Manchester Mfg. v. Sears

• Court: District Court, D. New Hampshire
• Decided: October 1, 1997
• Docket: CV-91-752-SD
• Status: Published

Opinion

Manchester Mfg. v. Sears CV-91-752-SD 10/01/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Manchester Manufacturing Acauisitions, Inc., et al

v. Civil No. 91-752-SD

Sears, Roebuck & Co., et al

O R D E R

In its order of June 24, 1997 (document 248), the court

issued new deadlines for further proceedings in this action.1 In

response thereto, the parties have filed additional motions and

objections. This order addresses the issues raised by such

pleadings.

1. Plaintiffs' Motion to Amend Complaint, document 251

In the course of its remand order, the court of appeals

pointed out that the New Hampshire Blue Sky Law, Revised Statutes

Annotated (RSA) 421-B, specified that third-party liability may

be based on the factor, inter alia, of "control." Dinco, supra,

111 F.3d at 968, 972; RSA 421-B:25, III. Plaintiff's motion

seeks to clarify that plaintiffs claim liability based on this

1The order resulted from a status conference held following the remand order of the court of appeals set forth in Dinco v. Dvlex, Ltd. , 111 F.3d 964 (1st Cir. 1997) . "control" theory.

Defendants' catalogue of objections includes undue

prejudice, introduction of a new and different theory of

litigation, the statute of limitations, the creation of a

conflict of interest among the defendants, failure to fairly

state a claim, and the addition of allegations against Harold

Levy, who is no longer a party to this litigation. Document

260 .2

Pursuant to Rule 15(a), Fed. R. Civ. P.,3 leave to amend

"shall be freely given when justice so reguires." Foman v.

Davis, 371 U.S. 178, 182 (1962). However, in its assessment of a

motion to amend, the court should consider the factors of "undue

delay, bad faith or dilatory motive on the part of the movant,

repeated failure to cure deficiencies by amendments previously

2The jury returned a verdict for Levy, who was a defendant in the first trial.

3Rule 15(a), Fed. R. Civ. P., provides in pertinent part,

A party may amend the party's pleading once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within 20 days after it is served. Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so reguires. . . .

2 allowed, undue prejudice to the opposing party, and futility of

the amendment." Id. 3 M o o r e 's F e d e r a l Practice § 15.15[1], at 15-42

(3d ed. Matthew Bender 1997). Additionally, the court should

consider judicial economy and its ability to manage the case

adeguately if the amendment is allowed. Id. at 15-42, 43.

Accordingly, while amendment following remand is permitted

when consistent with the decision of the appellate court, 3

M o o r e 's , supra, § 15.14[4], at 15-40, it is not automatic. Id. §

15.14[1], at 15-26.

In the instant case, the original complaint, filed

December 26, 1991, has already been twice amended, on January 6,

1992, and November 17, 1992. However, delay alone does not

provide sufficient grounds for the denial of leave to amend.

Ricoh Co., Ltd. v. Nashua Corp., 947 F. Supp. 21, 24 (D.N.H.

1996). There must be undue delay combined with prejudice, and

prejudice is present when the amendment would deprive the

nonmovant of the opportunity to meet the facts or evidence

presented by reason of the amendment. Id. at 24-25.

That is not here the case. The defendants have known all

along that the Blue Sky Law was one of the bases for plaintiffs'

claims. That the parties did not previously focus upon the

"control" issue of said statute does not mean that defendants

should not have been prepared to defend thereon. And the

3 defendants now have ample opportunity to prepare and present

their defenses.4

As the court finds that the "control" theory does not

present a new and different theory of litigation, but that it

arises out of the "conduct, transaction or occurrence" set forth

in the original complaint, the claim relates back to such

original complaint. Rule 15(c), Fed. R. Civ. P.;5 3 M o o r e 's ,

supra, § 15.19[2], at 15-81 to 84.

The fact that there may arise a possible conflict of

interest among the defendants, which in turn may reguire the

entry of new counsel (and possible additional delay) is not, in

the court's opinion, a reason for denying the motion to amend.

