally owned a one-percent interest, and SCV owned the remain-
ing fifty percent.
The partnership agreement provided that, on or before July 15,
1989, Bullock and Sea Marsh could purchase a controlling interest in
ESLP from SCV. After that date, the right to purchase control of the
partnership would shift to SCV.
ESLP acquired the Andell tract on January 26, 1989. Soon thereaf-
ter, Bullock found himself at loggerheads with SCV's management
over the resale of certain commercial parcels and the proposed annex-
ation and zoning of the remainder of the property by the town of Sea-
brook. In the hope of obtaining financing to exercise his option to
purchase control of the partnership from SCV and to develop the
Andell tract, Bullock attempted to enlist the assistance of ClubCorp
International (CCI) of Dallas, Texas, a major corporation engaged in
the business of owning and operating clubs and resort properties.
John Meeske was the president of the resorts division of CCI. On
June 30, 1989, Meeske and Bullock met with Stephen Jarchow and
John Lang of the Dallas office of Bear, Stearns & Co., a well-known
investment banking firm. Jarchow was the senior managing director
for real estate activities at Bear, Stearns, and Lang was his assistant.
Following the meeting, Meeske drafted a letter to Bullock and per-
sonally delivered it to Jarchow's residence for approval. Jarchow sug-
gested a few minor revisions to the letter, which Meeske incorporated.
The letter, dated July 7, 1989, professed CCI's"high level of interest"
in the Andell project, and it noted that Bear, Stearns had "expressed
enthusiasm about [its] potential involvement" in arranging financing.
However, the letter also related Bear, Stearns's concern that the
necessary rezoning of the property still had not been approved by the
5
town of Seabrook. The letter closed with Jarchow's suggestion that
the July 15 deadline imposed by Bullock for consummating the deal
be extended by ninety days. The extension was said to be necessary
to "allow [CCI] to complete our due diligence, properly structure the
. . . deal, and advance the required funds."
It is unclear from the record as to the extent, if any, that the July
7 letter merely memorialized an understanding that had already been
reached between Bullock and the others at the June 30 meeting. Nev-
ertheless, on July 6, 1989, the day before the letter from Meeske was
purportedly sent, Bullock filed suit in state court to prevent SCV from
exercising its option to purchase control of the partnership on or after
July 16. SCV removed the action to federal court, but, just prior to
a scheduled hearing on the matter, the parties reached a settlement.
Under the terms of the settlement agreement, the existing partner-
ship was dissolved, and Bullock and Sea Marsh were given until Sep-
tember 14, 1989, to purchase SCV's entire interest in ESLP for about
$5.2 million. If the transaction failed to materialize as scheduled,
SCV would acquire Bullock's and Sea Marsh's interests the following
day for approximately $2 million.
Prior to reaching the settlement with SCV, Bullock had filed an
affidavit in the district court in which Bear, Stearns was identified as
the anticipated source of financing for the purchase of ESLP. Shortly
after the settlement had been negotiated, John Hutchinson, SCV's
attorney and a partner in the Dallas law firm of Hughes & Luce, tele-
phoned Daniel Hennessy (also a partner in Hughes & Luce, and
holder of a one-half interest in SCV) to inform him of the details of
the agreement. Hutchinson admits that, during that conversation, he
"may have mentioned" that Bullock was seeking financing from Bear,
Stearns.
Hughes & Luce, as it happens, had, some time earlier, been
retained by Bear, Stearns as its Dallas counsel. Moreover, a third
Hughes & Luce partner, Allan Diamond, had been close friends with
Jarchow for twelve years. Diamond and Jarchow lunched together on
July 19, 1989, accompanied by Paul Berry, yet another Hughes &
Luce attorney. During the course of the meal, Diamond mentioned
that MJ Properties, whose president, David Haedt, owned the other
6
half interest in SCV, might itself seek Bear, Stearns's assistance in
financing SCV's anticipated purchase of Bullock's and Sea Marsh's
interests in ESLP.
