Hisert v. Haschen

980 F.3d 6

• Court: Court of Appeals for the First Circuit
• Decided: November 17, 2020
• Docket: 20-1329P
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 20-1329

RICHARD HISERT, Manager, on Behalf of H2H Associates, LLC,

Plaintiff, Appellee,

v.

HERBERT HASCHEN,

Defendant, Appellant,

and

BLUE WATERS DREDGING LLC; DAVID URBANI; DOROTHY B. WILLIAMS; JOSEPH EDGAR,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. F. Dennis Saylor, IV, Chief U.S. District Judge]

Before

Lynch, Thompson, and Kayatta, Circuit Judges.

Thomas T. Merrigan, with whom Sweeney Merrigan Law, LLP was on brief, for appellant. James F. Grosso, with whom O'Reilly, Grosso, Gross & Jones, P.C. was on brief, for appellee. November 17, 2020 LYNCH, Circuit Judge. Richard Hisert, the managing

member of H2H Associates, LLC ("H2H"), successfully brought suit

against Herbert Haschen for fraud. A jury found Haschen had

committed fraud in connection with a contract for dredging work to

be performed in Cohasset, Massachusetts. The jury awarded Hisert

$148,626 in damages.1 The finding of fraud was based on

Massachusetts law. This appeal for Haschen followed.

The Army Corps of Engineers had awarded H2H, a limited

liability company ("LLC") organized under New York law, a contract

in 2015 to dredge the Cohasset Harbor. H2H subcontracted with

Blue Waters Dredging LLC ("BWD"), an LLC organized under Maryland

law of which Haschen was a member, to perform the dredging work.

The alleged fraud occurred in December 2015 when Haschen signed a

partial lien waiver on behalf of BWD stating that all of BWD's

obligations with respect to the dredging project had been paid in

full. Haschen later acknowledged during discovery that he was

aware of open vendor accounts and suppliers and vendors demanding

payment owed to them at the time he signed the partial lien waiver.

H2H subsequently relied on the statement in that document to

continue making payments to BWD.

1 A default judgment was also entered against defendant Dorothy Williams in the amount of $342,309.38 and applicable costs and attorneys' fees were awarded against both Haschen and Williams.

- 3 - The district court instructed the jury as to the elements

of Massachusetts law with respect to fraud. Those instructions

were consistent with the district court's ruling in denying the

parties' cross-motions for summary judgment.2 Hisert v. Blue

Waters Dredging LLC, Civil Action No. 16-11960-FDS, 2018 WL

6025653, at *6-9 (D. Mass. Nov. 16, 2018). Haschen wanted Maryland

law to apply, while Hisert asserted that he could prevail under

either Massachusetts or Maryland law. Neither party advocated for

New York law to apply. Id. at *8.

The district court determined that there are two

relevant differences between Massachusetts and Maryland law with

respect to fraud. Id. at *6. The first difference is that Maryland

law requires proof of deliberate intent to deceive, id. (citing

case law from Maryland), while Massachusetts law does not, id.

(citing case law from this Circuit). The second difference is

that Maryland law requires proof of fraud by clear and convincing

evidence, id. at *7 (citing case law from Maryland), while

Massachusetts law requires proof only by a preponderance of the

evidence, id. (citing case law from this Circuit).

Finding that Massachusetts follows the functional

approach to choice-of-law analysis, the district court held that

2 The district court allowed defendant David Urbani's motion for summary judgment as to all counts. Hisert v. Blue Waters Dredging LLC, Civil Action No. 16-11960-FDS, 2018 WL 6025653, at *10 (D. Mass. Nov. 16, 2018).

- 4 - Massachusetts law applied since Massachusetts had the most

significant relationship to the occurrence and parties. Id. at

*7-8 (explaining that "[t]he functional approach is 'explicitly

guided by the Restatement (Second) of Conflict of Laws (1971)'"

(quoting Levin v. Dalva Brothers, Inc., 459 F.3d 68, 74 (1st Cir.

2006))). In particular, the district court determined that "the

location of the intended harm" and that "Massachusetts was the

focus of the overall transaction" weighed heavily in favor of

applying Massachusetts law over Maryland law. Id. at *8.

Haschen's brief on appeal purports to raise several

issues: (1) whether the district court erred in denying his motion

to dismiss the amended complaint for failure to state a claim for

fraud; (2) whether it erred in determining at summary judgment

that Massachusetts law applied to the fraud claim; (3) whether it

erred in denying his motion for summary judgment on the fraud

claim; and (4) whether it erred in rejecting his argument at

summary judgment that the fraud claim against him was barred by

the arbitration clause in the agreement between H2H and BWD.

