USCA1 Opinion
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 93-1404
THE CONJUGAL PARTNERSHIP COMPRISED BY JOSEPH JONES
AND VERNETA G. JONES, D/B/A STENOTYPE SYSTEMS,
Plaintiffs, Appellants,
v.
THE CONJUGAL PARTNERSHIP COMPRISED OF
ARTHUR PINEDA AND TONI PINEDA,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. W. Arthur Garrity, Jr.,* Senior U.S. District Judge]
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Before
Cyr, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Olga M. Shepard for appellants.
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Maria H. Sandoval for appellees.
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May 4, 1994
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*Of the District of Massachusetts, sitting by designation.
BOWNES, Senior Circuit Judge. This is a breach of
BOWNES, Senior Circuit Judge.
____________________
contract action arising out of a dispute between two court
reporters in the United States District Court for the
District of Puerto Rico. The appeal involves two jury
trials. In the first trial, a jury found in favor of
plaintiff, Joseph Jones, and awarded him $225,000 in damages.
The district court granted a postjudgment motion by
defendant, Arthur Pineda,1 vacated the judgment, and ordered
plaintiff to remit $140,000 or submit to a new trial on
damages. Plaintiff refused to accept the remittitur, and
proceeded to trial. This time around he was awarded $20,000.
He appeals, challenging the district court's jurisdiction,
its decision to vacate the original judgment and order a
partial remittitur or a new trial on damages, and the court's
admission of evidence, at both trials, on the issue of
mitigation of damages. We affirm.
I.
I.
BACKGROUND
BACKGROUND
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The following facts are viewed in the light most
favorable to the verdict winner, the plaintiff, and all
reasonable inferences are drawn in his favor. Lama v.
____
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1. More precisely, the plaintiffs-appellants in this case
are the conjugal partnership comprising Joseph Jones and his
wife Vernetta, who worked together as Stenograph Systems,
Inc. The defendants-appellees are the conjugal partnership
comprising Arthur Pineda and his wife Toni. Throughout this
opinion, we refer to the parties in the singular, meaning the
husband court reporter.
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Borras, 16 F.3d 473, 477 (1st Cir. 1994).2 Plaintiff Jones
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came from New York State to Puerto Rico in March 1987 to work
as the official court reporter for federal district judge
Jose A. Fuste. The position was offered for a one-year term,
and Jones left Judge Fuste's employ as scheduled in March
1988. Shortly thereafter, defendant Pineda, the official
court reporter for federal district judge Raymond L. Acosta,
offered Jones a lucrative opportunity. Judge Acosta was the
presiding judge in the San Juan Dupont Hotel Fire Litigation,
a complex multi-plaintiff case which promised a lengthy trial
during which the attorneys would require daily transcripts.
Pineda realized that he and his wife, who was not a
court reporter but aided her husband in producing the
transcripts, would be unable to handle this task alone.
After some preliminary discussions, Pineda and Jones reached
an oral agreement whereby Pineda agreed to hire Jones "for
the entire length of the Dupont trial," during which they
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would split all of the court reporting duties and fees.
Jones agreed to remain in Puerto Rico until the trial ended,
and further agreed to get a letter of reference from Judge
Fuste. Subsequently, Pineda sought Judge Acosta's approval,
which was reluctantly given, for hiring Jones. Apparently
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2. For a more thorough recitation of the facts of this case,
we refer you to the district court's thorough opinion,
Conjugal Partnership Comprised by Jones v. Conjugal
______________________________________________ ________
Partnership Comprised by Pineda, 798 F. Supp. 892 (D.P.R.
_________________________________
1992) ("Conjugal I").
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Jones had transcribed several pretrial conferences in the
Dupont case, and Judge Acosta was not impressed with his
reporting skills. Nonetheless, given Pineda's repeated
assurances, Judge Acosta acquiesced to Jones' participation
for "phase I" of the Dupont trial. But, Pineda never
informed Jones that Judge Acosta's authorization was a
condition precedent to the oral contract, or that revocation
of the judge's approval would result in the contract's
termination. And, Pineda never informed Judge Acosta that he
had hired Jones for the duration of the trial.
