John Macsherry, Jr. v. Sparrows Point, LLC
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Opinion
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 19-1281
JOHN H. MACSHERRY, JR.,
Plaintiff − Appellee,
v.
SPARROWS POINT, LLC; COMMERCIAL DEVELOPMENT COMPANY, INC.; MICHAEL ROBERTS,
Defendants – Appellants.
No. 19-1321
Plaintiff − Appellant,
SPARROWS POINT, LLC; COMMERCIAL DEVELOPMENT COMPANY, INC.; MICHAEL ROBERTS,
Defendants – Appellees.
Appeals from the United States District Court for the District of Maryland, at Baltimore. Frederick P. Stamp, Jr., Senior District Judge. (1:15-cv-00022-FPS)
Argued: May 27, 2020 Decided: September 1, 2020 Before MOTZ and DIAZ, Circuit Judges, and Max O. COGBURN, Jr., United States District Judge for the Western District of North Carolina, sitting by designation.
Vacated and remanded by published opinion. Judge Diaz wrote the opinion, in which Judge Motz and Judge Cogburn joined.
Joshua J. Gayfield, Megan J. McGinnis, MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellants/Cross-Appellees. Andrew K. O’Connell, THOMAS & LIBOWITZ, P.A., Baltimore, Maryland, for Appellee/Cross-Appellant.
2 DIAZ, Circuit Judge:
A jury awarded John Macsherry, Jr. $1 million on his claims against Sparrows Point,
LLC; Commercial Development Company, Inc.; and Michael Roberts (collectively “the
defendants”) for nonpayment of a commission on the sale of a large parcel of industrial
property located on the Sparrows Point peninsula, which juts out from Baltimore Harbor. 1
The defendants (who are based in St. Louis) employed Macsherry for approximately two
years as their local, boots-on-the-ground representative in Baltimore while they performed
environmental cleanup on the parcel, and upon its sale for $110 million, the jury found that
they were contractually obligated to pay Macsherry 0.75% of that price.
On appeal, the defendants contend that the evidence is insufficient to support the
jury’s verdict as to all claims. Alternatively, they seek a new trial on two grounds,
contending that the district court erred both in admitting evidence (under Fed. R. Evid.
408) of an alleged effort to compromise Macsherry’s claim to a commission and in granting
Macsherry a jury trial under Fed. Rs. Civ. P. 38(b) and 39(b).
As we explain, we agree that the evidence of the defendants’ effort to compromise
Macsherry’s claim wasn’t admissible for any purpose under Rule 408 and that the error
wasn’t harmless. That is, even assuming that the evidence is sufficient as a matter of law
to support the jury’s verdict, we cannot be confident that the jury was not substantially
1 Macsherry’s complaint alleges four claims: (1) Violations of the Maryland Wage Payment and Collection Law; (2) Breach of Contract, (3) Promissory Estoppel, and (4) Quantum Meruit.
3 swayed by the evidentiary error. Accordingly, the defendants are entitled to a new trial.
But as we also find that the district court enjoyed ample discretion to grant Macsherry’s
untimely request for a jury trial under Rule 39(b), the new trial may remain before a jury. 2
I.
We begin with the facts, many of which are contested, and the procedural history.
A.
1.
In the late 1980s, Michael Roberts bought his first piece of industrial real estate in
the form of a defunct brewery. Within a year, he had demolished the facility, sold the
scrap, remediated the property’s environmental liabilities, and resold it for a huge profit.
Looking to replicate the success of that venture, in 1990, Michael Roberts and his brother,
Thomas, 3 founded Commercial Development Company, Inc. (“CDC”), a Missouri-based
company, to facilitate the remediation and resale of other such ‘brownfield’ properties.
In the years since, the Roberts brothers have developed a business model whereby
they form single-purpose companies to purchase individual brownfield properties, whose
environmental liabilities are then remediated by CDC. The brothers then resell the parcels
through their respective single-purpose companies. And while the brothers share control
2 Because we remand for a new trial, we need not reach Macsherry’s challenges on cross-appeal to the district court’s amendment of the judgment. 3 We occasionally refer to the brothers by their first names.
4 of all companies involved in the process, one of them is assigned principal responsibility
for each property.
So it was that, in September 2012, the Roberts brothers formed Sparrows Point,
LLC, another Missouri-based company, for the purpose of acquiring about 3,100 acres of
highly contaminated industrial property on the Sparrows Point peninsula, where the
Bethlehem Steel mill formerly stood. Michael Roberts was assigned responsibility for the
Sparrows Point site, which was purchased in tandem with an unaffiliated, Chicago-based
liquidation firm called Hilco Global. The transaction was structured so that Hilco acquired
the site from the railroad tracks up, while Sparrows Point, LLC acquired it from the land
down, including all of the environmental liabilities. As usual, the defendants planned to
redevelop the land and then sell or lease their interest.
2.
Soon after the acquisition of the Sparrows Point site, CDC’s then Vice President of
Asset Management, Robert Schoelch, approached Michael Roberts to discuss, as Michael
later testified, “hiring a local representative to act as boots on the ground in Baltimore.”
J.A. 782. In Schoelch’s view, the defendants needed someone with a solid network in the
community to help “move the project forward” by dealing with brokers, tenants, and state
and local officials, among other responsibilities. J.A. 1421. According to Schoelch, they
also discussed the need for a “commission component” to the position’s compensation
package, J.A. 1435, though Michael testified to the contrary and that he “never authorized”
Schoelch to offer a commission component, J.A. 786.
5 Enter Macsherry, who, on September 20, 2012, sent an email to CDC’s Chief
Executive Officer, Randall Jostes, to inquire about working for “the owners of Sparrows
Point.” J.A. 440. As if reading Schoelch’s mind, Macsherry billed himself as “a Baltimore
person who ha[d] been in the real estate industry for close to 30 years,” with “excellent
experience” in “master planning” and “development,” “excellent contacts in the
community,” and valuable “knowledge” of the Baltimore Harbor. J.A. 1611.
Macsherry’s email was forwarded to Schoelch, who then called Macsherry. Over
the ensuing weeks, the two men exchanged half a dozen more calls and emails regarding
the boots-on-the-ground position—until, on December 4, 2012, Schoelch called Macsherry
to say that the defendants wanted to make him an offer.
What happened next is somewhat disputed. Macsherry testified that Schoelch sent
him an email (which, however, was never produced in discovery), along with a one-page
term sheet attached (a copy of which was produced), that same day. See J.A. 1673 (the
“Original Term Sheet”). Though it contains no date, names, or signature lines, the Original
Term Sheet lists the relevant position as Sparrows Point, LLC’s “Vice President of Leasing
and Development” and recites, among other terms, a “Salary” of $50,000 per year and a
“Commission” of “75 basis points paid on the total net value of any sales/leases or parcels.”
Id. Michael Roberts, Schoelch, and Macsherry all testified that they understood “75 basis
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PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 19-1281
JOHN H. MACSHERRY, JR.,
Plaintiff − Appellee,
v.
SPARROWS POINT, LLC; COMMERCIAL DEVELOPMENT COMPANY, INC.; MICHAEL ROBERTS,
Defendants – Appellants.
No. 19-1321
Plaintiff − Appellant,
SPARROWS POINT, LLC; COMMERCIAL DEVELOPMENT COMPANY, INC.; MICHAEL ROBERTS,
Defendants – Appellees.
