Amcel Corporation v. Executive Sale, Inc

• Court: Court of Appeals for the First Circuit
• Decided: February 25, 1999
• Docket: 97-2278
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 97-2278



                        AMCEL CORPORATION,



                       Plaintiff, Appellee,



                                v.



      INTERNATIONAL EXECUTIVE SALES, INC., and LOU PETRONE,



                     Defendants, Appellants.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF MASSACHUSETTS



         [Hon. Reginald C. Lindsay, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                                

                 Coffin, Senior Circuit Judge,

                                

                   and Boudin, Circuit Judge.


Edward C. Cooley with whom Giarrusso, Norton, Cooley &McGlone, P.C. was on brief for appellants.

     Maureen E. Curran with whom Edward Notis-McConarty and

Hemenway & Barnes were on brief for appellee.


February 25, 1999


BOUDIN, Circuit Judge.  This appeal centers around an

award of exemplary damages under Mass. Gen. Laws ch. 93A made in

favor of the plaintiff Amcel Corporation and against Lou Petrone,

a defendant in the district court.  In the relevant time frame,

Petrone was the president and majority shareholder of co-defendant 

International Executive Sales ("IES").  A truncated history of the

controversy, based on the findings of the trial judge, will suffice

to frame the issues on this appeal.

  Amcel is a Massachusetts company that makes plastic

cutlery and trash can liners for commercial use.  Between April

1987 and August 1992, IES served as an exclusive commission sales

representative for Amcel in southern Ohio and West Virginia. 

Pertinently, IES agreed that it would not represent lines that

conflicted or competed with Amcel's product lines.  Nevertheless, 

as the district court later found, IES breached this understanding

in several respects.

  Beginning in March 1992, IES--at Petrone's direction--

began to sell to some of Amcel's customers plastic trash can liners

made by Carlisle Plastic, Inc., a competitor of Amcel.  Petrone

told his employees, on threat of firing, to conceal these dealings

and lie if necessary.  When Amcel inquired about a decline in sales

in Petrone's territory, one of Petrone's subordinates falsely told

Amcel that IES was not selling products  in competition with Amcel. 

  Petrone also diverted to Carlisle a customer interested

in liners made from recycled materials, liners that Amcel might

have supplied.  In June 1992, when Petrone signed an agreement with

this customer--long supplied by Amcel--Petrone was secretly

negotiating with Carlisle to represent Carlisle instead of Amcel on

a full-time basis.  Amcel was told nothing of these events until

August 12, 1992, when Petrone told Amcel that he had a better offer

from Carlisle and--misrepresenting the terms of the offer--Petrone

sought  improved terms from Amcel.

  Ultimately, IES resigned as Amcel's representative on

August 14, 1992, effective at the end of that month.  Thereafter,

Amcel learned that IES had been selling Carlisle liners to Amcel

customers.  In September 1992, Amcel sued IES and Petrone in

Massachusetts state court.  The complaint included claims for

breach of contract and for unfair and deceptive acts or practices

in violation of Massachusetts' chapter 93A.  After some preliminary

maneuvers irrelevant here, the case was removed by the defendants

to federal district court on May 21, 1993.

     On June 15, 1993, Petrone and IES moved to dismiss for

lack of personal jurisdiction or to transfer to another district. 

The motion also urged that the 93A claim be dismissed because the

acts or practices in question were "alleged" to have occurred in

Kentucky and Ohio rather than "primarily and substantially" in

Massachusetts, as section 93A expressly requires.  Mass. Gen. Laws

ch. 93A,  11.  On June 24, 1994, the magistrate judge (Judge

Bowler) wrote a thorough decision recommending denial of these

requests, which the district court (Judge Lindsay) later sustained. 

     In refusing the recommended dismissal of the 93A claim,

the magistrate judge pointed out that the case law has been

generous in allowing the "primarily and substantially" requirement

to be met by considering not only the site of the wrongful acts but

also where the plaintiff "received and acted upon" the wrongful

acts and the site of the loss or damages.  Clinton Hosp. Ass'n v.

Corson Group, Inc., 907 F.2d 1260, 1265-66 (1st Cir. 1990).  After

detailed discussion, Judge Bowler concluded that the complaint

indicated enough ties to Massachusetts to preclude dismissal of the

93A claim on the face of the complaint.

     The case was tried to the bench over 12 days between

December 9, 1996, and January 28, 1997.  On September 26, 1997,

Judge Lindsay issued a detailed memorandum decision.  On the

contract claim, he found that between March and August 1992, IES

had diverted from Amcel to Carlisle trash can liner sales that

would have produced profits for Amcel in the amount of $221,587. 

This amount, plus interest, was awarded to Amcel against IES.  On

appeal, the defendants do not challenge this award.

