February 20, 1992
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No. 91-1307
PUTNAM RESOURCES,
Plaintiff, Appellant,
v.
RONALD M. PATEMAN, ET AL.,
Defendants, Appellees.
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No. 91-1308
RONALD M. PATEMAN, ET AL.,
Plaintiffs, Appellees,
v.
FRENKEL & COMPANY, INC.,
Defendant, Appellant.
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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Francis J. Boyle, U.S. District Judge]
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Before
Campbell, Aldrich and Selya, Circuit Judges.
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Henry P. Monaghan, with whom Norman Roy Grutman and Grutman
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Greene & Humphrey were on brief, for plaintiff Putnam Resources.
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Alan G. Miller, with whom Stephen J. Paris, D. Alice Olsen,
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and Morrison, Mahoney & Miller were on brief, for defendant
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Frenkel & Company, Inc.
James F. Campise, with whom Marcigliano & Campise, George
_________________ ______________________ ______
Vetter, Gordon P. Cleary, Howard A. Merten, and Vetter & White
______ _________________ _________________ _______________
were on brief, for Ronald M. Pateman, et al.
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SELYA, Circuit Judge. When Virgil, some twenty
SELYA, Circuit Judge.
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centuries ago, wrote in The Aeneid of mankind's "accurst craving
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for gold," he accurately anticipated the timeless appetite
undergirding the twin appeals which confront us today. The
tarnished tale follows.
I. BACKGROUND
I. BACKGROUND
We limn the contours of the case as reflected in the
trial record, resolving occasional conflicts in a manner
consistent with the jury's recension of the evidence.
Putnam Resources, Ltd. (Putnam), a Connecticut limited
partnership dealing in precious metals, was a vendor to
Sammartino, Inc. (SI), a Rhode Island corporation. Under a
series of contracts in force between the two, Putnam stored gold
at SI's premises in Cranston, Rhode Island. The gold was made
available in daily allotments for SI's manufacture of fine
jewelry. To facilitate this arrangement while providing needed
security, a field warehouse was established under the auspices of
SLT Warehouse Company (SLT). SLT would receive gold from Putnam
at the field warehouse, log it in, and thereafter dole it out to
SI. Putnam was to be paid for the metal as and when the
manufacturer sold the jewelry which it made from the gold.
In mid-1986, Putnam's insurance broker, Frenkel & Co.
(Frenkel), a New York firm, learned that Putnam's carrier was
planning to cancel existing coverage. Frenkel sought a
replacement policy in the London market. Its attention soon
focused on Lloyd's of London. Because underwriters at Lloyd's
2
deal through a select group of intermediaries, Frenkel found it
necessary to work cooperatively with J.H. Minet & Co. (Minet), a
London brokerage house. In September, Minet managed to assemble
a consortium which wrote the desired insurance (Lloyd's marine
policy no. 243440200). Ronald M. Pateman was the lead
underwriter.1
In July 1987, SI's factory closed to permit the work
force to take a summer vacation. The SLT warehouseman, Charles
Harrison, subsequently testified that, during this interval,
Walter Sammartino (Sammartino), SI's principal, sought
authorization to remove quantities of gold from the field
warehouse far exceeding what Putnam had authorized SLT to
release. Harrison testified that he did as Sammartino asked,
believing that an exchange would eventually take place to
replenish the inventory. When the excess gold had not been
replaced by the end of July, Harrison informed his superiors at
SLT about the situation. Shortly thereafter, Sammartino notified
Putnam that substantial amounts of the vendor's gold were
missing. After inspecting the premises and finding the cupboard
virtually empty, Putnam filed claim under the Lloyd's policy for
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1Lloyd's marine policy no. 243440200 was syndicated and,
accordingly, issued by a coterie of subscribing underwriters.
Each subscriber had a defined interest in the policy (the total
of all subscribing interests being 100%). Though naming all the
subscribers, the plaintiff sued Pateman "individually and in his
capacity as representative underwriter," alleging, inter alia,
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that Pateman was "the general manager of [the subject] policy."
For ease in reference, we emulate the parties and the district
court, treating Pateman as if he were the sole underwriter in
interest.
3
an estimated loss of $3,900,000. In October, the underwriters
paid Putnam $2,000,000 on account, but noted that an
investigation of the circumstances and an accounting of Putnam's
inventories were still in progress.
Eventually, the underwriters denied the claim outright.
Invoking diversity jurisdiction, 28 U.S.C. 1332(a), Putnam sued
on the policy in federal court. A change of venue was granted,
transferring the case from the District of Connecticut to the
District of Rhode Island. The case was docketed in the
transferee district on April 29, 1988. Pateman answered the
complaint on July 20, 1988, contending that no loss occurred
during the policy period because Putnam's gold had been
wrongfully misappropriated well prior to issuance of the Lloyd's
policy. Additionally, Pateman pleaded two affirmative defenses,
hypothesizing that, even if a loss transpired while the policy
was in force, an agent infidelity exclusion in the policy barred
recovery;2 and that, in any event, material misrepresentations
and omissions arising in the course of obtaining the policy
negated the coverage. Pateman also counterclaimed for return of
the advance payment. On September 8, 1988, Pateman sued Frenkel
in Rhode Island's federal district court, alleging that, during
the original negotiations, Frenkel purposely failed to disclose
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2The agent infidelity exclusion eliminated coverage for any
loss resulting from "infidelity, conversion and/or misappro-
priation" perpetrated by an agent of the insured. The insurer's
claim in this respect rested on its contention that the SLT field
warehouseman, Harrison, was Putnam's agent within the
contemplation of the policy.
4
facts material to the underwriters' proposed assumption of the
risk.
The two suits were consolidated and the case was tried
to a jury. The jury exonerated Pateman from liability to Putnam,
finding not only that Putnam was unable to prove an insured loss,
but also that Pateman had proved both of his affirmative
defenses. Finally, the jurors found that Frenkel, in procuring
the policy, had intentionally concealed material facts.
Accordingly, the district court entered judgment for Pateman (1)
on the primary complaint (qua defendant), (2) on the counterclaim
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(in the sum of $2,000,000), and (3) on Pateman's separate
complaint (in the same sum). The counterclaim defendant, Putnam,
and the named defendant in the second suit, Frenkel, both
appealed.
We deal first with Putnam's appeal, bifurcating our
analysis to consider, initially, its argument that the court
below erred in entering judgment on the counterclaim (Part II).
Concluding, as we do, that the judgment on the counterclaim was
responsive to the jury verdict, we thereafter consider Putnam's
remaining assignments of error (Part III). That exercise
completed, we turn last to Frenkel's appeal (Part IV). In the
end (Part V), we affirm the defendant's verdict in Putnam's case
and the $2,000,000 damage award in favor of the counterclaimant,
Pateman. At the same time, we set aside the multimillion dollar
verdict against Frenkel, remanding Pateman's case against the
broker for a new trial.
5
II. THE JUDGMENT ON THE COUNTERCLAIM
II. THE JUDGMENT ON THE COUNTERCLAIM
Putnam hotly disputes the district court's entry of
judgment on the counterclaim, asserting that the court
impermissibly exceeded the perimeters of the jury's responses.
In order to place Putnam's argument into proper perspective, it
is essentialthat webegin by recountinga panoplyof criticalevents.
A. The Circumstances Surrounding the Verdict.
A. The Circumstances Surrounding the Verdict.
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The district court sent the case to the jury by means
of a specially crafted verdict form which, as eventually
clarified by the court and inscribed by the jury, we provide in
an appendix hereto. The form was a hybrid. It combined
questions (e.g., items one, two and three) with declarations
(e.g., item four) and also combined statements that seemed like
verdicts (e.g., items five and six) with statements that seemed
like findings (e.g., item four). The form instructed the jury to
determine whether Pateman was liable to Putnam. If not, the jury
was to enumerate which of three delineated reasons exonerated
Pateman from liability. The form also provided a space for the
jury to enter its verdict as between Frenkel and Pateman,
specifying the dollar amount of Frenkel's liability if Pateman
prevailed. The form did not contain a similar space for entry of
the jury's verdict on the counterclaim.
The omission, of course, was scarcely a bolt from the
blue. For one thing, the form was a hybrid, thus putting the
parties on notice to expect the unexpected. For another thing,
the record shows that the district court discussed the verdict
6
form with counsel on numerous occasions. The court repeatedly
solicited counsel's advice, stressing that it was seeking ways of
simplifying the jury's task. As the day of reckoning dawned, the
court apprised counsel of the final design of the verdict form
before actually giving it to the jurors. No one, least of all
Putnam, objected to the absence of a direct request for a verdict
on the counterclaim. All parties must have realized that the
counterclaim was being decided. After all, more than once during
on-the-record colloquy between court and counsel the judge
articulated his view that, if Pateman was not liable to Putnam at
all, the necessary implication of such a finding would be to
require Putnam to return the $2,000,000 that Pateman had advanced
on the insurance claim. Far from voicing any disagreement with,
or criticism of, the district court's assumption, Putnam
indicated its assent that, should the jury find Pateman not
liable, it would follow automatically that Pateman would prevail
on the counterclaim.3
And, there was more. Notwithstanding the apparent
lacuna in the form, the district court, in charging the jury,
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3The following exchange is representative of the dialogue:
THE COURT: If you come up with
something, two million dollars or less, then
it seems to me that it's almost automatic
that you owe, you have to return to the
Defendant any difference between what you
come up with and two million dollars, isn't
that the case?
MR. GRUTMAN [Putnam's trial attorney]:
I understand that . . . .
7
left no doubt that submission of the Putnam/Pateman dispute
included the counterclaim for return of the advance. The court
reminded the jury that, in addition to defending the primary
complaint, Pateman was "counterclaim[ing] against plaintiff
Putnam for return of the two million dollars it advanced to
Putnam." The court told the jury specifically that, if the jury
determined the amount of the covered loss was "less than two
million dollars, then you must render a verdict for the defendant
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for the difference between the loss and two million dollars."
(Emphasis supplied). Putnam did not object either to the final
version of the verdict form or to the court's instructions
appertaining thereto.
The jury paused during its deliberations to ask whether
it could specify more than one reason for finding Pateman not
liable to Putnam. After consulting with all counsel, the judge
responded that such a hydra-headed finding would be permissible.
At the same time, the judge modified the verdict form to make it
crystal clear that the jury should not consider the case against
Frenkel unless it found that Pateman's nondisclosure defense had
been proven vis-a-vis Putnam. Once again, Putnam registered no
objection.
When done deliberating, the jury returned to the
courtroom with the completed form. Examination of the sheet
revealed that the jury had answered item one ("Do you find
defendant Pateman liable to plaintiff Putnam?") in the negative;
indicated, in item four, Putnam's failure to show a covered loss
8
and, additionally, Pateman's success in proving both affirmative
defenses; and completed items five and six so as to award Pateman
$2,000,000 against Frenkel. After polling the jurors at Putnam's
request, without incident, the district court dismissed the
panel. At that point the court stated:
In accord with the responses of the jury to
the questions submitted to them, the Clerk
will at this time enter judgment for Pateman
and others against Putnam Resources in the
amount of two million dollars, interest and
costs, and against Frenkel & Company in the
amount of two million dollars, interest and
costs.