The next day, July 20, Jarchow met with Bullock, Meeske, and
John Kruse (the latter representing a South Carolina group that had
agreed to provide Bullock with additional financing to develop the
tract) to inform them that Bear, Stearns had rejected the financing
proposal discussed at the June 30 meeting. Jarchow explained that a
conflict of interest prevented Bear, Stearns from dealing simulta-
neously with Bullock and MJ Properties regarding the Seabrook prop-
erty.
On September 14, 1989, the deadline previously agreed upon, Bul-
lock moved in the district court to restrain SCV from exercising its
right under the settlement agreement to purchase ESLP. The district
court denied the motion on September 29, 1989, and SCV tendered
payment to Bullock and Sea Marsh forthwith.
Bullock, on behalf of himself and Sea Marsh, then filed a second
lawsuit in state court. That action was also removed to the district
court. The amended complaint identified numerous defendants,
including SCV, ESLP, Hughes & Luce, Hutchinson, Diamond, Hen-
nessy, MJ Properties, and Haedt. Bullock alleged that SCV and its
owners and officers had breached their fiduciary duties arising out of
SCV's partnership with him and Sea Marsh, and he asserted a pano-
ply of other claims against various combinations of defendants,
including claims for fraud, breach of the partnership agreement, and
tortious interference with contractual relations.
On May 6, 1993, the district court dismissed, for want of personal
jurisdiction, the claims against the Hughes & Luce partners (Hutchin-
son, Hennessy, and Diamond) and the firm itself. The claims against
the remaining defendants proceeded to trial before a jury on Decem-
ber 6, 1993.
During the trial, the district court excluded certain evidence prof-
fered by the plaintiffs in support of their claims, including (1) the ini-
tial draft of Meeske's July 7, 1989, letter to Bullock; (2) Meeske's
testimony that Jarchow had approved the letter that was actually sent;
7
(3) testimony by Meeske, Bullock, and Kruse regarding certain
remarks made by Jarchow at their July 20 meeting; and (4) evidence
of acts committed by SCV prior to the dissolution of ESLP, allegedly
demonstrating an ongoing plan to interfere with Bullock's efforts to
purchase control of the partnership.
Following the close of all of the evidence, the district court granted
the defendants' motion, pursuant to Fed. R. Civ. P. 50(a), for judg-
ment as a matter of law as to each of the plaintiffs' claims. Bullock
and Sea Marsh appealed, and we heard oral argument of the matter
on November 2, 1994.
At the outset of the oral argument, we questioned the parties at
length concerning whether subject matter jurisdiction over the dis-
pute, which had been based on the alleged diversity of citizenship
between the plaintiffs and the defendants, had existed in the district
court. The discussion was occasioned by the mention in a footnote to
the appellants' brief that, although no specific findings had been made
below regarding the citizenship of SCV, certain facts lent credence to
the notion that it had been, like the plaintiffs, a citizen of South Caro-
lina.
We were unable to determine from the record then before us
whether the exercise of federal jurisdiction over the underlying action
was appropriate. Hence, on November 29, 1994, we ordered a limited
remand to the district court so that it might take such evidence as nec-
essary to resolve the issue.
By order filed March 14, 1996, the district court ruled that SCV
was not a citizen of South Carolina, and, thus, that complete diversity
of citizenship existed between the parties on either side of the dispute.
This order is also now before us for review as the result of a second
appeal filed by Bullock and Sea Marsh, and, inasmuch as the correct-
ness of the district court's ruling bears directly on our jurisdiction to
consider the initial appeal, we address the matter at the threshold.
II.
A.
In determining whether diversity jurisdiction exists, a corporation
is deemed to be a citizen of both the state in which it is incorporated
8
and the state in which it has its principal place of business. 28
U.S.C.A. § 1332(c)(1) (West 1993). It is undisputed that SCV is
incorporated in Texas, and not in South Carolina. The pertinent query,
then, is whether the company will nonetheless be deemed to be a citi-
zen of the latter by having its principal place of business there. The
district court answered in the negative, concluding that SCV's princi-
pal place of business was in New York.