     On the 93A claim, the judge found that Petrone's conduct,

primarily the incidents already summarized, represented a pattern

of deceptive and unscrupulous conduct and merited trebling of the

contract award.  Having imposed liability for actual damages on

IES, he entered judgment for twice this amount ($443,174) against

Petrone, adding attorneys' fees and costs under the 93A claim.  SeeMass. Gen. Laws ch. 93A,  11.  The judgment relating to the 93A

claim is the subject of this appeal.

     The only claim of error in this court requiring much

discussion is defendants' assertion that the conduct associated

with the breach of contract and diversion of sales to Carlisle did

not occur "primarily and substantially" in Massachusetts.  In a

footnote to its decision, the district court said that "Petrone has

failed to raise the issue."  The court then said briefly that while

"Petrone made many of his misleading statements in places outside

of Massachusetts,"

     [o]utweighing this factor, however, are the

     facts that (1) Amcel, a Massachusetts company,

     took action in reliance on the statements in

     Massachusetts, and (2) the injury to Amcel was

     sustained in Massachusetts.  The court,

     therefore, concludes that the defendants have

     failed to carry their burden of proving that

     the actions took place primarily and

     substantially outside of Massachusetts.



     Although we think that it is quite likely that Amcel

would prevail on this issue if we addressed it on the merits, we

decline to do so because it has not been adequately preserved for

appeal.  Under Massachusetts law, the burden is upon the defendant

to disprove the "primarily and substantially" condition, making it

effectively an affirmative defense.  Mass. Gen. Laws ch. 93A,  11;

see also Play Time, Inc. v. LDDS Metromedia Comms., Inc., 123 F.3d

23, 32 (1st Cir. 1997).  When Petrone and IES answered the

complaint on February 3, 1995, they made no specific reference to

the defense, an omission that would forfeit an ordinary affirmative

defense.  Fed. R. Civ. P. 8(c); Knapp Shoes, Inc. v. Sylvania Shoe

Mfg. Corp., 15 F.3d 1222, 1226 (1st Cir. 1994).

     However, we are not concerned with niceties of pleading. 

The controlling objection is that following the answer, the

defendants never developed the defense:  it was not mentioned in

their pretrial brief or their post-trial brief in the district

court, and if it was mentioned at any point during the trial,

Petrone and IES have neglected to tell us where.  In this court,

Amcel said that the defense had been waived, and defendants filed

no reply brief at all.

     The general rule is that absent extraordinary

circumstances, legal theories not raised in district court cannot

be raised for the first time on appeal as a matter of right.  This

limitation has been applied both to issues that are wholly "alien

to the record," United States v. Kobrosky, 711 F.2d 449, 457 (1st

Cir. 1983), and to those that are merely mentioned in the pleadings

but not seriously developed in the record thereafter, see Violette,

62 F.3d at 11.  The rule makes special sense where, as here, the

theory is effectively a defense that is out of the case unless

pressed and proved by the defendant.

     The rule has various reasons, applying with different

force in different circumstances.  Perhaps most important, often

the other side would try its case differently if it knew of the

issue; and the trial judge would so instruct the jury or make

specific findings on it at a bench trial.  See National Ass'n of

Social Workers v. Harwood, 69 F.3d 622, 627-28 (1st Cir. 1995);

Poliquin v. Garden Way, Inc., 989 F.2d 527, 531 (1st Cir. 1993). 

But the rule applies without any showing of prejudice; prejudice is

of concern only where the court is otherwise inclined to relax the

rule.  See Harwood, 69 F.3d at 627-28.

     Sometimes on appeal, a legal argument not raised below

(e.g., an objection to evidence or an instruction) is fairly viewed

under the plain error doctrine.  But the defendant's failure to

raise and prove a defense for which the defendant carries the

burden of proof involves no judicial error at all; many defenses

are potentially available, the court normally considers only those

pressed by the defense, and a defense ignored by the defendant is

simply forfeit.  See Knapp Shoes, Inc. v. Sylvania Shoe Mfg. Corp.,

15 F.3d 1222, 1227 (1st Cir. 1994).

     Now, it is quite true that an issue resolved on the

papers  prior to trial may be preserved for appeal--the word "may"

should be stressed, cf. Fusco v. General Motors Corp., 11 F.3d 259,

262-63 (1st Cir. 1993)--even if no further mention is made by

counsel until after the judgment.  Thus, if the complaint fails to

state a claim but the district court denies a motion to dismiss,

the issue as posed at the motion stage is normally preserved for

appeal, cf. Bonilla v. Trebol Motors Corp., 150 F.3d 77, 80 (1st

Cir. 1998); Wright & Miller, Federal Practice and Procedure: Civil

2d  2376, at 420 (1994), although the defect might be cured

thereafter (e.g., by proof at trial and an effective amendment of

the pleadings, Fed. R. Civ. P. 15(b)).    

     But this reservation does Petrone no good in this case. 

