Dopp v. HTP Corp.
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Dopp v. HTP Corp., (1st Cir. 1994).
Opinion
USCA1 Opinion
November 25, 1994 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 93-2373
PAUL S. DOPP,
Plaintiff, Appellant,
v.
JAY PRITZKER,
Defendant, Appellee.
_________________________
Nos. 94-1130
94-1131
PAUL S. DOPP,
Plaintiff, Appellee,
v.
JAY PRITZKER,
Defendant, Appellant.
_________________________
ERRATA SHEET ERRATA SHEET
The opinion of the court issued on October 28, 1994, is
corrected as follows:
1. On page 25, line 13 delete signal for footnote 12, and
add the following at the end of the sentence (after "$600,000."):
Under the SSA, Pritzker could have exercised the buy-out option
as late as 10 years after the formation of the contract
(withholding any payment until then). There is evidence in the
record, through an expert witness presented by Pritzker, that the
prospect of so long a delay would justify a somewhat lower
figure, reflective of a time-related discount. The expert
testified that this reduction to present value could have brought
the present value of the redemption price as of December 3, 1984,
as low as $114,638.
2. Delete footnote 12 in its entirety and renumber all
subsequent footnotes accordingly.
3. On page 26, line 3 change "the . . . price" to
"$114,638."
4. On page 26, line 4, page 27, line 10, page 29, line 7,
and page 29, line 12 change "$13,686,600" to "$14,171,962."
5. On page 29, line 10 change "$3,313,400" to
"$2,828,038."
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 93-2373
PAUL S. DOPP,
Plaintiff, Appellant,
v.
JAY PRITZKER,
Defendant, Appellee.
_________________________
Nos. 94-1130
94-1131
PAUL S. DOPP,
Plaintiff, Appellee,
v.
JAY PRITZKER,
Defendant, Appellant.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge] ___________________
_________________________
Before
Selya and Cyr, Circuit Judges, ______________
and Zobel,* District Judge. ______________
_________________________
Ruben T. Nigaglioni, with whom Diana Mendez-Ondina and _____________________ ____________________
Ledesma, Palcu & Miranda were on brief, for plaintiff. ________________________
Gael Mahony, with whom Frances S. Cohen, David A. Hoffman, ___________ ________________ _________________
Joshua M. Davis, Hill & Barlow, Salvador Antonetti-Zequeira, ________________ _______________ ____________________________
Ricardo Ortiz-Colon, and Fiddler, Gonzalez & Rodriguez were on ___________________ ______________________________
brief, for defendant.
_________________________
October 28, 1994
_________________________
_______________
*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. In these appeals, we revisit the SELYA, Circuit Judge. _____________
remedial phase of a protracted dispute in which the main
protagonists are a pair of erstwhile partners, Paul S. Dopp and
Jay A. Pritzker. The litigation stems from an oral contract
between the two men concerning the purchase of the Dorado Beach
Hotel Corporation (DBHC), a company that controlled a complex of
hotels and golf courses situated on 1,000 beachfront acres along
the north shore of Puerto Rico.
In an earlier opinion we upheld a jury verdict finding
Pritzker liable to Dopp, but vacated both the jury's damage award
and the trial court's rulings in connection with equitable
relief. See Dopp v. HTP Corp., 947 F.2d 506 (1st Cir. 1991) ___ ____ __________
(Dopp II). On remand, the district court held a second trial to _______
determine Dopp's entitlement to various forms of relief. After a
jury returned a series of special findings, see Fed. R. Civ. P. ___
49(a), the district court entered a revised judgment.
Both sides now appeal.1 Their appeals require that we
examine: (1) whether the district court lawfully denied Dopp
resolution (a form of rescission) as a remedy for contractual
breach; (2) whether the jury's assessment of full damages,
$17,000,000, was either excessive, as Pritzker claims, or too
____________________
1The three appeals with which we are concerned today were
consolidated for oral argument with three other appeals arising
out of the same case. Since the latter appeals (Nos. 93-2374,
94-1128, and 94-1129, respectively) involve segregable issues
they focus on a series of financing agreements entered into
between Dopp and three financiers, Robert Yari, Lincoln Realty,
Inc., and Baird Patrick & Co., for the apparent purpose of
funding Dopp's litigatory efforts we will address them in a
separate and subsequent opinion.
4
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USCA1 Opinion
November 25, 1994 UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 93-2373
PAUL S. DOPP,
Plaintiff, Appellant,
v.
JAY PRITZKER,
Defendant, Appellee.
_________________________
Nos. 94-1130
94-1131
PAUL S. DOPP,
Plaintiff, Appellee,
v.
JAY PRITZKER,
Defendant, Appellant.
_________________________
ERRATA SHEET ERRATA SHEET
The opinion of the court issued on October 28, 1994, is
corrected as follows:
1. On page 25, line 13 delete signal for footnote 12, and
add the following at the end of the sentence (after "$600,000."):
Under the SSA, Pritzker could have exercised the buy-out option
as late as 10 years after the formation of the contract
(withholding any payment until then). There is evidence in the
record, through an expert witness presented by Pritzker, that the
prospect of so long a delay would justify a somewhat lower
figure, reflective of a time-related discount. The expert
testified that this reduction to present value could have brought
the present value of the redemption price as of December 3, 1984,
as low as $114,638.
2. Delete footnote 12 in its entirety and renumber all
subsequent footnotes accordingly.
3. On page 26, line 3 change "the . . . price" to
"$114,638."
4. On page 26, line 4, page 27, line 10, page 29, line 7,
and page 29, line 12 change "$13,686,600" to "$14,171,962."
5. On page 29, line 10 change "$3,313,400" to
"$2,828,038."
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 93-2373
PAUL S. DOPP,
Plaintiff, Appellant,
v.
JAY PRITZKER,
Defendant, Appellee.
_________________________
Nos. 94-1130
94-1131
PAUL S. DOPP,
Plaintiff, Appellee,
v.
JAY PRITZKER,
Defendant, Appellant.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge] ___________________
_________________________
Before
Selya and Cyr, Circuit Judges, ______________
and Zobel,* District Judge. ______________
_________________________
Ruben T. Nigaglioni, with whom Diana Mendez-Ondina and _____________________ ____________________
Ledesma, Palcu & Miranda were on brief, for plaintiff. ________________________
Gael Mahony, with whom Frances S. Cohen, David A. Hoffman, ___________ ________________ _________________
Joshua M. Davis, Hill & Barlow, Salvador Antonetti-Zequeira, ________________ _______________ ____________________________
Ricardo Ortiz-Colon, and Fiddler, Gonzalez & Rodriguez were on ___________________ ______________________________
brief, for defendant.
_________________________
October 28, 1994
_________________________
_______________
*Of the District of Massachusetts, sitting by designation.
SELYA, Circuit Judge. In these appeals, we revisit the SELYA, Circuit Judge. _____________
remedial phase of a protracted dispute in which the main
protagonists are a pair of erstwhile partners, Paul S. Dopp and
Jay A. Pritzker. The litigation stems from an oral contract
between the two men concerning the purchase of the Dorado Beach
Hotel Corporation (DBHC), a company that controlled a complex of
hotels and golf courses situated on 1,000 beachfront acres along
the north shore of Puerto Rico.
In an earlier opinion we upheld a jury verdict finding
Pritzker liable to Dopp, but vacated both the jury's damage award
and the trial court's rulings in connection with equitable
relief. See Dopp v. HTP Corp., 947 F.2d 506 (1st Cir. 1991) ___ ____ __________
(Dopp II). On remand, the district court held a second trial to _______
determine Dopp's entitlement to various forms of relief. After a
jury returned a series of special findings, see Fed. R. Civ. P. ___
49(a), the district court entered a revised judgment.
Both sides now appeal.1 Their appeals require that we
examine: (1) whether the district court lawfully denied Dopp
resolution (a form of rescission) as a remedy for contractual
breach; (2) whether the jury's assessment of full damages,
$17,000,000, was either excessive, as Pritzker claims, or too
____________________
1The three appeals with which we are concerned today were
consolidated for oral argument with three other appeals arising
out of the same case. Since the latter appeals (Nos. 93-2374,
94-1128, and 94-1129, respectively) involve segregable issues
they focus on a series of financing agreements entered into
between Dopp and three financiers, Robert Yari, Lincoln Realty,
Inc., and Baird Patrick & Co., for the apparent purpose of
funding Dopp's litigatory efforts we will address them in a
separate and subsequent opinion.
4
niggardly, as Dopp asserts; and (3) whether the district court
appropriately awarded Dopp attorneys' fees and prejudgment
interest, based on its determination that Pritzker displayed
obstinacy in conducting the litigation. After a careful
examination of the record and the applicable law, we affirm in
part, reverse in part, and remand.