The existence of subject matter jurisdiction is a legal question,
which we review de novo. Yarnevic v. Brink's, Inc., 102 F.3d 753,
754 (4th Cir. 1996). The district court's findings of fact upon which
the legal question is resolved may not be set aside unless they are
clearly erroneous. See Sligh v. Doe, 596 F.2d 1169, 1171 (4th Cir.
1979). The district court may assert subject matter jurisdiction under
Section 1332 in removed cases only if complete diversity of citizen-
ship between the parties on either side of the dispute existed both at
the time the suit was commenced in state court, and at the time of
removal. Rowland v. Patterson, 882 F.2d 97, 99 (4th Cir. 1989) (en
banc).
The suit at issue here was filed in the Court of Common Pleas for
the Ninth Judicial Circuit of South Carolina on or about April 18,
1990. SCV removed the suit to the district court on May 22, 1990.
The interlude of approximately five weeks between filing and
removal is immaterial in this case, inasmuch as the appellants do not
contend that SCV's citizenship status changed during that time.
B.
Relevant to ascertaining a corporation's principal place of business
are (1) the location of its home office (sometimes called its "nerve
center"), i.e., where the company's officers direct and coordinate its
activities, and (2) the location where the bulk of those activities take
place. Mullins v. Beatrice Pocahontas Co., 489 F.2d 260, 262 (4th
Cir. 1974).
The district court noted that SCV's corporate offices were, at the
time of filing and removal, located in the state of New York:
9
Its officers and directors were there, its corporate decisions
were made there, its correspondence was received there, its
bills were paid from a bank account in New York, it filed
its tax returns . . . and listed its address as being New York.
So as far as the corporate niceties, . . . all of that took place
in New York.
As to the more complex matter of determining where SCV con-
ducted the bulk of its corporate activities, we agree with the district
court's observation that those activities be viewed in the context of
the company's raison d'etre. The court below found that SCV's over-
arching purpose was the ownership of the Andell tract as an invest-
ment property, and not necessarily for development. 2 The district
court's finding is, in our opinion, not clearly erroneous.
Viewed in the proper light, it is clear that, prior to the removal of
the instant action, the most substantial activity in which SCV was
engaged was the management of the Andell tract so as to realize the
maximum profit from its ownership. This was the case when SCV
was essentially a passive investor in ESLP, and it remained so for a
considerable time after SCV was constrained to take a more active
role in overseeing the property following the dissolution of its part-
nership with Bullock and Sea Marsh.
Little actual development of the Andell tract occurred prior to May
22, 1990; that which did occur was at the instance of Bullock on
behalf of ESLP.3 The district court found that the acts performed by
SCV concerning the property, from the time that the partnership was
dissolved until the removal of this action to the district court, were
ministerial in nature, designed primarily -- if not exclusively -- to
_________________________________________________________________
2 Though not determinative of the issue, it is worth noting that, under
South Carolina law, the mere ownership of real or personal property by
a foreign corporation, without more, does not constitute the transaction
of business within the state. S.C. Code Ann. § 33-15-101(b)(9) (Law.
Co-op 1990).
3 For example, Bullock obtained a permit from the Coastal Council of
South Carolina to build a bridge on the tract, and he negotiated with the
owner of a neighboring development that hoped to obtain an easement
to install sewer lines on the partnership property.
10
protect its ownership interest. We cannot say that the district court
clearly erred in so finding.
Under these circumstances, we agree with the district court's con-
clusion that SCV's principal place of business during the relevant
time period was New York, and not South Carolina. The district
court's exercise of jurisdiction over the dispute was therefore proper.4
III.
Bullock and Sea Marsh maintain that the district court erred by dis-
missing the claims against the Hughes & Luce defendants on the
ground that they were not subject to personal jurisdiction in the Dis-
trict of South Carolina. We disagree.