Appeals from the United States District Court for the District of Maryland, at Baltimore. Frederick P. Stamp, Jr., Senior District Judge. (1:15-cv-00022-FPS)
Argued: May 27, 2020 Decided: September 1, 2020 Before MOTZ and DIAZ, Circuit Judges, and Max O. COGBURN, Jr., United States District Judge for the Western District of North Carolina, sitting by designation.
Vacated and remanded by published opinion. Judge Diaz wrote the opinion, in which Judge Motz and Judge Cogburn joined.
Joshua J. Gayfield, Megan J. McGinnis, MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellants/Cross-Appellees. Andrew K. O’Connell, THOMAS & LIBOWITZ, P.A., Baltimore, Maryland, for Appellee/Cross-Appellant.
2 DIAZ, Circuit Judge:
A jury awarded John Macsherry, Jr. $1 million on his claims against Sparrows Point,
LLC; Commercial Development Company, Inc.; and Michael Roberts (collectively “the
defendants”) for nonpayment of a commission on the sale of a large parcel of industrial
property located on the Sparrows Point peninsula, which juts out from Baltimore Harbor. 1
The defendants (who are based in St. Louis) employed Macsherry for approximately two
years as their local, boots-on-the-ground representative in Baltimore while they performed
environmental cleanup on the parcel, and upon its sale for $110 million, the jury found that
they were contractually obligated to pay Macsherry 0.75% of that price.
On appeal, the defendants contend that the evidence is insufficient to support the
jury’s verdict as to all claims. Alternatively, they seek a new trial on two grounds,
contending that the district court erred both in admitting evidence (under Fed. R. Evid.
408) of an alleged effort to compromise Macsherry’s claim to a commission and in granting
Macsherry a jury trial under Fed. Rs. Civ. P. 38(b) and 39(b).
As we explain, we agree that the evidence of the defendants’ effort to compromise
Macsherry’s claim wasn’t admissible for any purpose under Rule 408 and that the error
wasn’t harmless. That is, even assuming that the evidence is sufficient as a matter of law
to support the jury’s verdict, we cannot be confident that the jury was not substantially
1 Macsherry’s complaint alleges four claims: (1) Violations of the Maryland Wage Payment and Collection Law; (2) Breach of Contract, (3) Promissory Estoppel, and (4) Quantum Meruit.
3 swayed by the evidentiary error. Accordingly, the defendants are entitled to a new trial.
But as we also find that the district court enjoyed ample discretion to grant Macsherry’s
untimely request for a jury trial under Rule 39(b), the new trial may remain before a jury. 2
I.
We begin with the facts, many of which are contested, and the procedural history.
A.
1.
In the late 1980s, Michael Roberts bought his first piece of industrial real estate in
the form of a defunct brewery. Within a year, he had demolished the facility, sold the
scrap, remediated the property’s environmental liabilities, and resold it for a huge profit.
Looking to replicate the success of that venture, in 1990, Michael Roberts and his brother,
Thomas, 3 founded Commercial Development Company, Inc. (“CDC”), a Missouri-based
company, to facilitate the remediation and resale of other such ‘brownfield’ properties.
In the years since, the Roberts brothers have developed a business model whereby
they form single-purpose companies to purchase individual brownfield properties, whose
environmental liabilities are then remediated by CDC. The brothers then resell the parcels
through their respective single-purpose companies. And while the brothers share control
2 Because we remand for a new trial, we need not reach Macsherry’s challenges on cross-appeal to the district court’s amendment of the judgment. 3 We occasionally refer to the brothers by their first names.
4 of all companies involved in the process, one of them is assigned principal responsibility
for each property.
So it was that, in September 2012, the Roberts brothers formed Sparrows Point,
LLC, another Missouri-based company, for the purpose of acquiring about 3,100 acres of
highly contaminated industrial property on the Sparrows Point peninsula, where the
Bethlehem Steel mill formerly stood. Michael Roberts was assigned responsibility for the
Sparrows Point site, which was purchased in tandem with an unaffiliated, Chicago-based
liquidation firm called Hilco Global. The transaction was structured so that Hilco acquired
the site from the railroad tracks up, while Sparrows Point, LLC acquired it from the land
down, including all of the environmental liabilities. As usual, the defendants planned to
redevelop the land and then sell or lease their interest.
2.
Soon after the acquisition of the Sparrows Point site, CDC’s then Vice President of
Asset Management, Robert Schoelch, approached Michael Roberts to discuss, as Michael
later testified, “hiring a local representative to act as boots on the ground in Baltimore.”
J.A. 782. In Schoelch’s view, the defendants needed someone with a solid network in the
community to help “move the project forward” by dealing with brokers, tenants, and state
and local officials, among other responsibilities. J.A. 1421. According to Schoelch, they
also discussed the need for a “commission component” to the position’s compensation
package, J.A. 1435, though Michael testified to the contrary and that he “never authorized”
Schoelch to offer a commission component, J.A. 786.
5 Enter Macsherry, who, on September 20, 2012, sent an email to CDC’s Chief
Executive Officer, Randall Jostes, to inquire about working for “the owners of Sparrows
Point.” J.A. 440. As if reading Schoelch’s mind, Macsherry billed himself as “a Baltimore
person who ha[d] been in the real estate industry for close to 30 years,” with “excellent
experience” in “master planning” and “development,” “excellent contacts in the
community,” and valuable “knowledge” of the Baltimore Harbor. J.A. 1611.
Macsherry’s email was forwarded to Schoelch, who then called Macsherry. Over
the ensuing weeks, the two men exchanged half a dozen more calls and emails regarding
the boots-on-the-ground position—until, on December 4, 2012, Schoelch called Macsherry
to say that the defendants wanted to make him an offer.
What happened next is somewhat disputed. Macsherry testified that Schoelch sent
him an email (which, however, was never produced in discovery), along with a one-page
term sheet attached (a copy of which was produced), that same day. See J.A. 1673 (the
“Original Term Sheet”). Though it contains no date, names, or signature lines, the Original
Term Sheet lists the relevant position as Sparrows Point, LLC’s “Vice President of Leasing
and Development” and recites, among other terms, a “Salary” of $50,000 per year and a
“Commission” of “75 basis points paid on the total net value of any sales/leases or parcels.”
Id. Michael Roberts, Schoelch, and Macsherry all testified that they understood “75 basis
points” to mean three-quarters of one percent, i.e., a 0.75% commission.
After receiving the Original Term Sheet, Macsherry sought to negotiate better terms,
especially with respect to pay and vacation time. According to Macsherry, Schoelch said
he would need to obtain Michael’s approval for any changes, and shortly thereafter sent
6 Macsherry (in another email that was never produced in discovery) a red-lined version of
the term sheet (a copy of which was produced in discovery). See J.A. 1657 (the “Red-
Lined Term Sheet”).
In addition to a newly listed start date of Monday, December 10, 2012, the Red-
Lined Term Sheet recites a salary of $77,000 and two extra vacation days, while the
commission term remains substantially the same at “75 basis points paid on the total value
of any sales/leases or parcels on any deals closed after the Start Date.” Id. Further, while
the Red-Lined Term Sheet still lacks any date, names, or signature lines, the Tracked
Changes panel of the Microsoft Word document that Macsherry received reflects that the
changes were entered by “R. Schoelch” on December 4, 2012. Id.
