389 Orange Street Partners v. Arnold

170 F.3d 1200

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 22, 1999
• Docket: Nos. 97-35877, 98-35005 and 98-35240
• Status: Published

Opinions

Opinion by Judge TROTT; Dissent by Judge NOONAN.

TROTT, Circuit Judge:

I

Overview

Clifford Robinson appeals three final judgments of the District of Oregon in favor of cross-claim defendants Orange Street Partners (“OSP”), Regis Conlon, Sebastian Ciar-cia, and Richard and Kyle Arnold (collectively, “Appellees”). The action originated as an interpleader action brought by Trailblazers, Inc. against Robinson and OSP to determine the appropriate recipient of wages earned by Robinson. Robinson brought several cross-claims against Appellees. The first judgment awarded the wages to OSP under a promissory note and security agreement and dismissed Robinson’s claims against all but Ciarcia as time-barred. The second judgment granted attorneys’ fees to OSP. The third judgment dismissed Robinson’s claims against Ciarcia as time-barred. We have jurisdiction under 28 U.S.C. § 1291 (1994), and we affirm in all respects,

II

Background

Acting through his then-agent, Larry Gill-man, Robinson built a home in Connecticut at a total cost of approximately $1,500,000. Under a power of attorney, Gillman obtained initial financing on Robinson’s behalf from Shawmut Mortgage Co. and Berkshire Bank, which was later replaced by a loan from Sears Mortgage Co. in the amount of $1,125,-000. Ciarcia was responsible for disbursing the Sears funds at Gillman’s direction. Gill-man obtained additional financing from Still-water Pond Partners. OSP, a partnership of the Arnolds, Conlon, Ciarcia, Stillwater, and several non-parties, also made a loan to Robinson, and the loan from Stillwater was “rolled over” into the loan from OSP, for a debt to OSP of $468,000. OSP disbursed these funds at Gillman’s direction.

Robinson signed a promissory note for the OSP loan in Connecticut on June 25, 1993, when his house purchase closed. At the same time, Robinson executed an “Assignment of Security and Security Agreement” to OSP, assigning his wages from Trailblazers to OSP in the event of default on the promissory note. Robinson then signed a letter to Trailblazers, placing the organization on notice of the assignment and instructing that his wages be paid to OSP on demand.

Following the terms of the promissory note, Robinson made thirty-five monthly interest payments between June, 1993, and May, 1996. The principal was due in a balloon payment on May 26, 1996, which Robinson failed to make. OSP demanded the full amount of the principal plus a penalty of $23,269.16, for a total demand of $488,269.16, from Trailblazers. Trailblazers brought the instant interpleader action against Robinson and OSP.

With respect to the OSP loan, Robinson brought cross-claims of breach of fiduciary duty, negligence, conversion, fraud, and breach of contract against OSP and Ciarcia. With respect to the Sears loan, Robinson brought cross-claims of breach of trust, quasi contract, legal malpractice, negligent misrepresentation, and deceit against Ciarcia. Robinson also alleged that the Arnolds and Con-Ion were jointly and severally liable for OSP’s and Ciarcia’s breaches of contract and liable under agency law principles for OSP’s and Ciarcia’s potential liabilities to Robinson. Robinson filed his claims on August 8, 1996, more than three years after the loans closed. OSP cross-claimed against Robinson for payment on the promissory note.

The district court granted summary judgment to OSP on its contract claim, awarding $517,734.02 for late fees, prejudgment interest, and principal, and awarded attorneys’ fees to OSP under a provision in the promissory note. The court granted summary judgment to Appellees on the claims arising from the OSP loan and summary judgment to Ciarcia on the claims arising from the Sears loan, holding all of these claims barred by both the Connecticut and the Oregon statutes of limitation. Robinson moved for reconsideration of summary judgment. The district court denied the motion.

Ill

Standard of Review

This court reviews the district court’s grant of summary judgment de novo. Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir.1998). Viewing the evidence in the light most favorable to Robinson, we must determine whether any genuine issues of material fact remain and whether the district court correctly applied the relevant substantive law. See id.