I. BACKGROUND I. BACKGROUND
We divide this segment of our opinion into two
subparts, treating the facts and the travel of the case
separately. In doing so, we write somewhat sparingly because the
background of the litigation is already well-documented. See, ___
e.g., id. at 508-09; Dopp v. HTP Corp., 831 F. Supp. 939, 941-42 ____ ___ ____ _________
(D.P.R. 1993) (Dopp III); Dopp v. HTP Corp., 755 F. Supp. 491, ________ ____ _________
492-94 (D.P.R. 1991) (Dopp I). ______
A. The Facts. A. The Facts. _________
In May of 1984, Dopp wangled an option to acquire DBHC
for the approximate price of $40,500,000. He secured the option
with a $2,000,000 letter of credit supplied with the assistance
of Island Resorts, S.A. (IRSA), a Panamanian corporation. The
option agreement specified that the underlying purchase-and-sale
transaction would be consummated no later than December 3, 1984.
Though playing for high stakes, Dopp had relatively few
chips of his own. Thus, he immediately set out in search of
financial backing. He encountered heavy seas. With time running
out, Dopp turned to Pritzker. The parties reached an oral
agreement on November 30, 1984. Under its terms, Pritzker agreed
5
to provide the funds needed to seal the purchase and reimburse
Dopp's and IRSA's costs. In exchange, Dopp agreed that Pritzker
would receive an 80% equity interest in a holding company that
would be formed to acquire DBHC's stock, and, as a sweetener,
that a Pritzker affiliate would be given a long-term contract to
manage the hotels coincident with the closing.
The parties formed HTP Corporation (HTP) to serve as
the holding company. Dopp controlled 20% of HTP's stock in the
first instance, but ceded some shares to IRSA in accordance with
a prior arrangement. In the end, Dopp retained a 12% interest in
HTP. Meanwhile, Pritzker, through a nominee, held an 80%
interest.2
On December 3, 1984, Pritzker presented two documents
to Dopp that supposedly embodied their oral agreement. Pritzker
injected into one of these documents the stock subscription
agreement (SSA) a clause granting the majority shareholder
(Pritzker) an option to retire the stock held by the two minority
shareholders (Dopp and IRSA) for $50,000 per share, or $1,000,000
in the aggregate, at any time within 10 years. With the purchase
option due to expire, the move put Dopp at a huge disadvantage.
He signed the documents.
After HTP obtained a one-day extension from the seller,
it closed the underlying transaction on December 4, 1984. HTP
bought DBHC's stock for $36,846,000, net of adjustments; the
____________________
2For ease in reference, we ignore the nominee, a shell
corporation, and treat Pritzker as if he, himself, were the
majority shareholder.
6
seller canceled the letter of credit; Pritzker reimbursed Dopp
and IRSA for expenses advanced ($710,000); and Dopp received a
prearranged $200,000 "consulting fee."
B. The Litigation. B. The Litigation. ______________
In mid-1988, Dopp initiated a diversity suit in the
United States District Court for the District of Puerto Rico,
naming Pritzker, HTP, and several others as defendants. He
alleged, inter alia, that the buy-out option in the SSA _____ ____
contravened the oral contract, and that his consent to the SSA
had been unfairly procured. After a 10-day trial, a jury found
in Dopp's favor, determining that the parties had formed an oral
contract on November 30, 1984, and that, thereafter, Pritzker had
employed deceit and duress to pressure Dopp into signing the SSA,
thereby violating the oral contract. Based on these
determinations, the jury awarded Dopp $2,000,000 in damages.
Thereafter, the district court, acting in response to Dopp's
motion under Fed. R. Civ. P. 59(e), declared the SSA null and
void in respect to Dopp's shares in HTP, but declined to order
resolution of the oral contract.3
The first trial produced no fewer than ten appeals.
After considering them, we upheld the liability determination but
vacated both the damage award and the district court's remedial
rulings, see Dopp II, 947 F.2d at 520. We then remanded for ___ _______
____________________
3Resolution is a remedy that, under Puerto Rico law,
operates in much the same way as rescission. See P.R. Laws Ann. ___
tit. 31, 3052 (1991); see also Dopp II, 947 F.2d at 510-11. We ___ ____ _______
discuss the nature of the remedy at greater length in Part II(A),
infra. _____
7
further relief-related proceedings, indicating that, "assuming a
competent evidentiary predicate, the jury may be instructed on,
and asked to determine, variously: (1) full damages . . .; (2)
the amount of accessory damages, if any, [pursuant to annulment]
. . .; and (3) the amount of accessory damages, if any, [pursuant
to resolution] . . . ." Id. at 519. We also observed that ___
"annulment and resolution are mutually exclusive remedies," and
that "the plaintiff may or may not . . . satisfy the district
court that he is entitled to an order for resolution of the Oral
Contract." Id. at 520. ___
On March 27, 1993, a second jury rendered a series of
special findings. The jury fixed the amount of full damages at
$17,000,000, and the amount of damages ancillary to resolution
(if resolution were ultimately ordered) at either $19,621,000 or
$210,071,000, depending on whether the court might order
resolution in natura or in kind. See Dopp III, 831 F. Supp. at __ ______ ___ ________
942 & n.5. The jury determined that, if Dopp elected annulment,
there would be no accessory damages. See id. ___ ___
On September 9, 1993, the district court made certain
supplementary rulings. Among other things, the court denied
Pritzker's motions for judgment as a matter of law and for a new
trial; put a damper on Dopp's quest for resolution; rejected
Dopp's motion to alter or amend the judgment; upheld the jury's
assessment of full damages; and awarded Dopp prejudgment interest
8
and attorneys' fees.4 See id. at 943-52. These appeals ensued. ___ ___
II. RESOLUTION II. RESOLUTION
In our earlier opinion, we determined that up to three
main remedies might be available to Dopp, namely, annulment of
the SSA, resolution of the oral contract, or full damages. Dopp ____
II, 947 F.2d at 519. We noted that, in the event Dopp achieved __
either annulment or resolution, the jury might also award
accessory damages. See id. We defined the third remedy, "full ___ ___
damages," as comprising "the amount of damages which would make
Dopp whole in the absence of either annulment or resolution . . .
." Id. Withal, we cautioned that the availability of any given ___
remedy depended upon the existence (or nonexistence) of a
"competent evidentiary predicate." Id. ___
At the second trial, Judge Pieras instructed the jurors
as to each of these three remedies and commanded them to
determine on a contingent basis the amount of money damages, if
any, that each anodyne actually would entail. The jurors
complied. Following the jury's calculation of potential damages,
the judge asked Dopp to elect a remedy. Dopp chose resolution.
Much to his dismay, the district court ruled that, given the
evidence, resolution was unobtainable. Under protest, Dopp then
elected an alternate remedy: full damages. He now beseeches us
____________________
4The district court also made a number of rulings in regard
to third parties who claimed an interest in the proceeds of the
litigation through prior arrangements with Dopp. See Dopp III, ___ ________
831 F. Supp. at 952-59. We leave these rulings to one side for
present purposes, intending, however, to deal with them in due
course. See supra note 1. ___ _____
9
to reverse the district court's denial of resolution.
In order to respond to Dopp's importunings, we must
determine the nature of resolution under Puerto Rico law, settle
upon the proper standard of review, consider whether the court
below paid sufficient homage to the lessons of Dopp II, and, ________
finally, evaluate the sturdiness of the district court's ruling.
A. Legal Principles. A. Legal Principles. ________________
The remedy of resolution emanates from article 1077 of
the Puerto Rico Civil Code, which reads in pertinent part:
The right to rescind the obligations is
considered as implied in mutual ones, in case
one of the obligated persons does not comply
with what is incumbent upon him.
The person prejudiced may choose between
exacting the fulfillment of the obligation or
its rescission, with indemnity for damages
and payment of interest in either case. He
may also demand the rescission, even after
having requested its fulfillment, should the
latter appear impossible. . . .
P.R. Laws Ann. tit. 31, 3052 (1991).
It is noteworthy that "[n]ot every breach of a
contractual obligation gives rise to a resultory action under
article 1077." Dopp II, 947 F.2d at 510-11. To pave the way for _______
the remedy, the unfulfilled obligation must be reciprocal in
nature. See id. at 511. Reciprocity inheres when "there are ___ ___
obligations and correlative obligations so interdependent between
themselves that one is the consequence of the other, and the
performance of said obligation by a contracting party constitutes
the motive of the contract for the other party, and vice versa."