After receiving the Red-Lined Term Sheet, Macsherry attempted again to negotiate
better pay, but Schoelch told him that the revised deal was the best one that Michael
Roberts “w[ould] agree to.” J.A. 465. At that point, Macsherry said that he “[woul]d
accept these terms and conditions.” Id.
For his part, Schoelch recalled little about his interactions with Macsherry between
September 20 and December 4, but conceded to having created and sent the Red-Lined
Term Sheet to Macsherry. Not in dispute, however, was that no employment contract was
formed on December 4 because the Red-Lined Term Sheet wasn’t a formal offer, as
Michael Roberts had not yet approved it.
On December 6, CDC flew Macsherry out to their headquarters in St. Louis. He
spent about an hour meeting with the Roberts brothers, during which time they discussed
such generalities as the redevelopment of the Sparrows Point site and the Baltimore real
7 estate scene, but not such details as Macsherry’s compensation. “That kind of stuff,”
Michael Roberts would later testify, “was all . . . up to [Schoelch].” J.A. 785–86.
Macsherry then met with CDC’s Chief Operating Officer and Director of Human
Resources, Becky Lydon. According to Macsherry, after telling him that he was officially
hired, Lydon gave him a “clean version” of the Red-Lined Term Sheet—that is, one
without the redlines but with all the same terms—to sign. J.A. 469–70. Macsherry knew
the clean version memorialized the same terms as the Red-Lined Term Sheet (including
with respect to commission) because he had brought a copy of the latter along with him to
St. Louis, and “compared the two documents” side-by-side right then and there. J.A. 470.
Macsherry added that after he’d signed the clean version, Lydon said she would “get Mike
Roberts to sign it” too and “send [him] a copy.” J.A. 471. But Macsherry never received
a copy, and no clean version of the Red-Lined Term Sheet—nor any other document
purporting to be Macsherry’s employment agreement—was ever produced in discovery.
Lydon’s testimony paints an entirely different picture of this meeting. She never
told Macsherry he was hired and, in fact, didn’t even know that he’d been hired until later
that day, when Schoelch told her so. Lydon had been asked to simply “go in and explain”
what Macsherry’s medical, dental, and vision benefits would be, J.A. 1328–29, and hadn’t
presented Macsherry with any employment agreement. And she didn’t learn the details of
Macsherry’s compensation package until the next day, when Schoelch told her that
Macsherry would be paid a salary of $77,000, with no commission component. As for
Schoelch, he testified that he couldn’t recall the final terms of Macsherry’s compensation
package.
8 3.
On December 10, 2012, Macsherry began working as CDC’s Vice President of
Development and Leasing—consistent with the date and position (though technically not
the same employer) reflected in the Red-Lined Term Sheet.
Macsherry performed myriad duties as the defendants’ local representative for the
Sparrows Point site, such as dealing with officials from the Maryland Port Authority and
other state and local agencies, supervising the extensive remediation of the site’s complex
environmental liabilities, managing the site’s water and sewer infrastructures, dealing with
the site’s existing tenants, and creating a concept plan for marketing the redeveloped site.
Macsherry also supervised a third-party real estate broker named Cassidy Turley, whom
the defendants hired to find a buyer for the site (which Macsherry wasn’t hired to do).
The leading candidate to purchase the redeveloped Sparrows Point site soon
emerged as Hilco, the company that already owned the site from the railroad tracks up.
Hilco had expressed its interest in acquiring the remainder of the site at a dinner with the
Roberts brothers in late 2012. The brothers turned their end of the negotiations over to
Schoelch and Jostes, who continued to court Hilco, with varying degrees of success,
throughout 2013. For Macsherry’s part, he testified that, while Hilco “wasn’t [his] sale to
make,” J.A. 624, he was nonetheless involved in the client relationship by “doing what [he]
was hired to do”—that is, by “dealing with Hilco on various issues” related to the
defendants’ redevelopment of the site, J.A. 621.
In May 2013, Macsherry negotiated the renewal of a lease with the Nelson
Company, an existing tenant of the Sparrows Point site. Seeking payment of a 0.75%
9 commission (amounting to $281) on that renewal, Macsherry emailed Lydon and Schoelch
separately, asking them each to send him a copy of his employment agreement, which he
said he’d never received (to Lydon) or had misplaced (to Schoelch). Lydon responded that
she was “in the middle of a big closing” and asked whether Macsherry had “checked with
[Michael Roberts].” J.A. 1653. Macsherry replied that Michael “said he could not find it”
and blamed its absence “on his filing system” (adding “like he has one”), but now attached
a copy of the Red-Lined Term Sheet, which he characterized as an unsigned copy of his
agreement. Id. Macsherry also sent Schoelch a copy of the Red-Lined Term Sheet, as well
as a formal commission invoice.
The parties offer characteristically competing accounts of how Macsherry’s request
for a commission on the Nelson lease was resolved. According to Macsherry, Schoelch
called to assure him that the Red-Lined Term Sheet reflected his employment terms and
that he would receive the requested commission, but stated that it wasn’t “a good time to
process the invoice” because “there was a lot going on.” J.A. 535. Schoelch, by contrast,
testified that he told Macsherry that the Red-Lined Term Sheet “was not his term sheet,”
J.A. 1493, and that he didn’t know the “final terms” of Macsherry’s agreement, J.A. 1497.
As for Lydon, she claimed that she reached out to Schoelch after receiving Macsherry’s
initial email and was told that Macsherry had no employment agreement, though she never
relayed that information to him. By late July, Macsherry dropped his pursuit of a
commission on the Nelson lease.
10 4.
After months of negotiations, Hilco agreed to buy the balance of the Sparrows Point
site for $110 million. The deal closed on September 18, 2014, and the Roberts brothers
pocketed upwards of $65 million in profit. 4
As the Hilco sale was about to close, Macsherry emailed Lydon to request his 0.75%
commission (amounting to $825,000) on the sale, attaching the Red-Lined Term Sheet in
support. Lydon forwarded the request to Michael Roberts, who ignored it. Macsherry then
called Michael directly and left him a voicemail about his request for a commission, and
also sent him an email to the same effect, but Michael didn’t respond to either.
On September 12, 2014, Lydon emailed Macsherry a formal termination letter
effective upon the closing with Hilco. J.A. 1672. The letter stated that Macsherry would
be paid “[a]ll payroll earned . . . as well as any vacation time earned but not yet taken” as
of the date of the closing, but made no reference to any commission. Id. Macsherry
responded to Lydon’s email the next day, asserting that his employment agreement “had a
commission clause of .75% of the sale value,” that his compensation “was primarily based
on the commission,” and that he was “hopeful the company w[ould] honor this agreement.”
J.A. 1670. Lydon replied by asking whether Michael Roberts had called Macsherry to
discuss his commission request “yet.” Id.
4 The defendants transferred funds from the Hilco sale to family trusts after MacSherry stated that he was planning to retain counsel over his unpaid commission.
11 On September 17, Macsherry told Lydon that he still hadn’t heard from Michael
about his request for a commission on the Hilco sale. The sale closed the following day,
and Macsherry was terminated without a commission, though the defendants did pay a
commission to Turley (the independent broker). On September 19, Macsherry emailed
Michael Roberts again to request that he call him about his commission request, which
Michael finally did.
