USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________

Nos.

95-1061
95-1145
95-1570
95-1648

CIGNA FIRE UNDERWRITERS COMPANY, ET AL.,

Plaintiffs, Appellees, Cross-Appellants,

v.

MACDONALD & JOHNSON, INC.,

Defendant, Appellant, Cross-Appellee.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Frank H. Freedman, Senior U.S. District Judge]

__________________________
____________________

Before

Selya, Circuit Judge,

_____________
Bownes, Senior Circuit Judge,
____________________
and Boudin, Circuit Judge.
_____________

____________________

John B. Stewart, with whom Edward V. Leja and Moriarty, Donog

_______________
_______________
________________
& Leja, P.C. were on brief for CIGNA Fire Insurance, et al.
____________
F. Michael Joseph,
__________________

with whom

Joseph, St. Clair & Cava was

__________________________

brief for MacDonald & Johnson, Inc.

____________________

June 28, 1996

____________________

BOWNES,

Senior

Circuit

Judge.

Before

us

are

BOWNES,

appeals

Senior Circuit Judge.

______________________

by both parties after

Insurance

Company

conglomerate.

insurance

insurance.

failure

to

brought

contract;

("CIGNA")

MacDonald &

independent

two jury trials.

agent

is

Johnson,

large

Inc.,

insurance

("M&J") is

an

that sold,

inter alia, CIGNA

___________

CIGNA sued M&J

for breach of

contract alleging

remit insurance

premiums due

counterclaim against

intentional

CIGNA

interference

relations; intentional interference

violation of Mass. Gen. L. ch. 93A,

After a four-day trial,

verdicts:

CIGNA Fire

it

by M&J.

alleging:

with

M&J

breach of

contractual

with economic gain;

and

11, and 93A generally.

the jury returned

special

Judgment for the defendant on plaintiffs'

claim of breach of contract.

Judgment

for

plaintiffs

the defendant

on its

breach of contract

against the

counterclaim alleging
with damages

awarded

in the amount of $780,000.00.

Judgment

for

plaintiffs

against the

on its

counterclaim alleging

with

contractual relations

interference
with

the defendant

damages awarded

in

the amount

of

$500,000.00.

Adding

interest,

$1,544,106.73.

the

total

award

The

district court

to

found

M&J

for

came

to

CIGNA on

M&J's claimed violations of Mass. Gen. L. ch. 93A.

After a

hearing, the district court

jury verdict and ordered a new trial.

-22

set aside the

After another four-day trial the

in

favor of

M&J and

$250,000.00. Judgment

$321,333.28.

based on a

breached

awarded it

damages

for M&J, including

second jury found

in the

amount of

interest, came

Early in the second trial, the district

stipulation by

its contract

CIGNA was $169,798.14.

with

the parties, ruled

CIGNA and

judge,

that M&J

that the

to

had

amount due

Adding interest to this resulted in a

judgment

for CIGNA

in the

sum of

$219,888.60.

The judge

denied both parties' post-trial motions.

Before starting our exposition of the evidence

analysis

of the issues, we state the standard of review that

controls our

set aside

and

assessment of the district

the jury

verdicts and

court's decision to

order a new

trial in

first case and decline to do so the second time around.

R. Civ. P. 59(a) provides in pertinent part:

(a)
(a)

Grounds.
Grounds.

granted to all or
on

all or part

new

trial may

be

any of the parties and

of the issues

(1) in an

action in which there has been a trial by

jury,

for any

new trials have

in actions

of the reasons
heretofore been

at law

United States;

for which

in the courts

granted
of the

the

Fed.

The Court has

described the scope

of the rule

follows:

The motion for a new trial may invoke the

discretion of

the court in so

far as it

is bottomed on the claim that the verdict

is

against the

weight of

the evidence,

that the damages are excessive,

or that,

for other reasons, the trial was not fair

to

the

party

moving;

-33

and

may

raise

as

questions of law
substantial

arising out of

errors

in

rejection of evidence or

alleged

admission

or

instructions to

the jury.

Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940).
_______________________________

First Circuit precedent is clear.

district

court

may

set

aside

jury's verdict and order a new trial only

if the verdict is so clearly against
weight of the evidence
manifest

miscarriage

as to amount to a
of justice.

e.g., Lama v. Borras, 16

____ _______________
(1st Cir. 1994).
to

disturb a

the

F.3d 473,

See,
___
477

A trial judge's refusal

jury

verdict is

reversed

only for abuse of discretion.

Federico v. Order of Saint Benedict in Rhode Island, 64 F.3d

____________________________________________________

1, 5

(1st Cir. 1995).

See also Fleet Nat'l Bank v. Anchor

___ ____ ___________________________

Media Television, Inc., 45 F.3d 546, 552 (1st Cir. 1995).

______________________

There can

understood

verdict

the

and

be no doubt that the district court here

constraints applicable

ordering a

new trial.

to

setting aside

The new

trial ruling

states, inter alia:

_____ ____

A jury verdict may not be set aside as

matter of law under Fed. R. Civ. P. 50(b)

except

on

"determination

evidence could lead

a reasonable

to only one conclusion."

___________________
Aponte,
______

1 F.3d

(quoting

that

62, 66

the

person

Acevedo-Diaz v.
_______________
(1st Cir.

Hiraldo-Cancel v. Aponte,
_________________________

F.2d 10, 12 n.2 (1st Cir. 1991)).

I.
I.

ISSUES COMMON TO BOTH TRIALS

ISSUES COMMON TO BOTH TRIALS
____________________________

1993)
925

The evidence adduced at both trials was essentially

the same.

CIGNA has raised two issues on appeal which are

-44

common to both trials:

(1)

Whether the district court

erred in refusing

to grant its motions for judgment as a matter of law on M&J's

breach of contract claim at the conclusion of both trials.

(2)

that M&J's

Whether

the district

claims "were not

court erred

barred or

in ruling

diminished" for

its

failure to exhaust its administrative remedies provided under

Mass. Gen. L. ch. 175,

163.