It was only then that Putnam's trial counsel stirred. He argued
that entry of judgment on the counterclaim did not necessarily
follow from the jury's verdict. Rather, two interpretations of
the verdict form were possible: on the one hand, the jury may in
fact have found, as the court assumed, that Pateman was entitled
to recover on the counterclaim; on the other hand, however, the
jury, while finding Pateman not liable to Putnam, might have
wished for equitable reasons to allow Putnam to keep the advance
payment. The district court was unimpressed. Final judgment
entered on the counterclaim.
On appeal, Putnam's paramount argument is that the
counterclaim was never submitted to the jury at all.
Secondarily, Putnam argues that, if the counterclaim was
submitted, the jury's responses in respect to it were fatally
ambiguous. We consider these asseverations in sequence.
B. Was the Counterclaim Adjudicated?
B. Was the Counterclaim Adjudicated?
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The premise supporting Putnam's contention that the
9
district court failed to submit the counterclaim to the jury a
premise that Putnam fails to state, but that the contention must
rest upon is that a claim can only be submitted by an express
reference on a verdict form. On this premise, the instructions
that the judge gives are little more than window dressing. That
is to say, the court's instructions about the implications of a
finding for the defendant on the plaintiff's claim, or about the
implications of various interrogatory answers for the
counterclaim, become meaningless if the court has not provided a
separate space on the verdict sheet for the jury to write
something like "we find for the defendant on the counterclaim."
We do not think this is the law.
In the first place, the architecture of Fed. R. Civ. P.
49 itself undercuts Putnam's premise.4 Whereas Fed. R. Civ. P.
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4The rule provides:
(a) Special Verdicts. The court may require
(a) Special Verdicts.
a jury to return only a special verdict in
the form of a special written finding upon
each issue of fact. In that event the court
may submit to the jury written questions
susceptible of categorical or other brief
answer or may submit written forms of the
several special findings which might properly
be made under the pleadings and evidence; or
it may use such other method of submitting
the issues and requiring the written findings
thereon as it deems most appropriate. The
court shall give to the jury such explanation
and instruction concerning the matter thus
submitted as may be necessary to enable the
jury to make its findings upon each issue.
If in so doing the court omits any issue of
fact raised by the pleadings or by the
evidence, each party waives the right to a
trial by jury of the issue so omitted unless
before the jury retires the party demands its
10
49(b) contemplates that written interrogatories and a general
verdict will be used in tandem, Fed. R. Civ. P. 49(a) allows the
court to submit a case for written findings without any general
verdict, or to "use such other method of submitting the issues .
. . as it deems most appropriate," and thereupon to enter such
judgment(s) as the findings may dictate. In the second place, it
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submission to the jury. As to an issue
omitted without such demand the court may
make a finding; or, if it fails to do so, it
shall be deemed to have made a finding in
accord with the judgment on the special
verdict.
(b) General Verdict Accompanied by Answer to
(b) General Verdict Accompanied by Answer to
Interrogatories. The court may submit to the
Interrogatories.
jury, together with appropriate forms for a
general verdict, written interrogatories upon
one or more issues of fact the decision of
which is necessary to a verdict. The court
shall give such explanation or instruction as
may be necessary to enable the jury both to
make answers to the interrogatories and to
render a general verdict, and the court shall
direct the jury both to make written answers
and to render a general verdict. When the
general verdict and the answers are
harmonious, the appropriate judgment upon the
verdict and answers shall be entered pursuant
to Rule 58. When the answers are consistent
with each other but one or more is
inconsistent with the general verdict,
judgment may be entered pursuant to Rule 58
in accordance with the answers,
notwithstanding the general verdict, or the
court may return the jury for further
consideration of its answers and verdict or
may order a new trial. When the answers are
inconsistent with each other and one or more
is likewise inconsistent with the general
verdict, judgment shall not be entered, but
the court shall return the jury for further
consideration of its answers and verdict or
shall order a new trial.
Fed. R. Civ. P. 49.
11
is well established that verdicts must be construed in light of
the totality of the surrounding circumstances, including the
court's instructions. See, e.g., Gander v. FMC Corp., 892 F.2d
___ ____ ______ __________
1373, 1378 (8th Cir.), cert. denied, 111 S. Ct. 209 (1990); Klein
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v. Sears Roebuck and Co., 773 F.2d 1421, 1427 (4th Cir. 1985);
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Wright v. Kroeger Corp., 422 F.2d 176, 178 (5th Cir. 1970); McVey
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v. Phillips Petroleum Co., 288 F.2d 53, 59 (5th Cir. 1961).
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Thus, Putnam's premise that a claim can only be submitted to a
jury by denomination as such in haec verba on the verdict sheet
____ _____
not only ignores the fact that the Civil Rules themselves provide
a vehicle for disposition of cases without any such express
reference, but also ignores the importance of the trial court's
instructions and the attendant circumstances.
In this case, the surrounding circumstances are
dispositive. While the verdict form did not provide a separate
question about the counterclaim, the court's instructions
mentioned the counterclaim several times and explained in
considerable detail how the jury's answers to the special
questions would be interpreted in respect to the counterclaim.
Moreover, the record shows beyond a shadow of a doubt that Putnam
understood and accepted a case concept under which a finding for
Pateman on the primary complaint would compel a finding against
Putnam on the counterclaim.5 For us to accept Putnam's
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5The record is equally plain that a finding against Putnam
on the counterclaim would be for the full amount of the advance
($2,000,000), so long as the jury accepted either of Pateman's
affirmative defenses. As previously reported, the jury gave
complete credence to both of these defenses.
12
hypothesis that the counterclaim was never submitted to the jury,
we would have to sever the instructions from the verdict form,
thereby exalting ritual at the expense of substance, and close
our eyes to Putnam's knowing acquiescence in the case concept as
fashioned by the court below. Courts ought not to play such
zero-sum games or allow disappointed suitors to do so. Cf. Parks
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v. Turner, 53 U.S. 39, 46 (1851) (sustaining a verdict which,
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while technically flawed, was clear enough on its face to convey
the intent of the jury); Roach v. Hulings, 41 U.S. 319, 321
_____ _______
(1842) (refusing to overturn a jury verdict which, while finding
for the plaintiff, failed to address explicitly the defendant's
affirmative defenses, the Court observing that although "this
verdict is not technically responsive to the several pleas, it
virtually answers and negatives them all"). The counterclaim was
submitted to the jury.
C. Were the Responses Ambiguous?
C. Were the Responses Ambiguous?
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That the counterclaim was submitted to the jury does
not, of course, mean that it was necessarily resolved by the jury
in the manner described by the court below. Reduced to bare
essence, Putnam's remaining argument is that, in order for a
judgment to enter, the jury's verdict must be certain and
unambiguous in its import and that, as to the instant
counterclaim, this threshold was never crossed. Though we agree
that, in many circumstances, clarity and lack of ambiguity are
prerequisites to the entry of judgment upon jury findings, but
___
cf. Fed. R. Civ. P. 49(a) (empowering trial judge to make
___
13
findings on omitted issues of fact), we think that this case
passes muster.
Here, the record is unclear as to whether the case was
given to the jury under Rule 49(a) or 49(b). In colloquy, the
district court referred to the verdict form as containing
"interrogatories." Although recourse to such terminology is not
dispositive, see Reorganized Church of Jesus Christ of Latter Day
___ ________________________________________________
Saints v. U.S. Gypsum Co., 882 F.2d 335, 338 (8th Cir. 1989), the
______ _______________
court's language suggests that it had Rule 49(b) in mind.
Furthermore, the court analyzed the verdict under Rule 49(b) in
deciding certain post-trial motions. These facts, taken together
with the jury instructions and the kinds of responses sought by
the verdict form, indicate that at least some of the claims were
submitted under Rule 49(b). See, e.g., Portage II v. Bryant
___ ____ __________ ______
Petroleum Corp., 899 F.2d 1514, 1520 (6th Cir. 1990) (applying
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similar criteria to determine the kind of verdict sought); see
___
also Scott v. Isbrandtsen Co., 327 F.2d 113, 119 (4th Cir. 1964).
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But, simply because Rule 49(b) was used to resolve the
primary complaint does not necessarily mean that the counterclaim
was so governed. To the contrary, having established beyond
cavil that the counterclaim was submitted to the jury, see supra
___ _____
Part II(B), the fact that there was no space provided on the form
for the entry of a general verdict on the counterclaim argues
persuasively that the counterclaim should be considered under
Rule 49(a). See Simien v. S.S. Kresge Co., 566 F.2d 551, 556
___ ______ ________________
(5th Cir. 1978) (where the jury has not been given an appropriate
14
form for a general verdict, "the submission must be judged under
the standard of Rule 49(a)"); see also Scott, 327 F.2d at 119.
___ ____ _____
Nor is such a hybrid submission prohibited. After all, a
district court has wide discretion in constructing and utilizing
verdict forms. See, e.g., Floyd v. Laws, 929 F.2d 1390, 1395
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(9th Cir. 1991); Portage II, 899 F.2d at 1520; Reorganized
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Church, 882 F.2d at 338; Allen Organ Co. v. Kimball Int'l, Inc.,
______ _______________ ___________________
839 F.2d 1556, 1561 (Fed. Cir.), cert. denied, 488 U.S. 850
_____ ______
(1988); Geosearch, Inc. v. Howell Petroleum Corp., 819 F.2d 521,
_______________ ______________________
527-28 (5th Cir. 1987); Klein, 773 F.2d at 1426-27; Kazan v.
_____ _____
Wolinski, 721 F.2d 911, 915 (3d Cir. 1983); see also Fed. R. Civ.
________ ___ ____
P. 49(a) (court may use such methods of submitting issues "as it
deems most appropriate"). In the exercise of this discretion,
district courts may mix and match kinds of verdicts. See, e.g.,
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Loffland Bros. Co. v. Roberts, 386 F.2d 540, 546 (5th Cir. 1967)
__________________ _______
(upholding the use of specific interrogatories concerning one
party's claim and general questions concerning another party's
claim), cert. denied, 389 U.S. 1040 (1968); Clegg v. Hardware
_____ ______ _____ ________
Mut. Cas. Co., 264 F.2d 152, 156 (5th Cir. 1959) (a jury verdict
_____________
may be "on a general charge or by special questions, or a blend
of both under [Fed. R. Civ. P.] 49").
In this case, the district court may have feared that
requiring a general verdict on the counterclaim would
overcomplicate matters. The case concept accepted by all parties
dictated that a finding for Pateman on either or both of its
affirmative defenses a fortiori compelled a return of the money
_ ________
15
advanced. Additional questions beyond those needed under the
case concept might have served to encumber the real issues and
make the jury's task needlessly complex. Whatever the district
court's actual reasons, it is at least arguable, perhaps likely,
that the court's approach saved the jury time and spared possible
confusion in an already labyrinthine case. The court, therefore,
did not misuse its broad discretion in employing a hybrid verdict
form.
To be sure, the crafting of so unorthodox a procedure
makes it desirable that a reviewing tribunal afford heightened
scrutiny to what ultimately transpired below. We do so here in
order to ensure both the fairness of the procedure and the
definiteness of the jury's views on the counterclaim. As to the
former, there is no room for doubt. Putnam knew about, and
acquiesced willingly in, the lower court's approach. It sat
silent when it learned of the verdict form's shape and when it
heard the instructions under which the court submitted the
counterclaim to the jury. Silence after instructions, including
instructions on the form of the verdict to be returned by the
jury, typically constitutes a waiver of any objections. See
___
Anderson v. Cryovac, Inc., 862 F.2d 910, 918 (1st Cir. 1988) ("If
________ _____________
a slip has been made, the parties detrimentally affected must act
expeditiously to cure it, not lie in wait and ask for another
trial when matters turn out not to their liking."). The short of
it is that a party cannot be permitted to complain about invited
errors. Here, Putnam forfeited any right to gripe about a lack
16
of procedural orthodoxy.6 To hold otherwise "would place a
premium on agreeable acquiescence to perceivable error as a
weapon of appellate advocacy." Merchant v. Ruhle, 740 F.2d 86,
________ _____
92 (1st Cir. 1984).