Denials of motions to dismiss under Rule 12(b)(6) or motions for

summary judgment under Rule 56 are generally not appealable when

issued, see Ortiz v. Jordan, 562 U.S. 180, 188 (2011); In re

Empresas Noroeste, Inc., 806 F.2d 315, 317 (1st Cir. 1986), and

when an appeal of a subsequent judgment does go forward, we

generally pay no heed to whether the earlier denials were proper,

- 5 - see Ortiz, 562 U.S. at 183-84 (holding that a party may not "appeal

an order denying summary judgment after a full trial on the merits"

because "[o]nce the case proceeds to trial, the full record

developed in court supersedes the record existing at the time of

the summary-judgment motion"); Sexual Minorities Uganda v. Lively,

899 F.3d 24, 35-36 (1st Cir. 2018) (holding that "[w]hen an order

denying a Rule 12(b)(6) motion has no effect on the ultimate

disposition of the case, that order is unreviewable").3

When this Court at oral argument pointed out these issues

to counsel for the appellant, he pointed to a footnote in his

opening brief and argued that footnote somehow preserved his

challenge to the jury instruction given regarding Massachusetts

law as to fraud.4 While these arguments were not properly presented

3 Although Haschen appears to have made an oral Rule 50(a) motion for judgment as a matter of law at the close of trial, he did not file a Rule 50(b) renewed motion for judgment as a matter of law following the jury's verdict. See Fed. R. Civ. P. 50(a)- (b). He therefore did not preserve these legal issues for appellate review. See Ortiz, 562 U.S. at 183-85; Ji v. Bose Corp., 626 F.3d 116, 127 (1st Cir. 2010) (holding that moving unsuccessfully for summary judgment does not obviate the need to move under Rule 50 in order to preserve an argument that a party is entitled to judgment as a matter of law); Udemba v. Nicoli, 237 F.3d 8, 13 (1st Cir. 2001) (holding that "to preserve for appeal the district court's rejection of a motion for judgment as a matter of law made at the close of the evidence, the movant must seasonably renew that motion post-verdict"). 4 The footnote referred to by appellant's counsel states: "Haschen raised the choice of law issue in his summary judgment motion . . . ; by Motion in Limine . . . ; and by objection at sidebar following the Court's instructions to the jury." All that appellant's counsel said at sidebar on the choice-of-law issue

- 6 - on appeal, see Ortiz, 562 U.S. at 183-85; Ji v. Bose Corp., 626

F.3d 116, 127 (1st Cir. 2010), they lack merit in any event.

The district court was plainly correct that

Massachusetts law applied. Massachusetts generally follows the

functional approach to choice-of-law analysis. Levin, 459 F.3d at

74; UBS Fin. Servs., Inc. v. Aliberti, 133 N.E.3d 277, 288 n.12

(Mass. 2019); Cosme v. Whitin Mach. Works, Inc., 632 N.E.2d 832,

834 (Mass. 1994); Bushkin Assocs., Inc. v. Raytheon Co., 473 N.E.2d

662, 668-70 (Mass. 1985) (assessing, among other factors, the

comparative interests of the states involved and which has the

most significant relationship to the occurrence and parties).

While Haschen now argues on appeal that Massachusetts courts would

not necessarily apply such an approach in a tort case, he did not

preserve that argument by making it below. See In re Rauh, 119

F.3d 46, 51 (1st Cir. 1997) ("A party may not raise new arguments

for the first time on appeal."). The district court did not err

in finding that under the functional approach, Massachusetts had

a more significant relationship to the occurrence and parties than

Maryland. Although Haschen was in Maryland when he made the

fraudulent statement, the subject of the transaction was in

following the jury instructions was that "I want to once again note my objections to the Court's ruling on Massachusetts vs. Maryland law." He did not propose any further instructions on the applicable law with respect to fraud. However, Hisert has not raised in his opposition brief these impediments to Haschen's claims on appeal.

- 7 - Massachusetts and at least some of the injury took place there.

Hisert, 2018 WL 6025653, at *8. The dredging project was being

performed in Massachusetts, H2H continued to make payments for

that project in reliance on Haschen's false statement, and at least

some of the unpaid vendors and suppliers were located in

Massachusetts. Id. Massachusetts also has strong interests in

not having businesses operating within the Commonwealth defrauded

and in ensuring that public projects being performed within the

Commonwealth are completed in an appropriate and timely manner.

Those interests further support application of Massachusetts law.

And although Haschen does not appear to challenge the

sufficiency of the evidence, there was clearly enough for a

reasonable jury to determine that Haschen was liable for defrauding

Hisert and H2H, particularly given the lower burden for proving

fraud under Massachusetts law.

Finally, it is also clear that the arbitration clause in

the contract between H2H and BWD does not bar this lawsuit against

Haschen. Assuming arguendo that the arbitration clause in the

contract does apply to Haschen, he never moved to compel

arbitration or to stay this case in favor of arbitration. Even on

appeal, he does not argue for any of the forms of relief allowed

for under the Federal Arbitration Act. See 9 U.S.C. §§ 3-4. He

thus waived any right to arbitrate this fraud claim. See In re

- 8 - Citigroup, Inc., 376 F.3d 23, 26 (1st Cir. 2004) ("A party may

waive arbitration expressly or implicitly.").

Affirmed. Costs are awarded to Hisert.

- 9 -