Submission of M&J's Breach of

Submission of M&J's Breach of
_____________________________
Contract Claim to the Jury
Contract Claim to the Jury
__________________________

The

question,

sufficient evidence for

decided by

the

substantially

follows.

the

M&J

course, is

whether

there

was

M&J's breach of contract claim to be

juries.

Frank

testified that

of

The

same for

Lombard,

relevant evidence

both

trials

president

encountered serious

which

is summarized

and

owner

financial

of

was

as

M&J,

problems

when

the Bank of New England collapsed causing M&J's line of

credit

it

to terminate on May 30, 1991.

was usual for M&J,

bank

loans

to meet

Lombard testified that

and other insurance

its

premium

obligations to

companies for premiums owed by the insureds.

the

bank,

agencies, to use

insurance

In other words,

agency would carry its clients by borrowing money from a

pay the premiums due the company and wait for payments

from the clients.

stripped

The collapse of

M&J of any

other insurance

cash reserves.

the Bank of New

Lombard testified that

companies with whom M&J

-55

England

did business agreed

to accept monthly

installment premium

payments or

extended

the due date for the payment of premiums.

Another

factor that

impacted

on M&J's

financial

condition was the loss of its biggest insurance account, F.L.

Roberts Co.

("Roberts").

Premiums on

this account amounted

to between $800,000.00 and $1,000,000.00 a year.

large wholesaler

and retailer

operator of service stations and

England.

of petroleum

Roberts was

products and

car washes in southern

New

The

events.

evidence discloses

sequence of

Lombard was an insurance consultant for Roberts, not

an agent, from 1979 through 1986.

not

the following

have a carrier for 1987.

In late

1986, Roberts did

Lombard suggested that Roberts

try to obtain insurance coverage for a three-year period with

the

premiums being determined on the

expenses

and

Roberts' losses.

basis of the carrier's

Under such

insured, who paid a deposit premium initially,

refunds by the carrier

vice versa.

would

at the end

The amount

be determined each

program the

might be owed

of the insurance year

due either the

year.

carrier or

In January

or

Roberts

of 1987, such a

program was entered into between

Roberts and CIGNA for three

years with M&J

The amount

acting as agent.

of premiums due

would

July or

be determined in September

August of 1990

1988, 1989, and

Lombard calculated

Roberts $200,000.00 under the program.

1990.

that CIGNA

In

owed

He contacted CIGNA on

-66

September 30,

Lombard

1990, and was told that it would look into it.

called the CIGNA department in charge of the program

and was reprimanded

for doing so.

go into effect in January of 1991.

by

CIGNA from

Roberts

Lombard that it would

credited with

worked in

not

the $200,000.00

not part

because she

collect it.

of

Roberts

refund.

Laurie

risk division of

surcharge of $56,000.00.

was

The down payment required

informed

not pay the $250,000.00 unless

owed Roberts money

pay it

program was set to

was $250,000.00.

the special

that CIGNA

A new

Scanlan, who

CIGNA, acknowledged

under the program,

asserted that

it was

but would

Roberts also

owed a

Lombard told Scanlan the surcharge

the insurance

program.

She told

him to

He refused.

An inter-office CIGNA memo states its position:

Per

our

discussion,

the

strategy will be utilized in

following
solving the

F.L. Roberts FVC surcharge dispute.

Number one, Insured Meeting.

meeting

Set up a

with F.L. Roberts and invite the

agent.

Number two, Program

the

need

terms.
and

for

the

surcharge

Provide the

'90 years

Intent.
in

vague

proposal for the '89

to

document

surcharge, in parentheses,
FVC not mentioned.

the
'87 and

stated
'88:

Close parentheses.

Number 3, CIGNA's Needs.

collect the

Discuss

surcharge,

If we cannot

we cannot

be

market for such coverages.

Number 4, Payment

Intentions.

After

discuss needs for surcharge, determine if

-77

F.L. Roberts is

willing to

pay the

FVC

surcharge.

Number five, Refusal to Pay.

Legally,

we cannot enforce the payment of the

surcharge.

Therefore,

refuse

pay.

to

But

back-off if
we

should

FVC
they
then

seriously consider non-renewal.

Hopefully, we can satisfy

and

collect the

time.

M&J

surcharge

our insured
at the

same

Good luck.

expected a

Roberts insurance

program.

proposal from

CIGNA for

Scanlan was supposed

the 1992

to work up

the

figures.

Lombard

December 16, stating

terms

unless

letter further

notices

received a

that CIGNA would not

CIGNA was

stated

letter

paid the

that CIGNA

the next day, but

1991

CIGNA

as per the

a statement by CIGNA

$28,903.58

as of

premiums due.

if Roberts paid

letter.

Lombard

The

cancellation

CIGNA within ten

Roberts' insurance was

immediately faxed to

showing a credit

December 20, 1991.

on

negotiate renewal

would issue

days, the notices would be rescinded.

cancelled

from Scanlan

due Roberts of

After the

fax, CIGNA

reinstated Roberts' insurance.

CIGNA sent

about

a renewal

proposal for 1992

$500,000.00 more than the

given until noon the next day to

the proposal totally unacceptable.

prior program.

that cost

Lombard was

make up his mind.

He found

Lombard tried to work out

an alternative program

Joann White

with CIGNA.

of CIGNA, he issued

January 1, 1992.

With the permission

of

temporary binders effective

Scanlan notified Roberts that the temporary

-88

policies

Scanlan

were

not valid.

Lombard

received a

letter from

that a new agent, Palmer Goodell Insurance, would be

Roberts' new broker unless

the

close of business on

was

received.

M&J's

Lombard was notified otherwise by

January 17.

commissions

No such notification

on

the Roberts

account

amounted to about $80,000.00 per year.

The

third

unexecuted promissory

financial

to

pay

of the

notes

the

premiums

evidence

from M&J

problems increased, it

installments.

would

aspect

due

in

CIGNA told M&J

involved

to CIGNA.

As

two

M&J's

approached CIGNA and asked

twelve

regular

in September of

monthly

1991 that it

draw up a promissory note providing for payment of the

past due premiums in regular monthly installments.