Ponce v. Vidal, 65 P.R.R. 346, 351 (1945). That is, reciprocity _____ _____
10
is basically a way of saying that a particular obligation
exhibits both mutuality and essentiality what one might term ____ ___
"mutual essentiality." This concept embodies the notion that, in
the absence of a particular mutual obligation, the contract would
never have come into being, and, thus, should cease to exist.
The Supreme Court of Puerto Rico recently fleshed out
this idea, observing that
not every failure to comply with a mutual
obligation will have the effect of
terminating the contract. For this to be the
case, the unmet obligation must be an
essential obligation or fulfillment of the
obligation must constitute the motive that
induced the other party to enter into the
contract.
Ramirez v. Club Cala de Palmas, ___ D.P.R. ___, 89 J.T.S. 22 _______ ____________________
(1989) (revised official translation). Put bluntly, "the
unfulfilled obligation must be the principal one." Id. ___
The Ramirez court likewise emphasized the overarching _______
concern of article 1077: that contracts, if and when possible,
be preserved and ultimately fulfilled. See id. This is the ___ ___
"higher interest" served by a narrow construction of the element
of reciprocity. Id. From all that we can discern, then, Article ___
1077 is a remedy of last resort, reserved for situations in which
a party's breach dissipates the very essence of a contract.
B. Standard of Review. B. Standard of Review. __________________
We think it follows from this characterization that the
applicability of article 1077 in a given case presents a mixed
question of law and fact. The Puerto Rico Supreme Court has
identified reciprocity as the key principle on which article 1077
11
rests. See Vidal, 65 P.R.R. at 351. And though reciprocity ___ _____
itself is wholly a legal construct, its existence in any
particular contractual setting is almost entirely contingent on
the determination of a series of essentially factual questions,
e.g., the subject matter of the contract, the context in which it ____
arose, the parties' intentions, their course of conduct, and the
like. See id. (describing reciprocity as a function of the ___ ___
"character" of a particular obligation).
Indeed, to the extent that reciprocity actually resides
at the intersection of mutuality and essentiality, its
characterization as a mixed question of law and fact becomes
virtually unavoidable. Essentiality is closely akin to, if not a
species of, materiality, and courts and commentators have long
recognized that materiality is primarily a question of fact, the
resolution of which is necessarily a function of context and
circumstances. See, e.g., Gibson v. City of Cranston, ___ F.3d ___ ____ ______ ________________
___, ___ (1st Cir. 1994) (No. 94-1375, slip op. at 8-9); see also ___ ____
3A Arthur L. Corbin, Corbin on Contracts 700, at 309-10 (1960 & ___________________
Supp. 1992) (noting that whether a party's breach "go[es] to the
`essence'" of the contract is a function of weighing various
factors); 2 E. Allan Farnsworth, Farnsworth on Contracts 8.16, _______________________
at 443 (1990) ("Whether a breach is material is a question of
fact.").
Putting the issue into this perspective has salient
implications for appellate oversight. "The standard of review
applicable to mixed questions usually depends upon where they
12
fall along the degree-of-deference continuum: the more fact-
dominated the question, the more likely it is that the trier's
resolution of it will be accepted unless shown to be clearly
erroneous." In re Howard, 996 F.2d 1320, 1328 (1st Cir. 1993); _____________
see also Williams v. Poulos, 11 F.3d 271, 278 (1st Cir. 1993) ___ ____ ________ ______
("The clearly erroneous standard . . . ordinarily applies when we
review a trial court's resolution of mixed questions of law and
fact.").
Here, the fact-specific nature of the inquiry into
resolution demands that we accept the district court's findings
unless they are shown to be clearly erroneous.5 In practical
terms, this means that the findings will hold sway unless, after
reading the whole record and making due allowance for the trier's
superior insights into credibility, the reviewing court
unhesitatingly concludes that a mistake has been made. See ___
____________________
5Referring to the district court's statement that Dopp was
"not entitled to resolution as a matter of law," Dopp III, 831 F. ________
Supp. at 959, Dopp suggests that our review should be de novo. __ ____
See, e.g., McCarthy v. Azure, 22 F.3d 351, 354 (1st Cir. 1994) ___ ____ ________ _____
(holding that questions of law engender plenary appellate
review). We reject the suggestion. On close perscrutation, it
is plain that Judge Pieras reached his conclusion about Dopp's
lack of entitlement to resolution as a result of a case-specific,
fact-dominated decisional process. See Dopp III, 831 F. Supp. at ___ ________
946-50. The words contained in a district court's ruling must be
"read in context" and judged by their "cumulative import."
United States v. Tavano, 12 F.3d 301, 304 (1st Cir. 1993). ______________ ______
Mindful that the law does not require district courts to be
letter-perfect in their syntax or choice of phraseology in
matters of word usage, we have repeatedly acknowledged that "an
appellate court must not hesitate to excuse an awkward locution
and give a busy trial judge a bit of breathing room," Lenn v. ____
Portland Sch. Comm., 998 F.2d 1083, 1088 (1st Cir. 1993) (citing ____________________
other cases) we refuse to sacrifice substance on the altar of
form.
13
Dedham Water Co. v. Cumberland Farms Dairy, Inc., 972 F.2d 453, ________________ ____________________________
457 (1st Cir. 1992); Cumpiano v. Banco Santander P.R., 902 F.2d ________ ____________________
148, 152 (1st Cir. 1990); see also Fed. R. Civ. P. 52(a). In the ___ ____
last analysis, the clear-error rubric betokens a "highly
deferential mode[] of review." Howard, 996 F.2d at 1327. ______
Of course, "Rule 52(a) does not inhibit an appellate
court's power to correct errors of law, including those that may
infect a so-called mixed finding of law and fact, or a finding of
fact that is predicated on a misunderstanding of the governing
rule of law." Bose Corp. v. Consumers Union of U.S., Inc., 466 __________ _____________________________
U.S. 485, 501 (1984). But, here, although Dopp argues for de __
novo review, he has not shown that any error of law influenced or ____
otherwise tainted the district court's findings of fact.
Although he repeatedly describes the court's findings in terms of
legal, rather than factual, error, merely calling a dandelion an
orchid does not make it suitable for a corsage. As we have
remarked before, "[t]he clearly erroneous rule cannot be evaded
by the simple expedient of creative relabelling." Reliance Steel ______________
Prods. Co. v. National Fire Ins. Co., 880 F.2d 575, 577 (1st Cir. __________ ______________________
1989).
We have said enough on this score. Since "we will not
permit parties to profit by dressing factual disputes in `legal'
costumery," id., we think that, with one exception, we must ___
subject the district court's denial of a resultory remedy to
clear-error review. Before doing so, however, we visit the
exception.
14
C. Law of the Case . . . Not! C. Law of the Case . . . Not! _________________________
Dopp boldly contends that the district court failed to
recognize the law of the case. A contention that the law of the
case precludes reexamination of an issue raises a pure question
of law, and, thus, engenders plenary review. See McCarthy v. ___ ________
Azure, 22 F.3d 351, 354 (1st Cir. 1994); Liberty Mut. Ins. Co. v. _____ _____________________
Commercial Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992). _________________________
Dopp's "law of the case" argument prescinds from a
wildly optimistic reading of our earlier opinion an opinion
that, in Dopp's view, directed the district court to grant him
resolution. In support of this claim, Dopp adverts to our
general discussion of article 1077, both in terms of its possible
(past) role in the first jury's determination of damages, see ___
Dopp II, 947 F.2d at 513-14, and in terms of its possible _______
(future) role in the jury trial to be held following remand, see ___
id. at 510-11, 519. ___
To be charitable, Dopp reads our language through rose-
colored glasses, ignoring the forest and focusing self-
interestedly on a few isolated trees. In the bargain, he
cavalierly wrests phrases from their analytical context,
disregarding the wise adage that the words contained in judicial
opinions "are to be read in light of the facts of the case under
discussion." Armour & Co. v. Wantock, 323 U.S. 126, 132 (1944). ____________ _______
The whole purpose of our original analysis was to ascertain,
assuming that Article 1077 might have applied, on what theory the _____________________________________________
judge and jury could have generated the determination of damages.
15
We lamented that the actual basis for the damage award was
"completely uncertain," Dopp II, 947 F.2d at 513, and that the _______
record revealed "rampant confusion over what relief was
warranted," id. at 516. In short, our earlier opinion shows ___
beyond hope of contradiction that we decided nothing in regard to
the ultimate applicability of a resultory remedy.
The sockdolager is that Dopp's "law of the case"
argument entirely ignores both our prediction that at a second
trial Dopp "may or may not . . . satisfy the district court that
he is entitled to an order for resolution of the Oral Contract,"
and our straightforward declaration that we "intimate no view" as
to the eventual outcome of this question. Id. at 520. The words ___
could not be plainer or more explicit. Given this express
disclaimer, it is fanciful for Dopp to suggest that we bound the
lower court to an award of resolution the second time around.