The matter of certainty must also be resolved against
Putnam. A jury need not use any particular language in rendering
its verdict. "Any words which clearly convey the meaning and
intention of the jury are sufficient." Faudree v. Iron City Sand
_______ ______________
& Gravel Co., 315 F.2d 647, 649-50 (3d Cir. 1963). In this
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instance, especially given the tenor of the charge and the
universally accepted case concept, the findings on item four
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6We find instructive Western Fire Ins. Co. v. Word, 131 F.2d
_____________________ ____
541 (5th Cir. 1942). There, in a case somewhat analogous to this
one, the Fifth Circuit wrote:
[T]he court fully and fairly charged the jury
on every material issue in the case, and gave
specific instructions as to the form of
verdict to be returned if the jury found for
[one side or the other]. When the court
concluded instructions to the jury, counsel
who is now complaining of the form and of the
insufficiency of the verdict, expressed
satisfaction with the instructions, and when
asked if he had any objections to make stated
without reservation, "None for us, Your
Honor." The verdict of the jury complied
literally with the form contained in the
court's charge, and, accordingly, judgment .
. . was entered on that verdict. It is a
rule of law so old that the memory of man
runneth not to the contrary that one may not
sit by without objection to rulings or
instructions, and then after verdict and
judgment, and when it is too late for the
court to change its rulings or charge, come
forward with objections on appeal and seek to
put the court in error.
Id. at 543-44.
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17
required the entry of a judgment in Pateman's favor on the
counterclaim. Unlike the cases cited by Putnam which have found
ambiguity in jury verdicts, see, e.g., Russell v. Place, 94 U.S.
___ ____ _______ _____
606 (1876), there is no plausible theory here, legal or
equitable, which could ground an assertion that the jury findings
were ambiguous. The court charged, without objection, that a
finding of intentional nondisclosure would constitute grounds
sufficient for Pateman to prevail on the counterclaim. The jury
so found. For our part, "[w]e must assume that the jury listened
to and understood the court's entire charge." Mashpee Tribe v.
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New Seabury Corp., 592 F.2d 575, 592 (1st Cir.), cert. denied,
__________________ _____ ______
444 U.S. 866 (1979).
What is more, our conclusion that the court, with the
parties' acquiescence, submitted the counterclaim under Rule
49(a), not Rule 49(b), albeit by implication, dispels any
lingering
questions about ambiguity. In the Rule 49(a) context, a failure
to object to omissions in interrogatories constitutes a waiver of
jury trial on those issues. See, e.g., Pielet v. Pielet, 686
___ ____ ______ ______
F.2d 1210, 1218 (7th Cir. 1982) ("[I]f the trial court 'omits any
issue of fact raised by the pleadings or by the evidence' . . .
each party waives the right to a jury trial of the omitted issue
unless he demands its submission before the jury retires.")
(quoting Rule 49(a)), cert. denied, 459 U.S. 1107 (1983); Cote v.
_____ ______ ____
Estate of Butler, 518 F.2d 157, 160 (2d Cir. 1975) (same). This
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18
is especially true in the instant case where Putnam waited until
after the jury had been polled and dismissed to inform the court
about the supposed deficiency in the verdict form, and even then,
did not request, as it might have done, that the jury be
reconvened. Reassembly was a distinct possibility, see Summers v.
___ _______
United States, 11 F.2d 583, 586 (4th Cir.) (it is the settled
______________
rule that the jury "may remain undischarged . . . though
discharge may have been spoken by the court, if . . . it remains
an undispersed unit, within the control of the court"), cert.
_____
denied, 271 U.S. 681 (1926); see also Brown v. Gunter, 562 F.2d
______ ___ ____ _____ ______
122, 124-25 (1st Cir. 1977), and Putnam's failure to make such a
request can be seen as a second waiver. In situations where
litigants had far less notice of a trial court's intention to act
in conceivably erroneous ways, we have ruled that an adversely
affected party, having failed to take prompt corrective action,
must forever hold its tongue. See, e.g., United States v.
___ ____ _____________
DiPietro, 936 F.2d 6, 11-12 (1st Cir. 1991); Reilly v. United
________ ______ ______
States, 863 F.2d 149, 160-61 (1st Cir. 1988).
______
To recapitulate, we deem the district court to have
made a hybrid submission here, submitting the primary complaint
and Pateman's complaint against Frenkel to the jury under Rule
49(b), but submitting the counterclaim to the jury under the
aegis of Rule 49(a). So viewed, the court, given the parties'
acquiescence and the jury's specific findings, properly entered
judgment for Pateman on the counterclaim. In this matter, as in
Roach v. Hulings, should the judgment be arrested on the
_____ _______
hypertechnical basis urged by the appellant, "this would be done
19
neither from a necessity to guard the merits of the controversy,
nor from the principles of sound inductive reasoning; but solely
in obedience to an artificial and technical rule." 41 U.S. at
321. Like the Roach Court, we find it both unnecessary and
_____
unwise to follow so petrified an approach.
III. PUTNAM'S OTHER ASSIGNMENTS OF ERROR
III. PUTNAM'S OTHER ASSIGNMENTS OF ERROR
Putnam marshals a host of other claimed errors. We
treat its sufficiency-of-the-evidence claim in extenso, before
__ _______
dealing summarily with the remainder of its arguments.
A. Sufficiency of the Evidence.
A. Sufficiency of the Evidence.
___________________________
Putnam assails the evidence as insufficient to sustain
the verdict in Pateman's favor on any basis. Principles of
judicial restraint counsel, however, that if determination of an
issue effectively disposes of an appeal, the appellate court
should resolve the case on that basis without reaching other
presented issues. See, e.g., Bob Willow Motors, Inc. v. General
___ ____ _______________________ _______
Motors Corp., 872 F.2d 788, 795-96 (7th Cir. 1989); Wilken v.
____________ ______
International Harvester Co., 701 F.2d 730, 733 (8th Cir. 1983);
____________________________
Howard v. Gonzales, 658 F.2d 352, 358 (5th Cir. Unit A 1981).
______ ________
Because our review of the record convinces us that the verdict is
fully sustainable on the ground of nondisclosure, we need not
consider whether the evidence was also sufficient in respect to
agent infidelity and/or nonoccurrence of loss.
The nondisclosure defense arose out of Pateman's
allegation that the underwriters were never advised of two
episodes occurring before the Lloyd's policy was placed. Pateman
20
asserted that knowledge of these episodes would have altered his
decision to cover the risk. Both incidents occurred at customer-
controlled sites where, as in its transactions with SI, the
dealer stored precious metals. The first vignette involved
Putnam's predecessor in interest, Fundamental Resources. In
March 1985, Fundamental asked Frenkel to report an alleged
conversion of more than $1,000,000 in silver from the premises of
a customer, Refinemet International Co. Thereafter, Fundamental
took legal action against Refinemet. The insurance claim and the
Refinemet suit were still unresolved when the Lloyd's policy was
written. At one point, it appeared that Refinemet would redeem
the loss. As late as March 1987, however, Putnam asked Frenkel
to "reiterate our demand" that the insurer pay the claim.
Eventually, Refinemet made good and the insurance claim abated.
The second episode involved a loss at Jackson Precious
Metals, reported by Putnam to Frenkel in April 1986. Again,
Putnam launched a third-party action, suing Jackson's owner and
the field warehouseman, SLT. The dispute was pending when the
Lloyd's policy took effect. Later on, SLT and Jackson's owner
settled with Putnam; and despite a decision to deny coverage,
Putnam's insurer reimbursed Putnam's sue-and-labor expenses
incident to the claim.
The record is clear that Pateman was not informed of
either episode. At trial, Putnam took the position that, having
effected a third-party recovery in each instance, the episodes
did not involve losses for which insurance was claimed, and were,
21
therefore, immaterial to an assessment of the risk to be assumed
by Pateman. Putnam also asserted that proof of intent to deceive
was lacking. It moved, successively, for a directed verdict,
judgment n.o.v., and a new trial. It now urges that the court
below erred in failing to grant these motions.
Since this assignment of error challenges the
sufficiency and weight of the proof, we pause to restate the
principles which govern our review. As to motions for judgment
as a matter of law:7
The yardstick by which we take the measure of
a refusal to grant a directed verdict is the
same as that which we apply to the denial of
a judgment n.o.v. In conducting that
exercise, we may not consider the credibility
of witnesses, resolve conflicts in testimony,
or evaluate the weight of the evidence.
Rather, we must examine the evidence and the
inferences reasonably to be drawn therefrom
in the light most favorable to the nonmovant.
. . . A judgment notwithstanding the verdict
should be granted only when the evidence,
viewed from this perspective, is such that
reasonable persons could reach but one
conclusion.
Wagenmann v. Adams, 829 F.2d 196, 200 (1st Cir. 1987) (citations
_________ _____
omitted). As to motions for new trials, appellate review is also
severely circumscribed:
Denial of a motion for new trial will be
reversed only for an abuse of discretion, and
____________________
7Under recent amendments to Fed. R. Civ. P. 50(b) the
difference in nomenclature between a pre-verdict "motion for
directed verdict" and a post-verdict "motion for judgment n.o.v."
has been abolished. See Federal Civil Judicial Procedure and
______________________________________
Rules 139 (West Pub. Co. rev. ed. 1991). Both sets of motions
_____
are now known as motions for judgment as a matter of law. See
___
id. The legal standard governing the grant or denial of such
___
motions remains unchanged.
22
the discretion afforded the trial judge is
limited from the outset. A trial judge may
not grant a motion for a new trial merely
because he or she might have reached a
conclusion contrary to that of the jurors,
rather, the trial judge may set aside a
jury's verdict only if he or she believes
that the outcome is against the clear weight
of the evidence such that upholding the
verdict will result in a miscarriage of
justice.
Conway v. Electro Switch Corp., 825 F.2d 593, 598-99 (1st Cir.
______ ____________________
1987) (citations omitted). Pateman's case survives scrutiny
under these standards by a comfortable margin.
It is black letter law that fraud may be established by
inference from circumstantial facts. As the Court wrote almost
half a century ago:
[W]hile objective facts may be proved
directly, the state of a man's mind must be
inferred from the things he says or does . .
. . [C]ourts and juries every day pass upon
knowledge, belief and intent the state of
men's minds having before them no more than
evidence of their words and conduct, from
which, in ordinary human experience, mental
condition may be inferred.
American Communications Ass'n v. Douds, 339 U.S. 382, 411 (1950);
_____________________________ _____
see also F. Harper, F. James, Jr., & O. Gray, The Law of Torts,
___ ____ ________________
7.10, at 451 n.24 (2d ed. 1986) (proof of fraudulent intent may
be established by circumstantial evidence). The state of a
person's mind must be inferred primarily from what he says and
what he does. In addition, "[s]uch an inference may come from
proof of the objective falsity itself, from proof of a motive to
lie, and from other facts tending to show that the defendant
really knew the things he claimed not to know." United States v.
_____________
23
Sweig, 441 F.2d 114, 117 (2d Cir.), cert. denied, 403 U.S. 932
_____ _____ ______
(1971).