During their first call, Michael asked Macsherry to send him a copy of the document
supporting his request for a commission, and Macsherry obliged by sending him the Red-
Lined Term Sheet. The substance of their second call is hotly disputed. According to
Macsherry, Michael told him: “I know I owe you a commission. I don’t believe you
deserve a commission as big. What will you take?” J.A. 591–92 (the “Compromise
Statements”). In response, Macsherry said that he believed he was owed the full 0.75%
commission reflected in the Red-Lined Term Sheet, but remained open to an offer.
Michael said he would think about it and get back to him, but never did.
In Michael’s telling, however, he told Macsherry that the Red-Lined Term Sheet
was “not an employment agreement” and that Macsherry wasn’t owed any commission. 5
J.A. 938. Michael also told Macsherry that he wasn’t “opposed” to paying Macsherry “a
bonus of some sort,” but didn’t actually make an offer. Id. Whatever was said, Macsherry
and Michael reached no resolution that day or thereafter.
5 At trial, however, Michael admitted that he never asked Schoelch whether he offered Macsherry a commission.
12 B.
Macsherry filed suit in the Circuit Court for Baltimore County in November 2014,
asserting four alternative claims: (I) violation of Maryland’s Wage Payment and Collection
Law (the “MWPCL”), see Md. Code Ann., Lab. & Empl. § 3-501 et seq., which creates a
cause of action to recover wages left unpaid upon termination, id. § 3-507.2(a); (II) breach
of contract; (III) promissory estoppel; and (IV) quantum meruit. Macsherry also asserted
a fifth claim for what the district court called “enhanced damages” under the MWPCL, J.A.
420, which allows for recovery of up to treble damages where the wages were withheld
“not as a result of a bona fide dispute,” Md. Code Ann., Lab. & Empl. § 3-507.2(b).
Macsherry’s state-court complaint didn’t expressly demand a jury trial. Rather, it
referenced a jury only in the ad damnum paragraphs at the end of each of Macsherry’s four
substantive claims, which requested the court to “[a]ward . . . any other relief this Court or
a jury deems appropriate.” J.A. 37, 38, 39, 41. The complaint was also accompanied by a
Case Information Report pursuant to Md. R. 2-111, in which Macsherry checked the “No”
box of the “Jury Demand” section. J.A. 47.
The defendants removed the case to the district court for the District of Maryland,
invoking the court’s diversity jurisdiction. On the Civil Cover Sheet accompanying the
notice of removal, the defendants likewise checked the “No” box of the “Jury Demand”
section, which said to “Check Yes only if demanded in complaint.” J.A. 29.
The defendants simultaneously moved to dismiss the complaint, which the district
court granted in part, as to Michael Roberts alone, on the ground that the complaint failed
to state a claim against him individually. Macsherry v. Sparrows Point, LLC, No. 1:15-cv-
13 22 (D. Md. May 21, 2015). Attempting to cure this pleading defect, Macsherry filed an
amended complaint—which, like his initial, state-court complaint, only referenced a jury
in the four ad damnum paragraphs’ requests for “any other relief this Court or a jury deems
appropriate.” J.A. 59, 60, 62, 63. Michael Roberts again moved to dismiss the amended
complaint on individual liability grounds, which the district court granted in part, as to
claims II, III, and IV. Macsherry v. Sparrows Point, LLC, No. 1:15-cv-22, 2015 WL
6460261, at *9–15 (D. Md. Oct. 23, 2015).
In January 2016, the parties filed a joint status report in which Macsherry first
contended that the case was “to be tried by a jury.” J.A. 98. The defendants countered
“that a proper jury demand was not made,” however, and the parties noted that “[m]otions
practice may be required to resolve the dispute.” Id. To that end, Macsherry moved again
to amend his complaint (as well as to reopen discovery), seeking to add an express demand
for a jury trial. But the district court denied the motion, finding amendment improper under
Fed. R. Civ. P. 15 and, in any event, insufficient to cure any failure to properly demand a
jury trial under Fed. R. Civ. P. 38(b). Macsherry v. Sparrows Point, LLC, No. 1:15-cv-22,
2016 WL 8669914, at *8, 11 (D. Md. Oct. 28, 2016).
The parties then briefed cross-motions for summary judgment, which the district
court denied. Macsherry v. Sparrows Point, LLC, No. 1:15-cv-22, 2017 WL 3315262 (D.
Md. Aug. 3, 2017) (the “Summary Judgment Opinion”). The court found that the case was
“riddled with significant factual disputes,” id. at *36, including whether the parties agreed
to the commission term reflected in the Red-Lined Term Sheet and, if so, whether that term
was ambiguous in its scope, see id. at *21–24.
14 C.
With the case set for trial, Macsherry moved for a jury trial alternatively under Fed.
Rs. Civ. P. 38(b) and 39(b), which the district court granted on both grounds. Macsherry
v. Sparrows Point, LLC, No. 1:15-cv-22, 2017 WL 5591798, at *8 (D. Md. Nov. 17, 2017)
(the “Jury Trial Opinion”). The court found that the references to “this Court or a jury” in
the ad damnum paragraphs of the complaint sufficed to demand a jury trial under Rule
38(b), and even assuming they didn’t, Macsherry was entitled to a jury trial under Rule
39(b) pursuant to the “balancing test” of Malbon v. Pennsylvania Millers Mutual Insurance
Co., 636 F.2d 936 (4th Cir. 1980). Id. at *2–8.
Prior to trial, the parties also briefed two motions in limine, including one by the
defendants to exclude evidence of Michael Roberts’s Compromise Statements pursuant to
Fed. R. Evid. 408. The district court preliminarily denied both motions, subject to the
presentation of the evidence at trial. Macsherry v. Sparrows Point, LLC, No. 1:15-cv-022,
2018 WL 1123696, at *5 (D. Md. Mar. 1, 2018) (the “Motions in Limine Opinion”). With
respect to the Compromise Statements, the court found that they were admissible without
limitation because they didn’t fall under the exclusionary provision of Rule 408(a), and
even assuming they did, they were admissible under Rule 408(b) for the limited purpose
of proving Macsherry’s entitlement to enhanced damages under the MWPCL. Id. at *3–5.
The parties proceeded to a seven-day jury trial. At trial, the defendants renewed
their Rule 408 objection to the evidence of the Compromise Statements, but the district
court overruled the objection and admitted the statements without limitation. The
defendants then moved for a directed verdict under Fed. R. Civ. P. 50(a) at the close of
15 Macsherry’s evidence, which the district court denied as well. The jury returned a verdict
in favor of Macsherry on all claims. It also awarded Macsherry $1 million in net damages,
consisting of $825,000 in compensatory damages 6 (the full value of his claimed
commission on the Hilco sale) plus $175,000 in enhanced damages.
The defendants subsequently moved pursuant to Fed. R. Civ. P. 50(b) for judgment
notwithstanding the verdict or, alternatively, for a new trial on the ground that Macsherry
presented insufficient evidence to support the jury’s verdict. The district court denied the
motion. Macsherry v. Sparrows Point, LLC, No. 1:15-cv-22, 2019 WL 557005, at *5 (D.
Md. Feb. 12, 2019). But the court granted the defendants’ alternative motion to amend the
judgment pursuant to Fed. R. Civ. P. 59(e), for reasons not relevant here.
This appeal followed.