D. Analysis. D. Analysis. ________
Having exposed Dopp's threshold contention as baseless,
we now confront the critical question: did the district court
commit clear error in denying Dopp the remedy of resolution?
Based on a painstaking review of an amplitudinous record, we
think not.
Under the Civil Code, resolution requires more than
merely proving the nonfulfillment of some mutual obligation
contained in a bilateral contract. Rather, the unfulfilled
obligation must be "essential" to the contract, or, phrased
another way, the contemplated fulfillment of the obligation must
16
have constituted the contract's raison d'etre. The Ramirez court _____________ _______
put the point succinctly, stating that resolution cannot be
grounded in the nonfulfillment of "accessory" or "complementary"
obligations obligations that the court described as those which
"do not constitute the real consideration for executing a
contract and which are incorporated into the same to complete or
clarify the contracting parties' stipulations." Ramirez, ___ _______
D.P.R. __, 89 J.T.S. 22 (citing Del Toro v. Blasini, 96 P.R.R. ________ _______
662 (1968); Velez v. Rios, 76 P.R.R. 806 (1954); Vidal, 65 P.R.R. _____ ____ _____
346 (1945)). While the breach of such an accessory or
complementary obligation "may trigger an action for damages or
any other action that the circumstances of each case warrant,"
such a breach may "never" give rise to a rescissory action. Id. _____ ___
(emphasis in original). This is so, the court said, because
"[t]he requirement that the unfulfilled obligation be the
principal one serves a higher interest . . . that promotes the
fulfillment of contracts, and that prevents that, by a lesser
breach of contract, one of the parties may release himself from
the obligation, either because he is no longer interested or
because the contract does not suit him anymore." Id. (citing 1 ___
Diez Picaso, Fundamentos del Derecho Civil Patrimonial 859 (2d __________________________________________
ed. 1983)).
The question of whether Pritzker's provision of an
unencumbered, as opposed to encumbered, 12% interest in HTP
constituted either an essential obligation of his bargain, or the
motive that induced Dopp to enter into the contract, is not
17
necessarily subject to a simple, categorical answer. This very
uncertainty is, in itself, a good indicator that the district
court's answer, whether affirmative or negative, is not likely to
be clearly erroneous.
In any event, we discern no clear error here. Judge
Pieras, quoting Dopp's own testimony, determined among other
things that "[p]roviding Dopp with an unencumbered . . . equity ____________
interest in HTP is not a reciprocal obligation of the Oral
Agreement assumed by the defendant. Indeed the plaintiff `fully
expected that there would be some reasonable option' and
therefore did not rely on the absence of an option clause to
enter into the Oral Agreement." Dopp III, 831 F. Supp. at 950 ________
(emphasis in original). We believe that this assessment of
Dopp's actual expectation is supportable, and that it alone is
sufficient to ground a principled conclusion that the parties
regarded the element of non-encumbrance as an incidental, rather
than an essential, obligation of their contract. If it is true
that Dopp, prior and pursuant to the formation of the oral
contract, "fully expected that there would be some reasonable
option" as he, himself, testified and yet proceeded to the
written contract phase without settling this matter precisely, it
seems eminently reasonable for a factfinder to conclude that the
element of non-encumbrance could not have been the raison d'etre _____________
of the oral contract.
What is more, the plausibility of this conclusion rests
not only on Dopp's own words, but also on other witnesses'
18
testimony to the effect that, when ownership is closely held,
buy-out options are a regular attribute of intra-corporate
arrangements. For our part, we regard this truth to be self-
evident; indeed, it is difficult to imagine an 80% shareholder of
a close corporation owning extremely valuable assets who would
not routinely demand such protection. Pritzker may have been
many things, but, as Dopp well knew, he was neither a neophyte
nor an altruist. Hence, Dopp could not reasonably have expected
that Pritzker would forgo so elementary a precaution and leave
the minority stock unfettered.
The interest in preservation and ultimate fulfillment
of contracts that drives article 1077, see Ramirez, ___ P.R. Dec. ___ _______
__, 89 J.T.S. 22, does not suggest a contrary result. Here,
Pritzker's breach did not render the contract inherently infirm.
To be sure, the breach harmed Dopp, but his insistent focus upon
the harm begs the real question. The critical determinant of the
availability of a resultory remedy is neither the fact nor the
magnitude of the inflicted injury, but, rather, whether the
defaulting party's breach irretrievably undermined the contract.
In this instance, the district court thought not; and we can
scarcely conclude, based on the evidence presented, that its
decision was clearly erroneous.
In a last-ditch effort to turn the tide, Dopp insists
that the unreasonableness of the particular buy-out clause that
Pritzker inserted into the SSA somehow transmogrifies an
accessory obligation into an essential obligation. We do not
19
agree. If the obligation to produce an unencumbered 12%
ownership interest was not essential before and at the time of
the oral contract and, as we have pointed out, there is
adequate evidence to support a conclusion to that effect then
it does not matter that the obligation took on added importance
as time went by and circumstances changed.
Dopp's other arguments on this issue do not require
comment. For the reasons set forth herein, we uphold the
district court's finding that the obligation shirked by Pritzker
lacked mutual essentiality. Accordingly, we affirm the denial of
resolution.
III. FULL DAMAGES III. FULL DAMAGES
Because Dopp was not legally entitled to resolution,
his contingent election of an alternative remedy full damages
is both valid and binding. Withal, both parties question the
amount of the damage award. To answer these queries, we must
examine whether the district court correctly instructed the jury
as to the relevant measure of damages and, if so, whether the
jury's resultant rendition of full damages passes muster.
A. The Trial Court's Instructions. A. The Trial Court's Instructions. ______________________________
Under Dopp's rather imaginative theory of the case,
full damages, properly computed, total $60,581,000. He contends
that the verdict on full damages undershot this target because a
pinchpenny trial court charged the jury in too restrictive a
manner. Branding those instructions as contradictory to the
teachings of Dopp II and characterizing them as "poorly thought- _______
20
out and convoluted," Dopp asks us to set aside the verdict and
mandate further proceedings.6 We conclude that the court did
not commit reversible error in framing its jury instructions.
Our analysis begins, as it must, with the text of the
district court's charge. In relevant part, the judge told the
jury:
First you must render a verdict as to the
amount of the full damages to which Dopp is
entitled based on Pritzker's breach of the
oral contract. . . . Full damages reflect
the amount, if any, that is necessary to
compensate Dopp in the event that he does not
elect to have the Court enter an order of
annulment. They reflect the amount necessary
to put Dopp in as good a position as he would
have been if the oral contract had been fully
performed so that his shares were not being
encumbered by the SSA's buy-out clause. The
amount of full damages are [sic] therefore
the difference between the value of what he
was promised under November 30, 1984 oral
contract and the value of what he actually
received from Pritzker under the December 3,
1984 stock subscription agreement.
As we read these words, we believe that the court indicated, in
essence, that full damages consisted of the monetary cost of
encumbrance, that is, the value of what Dopp had a legitimate
right to expect (a 12% interest in HTP, not encumbered in any
unorthodox way) less the value of what he actually received (a
____________________
6Dopp also insists that in addition to taking other
corrective action, we should annul the SSA. He is barking up the
wrong tree. If Dopp desired annulment, he could have elected
that remedy below. See Dopp II, 947 F.2d at 519. He did not do ___ _______
so. See Dopp III, 831 F. Supp. at 942. Absent such an election, ___ ________
Dopp cannot pursue annulment on appeal. Nor is this outcome
unconscionable; as a general legal principle, "[p]arties cannot
have their cake and eat it, too." United States v. Weston, 960 _____________ ______
F.2d 212, 215 (1st Cir. 1992).
21
12% interest in HTP, subject to a particularly onerous
encumbrance), measured at the time of the breach (December 3,
1984).
Dopp disagrees. He posits on appeal, as he did
below,7 that the true measure of full damages is the value of
the purchase agreement plus a disgorgement premium referable to
Pritzker's wrongful possession. In support of this theorem, Dopp
directs our attention to certain language contained in Dopp II, _______
to article 1255 of the Civil Code, P.R. Laws Ann. tit. 31, 3154
(1991), and to "[a]n intuitive sense that an injustice is
inherent in the District's Court's formulation . . . ." Because
these exhortations boil down to a claim that the district court
misapprehended the substantive law on damages, appellate review
is plenary. See Losacco v. F.D. Rich Constr. Co., 992 F.2d 382, ___ _______ _____________________
384 (1st Cir.), cert. denied, 114 S. Ct. 324 (1993); see also _____ ______ ___ ____
McCarthy, 22 F.3d at 354. ________
Despite the freedom inherent in plenary review and the
generosity of our efforts, we are unable to discern a cognizable
legal basis on which Dopp's remedial theory might rest. In
particular, we find baffling Dopp's invocation of our earlier
opinion. Nothing contained therein suggests, by any stretch of
the most elastic imagination, that full damages for purposes of
this case could constitute anything more than the cost of
____________________
7Dopp properly preserved his rights anent the challenged
instructions, making a timely objection as required by Fed. R.