We review a district court’s refusal to grant a motion for reconsideration of summary judgment under Federal Rule of Civil Procedure 59(e) for an abuse of discretion. Bellus v. United States, 125 F.3d 821, 822 (9th Cir.1997). We review the district court’s award of attorneys’ fees made pursuant to state law for an abuse of discretion. St. Paul Fire & Marine Ins. Co. v. F.H., 117 F.3d 435, 439 (9th Cir.1997), overruled on other gnds., Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1227 (9th Cir.1998) (en banc).

IV

Summary Judgment on Robinson’s Cross-Claims

Connecticut and Oregon law provide materially different results when the statutes of limitation are applied to Robinson’s cross-claims against Appellees. In order to review the district court’s summary judgment on statute of limitation grounds, we first must decide what law supplies the statute of limitation for these claims. We hold that Connecticut law applies, and that under Connecticut law the district court correctly held that Robinson’s claims were time-barred.¹

A

Which State’s Law Applies

When a federal court sitting in diversity hears state law claims, the conflicts laws of the forum state are used to determine which state’s substantive law applies. Alaska Airlines, Inc. v. United Airlines, Inc., 902 F.2d 1400, 1402 (9th Cir.1990) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Under Oregon law, the statute of limitation is provided by the state which supplies the substantive law. Or.Rev.Stat. § 12.430(l)(b) (1997).

Oregon courts follow the Restatement (Second) of Conflict of Laws § 145 (1971) approach to determining the appropriate substantive law. Casey v. Manson Const. & Eng’g Co., 247 Or. 274, 428 P.2d 898, 900 (Or.1967) (adopting the approach in the tentative draft to the Restatement, which later became § 145). The Restatement focuses on the place where the injury occurred, the place where the conduct occurred, the domi-cil, nationality, place of incorporation and place of business of the parties, and the place where the relationship between the parties is centered. Id. Comparable factors are applied when an Oregon court considers the appropriate law for a claim of misrepresentation. Western Energy, Inc. v. Georgia-Pacific Corp., 55 Or.App. 138, 637 P.2d 223, 228-29 (Or.Ct.App.1981) (citing the Restatement § 148).

In the instant case, the alleged tortious conduct occurred in Connecticut. Most of the Appellees are residents of Connecticut. The relationship between Robinson and Ap-pellees is centered at the house in Connecticut. OSP is a Connecticut partnership. The only factor favoring Oregon substantive law is Robinson’s residence in Oregon. Applying the factors specific to a claim of misrepresentation yields the same result. Robinson signed the allegedly fraudulent documents in Connecticut, and the alleged misrepresentations were contained in the documents. Robinson was supposed to render performance under the promissory note by paying money to the Connecticut defendants. The Restatement factors militate in favor of applying Connecticut substantive law and, therefore, the Connecticut statutes of limitation.

B

Connecticut Statutes of Limitation

Robinson’s cross-claims were time-barred under Connecticut’s statutes of limitation. The statute for negligence actions provides for two years with a discovery rule, not to exceed three years from the date of the act or omission. Conn. Gen.Stat. § 52-584 (1997); McDonald v. Haynes Med. Lab., Inc., 192 Conn. 327, 471 A.2d 646, 650 (Conn.1984). For all other tort actions, a plaintiff must file suit within three years of the act or omission, regardless of the time of actual or constructive discovery of the cause of action. Conn. Gen.Stat. § 52-577 (1997).

All of the acts and omissions which Robinson alleges occurred on or before June 25, 1993, the date of closing the purchase of Robinson’s house. Robinson filed his cross-claims on August 8, 1996, more than three years later. Both Connecticut’s negligence and general tort statutes of limitation had run unless Robinson can establish an exception.

C

Fraudulent Concealment Exception

Robinson argues that Appellees fraudulently concealed his causes of action. Fraudulent concealment, if affirmatively pleaded and proved by the party seeking to avoid the statute of limitation, can toll the Connecticut statutes of limitation until the party subjectively discovers the cause of action. Conn. Gen.Stat. § 52-595 (1997); Beckenstein v. Potter & Carrier, Inc., 191 Conn. 150, 464 A.2d 18, 25 (Conn.1983) (“In order to raise a claim of fraudulent concealment, the party challenging a statute of limitations defense must affirmatively plead it.”). Because the Federal Rules of Civil Procedure govern pleading in diversity cases, Robinson must have stated “the circumstances constituting fraud ... with particularity.” Moore v. Brewster, 96 F.3d 1240, 1245 (9th Cir.1996) (citing Fed.R.Civ.P. 9(b)).