II.
The defendants first contend that the district court erred in admitting evidence of the
Compromise Statements under Fed. R. Evid. 408. We review the court’s admission of the
evidence for abuse of discretion and its underlying legal conclusions de novo. See United
States v. Benson, 957 F.3d 218, 228 (4th Cir. 2020). In so doing, we find that the admission
6 Specifically, the jury awarded Macsherry $825,000 in compensatory damages on each of his two contract claims (i.e., substantive violation of the MWPCL and breach of contract); $825,000 on his quantum meruit claim; and $175,000 on his promissory estoppel claim. But because the jury found that the parties had an express contract, the district court eliminated Macsherry’s awards under the two quasi-contract claims. And because the two contract claims arose from a single harm, the court entered judgment awarding Macsherry compensatory damages under just one of them (the MWPCL claim).
16 was legal error because the statements constituted an effort to compromise an actual dispute
over Macsherry’s claim to a commission on the Hilco sale, and weren’t admissible for any
purpose separable from proving or disproving the validity of that claim. We direct
appropriate relief as more fully explained below.
We start with the text of Rule 408, which this court has had few occasions to
consider. The Rule consists of two provisions. First, subsection (a) provides that evidence
of “the following” types of statements “is not admissible” on behalf of any party “either to
prove or disprove the validity or amount of a disputed claim or to impeach by a prior
inconsistent statement or a contradiction”:
(1) furnishing, promising, or offering—or accepting, promising to accept, or offering to accept—a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim—except when offered in a criminal case and when the negotiations related to a claim by a public office in the exercise of its regulatory, investigative, or enforcement authority.
Fed. R. Evid. 408(a). Second, however, subsection (b) provides that such evidence may be
admitted “for another purpose, such as proving a witness’s bias or prejudice, negating a
contention of undue delay, or proving an effort to obstruct a criminal investigation or
prosecution.” Fed. R. Evid. 408(b) (emphasis added).
Thus, our task here is to determine whether the Compromise Statements are the sort
of evidence implicated under Rule 408(a); and if so, whether they were admissible under
17 Rule 408(b) for a purpose other than to prove (or disprove) the validity or amount of
Macsherry’s claim to a commission. We take these steps in turn.
At bottom, Rule 408(a)’s exclusionary provision extends to evidence of an effort to
“compromise” a “disputed claim.” See Fed. R. Evid. 408(a). As an initial matter, we join
a majority of our sister circuits in recognizing that a dispute “need not ‘crystallize to the
point of threatened litigation’” to implicate this provision. See Weems v. Tyson Foods,
Inc., 665 F.3d 958, 965 (8th Cir. 2011) (quoting Affiliated Mfrs., Inc. v. Aluminum Co. of
Am., 56 F.3d 521, 527 (3d Cir. 1995)); see also Dallis v. Aetna Life Ins. Co., 768 F.2d 1303,
1307 (11th Cir. 1985); U.S. ex rel. Drakeford v. Tuomey, 792 F.3d 364, 390 (4th Cir. 2015)
(Wynn, J., concurring). But see Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co.,
561 F.2d 1365, 1373 (10th Cir. 1977) (suggesting the opposite view).
Rather, in our view, a dispute exists for purposes of Rule 408(a) “so long as there is
‘an actual dispute or difference of opinion’ regarding a party’s liability for or the amount
of the claim” at issue. Weems, 665 F.3d at 965 (quoting Affiliated Mfrs., 56 F.3d at 527);
accord Dallis, 768 F.2d at 1307; Drakeford, 792 F.3d at 390. This broader view not only
best interprets Rule 408(a)’s plain language, but also best promotes the “public policy
favoring the compromise and settlement of disputes” underlying this exclusionary rule.
See Fed. R. Evid. 408 advisory committee’s note to 1972 proposed rules; cf. Fiberglass
Insulators, Inc. v. Dupuy, 856 F.2d 652, 655 (4th Cir. 1988) (noting Rule 408’s “strong
public policy”). After all, the value of promoting efforts to settle disputes that have entered
the doors of a court applies all the more to disputes that haven’t yet done so.
18 The district court agreed with this principle, but found that there was nonetheless no
actual dispute or difference of opinion regarding Macsherry’s claim to a commission on
the Hilco sale at the time Michael Roberts allegedly made the Compromise Statements.
See Motions in Limine Opinion, 2018 WL 1123696, at *5. In so holding, the court reasoned
that Michael’s previous efforts “to avoid” Macsherry’s requests for a commission on the
Hilco sale “fl[ew] in the face of any notion of a dispute.” Id. In other words, the court
effectively ruled that a dispute must be explicitly communicated from one party to the other
before it implicates Rule 408(a).
We think that it strains both the plain language of Rule 408(a) and the record to
conclude that a dispute over Macsherry’s claim to a commission on the Hilco sale didn’t
exist at the time of the alleged Compromise Statements. See Weems, 665 F.3d at 966.
Weems is instructive on this point. There, our sister circuit held that a separation agreement
“was clearly an offer of compromise within the meaning of Rule 408” where the defendant
employer had sent it shortly after the plaintiff employee had complained that her being
placed on administrative leave amounted to gender discrimination. Id. at 964–66. The
court reasoned that even though the defendant “never followed up” with the plaintiff about
her complaint of discrimination, id. at 963, their offer to pay her an additional month of
salary in exchange for a release of all claims (and the end of her employment) implied an
actual difference of opinion, id. at 965–66.
So too here, the defendants had clearly—if impliedly—communicated a difference
of opinion over Macsherry’s claim to a commission on the Hilco sale by the time of the
Compromise Statements. Recall that, even crediting Macsherry’s account of the events
19 surrounding his earlier request for a commission on the Nelson lease, the defendants had
been ignoring his invoice for a mere $281 for well over a year by then, and showed no
intention of changing their tune. The defendants also had never so much as sent Macsherry,
as he put it, “any kind of acknowledgement” about the status or whereabouts of his final
agreement, let alone a copy of it. J.A. 555. As a result, Macsherry sent Lydon another
copy of the Red-Lined Term Sheet on September 9, 2014, when he first requested a
commission on the Hilco sale, being “concerned” that the defendants weren’t on the same
page about the terms of his agreement. J.A. 554.
The dispute over the commission became more pronounced over the ensuing weeks.
Notably, while Macsherry received no “follow up” from Lydon or Michael Roberts for
several days after his initial requests, see Weems, 665 F.3d at 963, the termination letter
that he received from Lydon on September 12 came “inferentially in response” thereto, see
id. at 665–66, insofar as it addressed Macsherry’s outstanding payroll entitlements without
mentioning any commission. Indeed, Macsherry was so alarmed at the omission that he
responded by urging the defendants to “honor” their “agreement” to pay him a commission.
J.A. 1670.
But rather than honor the alleged agreement, the defendants instead terminated
Macsherry without paying him any commission. Michael Roberts then persisted in
ignoring Macsherry’s requests to discuss his commission after terminating him. Surely,
the only “reasonable inference” to be drawn from such extensive efforts to avoid
Macsherry’s requests and terminate him without a commission is that the defendants
disputed their obligation to pay the commission in the first instance.