A court's exercise of personal jurisdiction must comport with due
process, which requires that a defendant's activities create a substan-
tial connection between himself and the forum state. Stover v.
O'Connell Assocs., Inc., 84 F.3d 132, 136 (4th Cir.) (citing Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)), cert. denied, 117
S. Ct. 437 (1996).5
The connection between the Hughes & Luce defendants and South
Carolina was, at best, tenuous. The acts alleged to have formed the
basis for the appellants' claims occurred in Texas, were committed by
_________________________________________________________________
4 Accord Vareka Invs., N.V. v. American Inv. Properties, Inc., 724 F.2d
907 (11th Cir. 1984) (corporation's principal place of business was Ecua-
dor, and not Florida, where it was formed as a passive investment vehicle
and all corporate decisions were made in Ecuador).
5 The assertion of jurisdiction over the defendant must also be autho-
rized by the forum state's long-arm statute, which may impose greater
restrictions on the court's authority than would otherwise be mandated
by the Constitution. Stover at 134. The South Carolina courts have held,
however, that the limits of its long-arm statute are conterminous with
those of due process. See, e.g., Atlantic Soft Drink Co. of Columbia, Inc.
v. South Carolina Nat'l Bank, 336 S.E.2d 876, 878 (S.C. 1985). In such
a situation, "the statutory inquiry necessarily merges with the constitu-
tional inquiry, and the two inquiries essentially become one." Stover at
136 (citations omitted).
11
Texas citizens, and concerned Bullock's efforts to obtain financing in
Texas from sources in Texas. Moreover, there is no evidence that
Diamond or Hennessy were ever physically present in South Carolina
during the relevant time period. Though a person's physical presence
in the forum state is not an absolute prerequisite to a court's exercise
of personal jurisdiction over him, his activities there must at least
have been meaningful enough to serve as an analogue for physical
presence. Id. (citing International Shoe Co. v. Washington, 326 U.S.
310, 316 (1945)).
There is no indication in the record that Diamond engaged in any
activities in South Carolina. Virtually the same can be said of Hen-
nessy; his mere ownership of a one-half interest in SCV is insufficient
to establish his presence in South Carolina, particularly in light of the
minimal business conducted there by the company.
Hutchinson was physically present in South Carolina, of course,
but only in his role as counsel for SCV. An attorney's entry of a court
appearance pro hac vice in the forum state, without more, is not a
substantial enough contact to permit that court to exercise jurisdiction
over his person. See Trinity Indus., Inc. v. Myers & Assocs., Ltd., 41
F.3d 229, 230 (5th Cir.), cert. denied, 116 S. Ct. 52 (1995). Indeed,
Hutchinson's contacts with the putative forum here are even more
attenuated than those present in Trinity, because, unlike the attorney-
defendants in that case, he has had no professional relationship what-
soever with the prospective plaintiffs.6
It is manifest that Hughes & Luce itself could only establish a pres-
ence in South Carolina through the acts of its agents. Inasmuch as we
conclude that none of the Hughes & Luce attorneys involved in this
case are amenable to the jurisdiction of the court below, it follows
that the firm is likewise beyond its reach. The district court committed
no error in dismissing the Hughes & Luce defendants for want of per-
sonal jurisdiction.
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6 Personal jurisdiction was ultimately held to exist over the attorney-
defendants in Trinity, but only because the nature and extent of their pre-
vious representation of the plaintiff supported a finding that they had
purposefully availed themselves of the privilege of doing business in the
forum state. Id. at 231.
12
IV.
A.