Civ. P. 51. He also moved to alter or amend the judgment on this
ground, in pursuance of Fed. R. Civ. P. 59(e).
22
encumbrance. Indeed, we specifically defined full damages as
"the amount of damages which would make Dopp whole in the absence
of either annulment or resolution," Dopp II, 947 F.2d at 519, and _______
the district court's formulation fits neatly within this
integument. Moreover, it is virtually a hornbook restatement and
application of the concept of contractual wholeness. See John D. ___
Calamari & Joseph M. Perillo, The Law of Contracts 14-4, at 591 ____________________
(3d ed. 1987) ("For breach of contract the law of damages seeks
to place the aggrieved party in the same economic position he
would have had if the contract had been performed."); 3
Farnsworth on Contracts, supra, 12.1, at 147 ("[C]ourts _________________________ _____
encourage promisees to rely on promises . . . [o]rdinarily . . .
by protecting the expectation that the injured party had when
making the contract by attempting to put the injured party in as
good a position as that party would have been in had the contract
been performed, that is, had there been no breach.").
Nor need we tarry over Dopp's second source of
"support" for his theorem. This so-called source article 1255
of the Civil Code is simply not supportive of Dopp's position.
As its text makes clear, article 1255 is relevant only "[w]hen
the nullity of an obligation has been declared." P.R. Laws Ann.
tit. 31, 3514 (1991). That is not the situation here.
Dopp's hole card his stated reliance on his
"intuitive sense" of "injustice" does not shore up his hand.
The plea that it embodies lies beyond the cognizance of this
court, which necessarily deals in the concreteness of fact, law,
23
and logic, not the fluidity of pathos and intuition. Absent a
demonstration of legal error and Dopp has offered none we
must uphold the district court's charge on damages.8
B. The Amount of Damages. B. The Amount of Damages. _____________________
Using the formula given in the trial court's
instructions, the jury calculated Dopp's full damages to be
$17,000,000. Pritzker, for his part, is satisfied with the
court's instructions but not with the amount of damages. He
argues that the verdict is not rationally based on the evidence
presented and, hence, that the district court erred in refusing
to grant his motion for a new trial. In stark contrast, Dopp
contends that the amount is far too scant, and that even "[i]f
the jury did exactly that which the district court stated it
could reasonably do," its verdict should have been in the
vicinity of $39,400,000.
Dopp's contention appears to be no more than a
recasting of his complaints about the charge, see supra Part ___ _____
III(A), and, at this point, the caterwauling may be rejected out
of hand. Pritzker's contention, however, raises serious
concerns.
____________________
8This ruling reflects not only Dopp's inability to discredit
the instructions themselves, but also his failure to substantiate
his own, alternative theory of damages. At best, it seems that
his theory, which proposes that full damages should include at
least the value of the purchase agreement (fixed by the jury in
its special findings at $40,000,000), might be viable if Dopp
proved that he had the capacity to close the deal without
Pritzker's assistance. But the record wholly fails to establish
that fact. Indeed, Dopp offered no such proof, and all
indications are that he lacked the wherewithal to go forward if
Pritzker withheld his financial backing.
24
Because jurors exercise great leeway in evaluating
claims and assessing damages, appeals based on verdict size are
seldom successful. When a disgruntled defendant complains that a
jury award is overgenerous, the verdict ordinarily stands "unless
it is grossly excessive, inordinate, shocking to the conscience
of the court, or so high that it would be a denial of justice to
permit it to stand." Segal v. Gilbert Color Sys., Inc., 746 F.2d _____ ________________________
78, 80-81 (1st Cir. 1984) (citations and internal quotation marks
omitted). Even in cases involving purely economic losses (which,
by and large, are more easily quantifiable in dollars and cents
than, say, damages for emotional distress), appellate review is
extremely deferential, evincing a frank recognition that "the
jury is free to select the highest figure for which there is
adequate evidentiary support." Kolb v. Goldring, Inc., 694 F.2d ____ _______________
869, 872 (1st Cir. 1982). Consequently, "such a verdict will be
reduced or set aside only if it is shown to exceed any rational
appraisal or estimate of the damages that could be based upon the
evidence before the jury." Segal, 746 F.2d at 81 (citation and _____
internal quotation marks omitted).
The rule that emerges is that, within wide limits, an
appellate court must accept a jury's seeming extravagance, even
if the court, left to its own devices, would have returned a
substantially smaller verdict. See Kolb, 694 F.2d at 871. ___ ____
Stated another way, while "the jury may not render a verdict
based on speculation or guesswork," Bigelow v. RKO Radio _______ __________
Pictures, Inc., 327 U.S. 251, 264 (1946), a reviewing court will _______________
25
not tinker with the jury's assessment of money damages as long as
it does not fall outside the broad universe of theoretically
possible awards that can be said to be supported by the evidence.
This deferential standard imposes a correspondingly heavy burden
on parties who challenge the amount of damages awarded by
allegedly overgenerous juries. And, moreover, the weight of the
burden grows heavier when, as now, the trial judge has reviewed
the jury's handiwork and has ratified its judgment. See Ruiz v. ___ ____
Gonzalez Caraballo, 929 F.2d 31, 34 (1st Cir. 1991). __________________
In this case, the upper edge of the universe of
sustainable awards is defined by the value of the asset owned by
Dopp (the option to acquire DBHC) as of December 3, 1984 (the
date of Pritzker's breach).9 Based on the highest credible
valuations contained in the record, and recognizing the
possibility of nonduplicative aggregation, we conclude that the
jurors could have found DBHC's properties to be worth as much as
$119,055,000 in late 1984. This figure is based upon an
appraisal of the hotel empire conducted by the Merrill Lynch Real
Estate Advisory & Appraisal Group (Merrill Lynch),10 read in
____________________
9On that date, Dopp owned an option to acquire DBHC. In
entering the oral contract, however, Dopp in effect agreed to
trade that asset for a 20% interest in DBHC's properties (a
portion of which he would then cede to IRSA). Thus, DBHC becomes
the proper barometer for measuring value.
10While Merrill Lynch issued its appraisal approximately one
year after the transaction closed, the district court admitted it
into evidence, and we think the jury could reasonably have relied
on it. See, e.g., Federal Sav. & Loan Ins. Corp. v. Texas Real ___ ____ _______________________________ ___________
Estate Counselors, Inc., 955 F.2d 261, 268 (5th Cir. 1992) ________________________
(upholding factfinder's reliance on later appraisal despite
evidence of changed market conditions).
26
light of testimony by a different expert witness evaluating
certain excess land not included in the Merrill Lynch appraisal.
According to this evidence, the empire had a value of
$110,000,000, and the excess land had a value of $9,055,000.
Hence, the jury lawfully could have valued DBHC's properties, as
a whole, at $119,055,000. In turn, this value is the value of
the asset the purchase option for the acquisition was to be
structured in such a way as to cost Dopp nothing (apart from
cession of an 80% interest in the acquired properties).11 On
this basis, then, a rational jury, apportioning the overall
value, could have concluded that Dopp's anticipated 12% interest
in HTP was worth $14,286,600 on the date of the breach.
Once the jurors determined an asset value, they next
would have needed to determine what portion or percentage of that
value constituted the cost of encumbrance. Taking the evidence
and arguments advanced at trial most favorably to Dopp, we think
that the jury lawfully could have determined that the buy-out
option eliminated virtually all the value of Dopp's 12% interest
in HTP, save only for the meagre price that Pritzker was
____________________
11Pritzker argues that the purchase price (roughly
$40,500,000) must be deducted from the value of DBHC before the
value of Dopp's pro rata interest is assayed because the purchase ___ ____
price constituted an acquisition cost. We can discern no logical
basis for such a deduction. The payment represented Pritzker's __________
acquisition cost not Dopp's. Dopp did not contribute to it;
instead, he ceded 80% of the equity in the acquiring entity to
Pritzker. That was Dopp's "acquisition cost" and it is fully
accounted for by limiting his recovery to 12% of DBHC's actual
value a value that did not somehow shrink because HTP or
Pritzker tendered the purchase price. Put another way, the value
of DBHC remained more or less the same regardless of the amount
expended for its acquisition.