Here, the deception was adequately proven. The
incidents involved matters of likely interest to an insurer
poised to propose a coverage package. There was evidence that
Frenkel's correspond-ence and internal memoranda referred to the
incidents as "losses" and "claims." There was also evidence from
which a factfinder could infer that the deception was both
material and studied. The jury heard testimony that Pateman
believed the incidents to be critical to a reasoned consideration
of the underwriting risk; that both Putnam and Frenkel were aware
of the ongoing legal actions referable to these incidents; that
the insurer involved would soon cancel its policy; that
difficulties were being encountered in securing replacement
coverage; and that the underwriters might be worried about
applicants such as Putnam "from a morality point of view." The
jury also heard that Frenkel, acting to Putnam's behoof, was
determined to place Putnam in the ocean marine market even though
Putnam had no international sendings, did not actually use the
foreign sites mentioned in Frenkel's correspondence, and had
already experienced an earlier policy cancellation because it was
not an authentic ocean marine risk. This, and other, evidence,8
____________________
8We think it significant, too, that the jury saw documents
in which Frenkel attested to Putnam's status as a "concerned,
careful and conservative organization." While statements of
opinion, especially trade talk and puffing, are generally not
adequate predicates for a finding of fraud unless the statements
suggest that a significant amount of factual information
underlies the opinion, see Harper, James & Gray, supra, 7.8, at
___ _____
24
coupled with the lack of any credible reason for nondisclosure,
was enough to allow reasonable factfinders to infer the scienter
required to establish concealment with intent to deceive. The
law is not so struthious as to require that a jury ignore
inferences which it reasonably finds are obvious. United States
_____________
v. Ingraham, 832 F.2d 229, 240 (1st Cir. 1987), cert. denied, 486
________ _____ ______
U.S. 1009 (1988).
Putnam has another string to its bow. It contends
that, even if intent to deceive can be gleaned from the evidence,
causation cannot. This contention depends on the somewhat
curious notion that, even if information concerning the Refinemet
and Jackson claims had been provided to Minet, the latter might
not have relayed the information to Pateman.9 Indeed, Minet's
____________________
430-31, we cite the testimony regarding Putnam's care as evidence
which could help a jury to conclude that Frenkel regarded
Putnam's background to be material to an underwriting assessment
of the firm's insurability.
9Minet's status was disputed at trial and in the parties'
appellate briefs. Minet seemed to view itself as an agent for
Frenkel. Along the same line, Pateman argues that Minet was
Frenkel's agent, and therefore, Putnam's sub-agent. Putnam
contends, however, that Minet was an independent contractor. We
need not answer the question in a definitive way. Were Minet
Frenkel's agent, it would, under prevailing principles of agency,
have been Putnam's sub-agent. See Restatement (Second) of Agency
___
79(b) & (c) (1958). As such, any failure by Minet to disclose
would be chargeable to Putnam so long as Minet, as here, was
acting within the scope of its employment. See Harper, James &
___
Gray, supra, 26.9, at 50. If Minet were Pateman's agent,
_____
Putnam would likewise be debarred from pursuing an intervening
cause argument premised on the possibility that Minet might
betray Pateman. Cf. Restatement (Second) of Torts 531 (1977)
___
(stating liability principles governing fraudulent
misrepresentations which damage individuals or classes intended
or expected to be influenced by the misrepresentations).
Accordingly, we indulge the only scenario that offers Putnam a
ray of hope, and assume, arguendo, that Putnam's view is correct:
________
25
spokesman refused to say during the trial whether he would have
told Pateman of Putnam's prior claims had he been apprised of
them. So, Putnam's thesis runs, failure to disclose could not
have been a legal cause of Pateman's injury. We disagree.
"Application of the legal cause standard to the
circumstances of a particular case is a function ordinarily
performed by, and peculiarly within the competence of, the
factfinder." Swift v. United States, 866 F.2d 507, 510 (1st Cir.
_____ _____________
1989); see also Peckham v. Continental Cas. Ins. Co., 895 F.2d
___ ____ _______ _________________________
830, 837 (1st Cir. 1990) (questions of causation "are normally
grist for the jury's mill"); Marshall v. Perez Arzuaga, 828 F.2d
________ _____________
845, 850-51 & n.8 (1st Cir. 1987) (similar), cert. denied, 484
_____ ______
U.S. 1065 (1988); Springer v. Seaman, 821 F.2d 871, 876 (1st Cir.
________ ______
1987) (similar); W. Keeton, D. Dobbs, R. Keeton & D. Owen,
Prosser & Keeton on the Law of Torts 321 (5th ed. 1984) ("[I]t
______________________________________
may properly be said that 'proximate cause is ordinarily a
question of fact for the jury, to be solved by the exercise of
good common sense in the consideration of the evidence of each
particular case.'") (citation and footnotes omitted). When, as
here, the existence of proximate cause turns on an issue of
superseding causation (the likely conduct of Minet), the jury's
role may be especially significant. See, e.g., Prince v. Leesona
___ ____ ______ _______
Corp., 720 F.2d 1166, 1169 (10th Cir. 1983).
_____
Our analysis of superseding cause is guided by several
principles. First, foreseeability often affects whether an
____________________
Minet acted as an independent contractor.
26
intervening act relieves an actor from liability for his
antecedent wrongdoing. Foreseeability is usually a jury
question. See Springer, 821 F.2d at 877; see also Restatement
___ ________ ___ ____
(Second) of Torts, 453 comment b (1965) (stating that the
question should be left to the jury whenever "there is room for
reasonable difference of opinion"). Second, the difficulties
which inevitably arise when proof of causation hinges upon
counterfactual reasoning emphasize the importance of inferences
and common sense in the factfinding process. As one text states:
The fact of causation is incapable of
mathematical proof, since no one can say with
absolute certainty what would have occurred
if the defendant had acted otherwise . . . .
Circumstantial evidence, expert
testimony, or common knowledge may provide a
basis from which the causal sequence may be
inferred.
Prosser & Keeton, supra, at 269-70 (footnotes omitted). Third,
________________ _____
when the evidence is in conflict, the determination of what the
intervening actor actually did is almost always for the jury.
See Restatement (Second) of Torts, 453, comment c. These
___
convergent principles argue persuasively that, in cases where
superseding cause is raised as a defense and there is some basis
for disagreement as to the facts, the jury should ordinarily
resolve the question of what a third party would likely have done
had the defendant refrained from committing the original wrong.
If the rule were otherwise, every similarly situated suitor would
be left in an epistemological quandary, required, in effect, to
do the impossible, that is, to prove a negative by direct
27
evidence.
Against this backdrop, we think that causation was
adequately proved. There was evidence that Putnam, through
Frenkel, sought to anticipate the inquiries of the underwriters
in its provision of information to Minet; that Frenkel assumed
the information would be used in negotiating for coverage; that
Minet viewed the situation as one requiring all parties to
negotiate in utmost good faith; and that Minet's man took all the
correspondence and documentation supplied by Frenkel to his
meeting with Pateman. From this evidence, a jury could
reasonably infer that Minet would have forthrightly disclosed any
meaningful information provided to it regarding prior claims.10
B. The Intent Requirement.
B. The Intent Requirement.
______________________
The district court erred, Putnam says, in charging
that, so long as the failure to disclose material matters was
intentional, then Pateman could prevail on the nondisclosure
defense and counterclaim. In Putnam's view, rather than merely
finding an intentional failure to disclose, the jury should have
been required to find that disclosure was omitted by reason of an
actual intent to deceive. Put another way, Putnam asserts that
the court failed to make it clear that, for Pateman to prevail,
the evidence had to establish that Frenkel not only kept matters
____________________
10In view of this conclusion, we need not reach, and express
no opinion on, Pateman's argument, citing Fogel v. Chestnutt, 668
_____ _________
F.2d 100 (2d Cir. 1981), cert. denied, 459 U.S. 828 (1982), that
_____ ______
in cases of this stripe the deceitful misrepresentation is itself
sufficient to establish the requisite causation (wholly aside
from what the intermediary party might or might not have done).
28
in the bosom of the lodge, but did so with the purpose of
deceiving the underwriters. Assuming for argument's sake that
intent to deceive was a necessary element of the case, we find
Putnam's self-serving characterization of the instructions to be
unwarranted: taken in its totality, the court's charge
adequately conveyed an intent requirement.
The district court charged in so many words that
Pateman, to prevail on the affirmative defense of intentional
failure to disclose and on the counterclaim, had to prove that
Putnam, directly or through its agent, "withheld or failed to
disclose fully . . . material facts with intent to deceive
Defendant Pateman." Record Appendix (R.A.) 2471a. In light of
this explicit instruction, Putnam's assignment of error seems
rather puzzling. Having studied Putnam's briefs, the gravamen of
its complaint can only be that the district court should have
married the phrase "to deceive" to the word "intent" each time
the latter word was uttered. But, a litigant "has no right to
put words in a judge's mouth." United States v. McGill (Robert),
_____________ _______________
___ F.2d ___, ___ (1st Cir. 1992) [No. 91-1145, slip op. at 3].
So long as the charge, viewed as a whole, adequately limns the
controlling issues, and does so without confusing or misdirecting
the jury, the trial judge enjoys considerable discretion in the
choice of idiom. He or she need not parrot the exact language
that a litigant prefers. See, e.g., id.; Brown v. Trustees of
___ ____ ___ _____ ___________
Boston University, 891 F.2d 337, 354 (1st Cir. 1989), cert.
_________________ _____
denied, 110 S. Ct. 3217 (1990); United States v. Nivica, 887 F.2d
______ _____________ ______
29
1110, 1124 (1st Cir. 1989), cert. denied, 494 U.S. 1005 (1990);
_____ ______
Brown v. Freedman Baking Co., 810 F.2d 6, 9-10 (1st Cir. 1987).
_____ ___________________
Reading the trial court's instructions in their
entirety, we are constrained to dismiss Putnam's jeremiad as
comprising more cry than wool. The instructions made clear, on
more than one occasion, that the intent at issue was an intent to
deceive. That the district court did not chant the talisman "to
deceive" every time the word "intent" or some varietal thereof
was mentioned neither invalidated nor undermined the
instructions. See Veranda Beach Club Ltd. Partnership v. Western
___ ___________________________________ _______
Surety Co., 936 F.2d 1364, 1384 (1st Cir. 1991) ("[T]he presider
__________
is not obligated to tailor the instructions to suit a party's
preference or fit the idosyncratic facts of the particular
case."); United States v. Cintolo, 818 F.2d 980, 1004 (1st Cir.)
_____________ _______
("Because the district court's charge adequately covered the
subject matter of what the defendant suggested . . . no error can
successfully be assigned to the 'trial court's failure to use the
precise language that defendant . . . would have preferred.'")
(citation omitted), cert. denied, 484 U.S. 913 (1987).
_____ ______
It would serve no useful purpose to linger. Even if
the instructions on intent to deceive could have been somewhat
more precise in linking intent to deception, we do not think it
possible that, in light of the charge as a whole, so subtle a
nuance loosened the jury's grasp of the governing law or
improperly influenced its deliberations.
C. Failure to Return Premiums.
C. Failure to Return Premiums.
__________________________
30
Invoking Fed. R. App. P. 28(i) in a cryptic single-
sentence footnote in its appellate brief,11 Putnam seeks to
"adopt Frenkel's discussion with respect to [Pateman's] failure
to return the insurance premiums." A number of obstacles block
the path of this initiative. We mention two of them.