The purpose of the federal rules is the trial of a case on the

merits, and the court finds that such possible conflict is

insufficient to reguire denial of the motion to amend.

Nor do the proposed allegations of the amendment falter for

failure to state a claim. The proposed amendments merely flesh

out the "control" theory under the Blue Sky Law, and there will

be ample time for discovery to determine whether or not this

4The newly set discovery deadline is March 1, 1998.

5Pursuant to Rule 15(c) (2), an amendment of a pleading relates back to the date of the original pleading when "the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading . . . ."

4 claim can survive any dispositive motions.

While the court will grant the motion to amend in large

part, it does concur that, insofar as the proposed allegations

concerning Harold Levy may be construed as an attempt to

introduce any further action against Mr. Levy, such allegations

will be stricken from the amended complaint. Levy was exonerated

by the prior jury, and plaintiffs did not appeal this order.

They are not now in a position to attempt to reintroduce any

claims of any sort against Mr. Levy.

With this last exception, the court herewith overrules

defendants' objections and grants the motion to amend the

complaint.

2. Defendants' Renewed Motion in Limine to Bar Introduction of

Deposition Exhibit No. 117 (Trial Exhibit No. 72), document 252

The challenged document is a handwritten memo authored by

Susan Mayo, an employee of Sears, Roebuck & Company (Sears)6

which was directed to another employee of Sears. At the first

trial, the court alternatively admitted this memo as either an

admission by an agent or servant. Rule 801(d)(2)(D), Fed. R.

Evid., or an admission by a co-conspirator, id., 801(d) (2) (E) .

6Sears was originally a defendant in this litigation, but it settled with plaintiffs shortly prior to the first trial.

5 The appellate court cast doubt on admissibility based on either

or both of such rules. Dinco, supra note 1, 111 F.3d at 973.

In their objection to defendants' motion, plaintiffs contend

that the evidence supports the prior rulings of the court with

respect to both agency and conspiracy. Document 266. They also

contend that admissibility exists either under the theory of

proof of an operative fact or proof of state of mind. Id.

It would be unhelpful for the court to attempt to rule on

this admissibility issue at this stage of the proceedings. As

the court of appeals points out, " [m]any of the [evidentiary]

issues may not arise in the same form on retrial or the trial

judge may treat them differently." Id. at 973. And even if it

is found that the documents are not admissible on the grounds

adopted by the trial judge at the first trial, they may well be

admissible on "state of knowledge." Id.

Accordingly, the court herewith denies the defendants'

motion, without prejudice to the defendants' right to reopen the

issue and raise such objections to the admissibility of the

document when it is proffered at trial.

6 3. Defendants' Motion to Withdraw, on Retrial, from

"Stipulation" Embodied in the Court's Ruling on the Plaintiffs'

Motion to Amend its Pretrial Statement in the First Trial,

document 253

When Sears settled with defendants before the first trial,

supra note 6, plaintiffs moved to amend their pretrial statement

to alternatively name additional witnesses to authenticate

certain Sears documents pursuant to Rule 803(6), Fed. R. Evid.,

or to obtain a stipulation of authenticity from defendants.

Defendants agreed to stipulate that the Sears records were

authentic business records pursuant to Rule 901(a), Fed. R. Evid.

By medium of replication, plaintiffs agreed to their

understanding of the stipulation, i.e., that the Sears records

were both the records of a regularly conducted business activity

and authentic. See Plaintiff's Objection, document 264, at 2.

The court approved plaintiffs' version of the stipulation,

and no further objection was taken by defendants. Defendants now

contend that, as this was merely a "tactical" decision concerning

a "guestion of law," they should be allowed to withdraw from the

previous stipulation.

While stipulations fairly entered into are favored, and

withdrawal therefrom disfavored, parties will be allowed to

withdraw if adherence to a stipulation may inflict a manifest

7 injustice on one of the parties. T.I. Fed'l Credit Union v.

Delbonis, 72 F.3d 921, 928 (1st Cir. 1995). Moreover, relief

from stipulations is especially favored where the stipulation

concerns a legal conclusion. Id.