27
obligated to pay to redeem Dopp's shares. We conclude that this
amount should be the face value of the buy-out option: $50,000
per share, or in the case of Dopp's shares, $600,000. Under the
SSA, Pritzker could have exercised the buy-out option as late as
10 years after the formation of the contract (withholding any
payment until then). There is evidence in the record, through an
expert witness presented by Pritzker, that the prospect of so
long a delay would justify a somewhat lower figure, reflective of
a time-related discount. The expert testified that this
reduction to present value could have brought the present value
of the redemption price as of December 3, 1984, as low as
$114,638.
Thus, the jury could have found that, because of the wrongful
encumbrance, Dopp lost an asset worth $14,286,600, and, in lieu
thereof, was left with an asset worth no more than $114,638. On
these assumptions, a verdict for compensatory damages in the
amount of $14,171,962 is adequately supported by the evidence.
Beyond this amount, the jury's award is problematic.
We are unable either to explain the excess or to locate an
evidentiary hook on which it might be hung. The court below
tried justifying the added damages in the following manner:
In calculating the loss suffered by Dopp . .
., the jury need not have limited its
consideration to the actual value of Dopp's
unencumbered shares in HTP as of the date of
the breach of the Oral Contract. The jury
was required to determine Dopp's loss as of ____
the date of the breach; however, at that
moment Dopp's loss included the likelihood
that he would be deprived of any
participation in the future profits generated
28
by the properties. The jury could have taken
into account that a corporation which owns
world-class resort properties could
potentially generate considerable profits
profits which would be denied to Dopp . . . .
Like any investment, Dopp's shares had the
potential to make money or to lose money.
And they had this potential ad infinitum . . __ _________
. .
Dopp III, 831 F. Supp. at 945. In other words, the district ________
court visualized the premium added by the jury as representing
compensation for Dopp's share of the venture's profits from the
date of the verdict "back to December 3, 1984, the date of the
breach." Id. ___
In our view, the district court's reasoning is flawed.
While past profit potential may very well have been ascertainable
and quantifiable, there is no indication in the record that the
jury had before it specific evidence that would have allowed it
to engage in this kind of calculation. Thus, the inclusion of a
pro rata share of past profits as part of the verdict is ___ ____
forbidden. Although juries generally enjoy broad latitude in
determining damages, their authority is not without all limits.
In the case of economic damages, in particular, the jury's award
must be rooted in an adequate evidentiary predicate. See Segal, ___ _____
746 F.2d at 81; Kolb, 694 F.2d at 872. Since a thorough ____
canvassing of the trial record fails to unearth any such support,
we are constrained to conclude that the jury, in exceeding a
$14,171,962 figure, could not have done so on the basis of a
wrongful diversion of profits except by an impermissible resort
to speculation and surmise.
29
This conclusion is staunchly reinforced by the fact
that the judge's charge made no mention of Dopp's putative
participation in past profits. To the contrary, the judge
cautioned the jurors that even though "[y]ou have listened to
considerable evidence . . . which bears on the finances of the
Dorado Beach Hotel Corporation during the period following
Pritzker's breach of the oral contract on December 3, 1984 . . .
[f]or the purposes of assessing Dopp's damages, you must
disregard this evidence." It is a bedrock rule that juries must
act within the parameters of the court's instructions. See Sparf ___ _____
& Hansen v. United States, 156 U.S. 51, 67 (1895). This rule has ________ _____________
particular pertinence where, as here, the instructions are crisp,
clear, and cogent. Thus, the district court's charge totally
undermines its later attempt to salvage the verdict.12
Dopp also tries to justify the excess portion of the
verdict on other grounds. His most forceful suggestion is that
the jury, in determining full damages, appropriately could have
considered the value of the management contract for the hotels
an asset worth, to Dopp's way of thinking, an additional
$35,200,000. He argues that, because Pritzker carved this
____________________
12There is perhaps another reason for rejecting the district
court's explanation: the necessity to safeguard against the risk
of duplicative recovery. After all, the expert valuations of
DBHC, such as the Merrill Lynch appraisal, already included _______ ________
future profit projections. While we understand that the
projected profits included in those valuations may be
qualitatively distinguishable from the venture profits of which
the district court wrote, we also appreciate that a jury
overwhelmed by datum upon datum of economic estimations could
quite easily have conflated the two species of gains.
30
contract out of the deal despite the fact that it was part of
DBHC's inherent value, there is "ample evidence" to conclude that
"the $17 million jury's valuation of Dopp's full damages is, if
anything, too low by any standard." On close inspection,
however, Dopp's "ample evidence" proves no sturdier than the
proverbial house of cards.13
In our estimation, the management contract is wholly
irrelevant to the issue of full damages. As the parties
themselves expressly agreed in the oral contract, the management
contract was to be awarded to a Pritzker affiliate, not to either
Dopp or DBHC. Hence, the management contract bears no
relationship whatever to Dopp's damages or to the value of DBHC,
regardless of whether it may have constituted, as Dopp now
alleges, "a value inherent to [sic] Dopp's purchase-sale
contract."
We need go no further on the issue of full damages. We
hold that the jury's verdict is untenable to the extent that it
exceeds $14,171,962. Accordingly, we have no principled
alternative but to direct the district court to order a
conditional new trial for the sole purpose of redetermining full
damages, the condition being that if Dopp agrees to remit
$3,313,400 from the award, or, put another way, if he agrees to
accept a reduction of the "full damages" award to $14,171,962,
____________________
13Dopp also attempts to justify the jury verdict based on
"expectations of profit sharing and capital appreciation [that]
were destroyed by Pritzker's imposition of the buy-out clause."
This argument parallels the district court's rationale, and
founders for the reasons previously discussed.
31
then the verdict, as reduced, may stand. Should Dopp fail to
consent to such a remittitur, then the district court shall order
a new trial limited to the issue of full damages.14 Although
this remittitur is not insubstantial, we regard it as both
necessary and appropriate under the circumstances. See, e.g., K- ___ ____ __
B Trucking Co. v. Riss Int'l Corp., 763 F.2d 1148, 1162-63 (10th ______________ ________________
Cir. 1985); Goldstein v. Manhattan Indus., Inc., 758 F.2d 1435, _________ ______________________
1448 (11th Cir.), cert. denied, 474 U.S. 1005 (1985); Dixon v. _____ ______ _____
International Harvester Co., 754 F.2d 573, 590 (5th Cir. 1985); ___________________________
Irene D. Sann, Remittiturs (and Additurs) in the Federal Courts, _________________________________________________
38 Case W. Res. L. Rev. 157, 188 (1987) (observing that, where
"the erroneously excessive portion of the jury verdict is a
liquidated amount that is, where the source of error is
identifiable and the measure of damages traceable to the error is
calculable . . . a remittitur of a small portion of the jury
verdict would be appropriate because the error can be identified
and corrected").
IV. OBSTINACY IV. OBSTINACY
Our final inquiry centers around the district court's
award of attorneys' fees ($1,500,000) and prejudgment interest
($6,843,379.42), based on its finding that Pritzker displayed
obstinacy. See Dopp III, 831 F. Supp. at 951 (citing P.R.R. Civ. ___ ________
____________________
14If the issue of full damages is tried anew, then Dopp
shall again be afforded the opportunity, at the appropriate time,
to elect between full damages and annulment. If, however, Dopp
were to elect annulment, he would receive no accessory damages,
as we see no basis for disturbing the special finding of the jury
to this effect, see Dopp III, 831 F. Supp. at 942 n.5. ___ ________
32
P. 44.1(d), 44.3(b)).15 Pritzker assigns error, arguing that
he was not obstinate within the meaning of the rules. We find
merit in Pritzker's plaint and nullify the awards. Hence, we do
not reach Dopp's contention that the court used too miserly an
interest rate.
A. Legal Principles. A. Legal Principles. ________________
In a diversity case in which the substantive law of
Puerto Rico supplies the basis of decision, a federal court must
give effect to Rules 44.1(d) and 44.3(b) of the Puerto Rico Rules
of Civil Procedure. See, e.g., De Leon Lopez v. Corporacion ___ ____ ______________ ___________
Insular de Seguros, 931 F.2d 116, 126 (1st Cir. 1991). These __________________
rules speak in imperatives. Thus, the imposition of attorneys'
fees and prejudgment interest is obligatory once a threshold
finding brings the rules into play. See Fernandez v. San Juan ___ _________ ________
____________________
15Rule 44.1(d) provides in relevant part:
In the event any party or its lawyer has
acted obstinately or frivolously, the court
shall, in its judgment, impose on such person
the payment of a sum for attorney's fees
which the court decides corresponds to such
conduct.
P.R. Laws Ann. tit. 32, app. III R.44.1(d) (1984 & Supp. 1989).