On the papers, the magistrate judge did not err in recommending

denial of the motion to dismiss the 93A claim.  At the complaint

stage, inferences are taken, and doubts are resolved, in favor of

the non-moving party, see Gooley v. Mobil Oil Corp., 851 F.2d 513,

514 (1st Cir. 1988); and given Amcel's location in Massachusetts,

its claim of injury there, and other allegations, there was a

reasonable chance (or more) that Amcel might prevail at trial on

the "primarily and substantially" issue based on the generous

reading of this phrase in the case law.  The defendants do not

really argue otherwise but say that the facts developed at trial

show that the condition was not met.

      However, this latter argument seeks to raise an issue

not litigated at trial.  Defendants did not refer to the

requirement in their pre-trial brief, or frame it in their papers

as a contested issue, or argue it to the judge in post-trial brief,

or ask for findings concerning it.  Of course, some facts in the

record bear on the issue, but gaps also exist.  Amcel says, for

example, that witnesses would have been asked about just where

certain misrepresentations were made, if this had been thought

relevant.

     Defendants' best argument is that the district judge,

while explicitly finding that Petrone had "failed to raise the

issue," went on to decide it.  We think the fairest way to take the

footnote is as an alternative holding, treating the issue as

forfeited but also as without much merit.  Judge Lindsay's

treatment of the merits in the footnote would hardly have been so

terse--the gist is a single sentence (quoted above)--unless he

believed that defendants had abandoned the issue.  

     "Belt and suspenders" is a common and generally desirable

approach in a district court decision.  If the reference to

abandonment would otherwise have sufficed, it would be perverse--

and send the wrong message--to change the outcome merely because

the district judge sought to provide further reassurance by a brief

reference to merits.  Further, since we join the district court in

thinking that the issue was abandoned, fairness to Amcel would

likely require a remand (to allow it to counter the showing) if we

reached the merits and disagreed with the analysis.

      As we noted at the start, in rare cases, an appeals

court may choose to address a legal theory not fairly developed in

the district court.  Although we have spoken of "gross miscarriage

of justice," Johnston, 595 F.2d at 894 (quoting Newark Morning

Ledger Co. v. United States, 539 F.2d 929, 932 (3d Cir. 1976), and

grounds "so compelling as virtually to insure appellant's success,"

id., (quoting Dobb v. Baker, 505 F.2d 1041, 1044 (1st Cir. 1974)),

such language is perhaps not to be taken as a complete formula. 

Compare Harwood, 69 F.3d at 627-28 (listing factors).

     But even under Harwood's more flexible approach, this is

not even an arguable case for considering a forfeited issue.  The

issue is not constitutional or one of continuing public importance;

rather, it turns on particular facts that might have been better

developed and analyzed if the issue had been raised below.  See id. 

There is a risk of prejudice to the other party here, Amcel.  See

id.  And there is no excuse for the defendants in not pressing the

issue below except--and this hardly helps--that it is one on which

the defendants would probably have lost.  See id.

     The defendants' remaining arguments, unrelated to the

"primarily and substantially" test, need not detain us long. 

Petrone disputes that certain of the collateral conduct he engaged

in was an unfair or deceptive act (e.g., the negotiations with

Carlisle to become its distributor) or that it injured Amcel (e.g.,

the attempt to get a better deal with Amcel by misleading it as to

the supposed terms offered by Carlisle; the transactions with

Amcel, which we have not described, involving Petrone's other

company).  All of this is beside the point.

     The district court's core findings as to deceptive acts

and practices related to the diversion of Amcel customers to

Carlisle during the period when IES was committed exclusively to

represent Amcel on the products it made.  Admitting that the

standard of review fatally constrains them, see Brennan v. Carvel

Corp., 929 F.2d 801, 813-14 (1st Cir. 1991), the defendants do not

directly quarrel with the key facts found by the district court as

to this set of incidents, the only ones for which damages were

awarded.  The other episodes of apparent misconduct by Petrone,

whether rightly or wrongly evaluated, did not control the result.

     Petrone's remaining objection has a certain brazen charm. 

He says, uncontroversially, that the damages properly awarded, and

multiplied if the court chooses, under 93A are those caused by the

unfair or deceptive conduct.  See Mass. Gen. Laws ch. 93A,  11. 

He then argues (1) that if Petrone had not concealed his betrayal

of Amcel, Amcel would have terminated IES at once, and (2) that the

deception therefore benefitted Amcel because IES continued to make

sales for Amcel (i.e., for customers not diverted to Carlisle)

until August 1992.  The implication is that the court should have

reduced the damages done to Amcel by benefits conferred.

     Any Amcel sales that Petrone did not divert prior to

August 1992 surely did benefit Amcel.  But IES was paid a

commission for those sales by Amcel.  It is pure speculation to

suppose that those customers would have abandoned Amcel for some

other supplier if IES had been discharged at an earlier point;

Amcel would presumably have commissioned someone else to continue

sales in the same territory.  Thus, we need not consider other

possible objections to this off-set theory.

     Affirmed.