Fraudulent concealment under Connecticut law requires that Robinson plead and prove three elements: (1) Appellees were aware of the facts necessary to establish the cause of action; (2) Appellees intentionally concealed these facts from Robinson; and (3) Appellees’ concealment of the facts was for the purpose of obtaining delay in Robinson’s filing the complaint. See Bartone v. Robert L. Day Co., 232 Conn. 527, 656 A.2d 221, 224-25 (Conn.1995).

We have searched the record from the district court and are unable to ascertain any allegation of fraudulent concealment as required by Connecticut law.² In his cross-claim, Robinson alleged:

Robinson was not aware of these acts and failures to act. Robinson justifiably relied on [the defendants’] failure to inform him of these material facts as an affirmative representation that no improper uses of Robinson’s funds was [sic] occurring. Robinson relied at all times material hereto on [the defendants’] express or implied representations that [they were] acting in Robinson’s best interests. Had Robinson known the truth, he would have taken steps both to stop further inappropriate actions and to seek relief for the losses he was suffering.

Cross-Claim ¶¶ 55, 95. Robinson also alleged with regard to his fraud claim against Ciarcia: “Ciarcia intentionally concealed these matters so that Robinson would not know the truth of this scheme and thereby deprive Ciarcia of legal fees and Ciareia’s other client OSP of a huge interest income stream,” and with regard to his fraud claim against OSP: “OSP’s failures to accurately account to Robinson for its disbursements were designed to conceal the scheme.” Cross-Claim ¶¶ 53, 90. Robinson did not allege with particularity any fraudulent activity that was “directed to the very point of obtaining the delay of which he afterward seeks to take advantage by pleading the statute,” as Connecticut law requires. Connell v. Colwell, 214 Conn. 242, 571 A.2d 116, 121 (Conn.1990).

The statutes of limitation issues were not a surprise to Robinson. OSP, Con-Ion, and the Arnolds pleaded the defense in their amended answer. They continued to assert the defense in the joint pretrial order and in two motions for summary judgment. Ciarcia asserted the defense in the joint pretrial order and in his motion for summary judgment.³ At a hearing on Robinson’s motion for leave to amend his complaint, the district court stated that it had “particular concerns in the area of the statute of limitations.” The district court later granted leave to amend the complaint, and Robinson added a new cause of action. Robinson had ample opportunity to amend his complaint to better allege fraudulent concealment and failed to do so.

Furthermore, Robinson did not place evidence on the record creating a genuine issue of material fact supporting arguments that the Appellees sought to obtain delay in the filing of his complaint. Connecticut requires proof of fraudulent concealment by “the more exacting standard of clear, precise, and unequivocal evidence.” Bartone, 656 A.2d at 224. In Connell, 571 A.2d at 121, where the plaintiff failed to present facts showing that the defendant’s actions were “directed to the very point of obtaining the delay of which he afterward seeks to take advantage by pleading the statute,” summary judgment for the defendant on the issue of fraudulent concealment was appropriate.

Robinson’s arguments regarding fraudulent concealment were merely vague claims that Appellees did not respond at Robinson’s request with information and therefore were not adequate to defeat summary judgment. Before Robinson filed his response to OSP’s, the Arnolds’, and Conlon’s motion for summary judgment, the district judge warned: “I want you to clearly put your best foot forward on the statute[s] of limitation[] question.” Robinson’s response asserted: “OSP’s role in the scheme was not known because the principals of OSP (attorney Ciar-cia and accountant Conlon) were not providing information to Robinson whereby he could discover their misuse and mismanagement of his funds.” Even after the district court’s admonition, Robinson failed to make arguments comporting with Connecticut’s law of fraudulent concealment.

D

Redesignation of Cross-Claims

Robinson argues on appeal that his cross-claims should be designated as affirmative defenses to his liability on the promissory note, such that the expiration of the Connecticut statutes of limitation is irrelevant. Because Robinson’s liability on the promissory note is only to OSP, only Robinson’s claims of breach of fiduciary duty, negligence, conversion, and fraud against OSP could qualify as affirmative defenses. Robinson failed to present this redesignation argument to the district court in a timely manner, and we hold that the district court did not abuse its discretion in failing to redesignate Robinson’s claims.