While Frenkel argued below that the underwriters
wrongly refused to return premiums, it discarded the argument on
appeal. We have had several occasions recently to remind counsel
that there are limits to the ability of parties to adopt other
parties' arguments by reference. See, e.g., United States v.
___ ____ ______________
Isabel, 945 F.2d 1193, 1200 (1st Cir. 1991); United States v.
______ ______________
David, 940 F.2d 722, 737 (1st Cir.), petition for cert. filed,
_____ _________________________
No. 91-6491 (Nov. 25, 1991). One obvious limit to an appellant's
power to hitch its wagon to another appellant's star is that the
adopter cannot adopt an argument that the adoptee has not
advanced on appeal. Because Frenkel made no argument on appeal
concerning the effect of the underwriters' failure to refund
premiums, Putnam cannot legitimately peddle such wares through
the medium of Rule 28(i).
The second obstacle in Putnam's path is equally
insurmountable. Frenkel does make a related argument, trying to
convince us that Pateman's continued collection of premiums after
__________
____________________
11Fed. R. App. P. 28(i) provides in relevant part:
In cases involving more than one appellant or
appellee, including cases consolidated for
purposes of the appeal, . . . any appellant
or appellee may adopt by reference any part
of the brief of another.
31
deciding to deny coverage was tantamount to a waiver of all
rights of rescission. But, Putnam's attempted adoption of this
asseveration is in the nature of an epiphany, Putnam not having
advanced the asseveration before the district court.12 Nothing
in Rule 28(i) displaces the requirement that, in order to raise a
particular point on appeal, an appellant must first have raised
the point below. See, e.g., Clauson v. Smith, 823 F.2d 660, 666
___ ____ _______ _____
(1st Cir. 1987).
For the reasons stated, we reject Putnam's appeal in
all its ramifications.13
____________________
12Frenkel, on the other hand, did file a post-trial motion
advancing the collection-of-premiums argument a motion in which
Putnam did not join. While Frenkel's appeal turns on another
question, eliminating any necessity for dealing with its motion
at length, we note, as an aside, that the district court's denial
of the motion was well within its discretion. See Fed. R. Civ.
___
P. 60(b)(2) (court may relieve a party from a final judgment
based on new evidence only if the evidence "by due diligence
could not have been discovered" in time for use at trial or under
Rule 59); see also Coastal Transfer Co. v. Toyota Motor Sales,
___ ____ ____________________ ____________________
U.S.A., 833 F.2d 208, 212 (9th Cir. 1987) (if evidence is in a
______
party's possession before the judgment against it is rendered,
the evidence, by definition, cannot be classified as "newly
discovered" for purposes of Rule 60(b)(2)); Taylor v. Texgas
______ ______
Corp., 831 F.2d 255, 259 (11th Cir. 1987) (similar).
_____
13Putnam briefed and argued several other points. Most of
them involved evidentiary issues relating to whether a loss
occurred within the policy period. As between Putnam and
Pateman, however, the jury verdict is sustainable on an
independently sufficient ground: intentional nondisclosure of
material facts. Thus, we may leave the evidentiary issues to one
side, noting only that any irregularity therein could not have
tainted the jury's findings on nondisclosure or damages. To the
extent that Putnam alludes to other supposed errors, not
encompassed within the preceding generality, discussion would
serve no useful purpose. Without exception, each such bevue
suffers from one or more of the following infirmities: (1) it
was not properly preserved at trial, (2) it lacks developed
argumentation on appeal, (3) it is subsumed by our discussion of
other points, (4) it is an irrelevancy, given our ratio
_____
32
IV. FRENKEL'S APPEAL
IV. FRENKEL'S APPEAL
Pateman's hodgepodge complaint against Frenkel
originally asserted a bevy of legal theories. Some were
abandoned along the way. At trial, the district court directed a
verdict for Frenkel on Pateman's negligence claims, including the
claim of negligent misrepresentation.14 When the dust settled,
Pateman's suit against Frenkel went to the jury solely on a tort
claim charging intentional nondisclosure. The jury awarded
Pateman $2,000,000. Before us, Frenkel clusters its heaviest
artillery in support of its contentions that (1) the evidence was
too exiguous to take the tort claim to the jury; and (2) in the
alternative, the jury was improperly instructed on the quantum of
proof necessary to sustain the claim. We believe that our
previous analysis fully disposes of the first of these
challenges.15 We limit the ensuing commentary, therefore, to
Frenkel's alternative contention.
A. The Problem.
A. The Problem.
___________
The stage is easily set. Over Frenkel's objection, the
____________________
decidendi, and/or (5) it is patently unmeritorious.
_________
14Pateman has not appealed this ruling.
15Insofar as matters material to the risk were concerned,
Frenkel knew virtually everything that Putnam knew. It oversaw,
through Minet, the dealings with Pateman that led to issuance of
the Lloyd's policy. Hence, Frenkel's argument that the evidence
was insufficient to sustain a verdict against it fails for
essentially the same reasons that Putnam's parallel argument
failed. See supra Part III(A). We add only that the evidence
___ _____
was sufficient for a jury to find fraudulent concealment either
under the preponderance standard accepted by Putnam or under the
more rigorous "clear and convincing" standard that Frenkel
contends should have been applied in Pateman's suit against it.
33
district court told the jury to use a preponderance of the
evidence standard in determining whether Frenkel was guilty of
intentional nondisclosure. Frenkel urges that, as between
Frenkel and Pateman, the tort had to be proven by clear and
convincing evidence.
The problem has two aspects. The first aspect centers
around choice of law. Although the district court seems never to
have made an unequivocal choice as to which state's law governed
this issue,16 Pateman intimates that the court looked to the
substantive law of Rhode Island, see, e.g., Ostalkiewicz v.
___ ____ ____________
Guardian Alarm, 520 A.2d 563, 569 (R.I. 1987), in deciding that
______________
the preponderance standard applied. Frenkel contends this was
error. It asserts that the court should have derived the quantum
of proof from New York law. Frenkel says this error makes a
decisive difference: it reads the caselaw, e.g., Leucadia, Inc.
____ ______________
____________________
16During the trial proper, the district judge eschewed any
formal choice of law. The judge appears to have concluded that
there were no significant differences between New York and Rhode
Island law on the key issues. Then, in a post-trial rescript
dealing with prejudgment interest, the judge stepped to the brink
of a decision. He wrote:
Defendant Frenkel contends that this
Court applied New York law at trial and thus
New York's interest statute should apply. At
no time during the course of this trial did
this Court decide that New York law was the
law it would apply. This Court determined
that Rhode Island had the most significant
contacts with the litigation, not New York.
Four months later, during oral argument on another group of post-
trial motions, the judge backtracked, stating that he had made "a
conscious effort not to make [a choice-of-law] determination."
R.A. 3182a-83a.
34
v. Reliance Ins. Co., 864 F.2d 964, 971 (2d Cir. 1988), cert.
__________________ _____
denied, 490 U.S. 1107 (1989), as requiring, in New York, that
______
intent to deceive be proved by clear and convincing evidence.
And, the jury in this case was not so instructed.
Pateman's rejoinder frames a second aspect of the
problem. He asserts that, under the New York cases, if the
insurer makes inquiries and the insured conceals material facts,
proof of deceit is altogether unnecessary. Thus, it is Pateman's
position that, even if New York law supplied the appropriate rule
of decision, the district court properly abjured an instruction
that intent to deceive had to be proven by clear and convincing
evidence.
Having stated the problem, we next shine the light of
our understanding on the conflict as to which jurisdiction's
substantive law should be embraced. We then attempt to chart the
contours of that law.
B. What State's Law Governs?
B. What State's Law Governs?
________________________
1. The Methodology. In diversity cases, the federal
1. The Methodology.
_______________
courts look to the choice-of-law rules of the forum state, here,
Rhode Island. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
___ __________ ______________________
487, 496 (1941); Borden v. Paul Revere Life Ins. Co., 935 F.2d
______ __________________________
370, 375 (1st Cir. 1991). In tort cases Rhode Island uses an
interest-weighing approach to choice-of-law issues.17 See
___
____________________
17Generally, the law of the forum governs procedural
matters. See Restatement (Second) Conflict of Laws, 133-35
___
(1971); see also Keeton v. Hustler Magazine, Inc., 465 U.S. 770,
___ ____ ______ ______________________
778 n.10 (1984) ("Under traditional choice-of-law principles, the
law of the forum State governs on matters of procedure."). It is
35
Pardey v. Boulevard Billiard Club, 518 A.2d 1349, 1351 (R.I.
______ ________________________
1986); Brown v. Church of the Holy Name, 252 A.2d 176, 178 (R.I.
_____ _______________________
1969); Woodward v. Stewart, 243 A.2d 917, 923 (R.I.), cert.
________ _______ _____
dismissed, 393 U.S. 957 (1968). The factors to be balanced
_________
include (a) the place of injury; (b) the place where the conduct
causing the injury occurred; (c) the place that the parties call
home (e.g., their domicile, residence, nationality, place of
incorporation, place of business and the like); and (d) the place
where the relationship between the parties was centered. See,
___
e.g., Brown, 252 A.2d at 179. When this basic list of factors
____ _____
proves inconclusive, an inquiring court should make a selection
from amongst the available candidates with an eye on such
prudential principles as predictability of results, maintenance
of interstate and international order, simplification of the
judicial task, advancement of the forum's governmental interests,
and application of the better rule of law. See Woodward, 243
___ ________
A.2d at 923; see also Restatement (Second) Conflict of Laws 6
___ ____
____________________
problematic whether the question here what law should govern
the quantum of proof for establishing fraud? is properly
categorized as one of procedure or of substance. See 1 Wigmore,
___
Evidence 5 at 358 n.11 (Tillers rev. 1983) ("Burdens of proof,
________
sufficiency of evidence . . . and presumptions are sometimes
treated as substantive and sometimes as procedural, with burdens
of proof and those evidentiary rules thought to affect burdens of
proof being most often treated as substantive."). We need not
probe the point too deeply, however, for two reasons. First,
Rhode Island's choice-of-law rules, labels aside, seem to favor
resort to the interest-weighing test even for issues that do not
directly involve standards of conduct. See Montaup Elec. Co. v.
___ _________________
Ohio Brass Corp., 561 F. Supp. 740, 744 (D.R.I. 1983); Brown v.
_________________ _____
Church of the Holy Name, 252 A.2d 176, 181 n.10 (R.I. 1969).
_________________________
Second, Pateman has not argued that the quantum of proof issue
should be treated as procedural for choice-of-law purposes.
36
(1971).
In applying Rhode Island's choice-of-law rules to the
case at hand, it is important to understand the principle of
depecage. In legal parlance, depecage erects the framework under
which different issues in a single case, arising out of a common
nucleus of operative facts, may be decided according to the
substantive law of different states. See Hutner v. Greene, 734
___ ______ ______
F.2d 896, 901 (2d Cir. 1984); Broome v. Antlers' Hunting Club,
______ ______________________
595 F.2d 921, 923 n.5 (3d Cir. 1979); E. Scoles & P. Hay,
Conflict of Laws 40, 75 (1984); R. Leflar, American Conflicts Law
________________ ______________________
221 (3d ed. 1977). Although the Rhode Island Supreme Court has
yet to pledge express allegiance to the principle of depecage,
the court's decisions make it clear that Rhode Island, like most
other jurisdictions, adheres to the principle in the tort
context. In Woodward, for example, the court held that
________
Massachusetts law governed some issues, while Rhode Island law
governed others. See Woodward, 243 A.2d at 923-24. To like
___ ________
effect, in Busby v. Perini Corp., 290 A.2d 210 (R.I. 1972), the
_____ _____________
court stated that it intended to "pass on the rights and
liabilities of the parties with respect to an issue in tort in
__ _____
accordance with the local law of the state which, with respect to
_______________
that issue, had the most significant relationship to the
____________
occurrence and the parties." Id. at 212 (emphasis supplied).