The

note

was brought to Lombard by Charles Glaser on February 6, 1992.

Lombard approved it orally,

but did not sign it

word "draft" was written across the top of it.

because the

This note had

a principal sum of $115,507.05.

Glaser, Lombard told him

asked Lombard what he

"I

was

don't know, I'm

During his discussion

about the Roberts account.

was planning to do.

March 23 by

Glaser

Lombard replied,

seeking a legal remedy."

presented to Lombard on

with

A second note

Robert Purdy.

The

principal was $105,324.14, but the payment terms and interest

were

the same

as

the first

note.1

This

note, however,

____________________

1.

There

is

no

explanation

in

the

record

difference between the principal in each note.

-99

as

to

the

included

a waiver and release

have against CIGNA.

of all claims

that M&J might

Lombard, still smarting because

of the

loss of the Roberts account, refused to sign the note.

Martens, a

Lombard

time

based

marketing official for CIGNA, who

Remmy

had dealt with

for an appreciable length of time, told Purdy at the

the waiver

on

his

and release

knowledge

of

were added

to the

Lombard,

Purdy

note that,

would

have

difficulty getting Lombard to sign the note as redrafted.

CIGNA

cancelled

its

agency

contract

with

M&J

forthwith

after Lombard refused to

sign the note.

It shut

down all of M&J's computers wired into the CIGNA net.

It put

all

direct

of the

policies

heretofore handled

by

M&J on

billing; i.e., premiums were paid directly to CIGNA.

M&J notified CIGNA that the

was prohibited

Gen.

agency

L.

by Massachusetts law,

ch. 175,

contract

163

without

prohibits

180

forthwith cancellation

which it

was.

the cancellation

days notice.2

After

____________________

2.

No company shall cancel

of

any

independent insurance

fire or casualty
said

the authority

agent is

agent for

insurance, or both,
not

an employee

if

of said

Mass.

of an

CIGNA

company and
contract
company

no

company shall

with such
gives

an agent

written

modify

unless the

notice

of

its

intent to cancel such agent or its intent

to

modify such

hundred
proposed

and

contract

eighty

effective

at

days
date

of

least

one

before

the

any

such

it

deferred

cancellation or modification.

-1010

checked

the

Massachusetts

cancellation for 180 days.

statute,

the

We

which

rule that

a jury

contract with

such

there

could

find

M&J.

The evidence

a finding.

to

presumed

to have

CIGNA breached

law,

knowledge.

binders that

evidence from

provided two

the

agency

grounds for

the "forthwith" cancellation was

Massachusetts

CIGNA cancelled its agency

the

that

One, that

contrary

honor

was sufficient

of

which

It also

CIGNA

could be

must

found that

contract with M&J by refusing

one

of its

officials

be

to

(White) had

authorized.

The Application of Mass. Gen. L. ch. 175,

163
The Application of Mass. Gen. L. ch. 175,
163
_______________________________________________

This

CIGNA

claims

available

issue does

"that

under

the

M.G.L.

not

merit

unexhausted

ch.

175,

extended

discussion.

administrative remedy

Sec.

163

eclipsed

or

diminished

M&J's claim

First, we

do

diminished"

for damages."

not understand

what

mean in the context

CIGNA

the terms

of this case.

brief

"eclipsed

agent

receiving

herein, any

notice

of

such

cancellation, modification

or expiration

MAY,
___

after receipt

within

thereof,

make

reference

to

question

as

fifteen days
a

written

three
to

demand

referees

whether

or

cancellation, modification or
will so affect the
or

replacement

with the company

for

of

the

not

such

expiration

renewal, continuation

of

any policies

placed

through the efforts

the agent, or the services

-1111

or

The statute

provides in pertinent part:

Except as otherwise provided

at 37.

of

needed by any

policyholder

doing

business

with

the

company as a result of the efforts of the

agent,

as

continuation
effect

having

to
of

justify
any
been

renewal

policies
placed

then
with

or
in
such

company by such agent.

(Emphasis added.)

It cannot be reasonably doubted that the statute is

permissive.

M&J had no duty to invoke it.

CIGNA

has cited no cases holding even tangentially

that

the statute applies in

that confronts us.

inapposite;

claims.

Circuit

The

or in

been

an

cites are

completely

different

statutes and

different

insurance

unable to

Massachusetts

Mass. Gen. L. Ch. 175

to the one

two cases it

they involve

We have

a situation similar

find any

requiring an

cases

in this

agent to

invoke

163 prior to asserting claims against

company, and

CIGNA has

cited none.

CIGNA's

argument is without merit.

II.
II.

THE FIRST TRIAL

THE FIRST TRIAL
_______________

The district

reasons.

court ordered

It ruled that

breached its contract with

the jury

a new trial

for three

finding that M&J

had not

CIGNA to pay premiums as

due "is

against

the clear weight

would result in a

of the

evidence and

miscarriage of justice."

The

enforcing it

court found

that the jury "rendered an improper 'sympathy' verdict."

The

breach

court found that the amount awarded M&J on its

of contract claim was "outrageous."

-1212

It held that M&J

"failed to

introduce evidence at trial

that established its

entitlement to over $700,000 in damages."

The

court

set

aside

the

jury

verdict awarding

$500,000.00 to M&J for intentional interference by CIGNA with

M&J's contractual

"there

was

no

relations with Roberts.

evidence

of

contract

It ruled:

between

Roberts;" that "even if there was a contract . .

no

that

evidence that

CIGNA knowingly

contract," and

there was a contract

"failed

to show

that M&J

even if

CIGNA, M&J

improper in

motive or means."

The court concluded:

In fine, after considering

to break

show that

interference was

and

. there was

and interference with it by

that CIGNA's

M&J

induced Roberts

failed to

that

the jury's

verdict in conjunction with its ruling on

CIGNA's breach of contract
the

Court

decision

surmises
on

the

that

claim, above,
the

jury's

&

Johnson

MacDonald

breach of contract claim "could only have

been a

sympathy" verdict.