With certain exceptions not applicable here, Rule 44.3(b)
provides that:
[T]he court will . . . impose on the party
that has acted rashly the payment of interest
. . . from the time the cause of action
arises in every case of collection of money
and from the time the claim is filed in
actions for damages until the date judgment
is pronounced. . . .
P.R. Laws Ann. tit. 32, app. III R.44.3(b) (1984 & Supp. 1989).
33
Cement Co., 118 D.P.R. 713 (1987). The two rules operate ___________
differently, however, in at least one salient respect: while
Rule 44.3(b) provides for determining the amount of prejudgment
interest in a mechanical fashion, specifying the period for which
interest is to be imposed and the interest rate to be used, Rule
44.1(d) vests the court with considerable discretion in
determining the amount of attorneys' fees to be bestowed.
A threshold finding of obstinacy brings both rules into
play. To be sure, the rules themselves use slightly disparate
terminology in describing the prerequisites to their operation.
Rule 44.1(d) speaks of parties who act "obstinately"; the
official translation of Rule 44.3(b) speaks of parties who act
"rashly"; and the official Spanish version of Rule 44.3(b) uses
the word "temeridad" a term that "is more appropriately
translated as `temerity,'" Dopp III, 831 F. Supp. at 951 n.9. We ________
regard these linguistic differences as inconsequential, for the
case law makes it transpicuously clear that the legally operative
conduct under both rules is that of obstinacy. See De Leon ___ _______
Lopez, 931 F.2d at 126-27 (citing other cases); see also _____ ___ ____
Fernandez, 118 D.P.R. 713 (noting that interest and attorneys' _________
fees will both be assessed "when the losing party has been
obstinate"). We hold, therefore, that obstinacy is the linchpin
of a determination under both Rule 44.1(d) and Rule 44.3(b). The
court below, which equated rashness and temerity with obstinacy,
see Dopp III, 831 F. Supp. at 951 n.9, thus employed the proper ___ ________
standard.
34
The rudiments of obstinacy are more or less
straightforward:
A finding of obstinacy requires that the
court determine a litigant to have been
unreasonably adamant or stubbornly litigious,
beyond the acceptable demands of the
litigation, thereby wasting time and causing
the court and the other litigants unnecessary
expense and delay.
De Leon Lopez, 931 F.2d at 126; accord La Playa Santa Marina, ______________ ______ _______________________
Inc. v. Chris-Craft Corp., 597 F.2d 1, 7 (1st Cir. 1979); Rivera ____ _________________ ______
v. Rederi A/B Nordstjernan, 456 F.2d 970, 975 (1st Cir.), cert. _______________________ _____
denied, 409 U.S. 876 (1972); Soto v. Lugo, 76 P.R.R. 416, 419 ______ ____ ____
(1954). The purpose behind the rules is to penalize "a losing
party that because of his stubbornness, obstinacy, rashness, and
insistent frivolous attitude has forced the other party to
needlessly assume the pains, costs, efforts, and inconveniences
of a litigation." Fernandez, 118 D.P.R. 713; see also Reyes v. _________ ___ ____ _____
Banco Santander de P.R., N.A., 583 F. Supp. 1444, 1446 (D.P.R. ______________________________
1984).
In fine, the rules are aposematic in the first
instance, and, if their warnings are not heeded, the resultant
imposts are intended to punish the offending party as well as to
recompense those who are victimized by the offender's
recalcitrance. Consequently, under the rules at issue here,
attorneys' fees and prejudgment interest cannot be imposed merely
to reward a successful litigant; rather, such premiums are
payable only if the offending party's behavior "result[s] in a
litigation that could have been avoided"; or if the behavior
35
"prolongs [the litigation] needlessly"; or if it "obliges the
other party to embark on needless procedures." Fernandez, 118 _________
D.P.R. 713 (citations omitted).
B. Standard of Review. B. Standard of Review. __________________
The very nature of a trial judge's interactive role
assures an intimate familiarity with the nuances of ongoing
litigation a familiarity that appellate judges, handicapped by
the sterility of an impassive record, cannot hope to match. The
standard of appellate review often recognizes this disparity. So
it is here: "[w]e review the trier's determination of whether a
party has been obstinate in a deferential manner, using an abuse-
of-discretion approach." De Leon Lopez, 931 F.2d at 127; accord _____________ ______
Quinones-Pacheco v. American Airlines, Inc., 979 F.2d 1, 7 (1st ________________ _______________________
Cir. 1992); Marshall v. Perez Arzuaga, 828 F.2d 845, 852 (1st ________ ______________
Cir. 1987), cert. denied, 484 U.S. 1065 (1988). _____ ______
We have fashioned a framework for gauging claimed
abuses of discretion:
In making discretionary judgments, a district
court abuses its discretion when a relevant
factor deserving of significant weight is
overlooked, or when an improper factor is
accorded significant weight, or when the
court considers the appropriate mix of
factors, but commits a palpable error of
judgment in calibrating the decisional
scales.
United States v. Roberts, 978 F.2d 17, 21 (1st Cir. 1992); accord _____________ _______ ______
Foster v. Mydas Assocs., Inc., 943 F.2d 139, 143 (1st Cir. 1991); ______ ___________________
Independent Oil & Chem. Workers of Quincy, Inc. v. Proctor & ___________________________________________________ _________
Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir. 1988). _______________
36
As its language suggests, the abuse-of-discretion
framework constitutes a substantial obstacle for appellants who
consider themselves aggrieved by discretionary decisions of the
district court; most such appellants are destined to leave this
court empty-handed. This is as it must be, especially in light
of the vastly different relationships between the district court
and the events of an actual trial, on the one hand, and the court
of appeals and those same events, on the other hand. This is not
to imply, however, that an appellate tribunal may merely rubber-
stamp a district judge's discretionary determinations. Though
abuse of discretion is a relatively relaxed standard of review,
it is a standard nonetheless, and the court of appeals will
interject itself if the trial court does not meet its measure.
C. Analysis. C. Analysis. ________
The court below cited three occurrences in support of
its finding of obstinacy: (1) the deceit and duress found by the
jury in the first trial to have been practiced by Pritzker during
the early stages of his dealings with Dopp; (2) Pritzker's appeal
from the verdict rendered by the first jury; and (3) Pritzker's
steadfast claim that Dopp's full damages amounted to no more than
$35,000. See Dopp III, 831 F. Supp. at 951. We think it is ___ ________
evident from this account that the district court lost its way.
In the pages that follow, we set forth our rationale.
Perhaps most important, there is no sign that the court
factored into the decisional calculus the overall nature of the
litigation, or that it placed Pritzker's conduct within the
37
context of the case as a whole. Prosopopoeially speaking, each
case, like each individual, has a personality distinct from that
of all others. A case's personality is important in evaluating
claims of obstinacy because, just as obstinacy may be found to
characterize a party's conduct at one stage of a particular case
but not necessarily at another, see Carrillo v. Sameit Westbulk, ___ ________ _______________
514 F.2d 1214, 1220 (1st Cir.), cert. denied, 423 U.S. 1014 _____ ______
(1975), so may obstinacy be found to characterize a particular
form of conduct in one case but not in another. In making a
determination of obstinacy under P.R.R. Civ. P. 44, therefore, it
is wise for the trier to take into account the case's
personality.16 This course becomes imperative when the court
is confronted with a case that has a highly distinctive
personality.
This is such a case. The district court described it
as involving "difficult and protracted legal battles." Dopp III, ________
831 F. Supp. at 940. This understates the matter. Here, the
stakes are high, the issues tangled, the law tenebrous, and the
litigants relentless. The nature of the performance sought and
the multiplicity of parties and interests contribute to the
____________________
16Our own precedents afford a testament to the importance of
correctly characterizing the nature of the litigation for the
purpose of discerning obstinacy. In La Playa Santa Marina, a ______________________
dealer sued a manufacturer. Following a bench trial, the
district court found the manufacturer liable for damages, 597
F.2d at 3-4, and, in addition, awarded attorneys' fees due to the
manufacturer's "obvious temerity in the defense of this suit."
Id. at 7. We reversed the fee award, observing that the ___
underlying dispute was one characterized by "close questions and
sharp conflicts in the evidence on both liability and damages."
Id. ___
38
case's uniqueness. In view of these realities, we are of the
opinion that the trial court had an inescapable obligation to
gauge the culpability of Pritzker's conduct accordingly. In
failing to undertake such an evaluation, the district court
abused its discretion.
We believe that the court compounded this error of
omission by slipping into various errors of commission. In the
first place, the court used too wide a temporal horizon.
Obstinacy depends on a party's conduct in the course of ___________________
litigation. See, e.g., De Leon Lopez, 931 F.2d at 126 __________ ___ ____ _______________
(indicating that the rules prohibit obstinacy "during the course
of a lawsuit"). Thus, the fact that Pritzker practiced deceit
and duress during the events antecedent to the litigation could
not trigger Rule 44.