20 Moreover, even if Michael Roberts’s difference of opinion wasn’t sufficiently clear
when he finally gave Macsherry a call on September 25, the Compromise Statements
themselves lay it bare. In Macsherry’s own telling, Michael’s alleged statements explicitly
disputed at least the amount of his claim to a commission on the Hilco sale, see J.A. 591–
92 (“I don’t believe you deserve a commission as big.”), and explicitly sought to negotiate
a compromise, see J.A. 592 (“What will you take?”). And in response, Macsherry says
that he invited Michael to make him an “offer.” Id. Such evidence thus plainly consists of
“statement[s] made during compromise negotiations” about Macsherry’s disputed claim.
See Fed. R. Evid. 408(a)(2). 7 In finding otherwise, the district court erred.
We turn next to consider whether the Compromise Statements were properly
admitted for a purpose other than “to prove or disprove the validity or amount” of
Macsherry’s disputed claim to a commission, Fed. R. Evid. 408(a). We don’t think the
district court admitted it for any such purpose.
To the contrary, because the district court found that the Compromise Statements
were admissible without limitation, the court allowed them to be used for one of the very
purposes foreclosed thereunder: to prove the validity of the claim that “the compromise
offer was meant to settle.” See Weems, 665 F.3d at 966–67. The evidence was indeed
7 Indeed, even in Michael’s telling of the phone call, he explicitly contested the validity of Macsherry’s claim to a commission and expressed a willingness to pay him “a bonus of some sort,” J.A. 938, further indicating that—whatever was actually said—the conversation consisted of an attempt to compromise a dispute over Macsherry’s claim.
21 highly relevant to show the validity of Macsherry’s claim to a commission on the Hilco
sale, since Michael Roberts’s alleged statements conceded as much. And by the same
token, the validity of Macsherry’s claim to such a commission was the central issue at trial
with respect to each of his substantive claims. 8 Thus, because the district court’s premise
that the evidence didn’t implicate Rule 408(a) was faulty, it follows that the court erred in
allowing the evidence to be admitted for such a purpose.
We also think the district court erred in finding (in the alternative) that, even if the
evidence was inadmissible to prove the validity of Macsherry’s substantive claims, it was
admissible under Rule 408(b) to prove Macsherry’s claim for enhanced damages under the
MWPCL. Here, the court reasoned that the evidence showed that the defendants withheld
Macsherry’s commission “not as a result of a bona fide dispute,” which would entitle him
to recover up to three times the value of the commission. See Md. Code Ann., Lab. &
Empl. § 3-507.2(b). A “bona fide” dispute means simply a “good faith” or “legitimate
dispute over the validity of the claim or the amount that is owing.” Admiral Mortg., Inc.
v. Cooper, 745 A.2d 1026, 1031 (Md. 2000). In other words, the district court supposed
that proving the defendants’ bad-faith liability for Macsherry’s commission was a purpose
distinct from proving their mere liability for it.
8 Whereas Macsherry’s claims for substantive violation of the MWPCL, breach of contract, and quantum meruit all turned on the existence of an express or implied contract promising to pay Macsherry a commission on the Hilco sale, his claim for promissory estoppel turned on the existence of a non-contractual promise to the same effect.
22 While the purpose identified by the district court is technically distinct from that of
proving the validity of Macsherry’s claim, the court failed to consider whether that purpose
is “inseparable” from one foreclosed under Rule 408(a). See Weems, 665 F.3d at 967.
Weems is again instructive on this point. There, our sister circuit held that the separation
agreement discussed above wasn’t admissible to prove the defendant’s “lack of good faith”
because such a purpose “directly establishe[d]” the defendant’s liability for the plaintiff’s
claim. Id. at 966. The court reasoned that, because the issue of the defendant’s “bad faith”
was inseparable from that of the claim’s validity, it didn’t constitute “another purpose”
within the meaning of Rule 408(b). See id. at 967. After all, the other purposes mentioned
thereunder, “such as proving a witness’s bias or prejudice, negating a contention of undue
delay, or proving an effort to obstruct a criminal investigation or prosecution,” Fed. R.
Evid. 408(b), are far removed from the purposes barred under Rule 408(a).
Other circuits have likewise construed Rule 408(b) to exclude purposes inseparable
from proving or disproving the validity or amount of the disputed claim. See, e.g.,
Stockman v. Oakcrest Dental Ctr., P.C., 480 F.3d 791, 798 (6th Cir. 2007) (holding that
evidence of a compromise offer wasn’t admissible under Rule 408(b) to show a failure to
mitigate damages because such a purpose “goes to the amount of the claim” (cleaned up));
Trebor Sportswear Co. v. The Ltd. Stores, Inc., 865 F.2d 506, 510 (2d Cir. 1989) (same
where the evidence was offered to show compliance with the statute of frauds because such
a purpose is “closely intertwined” with proving the validity of the claim); cf. Bradbury v.
Phillips Petroleum Co., 815 F.2d 1356, 1364 (10th Cir. 1987) (“[W]hen the issue is
doubtful, the better practice is to exclude evidence of . . . compromise offers.”). As these
23 courts have aptly stated, “[c]are should be taken that an indiscriminate and mechanistic
application of [Rule 408(b)’s] exception,” Trebor Sportswear, 865 F.2d at 510 (cleaned
up), doesn’t “eviscerate Rule 408[a]’s protection and undermine its clear purpose,”
Stockman, 480 F.3d at 798.
The same result follows here. Simply put, because the defendants’ bad-faith
liability for Macsherry’s claim to a commission under Md. Code Ann., Lab. & Empl. § 3-
507.2(b) is inseparable from the underlying validity of that same claim, the district court
erred in admitting the Compromise Statements to prove Macsherry’s entitlement to
enhanced damages.
B.
Of course, the district court’s error in admitting the Compromise Statements does
not necessarily compel relief. Instead, we must assess whether the error was harmless
within the meaning of Fed. R. Civ. P. 61. To deem an evidentiary error harmless, we must
be able to say, “with fair assurance, after pondering all that happened without stripping the
erroneous action from the whole, that the judgment was not substantially swayed by the
error.” Smith v. Baltimore City Police Dep’t, 840 F.3d 193, 201 (4th Cir. 2016) (cleaned
up), as amended (Nov. 1, 2016). And here, we cannot say that.
Evidence of the Compromise Statements was particularly harmful to the defendants
with respect to Macsherry’s claim for enhanced damages. True, other evidence in the
record supported the claim, such as the defendants’ persistent efforts to avoid Macsherry
rather than deny his claim outright; Roberts’s admission that he didn’t ask Schoelch
whether he offered Macsherry a commission; and the defendants’ transfer of funds from
24 their corporate accounts to family trusts after learning that Macsherry intended to retain
counsel. But it’s difficult to imagine any more probative evidence on the question of the
defendants’ good faith than an admission by CDC’s owner that Macsherry was entitled to
a commission on the Hilco sale. In fact, the Compromise Statements were the only
evidence of bad faith that the district court cited in denying the defendants’ motion for
summary judgment on this claim. See Motion for Summary Judgment Opinion, 2017 WL
3315262, at *33. It follows that such evidence wasn’t harmless with respect to the jury’s
verdict awarding enhanced damages.