In light of the fact that the stipulation at issue concerned

such a guestion of law, and in consideration of the ample time

existing for plaintiffs to procure the evidence concerning

admissibility of the records at issue, the court herewith grants

the defendants' motion.7

4. Defendants' Motion for Reconsideration of Court's Ruling

Barring Admission of Plaintiffs' Forbearance Agreement, document

Citing a criminal case concerning the Sixth Amendment right

of confrontation,8 defendants seek the right to introduce the

forbearance agreement entered into between plaintiffs and certain

of their lenders. The plaintiffs object. Document 261.

At the outset, the court notes that the right of

confrontation granted by the Sixth Amendment has no application

7The court rejects plaintiffs' suggestion that defendants should be reguired to fund the necessary discovery to prove admissibility of the contested records.

8United States v. De Soto, 950 F.2d 626, 629 (10th Cir. 1991) . to civil proceedings. Bennett v. National Transp. Safety Bd., 66

F.3d 1130, 1137 (10th Cir. 1995); United States v. Property Known

as 6109 Grubb Road, 886 F.2d 618, 621 (3d Cir. 1989), reh'q

denied, 890 F.2d 659, 660 (3d Cir. 1989); Erbacci, Cerone &

Moriartv, Ltd. v. United States, 939 F. Supp. 1045, 1056

(S.D.N.Y. 1996).

What is important, as the court has previously indicated, is

whether evidence of the forbearance agreement has a tendency to

prove a fact that is of conseguence to the determination of this

action. (See Order of Oct. 19, 1995, at 6, 7.) See 2 M o o r e 's ,

supra, § 401.07, at 401-43, 44.

Here, the "conseguential facts" concern (1) the liability,

if any, of defendants to plaintiffs and (2) if such liability be

proven, the amount of damages to be awarded. The identity of the

parties to whom damages are to be paid is not a "conseguential

factor." Accordingly, while defendants will be allowed to

examine plaintiffs and witnesses employed by their lenders as to

the fact that by terms of an agreement between the lenders and

plaintiffs the lenders are to recover a portion of any damages

awarded plaintiffs in this litigation, the forbearance agreement

will not be admitted into evidence. The defendants are

instructed to refrain from inguiry into the terms of the

forbearance agreement and to instruct their witnesses to avoid mention of such agreement or to attempt in any way to bring the

forbearance agreement before the jury.

The motion is denied, with the limited exception hereinabove

set forth.

5. Defendants' Renewed Motion in Limine to Exclude or Limit the

Reports and Testimony of Plaintiffs' Experts in the Second Trial,

document 255

The defendants argue that plaintiffs' experts, Mark McKinsey

and Alan McCausland, should be barred from testimony or severely

limited in the scope of their testimony at the second trial.

Plaintiffs object. Document 265.

At the outset, the court is satisfied and finds that each of

these experts possesses the necessary gualifications that "will

assist the trier of fact to understand the evidence or to

determine a fact in issue." Rule 702, Fed. R. Evid.

Accordingly, they will be permitted to testify again as experts

in the second trial. See United States v. Alzanki, 54 F.3d 1005,

1006 (1st Cir. 1995); Espeaqnette v. Gene Tierney Co., 43 F.3d 1,

11 (1st Cir. 1994).

The scope of testimony on retrial is an issue upon which

ruling cannot be had until such trial. If, as plaintiffs

suggest, the testimony will encompass the same breadth as at the

10 first trial, there is merit to and the court will probably limit

such testimony. See Dinco, supra. 111 F.3d at 973.

The motion is denied as to the exclusion of the testimony of

Messrs. McKinsey and McCausland, and it is also denied with

respect to the scope of their testimony, without prejudice to the

right of defendants to raise their objections to such testimony

when the witnesses are proffered at trial.