We turn finally to the substantive matter before us: whether the dis-
trict court abused its discretion in excluding the various evidence
described in Section I, supra. See United States v. Boyd, 53 F.3d 631,
636 (4th Cir.) (stating applicable standard of review), cert. denied,
116 S. Ct. 322 (1995).
According to the appellants, the initial draft of the letter from CCI,
Meeske's testimony that Jarchow approved the final version, Jar-
chow's remarks at the July 20, 1989, meeting, and the past incidents
of SCV's supposed misbehavior were all critical to demonstrating
that, but for the alleged intervention of Diamond and others, Bear,
Stearns would have committed to financing Bullock and Sea Marsh's
purchase of SCV's interest in ESLP. Indeed, the appellants' decision
to forgo a direct challenge to the district court's determination that the
evidence actually admitted was insufficient to present a jury issue7 is
a potent indication of the importance that they have attached to the
excluded exhibits and testimony.
The draft, Meeske's testimony of Jarchow's approval, and
Meeske's, Bullock's, and Kruse's testimony concerning Jarchow's
remarks were all deemed by the district court to be inadmissible hear-
say. See Fed. R. Evid. 802 (excluding hearsay evidence not admissi-
ble under a listed exception). SCV's previous acts of alleged
obstruction, which the plaintiffs sought to admit as an exception to
Rule 404(b)'s general prohibition against evidence of prior wrongful
acts to prove the character of a party or witness, were ruled by the dis-
_________________________________________________________________
7 Diamond testified that the luncheon meeting with Jarchow had been
postponed from weeks before, that it had not been prompted by anyone
else in the firm, and that any mention of the Andell project arose within
the larger context of the discussion, the purpose of which was to explore
the possibility of reciprocal business referrals. Jarchow testified that, by
the time of his luncheon with Diamond and Berry, he had already
decided that time restraints and economic and geographic factors mili-
tated against Bear, Stearns providing Bullock with the financing that he
had requested.
13
trict court to be irrelevant. See Fed. R. Evid. 402 ("Evidence which
is not relevant is not admissible.").
B.
The appellants admit the hearsay nature of the excluded evidence,
but they contend that it was nevertheless admissible under the third
exception to the hearsay rule, as probative of Jarchow's then-existing
intent to commit Bear, Stearns to the Andell project on Bullock and
Sea Marsh's behalf. The rule provides, in pertinent part:
The following are not excluded by the hearsay rule, even
though the declarant is available as a witness:
...
A statement of the declarant's then existing state of mind,
emotion, sensation, or physical condition (such as intent,
plan, motive, design, mental feeling, pain, and bodily
health), but not including a statement of memory or belief
to prove the fact remembered or believed. . . .
Fed. R. Evid. 803(3).
Under this exception, the initial draft of the CCI letter might have
been admissible. The probative value of the draft, however, is highly
suspect. On its face, it expresses Bear, Stearns's"enthusiasm" and
"high level of interest" in Bullock's proposal, but it can hardly be read
as a definite commitment to the Andell project; indeed, the draft's
final paragraphs suggest that Bear, Stearns's ultimate involvement in
the deal is contingent upon the resolution of the partnership's ongoing
difficulties in obtaining zoning approval from the town of Seabrook.
In view of the equivocal nature of the language used in the draft,
the district court did not abuse its discretion by withholding it from
the jury's consideration.8 Inasmuch as it was not error for the district
_________________________________________________________________
8 The final version of the letter was admitted into evidence, but the jury
was simultaneously instructed that it could not consider it as probative
of Jarchow's intent to provide financing for Bullock and Sea Marsh.
14
court to have ruled the draft itself inadmissible, it could not have been
erroneous for the court to have also excluded the evidence of Jar-
chow's approval of the draft's contents.
The evidence of Jarchow's remarks at the July 20 meeting similarly
lacked significant probative value. Meeske, Bullock, and Kruse would
all have testified that Jarchow cited Bear, Stearns's conflict of interest
as the reason for the company's decision not to pursue Bullock's
financing proposal. Bullock proffered further that Jarchow told him
during the meeting that "we've got five names we've already set up
to do this deal with, and I'm going to give you those names through
Mr. Lang, who is not here right now. He should be in any minute."
Lang never showed up.