Trueblood, Inc., 915

________________

See Phav v.
___ ________

F.2d at

767.

In

addition, because the issues of liability

and damages are so interwoven both issues
must be re-tried.

M&J, as

would be expected, objects

the district court's

rulings and findings.

strenuously to

We discuss them

seriatim.

The Jury Verdict that M&J did not

The Jury Verdict that M&J did not
_________________________________
Breach its Contract with CIGNA
Breach its Contract with CIGNA
______________________________

The

question

reasonable person

to only

is,

could

the

one conclusion.

evidence

lead

Acevedo-Diaz v.
_______________

-1313

Aponte, 1 F.3d 62, 66 (1st Cir. 1993).

______

district

court pointed

out in

We think so.

its memorandum

As the

opinion, the

evidence was clear and not disputed by M&J that it owed CIGNA

about $111,000.00

from

CIGNA

in premiums.

but from

the

This evidence

testimony

of John

came not only

Januska,

the

comptroller

there

and assistant treasurer of M&J.

He stated that

was no question that $111,000.00 was due CIGNA in July

of 1991.

And although strictly speaking it was not evidence,

counsel for M&J told

the jury in his opening

statement that

premiums due CIGNA had not been paid.

In its

focus from

notes.

of

the

appellate argument, M&J seeks

the agency contract to

to shift the

the unexecuted promissory

It contends that the notes constituted a modification

agency contract

and

that

payment

of the

overdue premiums

Lombard

testified that he agreed

note and that CIGNA did also.

both parties

in

agreed

to

monthly installments.

to the terms

of the first

CIGNA says that the first note

was only a tentative proposal for Lombard's consideration and

therefore

refused

the note was not

to

waiver and

given

sign the

release.

an opportunity

signed by the

second note,

Lombard's

to

pay

either

one with

Lombard

the added

assumption that he

the

monthly installments may have caused

options for

the

parties.

premiums owed

would be

CIGNA

in

him not to pursue other

payment, but it is not a valid basis for finding

modification of

the

-1414

agency

contract

or

new

contract between the parties.

by the two

Such a finding

unexecuted promissory notes.

The

is foreclosed

district court

did not err in ruling that the jury's verdict was contrary to

the evidence

and upholding it would result

in a miscarriage

of justice.

Moreover, there is another reason for upholding the

district court on this issue.

parties stipulated

Early in the second trial

that judgment would be

the

entered for CIGNA

against M&J on CIGNA's breach of contract claim in the amount

of

$169,798.14 plus interest.

By so doing,

M&J waived any

objections to CIGNA's contract claim in the first trial.

The Amount of Damages Awarded on M&J's

The Amount of Damages Awarded on M&J's

______________________________________
Breach of Contract Claim Against CIGNA
Breach of Contract Claim Against CIGNA
______________________________________

The jury

contract

claim.

awarded M&J $780,000.00 on

The

court

set this

aside

evidence failed

to establish

that it was

$700,000.00

damages

because it

verdict.

Lombard

$200,000.00

contract

in

as a

estimated

making a net loss

$215,490.00

loss

of

$39,046.00

loss was

commissions

on

to

was

lost a

over

"sympathy"

little

of the

over

agency

salvage $30,000.00

of $160,000.00.

to

In addition,

lost $161,158.00 on his commercial

"Market

sustained on

on

he

because M&J's

entitled to

the termination

He managed

Lombard testified that he

accounts,

that

result of

by CIGNA.

$40,000.00,

and

its breach of

the

Dyne"

Business,

and

personal accounts.

Roberts

account

came

The

to

$80,000.00, and there was a loss of profit sharing with CIGNA

-1515

amounting to

$44,000.00.

Lombard testified

dropped about $60,000.00 a

These

figures, even

allowance

for

if

that his salary

year after the CIGNA termination.

taken at

what appears

to

face

be

value and

with

double counting,

no

total

$699,694.00, not including the reduction in Lombard's salary.

The suit was brought

in the name of

that Lombard's reduction

considered.

Thus,

in salary

the

M&J so we do

is a proper

total amount

Lombard's testimony at face

of

not think

item to

damages,

value, did not, as the

be

taking

district

court pointed out, exceed $700,000.00.

It

was not

error for

aside

as excessive

the breach

M&J.

We point out that the

the

district court

of contract

to set

damages awarded

court found that the verdict on

damages for M&J was infected by the jury's complete disregard

of

the evidence on CIGNA's

appears

verdict.

to

be a

sensible

breach of contract

claim.

assessment of

first jury's

the

The second jury was not so influenced.

This

The Jury Award of $500,000.00 for CIGNA's

The Jury Award of $500,000.00 for CIGNA's
_________________________________________
Intentional Interference with
Intentional Interference with
_____________________________
M&J's Contractual Relationship with Roberts
M&J's Contractual Relationship with Roberts
___________________________________________

The district court correctly

law to a claim

relations.

elements:

for intentional interference with contractual

The

(1)

applied Massachusetts

party

making

the

claim must

prove

four

that there was a contract with a third party;

(2) that defendant knowingly induced that party to

contract; (3) that

defendant's interference was

-1616

break the

intentional

and

improper in motive or

was

harmed

by

means; and (4)

defendant's

action.

Hospital for Crippled Children,

________________________________

412

that the claimant

Wright v. Shriner's
_____________________

Mass.

469, 476,

589

N.E.2d 1241, 1245 (1992); see also G.S. Enterprises, Inc. v.

___ ____ __________________________

Falmouth Marine, Inc.,

_____________________

410 Mass. 262, 272,

571 N.E.2d 1363,

1369 (1991); United Truck Leasing Corp. v. Geltman, 406 Mass.

_____________________________________

811, 812, 551 N.E.2d 20, 21 (1990).

Our reading

of the

record confirms the

ruling of

the district court that there was no contract between Roberts

and

M&J.

long-standing business

relationship does

not

become a contractual relationship automatically, as M&J seems

to

argue.