Federal Rule of Civil Procedure 8(c) requires a district court to treat a claim that was misdesignated as a counterclaim as an affirmative defense if “justice so requires.” Caselaw does not interpret the phrase “justice so requires,” but we have held that a district court’s decisions with regard to the treatment of affirmative defenses is reviewed for an abuse of discretion. See Federal Sav. & Loan Ins. Corp. v. Gemini Mgmt., 921 F.2d 241, 243-44 (9th Cir.1990) (district court’s decision to strike affirmative defenses under Rule 12(f)).

Robinson currently contends that he sought three times during the proceedings below to have his claims redesignated. First, Robinson’s concise statement of material facts in opposition to summary judgment contains language which could be interpreted as raising defenses of misrepresentation and failure of consideration to Robinson’s liability on the promissory note. Second, the joint pretrial order discussed Robinson’s cross-claims as affirmative defenses. Third, Robinson argued in his motion for reconsideration of summary judgment that the claims should have been treated as affirmative defenses.

The concise statement of material facts opposing summary judgment was an inadequate means of presenting the redesignation argument to the district court. Robinson stated that he “opposes the enforcement [of the promissory note] based on lack of consideration and misrepresentations made concerning the substance of the purported debt.” The legal memorandum in opposition says nothing about the cross-claims qualifying as affirmative defenses. Furthermore, Robinson’s counsel did not point to the concise statement of material facts as a treatment of the cross-claim as an affirmative defense until oral argument on this appeal. If Robinson’s attorneys did not discover this argument until now, the district court should not be expected to have done so for them. We cannot say that “justice require[d]” the district court to interpret Robinson’s concise statement of material facts as a request for redesignation.

Raising the claims as affirmative defenses in the joint pretrial order was inadequate. Nothing on the record indicates that the district court ever reviewed the joint pretrial order. The court did not sign the joint pretrial order. The pretrial conference was scheduled for July 16, 1997, and summary judgment was granted July 11, 1997. Counsel admitted at oral argument that the joint pretrial order did not reach the district court until after summary judgment had been granted. We are left with the conclusion that Robinson did not present this argument to the district court before the district court granted summary judgment in OSP’s favor.

Raising the argument that the cross-claims should have been redesignated as affirmative defenses in his motion for reconsideration was simply too little, too late. Under Rule 59(e), a motion for reconsideration should not be granted, absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law. School Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.1993). Robinson was required to establish that the district court committed clear error in failing to redesignate the claims before summary judgment in order to present a viable Rule 59(e) motion. Without establishing that he presented the Rule 8(c) argument to the district court before summary judgment, Robinson cannot point to clear error on the part of the district court in failing to redesignate the claims. Our abuse of discretion review precludes reversing the district court for declining to address an issue raised for the first time in a motion for reconsideration. See Bellus, 125 F.3d at 822.

Our holding that the district court acted within its discretion in failing to redesignate the claims should not be interpreted to impose an onerous burden on litigants or strip Rule 8(c) of meaning. All Robinson was required to do was present some timely legal argument to the district court that his mistakenly designated cross-claims were actually affirmative defenses to his liability on the OSP promissory note. In all of the pleadings, motions, and memoranda filed with the district court leading up to summary judgment, Robinson failed to do so.⁴

E

Failure to Consider Additional Claims

Robinson argues that he brought additional claims of breach of express and implied trust against OSP and Ciarcia, and the district court did not address those claims in its summary judgment. However, Robinson’s only mention of these claims before the district court was in his memorandum opposing summary judgment. The claims were also raised in the joint pretrial orders, but, again, these joint pretrial orders were not before the district court before summary judgment was granted. When Robinson amended his complaint, he did not add the breach of trust claims. Because Robinson never pleaded breach of express and implied trust, the district court did not err in failing to consider them. See Insurance Co. of N. Am. v. Moore, 783 F.2d 1326, 1328 (9th Cir.1986) (holding that the district court did not commit error by refusing to award relief on an unpleaded cause of action).