In the second place, we do not believe that, in the
circumstances of this case, Pritzker's appeal from the first
jury's verdict constituted sanctionable conduct. The district
court thought that it was proper to penalize Pritzker for taking
the appeal because he "thereby caus[ed] significant additional
expenditures by the plaintiff, only to have the amount of the
verdict against him increased by the second verdict." Dopp III, ________
831 F. Supp. at 951. We find such a conclusion indefensible in
light of the appeals simultaneously taken by Dopp and several
other parties from the first jury verdict; the fact that
Pritzker's appeal succeeded at least in part, prompting us to
erase the original remedial scheme and to order a partial new
39
trial; and, finally, the uncertainty and complexity that
surrounded the issue of Dopp's entitlement vel non to resolution. ___ ___
This last point is especially significant because, as a
general rule, litigation of a novel but colorable claim cannot,
by itself, provide the basis for a finding of obstinacy under
P.R.R. Civ. P. 44. See, e.g., Riofrio Anda v. Ralston Purina ___ ____ _____________ ______________
Co., 772 F. Supp. 46, 54 (D.P.R. 1991) ("[W]here, as here, novel ___
issues are raised, a party cannot be held as obstinate."), aff'd, _____
959 F.2d 1149 (1st Cir. 1992); Marina Indus., Inc. v. Brown ____________________ _____
Boveri Corp., 114 D.P.R. 64 (1983) (similar); Brea v. Pardo, 113 _____________ ____ _____
D.P.R. 217 (1982) (similar). Indeed, even if a party's claim
ultimately fails, it cannot be deemed frivolous or obstinate for
that reason alone. See Navarro de Cosme v. Hospital Paiva, 922 ___ _________________ ______________
F.2d 926, 934 (1st Cir. 1991); Reyes, 583 F. Supp. at 1445; Felix _____ _____
v. Victory Carriers, Inc., 342 F. Supp. 1386, 1388 (D.P.R. 1972). ______________________
Such a rule is dictated by both common sense and common fairness.
Obstinacy must be judged primarily as of the time the conduct is
undertaken, not in hindsight;17 and penalizing a party for
filing a non-frivolous appeal for no other reason than that the
party's position deteriorated, rather than improved, in
consequence of the appeal is a paradigmatic misuse of discretion.
Finally, we are doubtful that Pritzker's myopic
assessment of Dopp's full damages at $35,000 constituted conduct
____________________
17That is not to say, however, that a court must close its
eyes to subsequent events, for such events sometimes can cast
light on what a party knew, or should have known, at the time he
acted.
40
violative of Rules 44.1(d) and 44.3(b). Though we readily
acknowledge that Pritzker's stated valuation verges on the
ludicrous, there is nothing to show that Dopp who even now
challenges a $17,000,000 verdict as too paltry, see supra Part ___ _____
III ever placed a more reasonable value on the case, or that a
realistic settlement offer by Pritzker would have satisfied Dopp
and shortened the proceedings.18
To sum up, this case in its present posture epitomizes
the potential risk of overapplication associated with Puerto
Rico's obstinacy rules. See Carrillo, 514 F.2d at 1219-20. ___ ________
Because the district court's subsidiary findings do not support
its ultimate finding of obstinacy, and because the record does
not otherwise show that Pritzker was "unreasonably adamant or
stubbornly litigious, beyond the acceptable demands of the _________________________________________
litigation," De Leon Lopez, 931 F.2d at 127 (emphasis supplied), __________ ______________
we have no choice but to vacate the award of attorneys' fees and
prejudgment interest.
V. CONCLUSION V. CONCLUSION
This case has taken on a life of its own. Perhaps its
duration is directly proportional to the imputed value of the
assets at stake, but, whether or not esurience is the cause of
the prolongation, old age inevitably overtakes cases as well as
____________________
18Although Dopp's apparent intractability does not in any
way justify Pritzker's seeming intransigence two wrongs do not
make a right an obstinacy determination must necessarily take
the whole picture into account. After all, courts have long
believed that, in assaying such matters, "[t]he lemon should not
be allowed to reap a reward for calling the grapefruit sour."
Quinones-Pacheco, 979 F.2d at 8 n.9. ________________
41
people. Although we are unable fully to inter the corpus of the
litigation today, we have done what we can to move the case
toward its final resting place.
For the reasons discussed, we affirm the district
court's denial of a resultory remedy; conditionally affirm the
award of full damages, subject to a remittitur (or,
alternatively, a limited new trial) as described in Part III(B),
supra; and reverse the award of attorneys' fees and prejudgment _____
interest.19
Affirmed in part, reversed in part, and remanded to the Affirmed in part, reversed in part, and remanded to the _______________________________________________________
district court for further proceedings consistent with this district court for further proceedings consistent with this _________________________________________________________________
opinion. Mandate shall be stayed for the time being, and shall opinion. Mandate shall be stayed for the time being, and shall _______ _______________________________________________________
issue simultaneous with the issuance of mandate in respect to the issue simultaneous with the issuance of mandate in respect to the _________________________________________________________________
three consolidated appeals, namely, Nos. 93-2374, 94-1128, and three consolidated appeals, namely, Nos. 93-2374, 94-1128, and _________________________________________________________________
94-1129, that are to be the subject of a separate and subsequent 94-1129, that are to be the subject of a separate and subsequent _________________________________________________________________
opinion. Each party shall bear his own costs. opinion. Each party shall bear his own costs. _______ ___________________________________
____________________
19To the extent that the parties to these appeals have
raised other arguments, some are rendered moot by our rulings,
and others are patently meritless. In any event, none requires
particularized discussion.
42
Related
Sparf v. United States
156 U.S. 51 (Supreme Court, 1895)
Armour & Co. v. Wantock
323 U.S. 126 (Supreme Court, 1944)
Bigelow v. RKO Radio Pictures, Inc.
327 U.S. 251 (Supreme Court, 1946)
Williams v. Poulos
11 F.3d 271 (First Circuit, 1993)
United States v. Tavano
12 F.3d 301 (First Circuit, 1993)
McCarthy v. Azure
22 F.3d 351 (First Circuit, 1994)
Jose Virella Rivera v. Rederi A/b Nordstjernan, and Third Party v. International Shipping Agency, Inc., Third Party (Two Cases)
456 F.2d 970 (First Circuit, 1972)
Carmen Carrillo Vda De Cerich v. Sameit Westbulk and Johan Hagenes, and Third-Party v. Caribe Shipping Company, Inc., Third-Party Defendants
514 F.2d 1214 (First Circuit, 1975)
La Playa Santa Marina, Inc. v. The Chris-Craft Corporation, La Playa Santa Marina, Inc. v. The Chris-Craft Corporation
597 F.2d 1 (First Circuit, 1979)
K-B Trucking Company and Keith Collins, Cross-Appellants v. Riss International Corporation and World Leasing, Inc., Cross-Appellees
763 F.2d 1148 (Tenth Circuit, 1985)
John G. Marshall v. Jose E. Perez Arzuaga, and Third-Party Avis Rent-A-Car of Puerto Rico, Inc., Third-Party John G. Marshall v. Jose E. Perez Arzuaga
828 F.2d 845 (First Circuit, 1987)
The Independent Oil and Chemical Workers of Quincy, Inc. v. The Procter & Gamble Manufacturing Company
864 F.2d 927 (First Circuit, 1988)
Reliance Steel Products Company v. National Fire Insurance Company of Hartford
880 F.2d 575 (First Circuit, 1989)
Marta Ruiz A/K/A Marta Ruiz Romero v. Generoso Gonzalez Caraballo, Etc.
929 F.2d 31 (First Circuit, 1991)
Pablo De Leon Lopez v. Corporacion Insular De Seguros
931 F.2d 116 (First Circuit, 1991)
Darcy Foster v. Mydas Associates, Inc., Etc.
943 F.2d 139 (First Circuit, 1991)
Paul S. Dopp v. Htp Corporation, Paul S. Dopp v. Htp Corporation, Paul S. Dopp v. Htp Corporation, Island Resorts, S.A.
947 F.2d 506 (First Circuit, 1991)
Federal Savings And Loan Insurance Corporation v. Texas Real Estate Counselors, Inc.
955 F.2d 261 (Fifth Circuit, 1992)
Luis Riofrio Anda v. Ralston Purina, Co., Luis Riofrio Anda v. Ralston Purina, Co.
959 F.2d 1149 (First Circuit, 1992)
Dedham Water Co., Inc. v. Cumberland Farms Dairy, Inc.
972 F.2d 453 (First Circuit, 1992)
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