The last

insurance program issued

to Roberts by

CIGNA through M&J was for a term of three years.

parties

insurance

had

contractual

coverage after

suggests strongly that

its

obligation

term expired.

that one

continue

The

the

evidence

Roberts decided to use a broker other

than M&J because it would be less

evidence

to

None of the

of the

neighbor of the president

owners

expensive.

of the

of Roberts.

There was also

new agency

was a

We need go no further

than the lack of a contract between Roberts and M&J to uphold

the

ruling of

the

district court

setting

aside the

jury

verdict awarding M&J $500,000.00 for intentional interference

with a contractual relationship by CIGNA.

At

decision

the

trial the

court

reserved

to itself

the

on the claim by M&J against CIGNA for violations of

-1717

Mass. Gen.

L. ch. 93A.

It

found in favor

of CIGNA.

M&J

moved for a new trial.

Our review of the record

reveals no

basis for reversing the

judgment of the district court.

We

do not find it necessary to delve into the nuances of chapter

93A law.

was

Suffice it to say that the sparsity of the evidence

firm basis

for the

court to

conclude that

M&J had

failed to meet its burden of proof on its 93A claims.

Denial of M&J's Motion to Amend

Denial of M&J's Motion to Amend
_______________________________
Count III of its Counterclaim
Count III of its Counterclaim
_____________________________

This issue requires some

M&J's

counterclaim

with

Economic Gain."

was entitled,

In

exposition.

Count III of

"Intentional Interference

a pretrial

memorandum

dated February 17, 1993, the district court said:

Defendant's third counterclaim against

CIGNA admittedly is mislabeled,

but this

and order

problem is

not fatal.

The Court

interpret the cause of action

intentional

recognized by
too,

as one for

interference

advantageous business

Here,

will

with

relations, a claim

the Massachusetts courts.2

defendant

has

pleaded

the

requisite elements.

The footnote stated:

counterclaim

within

nomenclature."

ten

"Defendant

days,

Inexplicably,

shall amend

substituting

M&J

did

the

not

its

correct

amend

the

counterclaim as ordered.

At

started,

the

pretrial conference

court pointed

counterclaim had not

said:

"I

out to

on

the

day the

M&J's counsel

been amended as ordered.

thought that

was

right in

-1818

there."

trial

that the

The attorney

The

court

replied, "No."

to

the

The

judge's law clerk then

documents, that

responded

was

by saying, "Okay."

never

filed."

said, "According

The

attorney

No objection was taken nor was

permission requested to amend the counterclaim nunc pro tunc.

____ ___ _____

After

amend

the conclusion

its counterclaim.

but the court said:

of the

The motion

trial, M&J

moved to

was denied as untimely,

In

the

tried,

event that

the

MacDonald
its

Court

&

this case
will

reconsider

Johnson's request

pleadings

to

intentional

is re-

include

to amend

claim for

interference

with

advantageous business relations.

Six days

motion

prior to

to amend their

intentional

relations.

grounds,

counterclaim to

interference

The

court

also noting

the second

with

denied

that

facts to support the claim,

the

trial, M&J filed

include a

claim for

advantageous

business

motion

the pleadings

on

timeliness

failed to

allege

that CIGNA presented no evidence

at the first trial (nor offered any at the second) to support

the inference

that CIGNA knowingly induced

its contract with M&J

improper.

Roberts to break

or that any interference by

CIGNA was

We review a denial

discretion.

of leave to amend for

district court,

in denying such

abuse of

leave, may

properly consider a party's undue delay, repeated failures to

cure deficiencies in

proposed

amendment.

the pleadings, and the futility

Foman
_____

v.

-1919

Davis,
_____

371 U.S.

of the

178,

192

(1962). Without deciding whether CIGNA had presented evidence

at

the first

trial sufficient to

enable a jury

intentional

interference

with

relations, we

hold that the district court

to find an

advantageous

business

acted within its

discretion in denying the motion to amend.

The district court told

that

its

complaint should

be

considered; M&J failed to do so.

to

deny leave to amend

was instructed to amend

failed to correct

court.

court

M&J before the first trial

amended

if

M&J

it

It was proper for the judge

after the first

trial where counsel

the complaint, failed to do

this error when it was pointed

Having left an

wanted

opening for

M&J to

so, and

out by the

try again,

the

could well find that M&J had failed to exercise proper

diligence because it waited virtually

before

submitting

its

motion

to

until the eve of trial

amend.

Under

these

circumstances, we will not disturb the ruling of the district

court.

The Second Trial

The Second Trial
________________

As

already explained,

the second

jury

trial was

limited to M&J's breach of contract claim against CIGNA.

moved for a new trial, which was denied.

M&J

Both parties object

to the damages award so we start with that.

Damages
Damages
_______

CIGNA attacks the damages on two grounds:

evidence

should not have been

that the

admitted because it was based

-2020

on hearsay and speculation

M&J

asserts that

improperly

initial

the award

limited

date

and that the award was

M&J's damages

of cancellation

October 15, 1992, the

was too

of

to

the

low because

the

too high.

the court

period from

agency contract,

the

to

extended date of cancellation required

under Massachusetts law.

Before

rehearse

discussing the

the evidence on

trial transcript.

Up

it received

The evidence

was "in the

sent letters

been

on damages came

He testified essentially as

of M&J who were insured

cancelled and

directly to CIGNA.

M&J.

in through

on premiums

$250,000 a year range."

notifying them

we

in the second

to 1992, M&J's average commissions

cancellation, clients

had

the parties,

damages as reported

the testimony of Frank Lombard.

follows.

claims of

by CIGNA were

that M&J's contract

all premiums

due

After the

with CIGNA

were to

be paid

Most of these clients did not renew their

policies

with

Lombard

kept

record

of all

such

clients.

From the date of the initial cancellation, April 2,

1992, to October 15, 1992, premiums from the affected clients

aggregated $1,720,495.00; M&J's loss in

$201,294.00.

This

was broken

--

commissions totalled

down into

three categories:

commercial

commissions

commissions

--

$12,875.00.