___
Moreover, the very section of the Restatement which the state
supreme court chose to follow in Busby endorses the use of
_____
37
depecage in resolving conflicts in tort cases. See Restatement
___
(Second) Conflict of Laws 145; see also id., comment on
___ ____ ___
subsection (1)(d) ("Each issue is to receive separate
consideration if it is one which would be resolved differently
under the local law rule of two or more of the potentially
interested states.").
Therefore, as a matter of methodology, we must apply
Rhode Island's interest-weighing approach to the specific issue
raised by Frenkel on appeal.
2. Scope of Application. Frenkel's ground of appeal
2. Scope of Application.
_____________________
does not affect Putnam's appeal for at least four reasons.
i. The law is clear that consolidated suits retain
i.
their separate identities in a federal court. See General
___ _______
Contracting & Trading Co. v. Interpole, Inc., 940 F.2d 20, 24
__________________________ _______________
(1st Cir. 1991) (listing other precedents). Thus, even though
the two underlying cases (Putnam v. Pateman; Pateman v. Frenkel)
were tried together, they evoked different choice-of-law rules.
Since Putnam's suit was initiated in Connecticut and transferred
to Rhode Island, Connecticut's choice-of-law rules, rather than
Rhode Island's, applied therein. See Ferens v. John Deere Co.,
___ ______ ______________
494 U.S. 516, 523 (1990) (transferee court must "apply the law of
the transferor court, regardless of who initiates the transfer").
ii. The issues, though superficially similar, were
ii.
actually different. As between Putnam and Pateman, the parties'
claims were ex contractu, pitting an insured against its insurer,
__ _________
and vice versa. As between Pateman and Frenkel, the cause of
38
action was ex delicto, pitting an insurer against a putative
__ _______
tortfeasor (the insured's broker). Moreover, a jury could
conceivably find that the relevant knowledge possessed by Putnam
and Frenkel, respectively, merited different rankings on a
fact/opinion continuum. These distinctions are significant for
choice-of-law purposes, compare, e.g., A.C. Beals Co. v. Rhode
_______ ____ ______________ _____
Island Hospital, 292 A.2d 865, 871 (R.I. 1972) (outlining Rhode
_______________
Island's choice-of-law rules for contract cases) with, e.g.,
____ ____
Brown, 252 A.2d at 178 (outlining Rhode Island's choice-of-law
_____
rules for tort cases), for purposes of applying the principle of
depecage, and for purposes of determining which component of the
chosen state's substantive law should govern, see infra Part
___ _____
IV(C).
iii. Putnam conceded below that a preponderance
iii.
standard should be used. Indeed, its trial counsel cursorily
dismissed New York as a choice-of-law candidate, describing that
state as "just a pismire" in respect to the genesis of the
litigation. R.A. 2524a. A party is, of course, "bound by a
plausible choice of law which it successfully urged the trial
court to follow." Borden, 935 F.2d at 375.
______
iv. Putnam never argued on appeal for a clear and
iv.
convincing standard, thereby forfeiting the contest. See Ryan v.
___ ____
Royal Ins. Co., 916 F.2d 731, 734 (1st Cir. 1990) (points neither
______________
briefed nor argued are waived); United States v. Zannino, 895
_____________ _______
F.2d 1, 17 (1st Cir.) (same), cert. denied, 110 S. Ct. 1814
_____ ______
(1990).
39
For these reasons, then, the discussion that follows
pertains solely to the choice of law that should have been made,
and the substantive rule of law that should have been applied,
with respect to Pateman's nondisclosure claim against Frenkel.
3. Standard of Review. The court of appeals affords
3. Standard of Review.
___________________
plenary review to a trial court's choice-of-law determinations.
See 1 S. Childress & M. Davis, Standards of Review 4.13 (1986);
___ ___________________
see, e.g., Quintero v. Klaveness Ship Lines, 914 F.2d 717, 722
___ ____ ________ _____________________
n.3 (5th Cir. 1990), cert. denied, 111 S. Ct. 1322 (1991); Kukias
_____ ______ ______
v. Chandris Lines, Inc., 839 F.2d 860, 861 (1st Cir. 1988). In
____________________
this instance, we assume, as the parties suggest, that the court
below chose to apply Rhode Island jurisprudence although, as we
previously remarked, see supra note 16, it is problematic whether
___ _____
the court actually made a state-specific choice of law on the
issue in question.18
4. Implementing the Methodology. Prospecting in the
4. Implementing the Methodology.
_____________________________
record for the nuggets of information valued by the forum's law
is tedious work. As between Pateman and Frenkel, the place of
____________________
18At the very least, the district court was leaning in the
direction of the forum. On several occasions the court stated
that the Rhode Island judiciary had historically taken an
expansive view of when Rhode Island's substantive law would
apply. See, e.g., R.A. 2502a (at which point the judge ruminated
___ ____
that, under Rhode Island's conflicts rule, if a case "has
anything to do with the State of Rhode Island, Rhode Island law
applies"). Moreover, the district court was obviously skeptical
of New York's connection to the case as a whole. See, e.g., R.A.
___ ____
2499a ("As far as I can see, the only real significance and
contact in this case with New York is that the lawyers are from
New York.").
40
injury was London; that is where Frenkel's misrepresentations
were passed on by Minet, where the policy was authorized, where
Putnam's claim was lodged, and where the advance payment
originated.19 The conduct giving rise to the particular injury
of which Pateman complained in the suit against Frenkel occurred
principally in New York. Frenkel's solicitation for insurance,
its representations concerning Putnam, and the form on which the
insurance was written all emanated from New York. The parties'
places of business were (and are) in London (Pateman) and New
York (Frenkel), respectively. The communications that trailed in
the wake of the claim, when Pateman sought an explanation for
Frenkel's withholding of information anent the insured's prior
loss history, were mainly between London and New York. The
policy itself specified that New York's statute of limitations
would be employed to resolve claims. The policy also
contemplated Putnam's continued use of Frenkel, a New York based
concern, as its agent for all communications and transactions
____________________
19None of the parties suggested the use of English law or
gave notice under Fed. R. Civ. P. 44.1 (providing that parties
must give notice of intent to "raise an issue concerning the law
of a foreign country") to that end. Hence, we do not consider
the applicability of English law here. See Clarkson Co. v.
___ ____________
Shaheen, 660 F.2d 506, 512 n.4 (2d Cir. 1981) (where neither
_______
party asserted applicability of foreign law, application of New
York law was not error), cert. denied, 455 U.S. 990 (1982);
_____ ______
Commercial Ins. Co. v. Pacific-Peru Constr. Corp., 558 F.2d 948,
____________________ __________________________
952 (9th Cir. 1977) (since neither party gave notice of intent to
raise issue concerning foreign law, federal court was not under
any obligation to apply it); see also Ruff v. St. Paul Mercury
___ ____ ____ ________________
Ins. Co., 393 F.2d 500, 502 (2d Cir. 1968) (per curiam) (court of
________
appeals could not take judicial notice of foreign law where
plaintiff failed to give written notice to district court that he
intended to rely upon foreign law).
41
with the underwriters.
Whereas New York's connection with the Pateman/Frenkel
dispute is less than pervasive, it is sturdier than Rhode
Island's connection. Other than serving as the forum, Rhode
Island had only two fragile links to the dispute: it was the
place where the supposed theft occurred and where an insured site
was situated. As to the first link, the place of the particular
injury complained of in Pateman's suit against Frenkel was
London, not Rhode Island. As to the second link, while it is
true that, during negotiations for the policy, coverage was
obtained for a site in Cranston, Rhode Island, that location was
more incidental than integral to the risk; as issued, the
insurance policy covered multiple sites in each of five states
(including three locations in New York), single sites in three
other states (including the Cranston facility), and sites in
three foreign countries (including one in England). Thus, Rhode
Island's grip on the Pateman/Frenkel dispute was very weak.
To the extent that uncertainty might remain as to
whether Rhode Island's evanescent contacts with the dispute were
enough to warrant bypassing New York's standard of proof, the
secondary guidelines limned in Woodward, 243 A.2d at 923, erase
________
any lingering doubt. The application of New York law would be
far more predictable to the parties than would application of the
law of whatever state hosted the suit or had the closest
connection with the stolen metal. Interstate order, while not
strongly implicated one way or the other here, would best be
42
maintained by applying New York law inasmuch as the defendant is
a New York firm, neither party maintains a place of business in
Rhode Island, some policy provisions specifically refer to New
York law, and "the negotiations for coverage pirouetted around
New York." Albany Ins. Co. v. Wisniewski, 579 F. Supp. 1004,
_______________ __________
1013 (D.R.I. 1984).20 We believe it self-evident that New York
possesses a much stronger interest than Rhode Island in the
question of how a New York broker negotiates insurance for a
Connecticut partnership in the London market. The remaining
Woodward guidelines are neutral: it is a standoff as to the
________
"better" rule of law; it would be a mug's game to argue that
using either standard would unduly complicate the judicial task;
and Rhode Island's interests would not be advanced in any
discernible way by applying its substantive law, rather than New
York's, to Pateman's claim against Frenkel.
We are also constrained to remark that Pateman, arguing
here for the application of Rhode Island's substantive rule, does
so with the institutional equivalent of a forked tongue. In the
lower court, Pateman laced his submissions with citations to New
York caselaw. On several issues, many of which are now academic,
Pateman insisted that New York was the place most solidly linked
to the claims asserted. See, e.g., R.A. 2497a (Pateman's counsel
___ ____
____________________
20Frenkel relies heavily on Wisniewski in support of the
__________
proposition that New York law applies. Wisniewski, however,
__________
involved a contract dispute, not a cause of action sounding in
tort. See Wisniewski, 579 F. Supp. at 1014. Inasmuch as Rhode
___ __________
Island has developed a rather elaborate analytical apparatus for
dealing with tort choice-of-law issues, we think Wisniewski,
__________
while relevant, has limited applicability.
43
states that "the contract and the contacts both involve [New
York] law"); R.A. 2500a (arguing that, on the issue of bad faith,
the district court "should apply the law of New York, because
that's where the conduct which is complained of occurred").
Although Pateman did not make this precise contention regarding
the deceit claim (he appears to have taken no choice-of-law
position on that claim, leaving Putnam and Frenkel to duke it out
in the district court on the arguably related contract-law issue
of intentional nondisclosure), the fact that he used New York law
and lobbied vigorously for its application on other issues, some
less directly connected to New York than the issue of deceit vel
___
non, comprises a fissilingual factor bearing to some degree upon
___
our determination in this case.21
We have said enough. On this scumbled record, as
between the two potentially interested states, we think that New
York had the more significant relationship to the Pateman/Frenkel
dispute and to the affected parties. In the absence of any
substantial, legitimate interest justifying the application of
Rhode Island's substantive law to this claim, we are of the
opinion that a Rhode Island court, mulling the Brown and Woodward
_____ ________
criteria, would handle the quantum of proof issue by resort to
New York law. It follows, therefore, that the district court
should have done the same.