While Macsherry’s remaining claims present a closer call, we are insufficiently
certain that the jury’s verdicts with respect to them weren’t likewise substantially swayed
by the error. True, the jury reasonably could have credited Macsherry’s theories of liability
all the same without evidence of the Compromise Statements. For instance, it was largely
undisputed that Schoelch drafted the Red-Lined Term Sheet during preliminary
negotiations about Macsherry’s agreement, and Macsherry testified that he signed a clean
version of that term sheet upon being formally offered the job. And the jury could have
still found that the commission term reflected in the Red-Lined Term Sheet applied whether
or not Macsherry was responsible for procuring the buyer.
But we can’t say with a fair assurance that the jury would have found that Macsherry
was entitled to an $825,000 commission on the Hilco sale if the Compromise Statements
had been excluded. Notably, those statements were the sole evidence tending to undermine
all three of the defendants’ principal theories of non-liability, namely: (1) that Macsherry
had no formal employment agreement; (2) that even if he did, Michael Roberts was
25 required to (yet didn’t) sign off on any commission term; and (3) that even if he did, the
commission term should be construed (in accordance with trade usage) to depend on
Macsherry’s procurement of the buyer. 9
The probative value of the evidence wasn’t lost on Macsherry, who emphasized
Michael Roberts’s alleged admission that he was owed a commission on the Hilco sale at
length, and for each of these purposes, in closing argument. And especially since the
statements were made by an individual who, in Macsherry’s own words, “exercised an
unusual level of control” over his companies and their employees, J.A. 1090, we think the
likelihood that they made a powerful impression on the jury is too substantial to overlook.
Thus, even if the jury generally credited Macsherry’s version of events, we can’t say with
sufficient certainty that evidence of the Compromise Statements wasn’t the straw that
broke the camel’s back. Cf. Weems, 665 F.3d at 968 (finding harmful error where the
improperly admitted evidence “very likely . . . affected the jury’s deliberations and . . .
verdicts,” even if the properly admitted evidence “was sufficient to support the verdict”
(cleaned up)).
9 Defendants contend separately that they’re entitled to judgment as a matter of law on Macsherry’s MWPCL wage claim because the alleged commission isn’t a compensable “wage” under the statute. They are wrong. The commission fits comfortably within the statute’s definition of a wage, which includes “all compensation that is due to an employee for employment.” Md. Code Ann., Lab. & Empl. § 3-501(c)(1). See also Medex v. McCabe, 811 A.2d 297, 302 (Md. 2002) (“Commissions are clearly within the scope of the Act . . . .”). Macsherry testified that the commission was intended to be a part of his overall compensation package. That is enough to dispose of defendants’ contention that the commission was unenforceable because it was gratuitous.
26 In sum, the district court’s errors under Rule 408 entitle the defendants to a new
trial.
III.
Having granted the defendants a new trial, we next consider whether that trial may
take place before a jury by taking up their contention that the district court erred in granting
Macsherry’s motion for jury trial pursuant to both Fed. Rs. Civ. P. 38(b) and 39(b). We
review the court’s grant of a jury trial for abuse of discretion, Pac. Fisheries Corp. v. HIH
Cas. & Gen. Ins., Ltd., 239 F.3d 1000, 1002 (9th Cir. 2001), and its underlying legal
conclusions de novo, Brown & Pipkins, LLC v. Serv. Employees Int’l Union, 846 F.3d 716,
730 (4th Cir. 2017). And we conclude that, while the court erred in finding that Macsherry
properly demanded a jury trial under Rule 38(b), it didn’t exceed the scope of its broad
discretion to grant him a jury trial nonetheless under Rule 39(b).
The Federal Rules of Civil Procedure preserve “inviolate” the parties’ “right of trial
by jury as declared by the Seventh Amendment to the Constitution,” Fed. R. Civ. P. 38(a),
providing two ways to invoke it. First and foremost, a district court “must” designate an
action “as a jury action” whenever a jury trial “has been demanded under Rule 38.” Fed.
R. Civ. P. 39(a). Second, even if a jury hasn’t been “properly demanded,” under Rule
38(b), a district court “may, on a motion, order a jury trial on any issue for which a jury
might have been demanded.” Fed. R. Civ. P. 39(b). We address these avenues in turn.
27 1.
Rule 38(b) provides that “[o]n any issue triable of right by a jury, a party may
demand a jury trial by: (1) serving the other parties with a written demand—which may be
included in a pleading—no later than 14 days after the last pleading directed to the issue is
served; and (2) filing the demand in accordance with Rule 5(d).” Fed. R. Civ. P. 38(b).
This rule applies to actions (like this one) arising under removal jurisdiction through Rule
81(c)(3), which provides that a party “entitled to a jury trial under Rule 38 must be given
one” if the party either “expressly demanded a jury trial in accordance with state law” prior
to removal or “serves a demand” in accordance with Rule 38(b) within fourteen days after
service of the last pleading directed to the issue (or, if “all necessary pleadings have been
served at the time of removal,” within fourteen days after service of the notice of removal).
See Fed. R. Civ. P. 81(c)(3)(A)–(B). But a party who fails to properly demand a jury trial
under Rule 38(b) or state law “waives a jury trial,” at least as a matter of right. See Fed.
R. Civ. P. 38(d), 81(c)(3)(A).
Macsherry failed to properly demand a jury trial under these interlocking rules. For
starters, the parties don’t dispute the district court’s ruling that Macsherry’s state-court
complaint failed to expressly demand a jury trial in accordance with Maryland law. See
Jury Trial Opinion, 2017 WL 5591798, at *3; cf. Md. R. 2-325. Macsherry was therefore
required to a file a demand in accordance with Rule 38(b) within fourteen days of being
served with the defendants’ last pleading (since all necessary pleadings hadn’t been served
at the time of removal). But while filed within that time, Macsherry’s amended complaint
likewise failed to properly demand a jury trial.
28 In finding to the contrary, the district court mistakenly relied on our observation (in
an unpublished decision) that “technical” compliance with Rule 38(b) “is not necessarily
required” to demand a jury trial. See Hohman v. Dunning, 991 F.2d 789 (table), 1993 WL
127955, at *2 (4th Cir. 1993) (per curiam) (finding Rule 38(b) satisfied where pro se
plaintiff’s jury demands failed to “include a certificate of service as required by a local
court rule”); see also Gargiulo v. Delsole, 769 F.2d 77, 78–79 (2d Cir. 1985) (finding Rule
38(b) satisfied where defendants’ jury demand was “made on the last page of their answer,”
and thus “not in the preferred style”). Yet even non-technical compliance requires that a
party actually demand a jury trial. Macsherry simply didn’t do that.
The district court’s reliance on Lutz v. Glendale Union High Sch., 403 F.3d 1061
(9th Cir. 2005), was also misplaced. In that case, our sister circuit began by noting that,
“[i]deally,” a demand under Rule 38(b) should be made “in a separate document or set off
from the main body of the pleading in order to make [it] readily recognizable.” Id. at 1064
(quoting 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2318
(2d ed. 1994)). But heeding its obligation to “indulge every reasonable presumption
against waiver” of the “fundamental” right to a civil jury trial, Aetna Ins. Co. v. Kennedy
to Use of Bogash, 301 U.S. 389, 393 (1937), the court held that the ad damnum paragraphs
of the plaintiff’s complaint—which requested damages “in such amount as may be
awarded by a jury,”—sufficed to invoke the right because they were “sufficiently clear to
alert a careful reader that a jury trial [was] requested,” 403 F.3d at 1064–65 (cleaned up).