In addition, M&J lost its annual

income from

CIGNA of $12,871.00.

$13,281.00;

$175,138.00;

and

-2121

personal

Market

commissions

Dyne

--

profit sharing

Lombard further testified

that the

been

commission loss to

$215,393.00.3

the end of the

Lombard

testified

commissions was the same as loss

year would have

that

loss

of

of profits and that M&J had

a renewal rate of 93% on insurance policies purchased through

it.

He started to testify

when

The

there was an objection

court

reminded

counsel

damages to October 15, 1992.

about future loss of profits

followed by a bench conference.

for M&J

that

M&J's counsel

it

had limited

made an offer of

proof that damages would be $215,000.00 in lost commissions a

year plus loss of profit sharing of $56,000.00 for a total of

$271,000.00 a year "ad infinitum."

We

court's ruling

start our

analysis of

on damages

with the

M&J's objection

to the

observation that

it is

obvious that an "ad infinitum" claim for damages has no basis

in

law and confounds common

sense.

however, to the claim by M&J that

damages could be awarded

we point out

that the

Confining our analysis,

the court's ruling that no

after October 15, 1992, was

transcript of

the jury

shows that no such instruction was given.

entirely up to the

error,

instructions

The court left it

jury to determine the period

of time for

which damages could be awarded:

In

considering

anticipated

any

profits

claim

for

resulting

loss of
from

____________________

3.

These amounts

are considerably

lower than the

items of

damages claimed in the first trial.

-2222

breach of contract,
the

length of

right

you should

time that

to expect to

consider

parties

had a

receive the benefits

of the contract.

If you determine the contract was only

for a certain period of time, or could be
terminated by
after

notice to the

certain

period,

award damages for losses

other party
you

may only

incurred during

that limited period of time.

CIGNA did not object to the failure of the court to

limit the time period for awarding damages.

M&J

argues that this

unexpected volte-face by the

__________

court on damages prevented it from introducing more extensive

evidence

on damages.

testified:

both

would

"Your

for 1992,

have

customers

answer to

and these people,

their

gone."

insurance each

It is

hard

annual

consider and

lost profits

was in

that Lombard

loss of commission

based on

evidence could have been introduced.

for

this is

[sic] damages are, our

renewed

are

The

to see

our experience,

year

and

these

what additional

This sum of $271,000.00

evidence

for the

jury to

there was no restriction in the charge limiting

the

period of damages.

We have

M&J carefully and there is

no discussion in it of any

period limitations on damages.

objection, stated, "a

not 201."

Based on

read the final argument for

The attorney for M&J, without

whole year's commission was

the evidence

before the

court's instructions, we find that M&J was not

the court's bench

time-

ruling that damages

-2323

$215,000,

jury and

the

prejudiced by

could not be

awarded

after October 15, 1992, because this

ruling was not conveyed

to the jury.

We are not impressed by CIGNA's objections that the

evidence on damages was based on speculation and hearsay

should

have

Lombard's

been

testimony

excluded.

was

As

based

the

on

his

experience in the insurance business.

self-serving went to

Lombard

was

damages and

court

to

rigorous

$250,000.00 in

testimony.

damages for

and

admissibility.

cross-examination

CIGNA introduced testimony

Lombard's

records

out,

That the testimony was

its credibility not its

subjected

contradicted

own

pointed

and

The

M&J strikes

on

through experts that

jury's verdict

us as

of

a reasonable

assessment

of the

evidence.

Moreover,

even if

Lombard's

testimony was hearsay in part, it did not affect the verdict.

The $250,000.00 award could only have been for the year 1992.

As to what

happened to

first-hand information.

A.

M&J's clients in

had

He testified as follows:

I kept track from the day this event

occurred in March of 1992.

in charge.
the

1992, Lombard

people

I was the
that

I was the one

one that talked to

got

the

letter

from

CIGNA. I was the one that handled all the

commercial

accounts, so

I knew

who was

affected by that action.

Any violation of the hearsay rule was de minimis.

__________

CIGNA's other objection that the award was too high

does

not

fare

any

better.

CIGNA

argues

that

Lombard

testified only as to lost revenues but ignored the other side

-2424

of the ledger

-- savings

in ongoing expenses

-- thus,

damages were

higher than

what normally would

be the

case.

that

M&J's

Lombard

expenses

did

did

testify

specifically,

not contract

account but continued at

after

however,

the loss

the same level.

He

of

the

the Roberts

testified that

no one

was terminated, and

same rate.

point

but

Lombard

did not

that expenses

continued at

was cross-examined intensively

give ground.

It was

well

the

on this

within the

province of the jury to believe Lombard's testimony.

Our rulings and findings on damages negate

argument

that its motion

for a remittitur

CIGNA's

should have been

allowed.

The Conduct of the Judge

The Conduct of the Judge
________________________

M&J's main

pronged condemnation

It asserts that

attack on

of the

the jury

verdict is

conduct of the

the judge should

a two-

district judge.

have recused himself

from

presiding over the second trial because of bias and prejudice

against

M&J.

It

also

accuses

the

judge

of

secretly

communicating with the jury

during its deliberations.

These

are serious charges.

Recusal
Recusal
_______

In its motion for recusal filed prior to the second

trial, M&J states three specific reasons for recusal:

1.

The very nature of a retrial order is

such that it should

be considered by one

other than the original trial judge.

-2525

2.

At

the pretrial

March 13, 1994,

open

court

Defendant,

that

conference held

on

Judge Freedman stated in

he

Plaintiff

thought
in

that

the

counterclaim,

Frank Lombard, was insincere.

3.

At

the pretrial conference

March 13, 1994,

held on

Judge Freedman stated in

open court that if a jury finds similarly

on

retrial, that he

trial.

would order a third

-2626

In its brief, M&J has expanded its reasons:

The
bias,
rulings.
in this

trial judge
but

allowed

not only
it

to

stated his
infect

his

As indicated in prior arguments

brief, he took away

verdicts in

favor of M & J after the first trial even

though

there

was

support them.
he

jury.

which

against

arising out

of

Roberts account.
rules

notice

c.

evidence of

was

before

clearly

& J

the

the

proper law in
for

loss

the

of

He failed

of civil

pending

pleadings.

to

existence of

He failed to apply

finding

the

evidence

In ruling on these motions

denied the

damages

ample

the

claim
F.L.

to adhere to

procedure regarding
and

amendments

to

He found against M & J on the

93A count without making any findings

of fact to support his decision.