6. Defendants' Motion for Reconsideration of Court's Ruling on

Plaintiffs' Motion in Limine to Exclude "Privileged Materials",

document 256

Prior to the first trial, defendants did not object to

plaintiffs' motion in limine (document 127), the subject of which

was certain documents, including communications with the Small

Business Administration (SBA), an analysis of plaintiffs' case

"inadvertently" left in the office of Jack Ketchum, and documents

provided to the Northern Community Investment Corporation (NCIC).

Defendants now contend that these documents are without the

privileges of attorney/client or work product.

Plaintiffs' objection points correctly to the fact that the

forbearance agreement previously hereinabove discussed makes SBA

and NCIC de facto clients of plaintiffs' counsel. Document 263.

The relationship of plaintiffs' counsel with SBA and NCIC clearly

11 satisfies the agency rules which give rise to the attorney/client

relationship. Fleet Bank-New Hampshire v. Chain Constr. Corp.,

138 N.H. 136, 139, 635 A.2d 1348, 1350 (1993).

The motion is accordingly denied.

7. Defendants' Motion for Reconsideration of the Court's Ruling,

Prior to the First Trial, Barring the Testimony and Reports of

Kip Kimble and Stafford Young, document 257

Prior to the first trial, the proposed witnesses. Kip Kimble

and Stafford Young, prepared appraisals of the premises owned by

Manchester Manufacturing, Inc. Because defendants failed to

designate Kimble and Young as expert witnesses, the court barred

their testimony or reports from the first trial. Defendants now

move, having complied with the court's order of designation for

the retrial, that these witnesses be allowed to testify.

Defendants apparently seek, however, to have these witnesses

testify, not as "experts" and their testimony and exhibits to be

admitted for the truth of the matter, but to establish the fact

that this information was received by plaintiffs before they made

the purchase of Manchester Manufacturing, Inc. The plaintiffs

object. Document 2 62.

The court finds and rules that if Messrs. Kimble and Young

are to testify at all, they are to testify here as experts

12 subject to the provisions of Rule 702, Fed. R. Evid.

Accordingly, the motion will be granted only to the extent that

the testimony and/or admissibility of any reports of Messrs.

Kimble and Young will be admitted only if they testify as

"experts" within the scope of such rule. The scope of their

testimony will be, as with the testimony of plaintiffs' experts,

determined at trial.

Defendants and their counsel are herewith instructed to

refrain from introducing into evidence any expert opinions as to

the real estate value of the property at issue as issued by Mr.

Kimble or Mr. Young without first obtaining permission of this

court outside the presence and hearing of the jury, and counsel

and the parties are instructed to warn and caution each and every

witness to strictly follow these instructions.

8. Conclusion

For the reasons hereinabove detailed, the court has granted,

with the exception of any attempts to include Harold Levy as a

party defendant, plaintiffs' motion to amend (document 251);

denied defendants' motion to exclude the Mayo memo (Trial Exhibit

72) without prejudice to defendants' right to renew its objection

at the time the document is proffered at trial (document 252);

granted defendants' motion to withdraw its agreement to the

13 stipulation concerning Sears documents (document 253); denied

defendants' motion for reconsideration of the court's ruling

barring admission of the plaintiffs' forbearance agreement

(document 254); denied defendants' motion to exclude or limit the

reports and testimony of plaintiffs' experts at the second trial

without prejudice to defendants' right to renew their objections

as to the scope of testimony at trial (document 255); denied

defendants' motion for reconsideration of the ruling on

plaintiffs' motion in limine to exclude "privileged matters"

(document 256); and granted in part and denied in part

defendants' motion for reconsideration of the court's ruling

concerning the testimony of the experts Kimble and Young

(document 257) .

SO ORDERED.9

Shane Devine, Senior Judge United States District Court

October 1, 1997 cc: Randall F. Cooper, Esg. John L. Putnam, Esg. H. Kenneth Merritt, Esg. Paul S. Samson, Esg.

9At 2:35 p.m. on September 30, 1997 (a time and date subseguent to the court's dictation of its final draft of this order), the court received an "assented-to" motion for leave for defendants to file reply briefs. Document 268. The motion is herewith granted, but the court, having reviewed the filed briefs, finds it unnecessary to change its order.