Even assuming that Lutz marks the outer limit of Rule 38(b), this case falls beyond
it. Recall that the ad damnum paragraphs of Macsherry’s amended complaint referred to
29 relief awarded not only by “a jury,” but also by “this Court,” joined by the disjunctive “or.”
J.A. 59, 60, 62, 63. Unlike Lutz’s, Macsherry’s ad damnum paragraphs thus referenced
both possible factfinders alternatively, suggesting no election between them either way.
Moreover, the ad damnum paragraphs of Macsherry’s state-court complaint had used the
same equivocal language even as the attached Case Information Report expressly declined
a jury trial. On these facts, even a careful reader wouldn’t have understood Macsherry’s
complaint to request a jury trial. This case therefore presents no reasonable presumption
against waiver.
Even though Macsherry “waive[d] a jury trial” as of right by failing to file a proper
demand under Rule 38, see Fed. R. Civ. P. 38(d), the district court retained discretion to
“order a jury trial” on motion by Macsherry under Rule 39, see Fed. R. Civ. P. 39(b). We
think the district court acted within its discretion in granting that motion.
We have not squarely addressed the scope of a district court’s discretion to grant a
motion for jury trial under Rule 39(b). Though the district court here exercised its
discretion by looking to the factors we enumerated in Malbon, that enumeration was dictum
in light of our sole holding that any Rule 39(b) argument had been waived, see 636 F.2d at
940–41. Nor have we ever applied the factors to a Rule 39(b) motion. 10
10 The Malbon factors “include (1) whether the issues are more appropriate for determination by a jury or a judge . . . ; (2) any prejudice that granting a jury trial would cause the opposing party . . . ; (3) the timing of the motion . . . ; [and] (4) any effect a jury trial would have on the court’s docket and the orderly administration of justice.” 636 F.2d at 940 n.11 (cleaned up).
30 Our sister circuits have tended to construe a district court’s discretion to grant relief
under Rule 39(b) rather narrowly, albeit in “diametrically . . . opposite” respects. 9 Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2334 (3d ed. 2020).
Some circuits hold that a district court should exercise its discretion to grant a jury trial “in
the absence of strong and compelling reasons to the contrary.” Swofford v. B & W Inc.,
336 F.2d 406, 409 (5th Cir. 1964), cert. denied, 379 U.S. 962 (1965); accord Kitchen v.
Chippewa Valley Schs., 825 F.2d 1004, 1013 (6th Cir. 1987); Parrott v. Wilson, 707 F.2d
1262, 1267 (11th Cir. 1983); AMF Tuboscope, Inc. v. Cunningham, 352 F.2d 150, 155
(10th Cir. 1965).
By contrast, a roughly equal number of circuits take the position that a district court
may only exercise its discretion to grant an untimely demand for a jury trial under Rule
39(b) upon a showing of “good reason for the belated demand.” Olympia Exp., Inc. v.
Linee Aeree Italiane, S.P.A., 509 F.3d 347, 352 (7th Cir. 2007); accord Pac. Fisheries
Corp., 239 F.3d at 1002 (“An untimely request for a jury trial must be denied unless some
cause beyond mere inadvertence is shown.”); Noonan v. Cunard S. S. Co., 375 F.2d 69, 70
(2d Cir. 1967) (same); see also SEC v. Infinity Grp. Co., 212 F.3d 180, 195 (3d Cir. 2000)
(“Courts in this Circuit generally deny relief when the only basis for such relief . . . is the
inadvertence or oversight of counsel.”) (cleaned up)).
We find more persuasive the view of the First Circuit, however, that the scope of
discretion granted under Rule 39(b) “is very broad,” such that “the case would be very rare
indeed where a district court abused its discretion in denying or granting a Rule 39(b)
motion.” Rowlett v. Anheuser-Busch, Inc., 832 F.2d 194, 200 (1st Cir. 1987), abrogated
31 on other grounds by Iacobucci v. Boulter, 193 F.3d 14 (1st Cir. 1999). Indeed, this view
alone reads Rule 39(b) according to its plain and ordinary language, which places no
qualification on a district court’s discretion to grant an untimely demanded jury trial. See
Fed. R. Civ. P. 39(b) (“[T]he court may, on motion, order a jury trial . . . .”). And by the
same token, it alone recognizes the soundness of the rule’s granting district courts—which
generally exercise “broad discretion” over “core matters of trial management,” United
States v. Lefsih, 867 F.3d 459, 467 (4th Cir. 2017)—the same authority to decide the very
format of the trial in cases where the right to a civil jury has been waived.
The view that district courts enjoy broad discretion to grant or deny a motion under
Rule 39(b) also comports with our decision in Gen. Tire & Rubber Co. v. Watkins, 331
F.2d 192 (4th Cir. 1964), cert. denied, 377 U.S. 952 (1964), which dealt with the flip side
of the coin. That case held that a district court didn’t abuse its discretion where it denied a
motion under Rule 39(b) based on the court’s view that “the technicalities involved in
determining the issues of patent validity and infringement” raised there, though triable by
a jury, were better suited to a bench trial. Id. at 197–98.
Allowing that some cases may present “exceptional circumstances” that “would
appear to compel the court, in the exercise of its discretion, to order a jury trial,” we found
that the circumstances at issue were a far cry from the sort. Id.; see also McCray v. Burrell,
516 F.2d 357, 371 (4th Cir. 1975) (“[W]e cannot say that there were such exceptional
circumstances that the failure to grant the . . . motion was an abuse of discretion.” (citing
Gen. Tire & Rubber, 331 F.2d at 197–98)). Our decision today simply extends the same
32 principles to a district court’s correlative discretion to grant a motion under Rule 39(b),
which likewise warrants deference in the absence of exceptional circumstances.
The defendants assert that such a deferential view of Rule 39(b) “emasculates” the
waiver provision of Rule 38(d). See Gen. Tire & Rubber, 331 F.2d at 198. Not so.
Whereas the view that Rule 39(b) compels district courts to grant relief would
present such a concern, see id., our view that the rule affords district courts broad discretion
to grant relief takes the opposite approach. In so doing, it respects the balance struck by
these interlocking rules, whereby a party must be afforded a jury trial if one is properly
demanded, but takes his chances with the court’s discretion if not. And because a court
may just as easily employ that discretion to deny an untimely request, a party who desires
a jury trial remains incentivized to properly demand one.
In this case, we are satisfied that the district court didn’t exceed its broad discretion
to grant Macsherry’s motion for a jury trial under Rule 39(b). In so doing, the court
emphasized that Macsherry had given notice of his desire for a jury well in advance of trial,
that a jury trial wouldn’t disrupt the court’s docket, and, most importantly, that a jury trial
wouldn’t prejudice the defendants. See Jury Trial Opinion, 2017 WL 5591798, at *7–8.
Such reasoning—in which the defendants identify no defect—is adequate to support a
favorable exercise of discretion. And so, while (absent exceptional circumstances) the
court would have also been within its discretion to deny Macsherry’s belated request for a
jury trial, we discern no abuse in its decision to grant the motion.
33 * * *
For the reasons given, we vacate the district court’s judgment and remand the case
for a new trial.
VACATED AND REMANDED
Related
Cite This Page — Counsel Stack
973 F.3d 212, Counsel Stack Legal Research, https://law.counselstack.com/opinion/john-macsherry-jr-v-sparrows-point-llc-ca4-2020.