M&J's Brief at 42-43.

28 U.S.C.

455(a) provides:

(a) Any justice, judge,

of

or magistrate

the

United

States shall

disqualify

himself

in any

proceeding in

which his

impartiality

might

reasonably

be

questioned.

We turn

to the

implicated.

case law

to determine

when the

In this Circuit the question is:

statute is

whether

the

impartiality
would

charge
is

create

of

grounded on
a

lack

of

facts that

reasonable

doubt

concerning the

judge's impartiality, not

in the mind of

the judge himself or even

necessarily in

the mind of

filing

the litigant

the motion under 28 U.S.C.

but rather in the mind

455,

of the reasonable

man.

United States v. Arache, 946

________________________

F.2d 129, 140

(1st Cir. 1991)

(quoting United States v. Cowden, 545 F.2d 257, 265 (1st Cir.
_______________________

1976), cert. denied, 430 U.S. 909 (1977)).

_____ ______

-2727

See also Town of

___ ____ _______

Norfolk v. United States Army Corps of Eng'rs, 968 F.2d 1438,

_____________________________________________

1460 (1st Cir. 1992); United States v. Lopez, 944 F.2d 33, 37
______________________

(1st Cir. 1991).

In

In Re Allied-Signal, Inc.,
__________________________

Cir. 1989), Judge

of observations

appeals

unless

Breyer, now Justice Breyer,

that

are

will not reverse a

such

891 F.2d

decision

pertinent

made a number

The

court

of

district judge's decision to sit

"cannot

conclusion supported by a

here:

967 (1st

be defended

as

rational

reasonable reading of the record."

(quoting In Re United States,

____________________

1981)).

Id. at 970.
___

When

666 F.2d 690,

695 (1st

Cir.

He amplified:

considering

disqualification,

the

district court is not to use the standard

___
of

Caesar's wife,

suspicion

disqualification
not
only
__________
confidence
appear

the

the standard

that

is

decision
need

through

to

of mere

because the
must

reflect

secure

public

proceedings

impartial, but also the

_________

that
need to

prevent parties from too easily obtaining

the disqualification of a
potentially
strategic

judge, thereby

manipulating the
reasons,

perhaps to

system for
obtain a

judge more to their liking.

Id.
___

We end our case

review with a quote from

El Fenix
________

de Puerto Rico v. The M/Y Johanny, 36 F.3d 136, 140 (1st Cir.
_________________________________

1994).

No

permissible reading

455(a)
intended

would

to allow

disqualification
innuendo

suggest

of subsection
that

Congress

a litigant

to compel

simply

concerning

on

unfounded

the

possible
________

partiality of the presiding judge.

-2828

We start our

rule

analysis by noting

that there is

no

of federal procedure that requires a different judge to

preside over a new

judge.

found

M&J

has cited no

none.

Absent

Massachusetts

discretion

jury trial ordered by the

of

has

case to

a Local

none),

the trial

in which a

second trial,

such substitution

We find

that so

Although

is not the

and we have

provides

matter

new judge should

nothing in the record

that would make

is

judge.

circumstances

this effect

Rule

this

original trial

within

there

may

(and

the

be

preside over the

usual practice.

here suggesting circumstances

the trial judge think twice

about presiding

over the new trial.

Because we

have affirmed the rulings

and findings

of the district court setting aside the verdicts in the first

trial

and ordering

a new

trial, it

would be

discuss the asseverations made by M&J

its brief.

pointless to

at pages 42 and 43

of

Our affirmance of the rulings and findings of the

district court scotches any

bias or prejudice claim on

this

basis.

This leaves for consideration

the

judge at

the pre-trial

the comments made by

hearing on May

13, 1994.

record reads as follows.

THE

COURT:

Well,

without even thinking

is your client

Mr.

Joseph,

F.L. Roberts

earnestly, sincerely

so forth believe he's

what
and

entitled to on the

breach of contract on the counter-claim?

-2929

The

MR.
entitled

JOSEPH:
to

the

He is,
jury

believes he's

verdict

on

the

counter-claim.

THE COURT:

MR. JOSEPH:

THE COURT:

$500,000?

Oh, indeed.

There's

no way to

move

that

his

if that's his thinking.

MR.
thinking.

JOSEPH:

Well,

is

THE

COURT:

Well,

if

that's his

thinking then you have no authority to do

anything.

MR. JOSEPH:

THE COURT:

Well, I have the authority.

Then, we'll have to talk

trial date and go from here.

MR. JOSEPH:

THE COURT:

All right, sir.

And I have to advise you

in advance that if

a second jury went as

far

jury went

as the

first

$500,000, the
as

well.

money, I'd take

You have

going

to get it.

did.

At least not

could always

to know

as

that away
you're not

I don't care what you

from this Judge.

take an appeal

you could get

as far

You

and see

another trial. That

if

would

be up to the first circuit.

MR. JOSEPH:

THE COURT:

Okay.

I was hoping we might be

able to be sincere in our thinking and go

somewhere.

Your client is not sincere in

my eyes.

MR.

JOSEPH:

Judge, I

really must

disagree with you and I insist

my client

is very

you don't

think

sincere.
he's

Perhaps if

sincere

you

yourself.

-3030

should

recuse

THE
thinks a

COURT:

No,

I'm saying

if he

jury verdict should be given to

him if he's not

willing to accept and go

with another trial, I frankly don't think

another jury would

go anywhere near that

figure.

If they

I'm

even convinced

not

give anything
he,

at all.

they would

ever do that.