V

Robinson’s Liability on the Promissory Note

The district court did not err in granting summary judgment to OSP on the issue of Robinson’s liability on the promissory note. Connecticut law recognizes the enforceability of promissory notes as simple contracts. Appliances, Inc. v. Yost, 181 Conn. 207, 435 A.2d 1, 2 (Conn.1980). Undisputed evidence supports the finding that Robinson obligated himself on the note at the closing on June 25, 1993. Robinson does not contest on appeal that he signed a promissory note for the loan from OSP.

Robinson argues on appeal that the loan document, wage assignment, and security interest documents presented by OSP are not authentic. He correctly points out that the documents were apparently misdated and borrowed from a different transaction for use in this particular loan. In so arguing, Robinson does not maintain that he is not obligated on the loan in the amount that the district court awarded or that he did not execute a wage assignment and security agreement. Further, Robinson did not argue lack of authenticity of the loan document or security interest documents before the district court, and the argument is not appropriate for the first time on appeal. See Brannan v. United Student Aid Funds, Inc., 94 F.3d 1260, 1266 (9th Cir.1996). Robinson only argued the lack of authenticity of the wage assignment in the motion for reconsideration, but this new argument did not provide proper reason for the district court to reconsider its grant of summary judgment. See ACandS, 5 F.3d at 1263.

VI

Attorneys’ Fees

The district court properly awarded attorneys’ fees to OSP for the litigation over Robinson’s liability on the promissory note. The note contains an attorneys’ fees provision, which is enforceable under Connecticut law. See Sivilla v. Philips Med. Sys., 46 Conn.App. 699, 700 A.2d 1179, 1185 (Conn.App.Ct.1997). Although Robinson appealed the attorneys’ fees award, he did not brief the issue. Because we affirm the district court on the issue of Robinson’s liability to OSP, we affirm the award of attorneys’ fees.

VII

Conclusion

Following the foregoing, we affirm the district court’s grant of summary judgment to OSP on the issue of Robinson’s liability on the promissory note. We affirm the district court’s summary judgment in Appellees’ favor on Robinson’s tort claims arising out of the OSP loan transaction. Finally, we affirm the district court’s award of attorneys’ fees to OSP.

AFFIRMED.

1 . The dissent makes much of facts which might very well lead to a conclusion that Robinson was "swindled” and accuses us of "legal formalism” in refusing to find a way to provide relief to Robinson. We are not unimpressed by evidence on the record which calls into question the forthrightness of OSP’s and the individual defendants' dealings with Robinson. However, when claims are time-barred, we cannot consider their merits no matter how "unfair” the result may seem.

2 . The dissent would require pleading by the standards of Rule 9(b) without considering Connecticut’s substantive law of fraudulent concealment. However, our approach in this case comports with circuit precedent. See Moore v. Brewster, 96 F.3d 1240, 1245-46 (9th Cir.1996) (requiring the plaintiff to plead the state-law elements of fraud according to the standards of Rule 9(b)). Robinson was required to plead, with particularity, each Connecticut-law element of fraudulent concealment.

3 . Ciarcia did not plead the affirmative defense of the statute of limitation in his answer. We recognize that failure to raise the statute of limitation as an affirmative defense constitutes waiver of the defense. Grabner v. Willys Motors, Inc., 282 F.2d 644, 646 (9th Cir.1960). However, Robinson did not argue waiver before the district court or on appeal to this court, so the issue is not properly before us on appeal.

The dissent contends that OSP’s and the individual defendants’ failure to move to dismiss Robinson’s complaint on statutes of limitation grounds waived the defense. Not only is this not the law, Robinson does not raise a waiver argument on appeal.

4 . The dissent argues: "It is difficult to know what justice does require if the facts and the inferences from the facts of this case do not require that Robinson be given the opportunity to show at trial that he was swindled.” The dissent’s error is in looking to the alleged underlying facts to determine whether justice requires redesignation of Robinson’s claims. Justice is not served by permitting a litigant to drop the ball in his lawsuit and seek to have it resurrected — at the expense of the other parties and the tax-paying public — by alleging egregious facts which invoke sympathy for the litigant's plight. Our decision that the district court did not abuse its discretion in refusing to redesignate Robinson’s cross-claims is based on Robinson’s failings during the litigation, not on the seriousness of his alleged substantive claims.