____________________
21We do not mean to imply that Pateman's lawyer was a cat
amongst pigeons. The able district judge, confronted with a
complicated maze of a case, received little help, and some
hindrance, from trial counsel on all sides.
44
C. What Does New York Law Provide?
C. What Does New York Law Provide?
______________________________
We move next to the question of what New York law
actually provides. We start this section of our analysis from
the premise that, in general, under New York law, a cause of
action in tort, predicated on an intentional, material
misrepresentation, known by the defendant to be false when made
and relied on by the plaintiff to his detriment, is akin to a
claim of intentional fraud, Simcuski v. Saeli, 377 N.E.2d 713,
________ _____
718 (N.Y. 1978), wherein the tort must be proved by clear and
convincing evidence. See id.; see also Leucadia, 864 F.2d at
___ ___ ___ ____ ________
971; Ajax Hardware Mfg. Corp. v. Industrial Plants Corp., 569
_________________________ ________________________
F.2d 181, 186 (2d Cir. 1977); Van Alen v. Dominick & Dominick,
________ ____________________
Inc., 441 F. Supp. 389, 402-03 (S.D.N.Y. 1976), aff'd, 560 F.2d
____ _____
547 (2d Cir. 1977); Rudman v. Cowles Communications, Inc., 280
______ ____________________________
N.E.2d 867, 871 (N.Y. 1972); Jo Ann Homes at Bellmore, Inc. v.
________________________________
Dworetz, 250 N.E.2d 214, 218 (N.Y. 1969); Wayne County Vinegar &
_______ ______________________
Cider Corp. v. Schorr's Famous Pickled Prods., Inc., 460 N.Y.S.2d
___________ ____________________________________
209, 217 & nn. 22-23 (N.Y. Civ. Ct. 1983); 60 N.Y. Jur.2d, Fraud
and Deceit 236, at 799. Pateman does not seriously dispute any
part of this generality.22 Rather, he contends that, although
____________________
22A few New York cases have questioned the need for clear
and convincing evidence in this context. See, e.g., Young v.
___ ____ _____
Hutchinson, 218 N.Y.S.2d 113, 114 (N.Y. App. Div. 1961) (per
__________
curiam) (theorizing that rigorous statements of the fraud/deceit
quantum of proof are merely "expressions of opinion as to 'what
constitutes a preponderance of evidence'") (citation omitted).
The majority view, however, is firmly supportive of the
principle. See Stephenson v. Lord, 421 N.Y.S.2d 730, 731 (N.Y.
___ __________ ____
App. Div. 1979) (per curiam) (acknowledging "previous[] . . .
conflict as to the standard of proof applicable in a fraud
action," citing Young, and concluding nevertheless that the New
_____
45
the verdict below was returned on a theory that Frenkel defrauded
the underwriters by intentionally failing to disclose material
facts to them, proof of deceit was superfluous. Ergo, he
concludes that any error in the court's charge was an
irrelevancy.
Pateman comes at this conclusion from two slightly
different directions, deriving both approaches from the special
nature of marine insurance. First, citing Stecker v. American
_______ ________
Home Fire Assur. Co., 84 N.E.2d 797, 800 (N.Y. 1949), he urges
_____________________
that there was never any need to prove deceit in this sort of
case concealment of material facts in the face of a focused
inquiry was enough to warrant the imposition of tort liability.
Second, citing cases such as Wisniewski, 579 F. Supp. at 1014, he
__________
asserts that, under marine insurance principles, the parties to
an insurance contract must negotiate uberrima fides (sometimes
________ _____
called uberrimae fidei), a standard which absolutely requires
_________ _____
disclosure of material information in negotiating for coverage,
regardless of intent.
We can blunt the force of these contentions without
resolving whether, under a policy of marine insurance, ocean
marine principles apply equally to "wet" and "dry" risks.23
____________________
York courts have since resolved the conflict in favor of a rule
requiring clear and convincing proof). In any event, Pateman has
not challenged the correctness of the general principle, instead
styling it as "academic."
23The court below ruled that, although the Lloyd's policy
was written on a marine form, the risk at issue was "a non-marine
risk." R.A. 2314a. Citing Stecker, 84 N.E.2d at 799, and Blair
_______ _____
v. National Security Ins. Co., 126 F.2d 955 (3d Cir. 1942),
___________________________
46
Assuming, arguendo, that such principles can sometimes apply to
________
"dry" risks, they do not apply here. To begin with, uberrima
________
fides cannot carry the day because the district court, although
_____
solicited by Pateman, did not charge the jury on this theory. We
do not think that a verdict returned under an erroneous theory of
liability can be left intact on a different, uncharged theory
unless the jury's factfinding necessarily embodied each of the
elements required to support a verdict under the uncharged
theory. Cf., e.g., Chiarella v. United States, 445 U.S. 222, 236
___ ____ _________ _____________
(1980) (rejecting alternative theory proffered by government to
support criminal conviction in light of fact that alternative
theory had not been submitted to the jury). Such cases, we
suspect, will be few and far between. This is not one of them.
Beyond that observation, we think Pateman's dual
approaches to the irrelevancy of the lower court's error share
common flaws. First and foremost, the approaches are allogamous:
the two lines of authority to which Pateman clings are contract-
oriented, not tort-oriented. It is undeniable that Stecker a
_______
case much debated, upon which both sides rely, and enigmatic in
the bargain arose out of an insured's suit to recover on the
policy. See Stecker, 84 N.E.2d at 798. By the same token,
___ _______
uberrima fides is by its terms a doctrine that requires a
________ _____
prospective insured, when seeking marine coverage, to disclose
____________________
Frenkel asserts that ordinary marine rules would, therefore, not
be in vogue, since the risk itself was other than maritime, that
is, the risk did not involve vessels or perils of the sea.
Pateman disagrees. We leave the disagreement unattended.
47
all known circumstances materially affecting the risk. See
___
Ingersoll Milling Machine Co. v. M/V Bodena, 829 F.2d 293 (2d
______________________________ __________
Cir. 1987), cert. denied, 484 U.S. 1042 (1988); Wisniewski, 579
_____ ______ __________
F. Supp. at 1014; see also 9 Couch, Couch on Insurance 2d 38.76
___ ____ _____________________
(1985) ("Good faith and the requirements of the contract of
[marine] insurance obligate the insured to make a specific and
full disclosure of all material facts of which he has, or ought
to have knowledge . . . to the insurer."); 2 J. Arnould, Law of
______
Marine Insurance and Average (10 British Shipping Laws) 550
______________________________ ______________________
(1961) (in marine insurance, the uberrima fides doctrine provides
________ _____
that "non-disclosure or misrepresentation by the assured . . .
will give [the underwriter] the right to avoid the policy"). For
almost two centuries, it has been thought that the contractual
relationship animates the duty. See, e.g., M'Lanahan v.
___ ____ _________
Universal Ins. Co., 26 U.S. (1 Pet.) 170, 185 (1828) ("The
___________________
contract of [marine] insurance has been said to be a contract
uberrimae fidei . . . ."). Hence, under the doctrine's
_________ _____
operation, "the parties to a marine insurance policy must accord
each other the highest degree of good faith." Knight v. United
______ ______
States Fire Ins. Co., 804 F.2d 9, 13 (2d Cir. 1986), cert.
______________________ _____
denied, 480 U.S. 392 (1987); accord Puritan Ins. Co. v. Eagle
______ ______ _________________ _____
S.S. Co., 779 F.2d 866, 870 (2d Cir. 1985). Uberrima fides
_________ ________ _____
characterizes the relationship of the contracting parties inter
_____
sese. It does not concern strangers to the policy. Not
____
surprisingly, then, the cases in which the doctrine has been
employed are by and large cases which utilize a principle of
48
utmost good faith when assessing whether a given condition or set
of facts justifies an insurer's avoidance of a marine insurance
policy in order to prevent an undeserving insured from collecting
under a previously issued policy. See, e.g., Wisniewski, 579 F.
___ ____ __________
Supp. at 1012 (describing insurers' contentions).24
Pateman's action against Frenkel was rigged for a
considerably different voyage. Frenkel, as an agent for a
disclosed principal, had neither an entitlement to the benefits
of the insurance contract nor any responsibility for its burdens.
See Restatement (Second) Agency 320 (1958). The action against
___
Frenkel was not founded upon the policy. The action was not a
contest between insured and insurer. To the contrary, Pateman's
suit sounded in tort, charging deceitful misconduct attributable
to one not a party to the insurance contract or otherwise
specially beholden to the carrier. We do not think that the
cases cited by Pateman can be extended to encompass the present
situation, where an insurer seeks to recover damages from the
____________________
24All the cases upon which Pateman relies deal with the
question of avoidance of a policy by an insurer vis-a-vis the
insured. See, e.g., Reliance Ins. Co. v. McGrath, 671 F. Supp.
___ ____ _________________ _______
669 (N.D. Cal. 1987); Thebes Shipping, Inc. v. Assicurazioni
_______________________ _____________
Ausonia, SPA, 599 F. Supp. 405 (S.D.N.Y. 1984); Mur-Joe Distrib.,
____________ _________________
Inc. v. Reliance Ins. Co., 1989 A.M.C. 2015 (N.Y. Sup. Ct. 1989);
____ _________________
Scarburgh Co. v. American Mfrs. Mut. Ins. Co., 435 N.Y.S.2d 997
_____________ ____________________________
(N.Y. Sup. Ct. 1979), aff'd, 439 N.Y.S.2d 298 (N.Y. App. Div.),
_____
appeal dismissed and denied, 425 N.E.2d 889, 900 (N.Y. 1981).
______ _________ ___ ______
Royal Ins. Co. v. Cathy Daniels, Ltd., 684 F. Supp. 786 (S.D.N.Y.
______________ ___________________
1988), is cut from the same cloth, see, e.g., id. at 791-92, with
___ ____ ___
the added wrinkle that the insured was allowed to recover for the
errors and omissions of its own insurance agent (which led to the
voiding of the policy). Id. at 792. This last holding offers no
___
solace to Pateman, a suitor seeking to impose tort liability not
on his own representative (who would owe him a fiduciary duty),
but on the insured's representative (who would not).
49
insured's broker for nondisclosure or misrepresentation of
material facts. We hold that the Stecker and uberrima fides
_______ ________ _____
doctrines, as thus far articulated by the New York courts, are
limited to contract-based controversies between insurer and
insured.25
To be sure, apart from rules which apply to parties in
privity of contract, there is arguably some support in New York
jurisprudence for relaxing the intent-to-deceive requirement in
certain tort cases of a particularly egregious stripe.26 But,
____________________
25Pateman's effort to cram this square peg of a diversity
case into a round state-law hole is particularly disconcerting
under the circumstances at bar. It was Pateman which chose a
federal forum, electing to bring suit against Frenkel in Rhode
Island's federal district court instead of suing in a New York
state court. We are reminded once again "that litigants who
reject a state forum in order to bring suit in federal court
under diversity jurisdiction cannot expect that new [state-law]
trails will be blazed." Ryan, 916 F.2d at 744. Accord Porter v.
____ ______ ______
Nutter, 913 F.2d 37, 40-41 (1st Cir. 1990); Croteau v. Olin
______ _______ ____
Corp., 884 F.2d 45, 46 (1st Cir. 1989); Cantwell v. Univ. of
_____ ________ ________
Mass., 551 F.2d 879, 880 (1st Cir. 1977).