This pre-trial

an

attempt to

comments of

concerning

settle

hearing was called by

the case.

the judge that

the

judge's

We

see nothing

would create a

impartiality

the judge in

in

in

the

reasonable doubt

the

mind

of

reasonable person.

The Alleged Secret Communication

The Alleged Secret Communication
________________________________
by the Judge with the Jury
by the Judge with the Jury
__________________________

M&J

has alleged

that

the

trial

judge,

without

advising counsel, responded in the negative to a question

the jury asking whether

it could award damages of

$240,000.00

This

between

to

the judge and jury

between Gary

Lombard,

M&J.

W.

four weeks after

secret

M&J, at

communication

of the

jury, and

a local restaurant

verdict and judgment

foreman subsequently

in the second

AFFIDAVIT OF GARY W. LAVALLEE

_____________________________

am Gary W.

address

is

82

Frank

three or

trial.

executed a sworn affidavit

which stated:

more than

first surfaced in a conversation

Lavallee, foreman

president of

The jury

alleged

by

Lavallee.
Main

Springfield, Massachusetts.

My business
Street,

West

-3131

I was
case of

the foreman of the

jury in the

CIGNA vs. MacDonald

and Johnson

Insurance Agency, Inc. in November 1994.

Based

on

our

recent

conversa-

tion regarding your jury award,

we the jury sent
out

to

requesting

two questions

Judge

Freedman

guidance.

question specifically asked

One
if

we could award damages over and

above

the

$240,000

illustrated on the
to

justify

for

renewal income.

you

had

blackboard,
a

His

loss

of

reply was

that we couldn't.

During
jury

our

was

deliberation,

in

complete

the

whole

agreement

to

awarding additional damages based on loss

of renewal income.

Signed under the pains and penalties of perjury this

1st
day of March 1995.
_______

\s\ Gary W. Lavallee

_______________________________
Gary W. Lavallee

The

problem.

other

question asked

by

the

tack

on

jury poses

It stated in writing:

(1)

Are

provide)

we

allowed

interest

to

to amount

that MacDonald is asking for?

(or

of damages

no

If so, can we charge 8%?

After consulting with counsel

the judge replied in

writing:

Interest cannot be

added to any

verdict

by the jury.

Judge Freedman.

-3232

The

allegation by

communication

because

was

never

the

jury foreman

squarely

resolved

the district court ruled

affidavit

that it

had

been

of a

secret

on the

merits

in a motion

obtained

to strike the

in violation

of

an

explicit rule prohibiting interviews by counsel, litigants or

agents except

under the

supervision of the

district court.

See United States v. Kepreos, 759 F.2d 961, 967

___ _________________________

cert.
_____

denied,
______

complete

this

474 U.S.

record was

issue

and that

901 (1985).

necessary for

the

district

(1st Cir.),

We concluded

a fair

that a

determination of

court should

determine

whether there was any private communication as alleged by the

jury

and,

if

so,

the

circumstances

surrounding

the

communication.

We,

therefore,

issued

an

order

retaining

jurisdiction and

remanding to the

district court for

limited

of determining

the

purpose
alleged

occurred

and,

circumstances.
be

private

assigned

if

the

whether

communication
so,

in

what

A new district judge will

by the

chief judge

of the

district court for the limited purpose of

conducting this proceeding.

Judge Douglas Woodlock was assigned by Chief

Tauro of the U.S. District Court of

the proceeding.

the

Judge

Massachusetts to conduct

On May 2, Judge Woodlock took testimony from

jury

foreman,

Lavallee, two

district

officers,

a deputy

U.S. Marshal,

and the

court

security

courtroom deputy

clerk to Judge Freedman during the trial.

-3333

On May 6 testimony was taken from six other jurors.

One of

the jurors had left the state and no attempt was made

to obtain her

same

day from

testimony.

Frank

Testimony was also

Lombard,

president

taken on

of M&J,

and

the

the

courtroom deputy clerk for the proceeding.

of

this evidentiary

parties

of

his

opportunity to

the

Lavallee

reviewing

hearing;

Judge

intention

to

At the conclusion

Woodlock informed

give

Judge

state his recollection of

affidavit.

Judge

Freedman's

Counsel

was

statement

the

Freedman

an

the allegations in

advised that

they

would

after

have an

opportunity to interrogate him.

In the meantime, counsel had advised Judge Woodlock

that Judge Freedman's

law clerk

at the time

of the

trial,

Kenneth B. Walton, might have relevant evidence to offer.

May 21, Mr. Walton's

evidence was taken.

At

On

the conclusion

of this hearing the parties informed Judge Woodlock that they

sought

no

other testimony

interrogate Judge Freedman.

and that

they

did not

wish to

Judge Woodlock made the following ultimate finding:

Based upon my review of

of record

in this case

adduced

at

the

pursuant

to my
fact

retired

to

begin

before
Judge

it

on

that

November

returned

Freedman

of

after

as a

the

jury

its deliberations
17,

1994,

in
and

with

its

verdict,

had

no

secret

communication with the

presence

hearings

assignment, I find

of

case

and the evidence

evidentiary

matter

this

the materials

counsel.

jury outside
The

the
only

communication Judge Freedman had with the

-3434

deliberating jury involved the receipt of

a

jury

which

question
he

responded
standard

concerning

shared

with

interest,

counsel,

and

to in writing, pursuant to his

practice

regarding

such

inquiries.

We

have

reviewed

carefully

evidentiary hearings held by

subsidiary findings

the record

of

the

Judge Woodlock and the detailed

he made.

We unhesitatingly

affirm his

ultimate finding and his underlying subsidiary findings.4

III.
III.

CONCLUSION
CONCLUSION
__________

The judgments of the

district court in both trials

are affirmed.
affirmed
________

No costs to either party.

No costs to either party.
_________________________

____________________

4.

In view of Judge Woodlock's findings, we need not address

the question of whether

and Lavallee,
violated

the

the initial contacts between Lombard

and the subsequent securing

mandate

of

Kepreos,
_______

759

of the affidavit,
F.2d

Accordingly, we express no opinion on that question.

-3535

at

967.