Considered as a whole, Jarchow's alleged remarks prove no more
than that, by the time of the July 20 meeting, he had already decided
to reject Bullock's proposal. The remarks reveal nothing about the
reason for Jarchow's decision, and they certainly do not indicate that
he was influenced by Diamond or anyone else.
The remarks also provide little insight into whether Jarchow had
ever made a firm decision to do business with Bullock. Moreover,
even had the remarks been probative of Jarchow's state of mind at
some time prior to the meeting, they would still not be admissible
under Rule 803(3), which excepts from the hearsay rule only those
statements tending to show the declarant's then-existing state of mind.
In other words, the rule permits the introduction of only those state-
ments made more or less contemporaneously with the genesis of the
state of mind, emotion, sensation, or physical condition of which the
statement is thought to be probative. The state of mind or other condi-
tion thus established may, in turn, explain some future act performed
by the declarant, but it may not serve as evidence of an action taken
in the past. This concept is illustrated by the advisory committee's
note:
The exclusion of "statements of memory or belief to prove
the fact remembered or believed" is necessary to avoid the
virtual destruction of the hearsay rule which would other-
wise result from allowing state of mind, provable by a hear-
15
say statement, to serve as the basis for an inference of the
happening of the event which produced the state of mind.
(emphasis supplied) (citing Shepard v. United States, 290 U.S. 96(1933)).9 In short, we are satisfied that the district court did not abuse
its discretion by excluding the testimony of Jarchow's remarks at the
July 20 meeting.10
C.
Bullock and Sea Marsh sought to introduce evidence that, during
the pendency of the partnership, SCV resisted Bullock's efforts to
have the tract zoned and portions of it sold off. The appellants main-
tain that SCV's resistance was evidence of its intent or plan from the
beginning to prevent Bullock from raising enough cash to take control
of ESLP, and therefore supports the inference that its agents inter-
vened in Bullock's efforts to obtain financing from Bear, Stearns.
According to the appellants, this evidence of SCV's alleged intent or
plan to wrongfully obstruct Bullock should have been admitted under
Fed. R. Evid. 404(b).
The district court found that SCV, under the partnership agreement,
had an "absolute right" to disagree with Bullock's strategic decisions
_________________________________________________________________
9 See also 11 James Wm. Moore et al., Moore's Federal Practice
§ 803(3)[9] (2d ed. 1996) ("[Though n]othing in the text of Rule 803(3)
explicitly prohibits backward inferences from states of mind other than
memory or belief . . . the Advisory Committee's . . . position accords
with the refusal of federal courts to allow backward inferences either
from memory or belief or from other mental states.") (emphasis sup-
plied) (citations omitted).
10 Jarchow was not present at trial, so portions of his deposition were
read into the record. The plaintiffs introduced Jarchow's testimony that
the decision to reject Bullock's financing proposal had been made prior
to the luncheon meeting with Diamond and Berry; they then attempted
to impeach Jarchow's testimony by introducing the previously excluded
evidence of the remarks that Jarchow allegedly made to Bullock and the
others on July 20, 1989. The district court correctly rejected this
attempted end-run. Though a party is permitted to impeach his own wit-
nesses, see Fed. R. Evid. 607, he may not do so as a subterfuge to admit
otherwise inadmissible evidence. United States v. Morlang, 531 F.2d
183, 190 (4th Cir. 1975).
16
regarding the disposition of the Andell tract. Consequently, the court
expressed its skepticism that the evidence of SCV's disagreement had
any probative value:
The synopsis of the testimony proposed to be introduced by
the plaintiff, I've read it in detail. I don't know what it
proves. . . . I just don't see where all this is relevant to this
case. . . . I don't think this shows any kind of motive, intent,
bad conduct or anything under 404(b) that is relevant to this
case.
We have examined the proffered evidence, and we hold that the dis-
trict court's determination that it lacked relevance was not an abuse
of its discretion.
V.
The judgment of the district court is affirmed, as is its subsequent
order on remand regarding the jurisdictional question.
No. 94-1140 -- AFFIRMED
No. 96-1524 -- AFFIRMED
17