_____
26It has been said, for instance, that:
The charge of fraudulent intent, in an action
for deceit, may be maintained by proof of a
statement made as of the party's own
knowledge, which is false; provided the thing
stated is not merely a matter of opinion,
estimate, or judgment, but is susceptible of
actual knowledge; and in such case it is not
necessary to make any further proof of an
actual intent to deceive. The fraud consists
in stating that the party knows the thing to
exist when he does not know it to exist; and,
if he does not know it to exist, he must
ordinarily be deemed to know that he does
not.
Church v. Wickwire, 247 N.Y.S. 100, 107 (N.Y. App. Div. 1931)
______ ________
(quoting Chatham Furnace Co. v. Moffatt, 18 N.E. 168, 169 (Mass.
___________________ _______
1988)).
50
given the setting in which these appeals arise, arguing about the
necessity of demonstrating duplicitous intent on Frenkel's part
strikes us as a rather rufescent herring. The court below
charged the jury, "if you determine by a preponderance of the
evidence that Frenkel, in obtaining the contract of insurance,
withheld or failed to disclose fully material facts with intent
to deceive Pateman, you must find for Pateman on its claim
against Frenkel." R.A. 2479a. The court directed the talesmen
to apply the preponderance standard to all the elements of the
___
fraudulent concealment claim. This use of a lesser standard of
proof was itself erroneous, wholly apart from the court's
instructions on intent to deceive. We explain briefly.
Under New York law, even if, as Pateman urges, the
intent-to-deceive component was surplusage a thesis on which we
take no view it was nonetheless essential for Pateman to prove
each of the remaining elements of the tort, i.e., that Frenkel
(1) intentionally withheld or failed fully to disclose (2) facts
(3) material to the risk (4) with the result that Pateman relied
thereon (5) to his detriment. See Van Alen, 441 F. Supp. at 403
___ ________
(outlining elements of common-law fraudulent concealment claim;
applying New York law); Chopp v. Welbourne & Purdy Agency, Inc.,
_____ ______________________________
522 N.Y.S.2d 367, 368 (N.Y. App. Div. 1987) (similar). And, each
of these elements had to be proven clearly and convincingly. See
___
Chopp, 522 N.Y.S.2d at 368; Orbit Holding Corp. v. Anthony Hotel
_____ ___________________ _____________
Corp., 503 N.Y.S.2d 780, 782 (N.Y. App. Div. 1986) (per curiam);
_____
Wayne County Vinegar, 460 N.Y.S.2d at 217; see also Van Alen, 441
____________________ ___ ____ ________
51
F. Supp. at 403 (evidence of fraud must be "clear and convincing"
and the inference of fraud must be "unequivocal"); Pittsburgh
__________
Coke & Chem. Co. v. Bollo, 421 F. Supp. 908, 924 (E.D.N.Y. 1976)
________________ _____
(same), aff'd, 560 F.2d 1089 (2d Cir. 1977); cf. Ratay v. Lincoln
_____ ___ _____ _______
Nat. Life Ins. Co., 378 F.2d 209, 212 (3d Cir.) (in suit to
___________________
recover on insurance policy, district court committed plain
error, requiring retrial, when court instructed jury that the
elements of the insurer's fraud defense needed to be proven only
by a "fair preponderance of the credible evidence") (construing
Pennsylvania law), cert. denied, 389 U.S. 973 (1967). Inasmuch
_____ ______
as the jury in this case was allowed to find all the essential
___
elements of Pateman's claim by a mere preponderance of the
evidence, a mistake was made.
D. Harmlessness.
D. Harmlessness.
____________
We shall not tarry over Pateman's importuning that any
errors in the charge were benign. As a general proposition, we
are confident that application of the wrong standard of proof, if
the variance was substantial and worked to the detriment of the
losing party, will ordinarily require retrial. See Gardner v.
___ _______
Wilkinson, 643 F.2d 1135, 1137 (5th Cir. Unit A 1981)
_________
(misstatement of burden of proof is reversible error if harmful
to losing party); Loeb v. Textron, Inc., 600 F.2d 1003, 1012 (1st
____ _____________
Cir. 1979) (similar); Barr Rubber Prods. Co. v. Sun Rubber Co.,
______________________ ______________
425 F.2d 1114, 1120-21 (2d Cir.) (similar), cert. denied, 400
_____ ______
U.S. 878 (1970); see generally Allen v. Chance Mfg. Co., 873 F.2d
___ _________ _____ _______________
52
465, 469 (1st Cir. 1989) (an erroneous jury instruction
necessitates a new trial "if the error could have affected the
result of the jury's deliberations"); cf. Mix v. Neff, 473
___ ___ ____
N.Y.S.2d 31, 34 (N.Y. App. Div. 1984) (new trial not necessary on
deceit claim where jury was erroneously instructed to decide
issue on "fair preponderance" rather than "clear and convincing"
quantum of proof because error favored appellant and was,
therefore, harmless). So here. Whether or not intent to deceive
was a necessary element of Pateman's nondisclosure claim against
Frenkel, New York law, properly construed, required Pateman to
prove all the elements of the tort by clear and convincing
evidence.
In sum, the district court erred in charging the jury
on the quantum of proof applicable to Pateman's tort claim
against Frenkel. A preserved instructional error requires a new
trial if, on the record as a whole, a reviewing court cannot say
with fair assurance that the judgment was likely unaffected. See
___
Gardner, 643 F.2d at 1137; see also Jerlyn Yacht Sales, Inc. v.
_______ ___ ____ ________________________
Roman Yacht Brokerage, ___ F.2d ___, ___ (1st Cir. 1991) [No. 90-
_____________________
1836, slip op. at 22] (applying standard). Here, the error had
more than a merely theoretical impact.27 The case was hotly
____________________
27We cite but one illustration of the point. The record
reveals that a central feature, if not the very linchpin, of
Frenkel's defense was its claim that the two undisclosed
incidents were immaterial to Pateman's acceptance of the risk.
See, e.g., R.A. 2413a-14a (jury summation of Frenkel's trial
___ ____
counsel). Materiality is one element of the charged tort that a
jury, on this record, could have decided either way. Pateman
should have been required to prove materiality by clear and
convincing evidence. No such requirement was imposed.
53
contested and, until the jury spoke, the outcome was problematic.
Thus, the failure of the district court to instruct the jury on
the proper quantum of proof may well have swayed the outcome.
The error, then, was not harmless. Frenkel, having requested a
more befitting instruction and taken a timeous objection to the
charge as framed, has standing to complain. Accordingly, the
judgment against Frenkel cannot stand.
V. CONCLUSION
V. CONCLUSION
In this bitterly disputed case, the parties' relentless
pursuit of gold (or its cash equivalent) has taken the district
court, and this court, through a myriad of issues some genuine,
some inaurate. Happily, having reached this juncture, we need go
no further.28
To sum up, our assay reveals that Putnam's arguments,
though ably made by distinguished appellate counsel, consist more
of dross than of gold. As between Putnam and Pateman, the jury
verdict was free from cognizable error and was dispositive of
both the complaint and the counterclaim. Consequently, the
judgment entered by the district court was lawful. Frenkel, on
the other hand, has mined a more enriching vein. The verdict
____________________
28Frenkel having prevailed on its appeal, nothing would be
gained by running the gauntlet of its asseverational array.
Frenkel's sufficiency-of-the-evidence arguments fail for
essentially the same reasons that Putnam's parallel arguments
failed. See supra Part III(A); see also supra note 15. Its
___ _____ ___ ____ _____
arguments based on Fed. R. Civ. P. 9(b) are, in a word, jejune.
And its remaining theses, to the extent preserved, are rendered
moot by our order granting it a new trial. Those points will
arise afresh, if at all, on a different record and in a divergent
procedural posture. It would, therefore, be idle for us to
comment on them.
54
Pateman obtained against it was seriously tarnished by the
incidence of instructional error. Consequently, the judgment
entered below in Pateman's suit against Frenkel must be vacated
and the case remanded for a new trial.29
In No. 91-1307, the appeal is rejected and the
In No. 91-1307, the appeal is rejected and the
_______________________________________________________
underlying judgment is affirmed. In No. 91-1308, the appeal is
underlying judgment is affirmed. In No. 91-1308, the appeal is
________________________________ ______________________________
sustained in relevant part, the underlying judgment is vacated,
sustained in relevant part, the underlying judgment is vacated,
_________________________________________________________________
and the case is remanded to the district court for retrial.
and the case is remanded to the district court for retrial.
________________________________________________________________
Costs in favor of the appellees in No. 91-1307 and the appellant
Costs in favor of the appellees in No. 91-1307 and the appellant
_________________________________________________________________
in No. 91-1308.
in No. 91-1308.
______________
____________________
29The fact that we remand for a new trial does not in any
way suggest that Pateman, if he recovers in full on the verdict
against Putnam, can effect a duplicative recovery against
Frenkel. Where compensatory damages are awarded to redress a
particular loss, the injured party is entitled to satisfaction in
full, but no more, regardless of the number of defendants found
liable or the number of legal theories advanced.
55
APPENDIX
________
JURY INTERROGATORIES AND ANSWERS
JURY VERDICT FORM QUESTIONS
_____________________________
YOU MUST RENDER YOUR VERDICT ON THIS FORM. YOU MUST
ANSWER THE QUESTIONS IN ORDER.
1. DO YOU FIND DEFENDANT PATEMAN LIABLE TO PLAINTIFF PUTNAM?
__________YES __________NO
(IF YOU HAVE ANSWERED "YES," PROCEED TO QUESTION 2.)
(IF YOU HAVE ANSWERED "NO," PROCEED TO QUESTION 4.)
2. WHAT IS THE TOTAL AMOUNT YOU FIND PATEMAN LIABLE TO PUTNAM,
WITHOUT INCLUDING ANY AMOUNT ALREADY PAID TO PUTNAM?
$__________
3. DO YOU FIND DEFENDANT PATEMAN LIABLE FOR SUE AND LABOR
EXPENSES?
__________YES __________NO
IF YOUR ANSWER IS YES, WHAT IS THE AMOUNT OF YOUR AWARD?
$__________
4. IF YOU FIND THE DEFENDANT PATEMAN NOT LIABLE TO PLAINTIFF
PUTNAM, PLEASE STATE THE REASON OR REASONS:
a. _____ PLAINTIFF PUTNAM HAS FAILED TO CARRY ITS
BURDEN OF PROOF.
b. _____ DEFENDANT PATEMAN HAS PROVEN ITS DEFENSE OF
THE INFIDELITY EXCLUSION.
c. _____ DEFENDANT PATEMAN HAS PROVEN ITS DEFENSE OF
NON-DISCLOSURE OF A MATERIAL FACT.
IF YOU HAVE ANSWERED "NO" TO QUESTION 1, AND HAVE CHECKED
"C" TO QUESTION 4, YOU SHOULD PROCEED TO QUESTIONS 5 AND 6.
56
5. WE THE JURY, AS TO THE ISSUE OF PLAINTIFF PATEMAN'S CLAIM
AGAINST DEFENDANT FRENKEL, FIND
__________LIABILITY __________NO LIABILITY
(IF YOU HAVE ANSWERED "NO LIABILITY," GO NO FURTHER.)
(IF YOU HAVE ANSWERED "LIABILITY," PROCEED TO QUESTION 6.)
6. WE THE JURY FIND DEFENDANT FRENKEL LIABLE TO PLAINTIFF
PATEMAN IN THE AMOUNT OF $_________________________.
_______________________________
FOREPERSON SIGNATURE
_______________________________
DATE
57