The Dupont trial was scheduled to proceed in
discrete "phases." Phase I began in March 1989 and lasted
for thirty-three days. Jones and Pineda shared the workload
and the fees generated by phase I. Phase II commenced on
June 27, 1989, and lasted until December 1990. The trial
ended in December 1991. Pineda terminated Jones on June 30,
1989, and told Jones that he made too many mistakes and was
slowing things down. Earlier that day Pineda had voiced
similar concerns about Jones to Judge Acosta who agreed that
Jones should no longer work on the case and revoked his prior
authorization. Pineda told Jones that he (Pineda), and not
Judge Acosta was responsible for Jones' discharge. There was
evidence that on June 29, the day before Jones was
terminated, a new system was developed for linking the in-
court stenograph machine to a computer located outside of the
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4
courtroom, enabling one reporter (Pineda) to handle the
reporting work.
For his work on phase I of the trial, Jones
received, $49,108.00, or approximately $1,500 for each of the
thirty-three sessions. This represents half of the total
fees paid for reporting services during phase I, $112,083,
less expenses. The entire trial generated a total of
$465,787.75 in court reporting fees.
The jury found that, under the parties' agreement,
Pineda was obligated to pay Jones one-half of the
compensation received for transcribing the trial, whether or
not Judge Acosta continued to authorize Jones' presence in
the courtroom. Consequently, it awarded Jones $225,000 in
damages.
Pineda moved for judgment as a matter of law, or
alternatively, for a new trial pursuant to Fed. R. Civ. P. 50
and 59. In a thoughtful opinion, the district court denied
the motion for judgment as a matter of law:
[T]he jury found reasonably that, in
exchange for plaintiff's promise to stay,
the defendant promised to employ
plaintiff for the duration of the Dupont
trial and to divide equally the
compensation he received; and further
found reasonably that defendant's
obligation to pay was not conditioned on
Judge Acosta's continuing approval of
plaintiff's participation and,
alternatively, that defendant knowingly
assumed the risk that Judge Acosta would
not approve of plaintiff's participation
after phase I. . . .
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Conjugal I, 798 F. Supp. at 896. The court also declined to
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order a new trial on liability because "the verdict on
liability, while by no means inevitable, was not against the
clear weight of the evidence." Id. at 899. The court found,
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however, that damages were a "different story." Id. at 899.
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The court found that the jury's award was excessive, was
based on a flawed analysis, and that a new trial limited to
the issue of damages was necessary. Id. at 900-02. The
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court added that plaintiff could avoid a retrial on damages
by agreeing to remit $140,000. Id. at 902-03. Plaintiff
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declined the offer and proceeded to trial. He was awarded
$20,000 in damages. This appeal ensued.
II.
II.
DISCUSSION
DISCUSSION
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On appeal plaintiff argues primarily that: (1) the
district court lacked subject matter jurisdiction; (2) the
trial judge abused his discretion in vacating the original
judgment and ordering a remittitur or alternatively, a new
trial on damages; and (3) the trial judge erred in allowing
defendant to present evidence, in both the first and second
trials, concerning mitigation of damages because defendant
had not pleaded mitigation as an affirmative defense.
A. Jurisdiction
A. Jurisdiction
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This action was removed from Puerto Rico Superior
Court pursuant to 28 U.S.C. 1442(a)(3). See Conjugal
___ ________
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6
Partnership Comprised by Jones v. Conjugal Partnership
__________________________________ _____________________
Comprised by Pineda, 734 F. Supp. 41 (D.P.R. 1990) (granting
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defendant's removal petition and denying plaintiff's motion
to remand). That statute provides:
(a) A civil action or criminal
prosecution commenced in a State court
against any of the following persons may
be removed by them to the district court
of the United States for the district and
division embracing the place wherein it
is pending:
. . .
(3) Any officer of the courts of the
United States, for any Act under color of
office or in the performance of his
duties.
28 U.S.C. 1442(a)(3).3 Plaintiff contends that the case
was improvidently removed from superior court and should be
remanded. We disagree.
The statute guarantees an officer of the federal
courts the right to remove an action commenced against him in
state court when he can allege a "colorable" federal defense
to that action. Mesa v. California, 489 U.S. 121, 136
____ __________
(1989); American Policyholders Ins. Co. v. Nyacol Products,
________________________________ ________________
989 F.2d 1256, 1259 n.3 (1st Cir. 1993). Although the Mesa
____
court was concerned principally with 1442(a)(1), the
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3. Although Puerto Rico is not a "State," Congress has
expressly provided that actions commenced in the Superior
Court of Puerto Rico are removable under the federal removal
statutes. 48 U.S.C. 864; Camacho, 868 F.2d at 486 n.4.
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general provision of the federal officer removal statute,4
the Court noted that "subsections (2)-(4) of 1442(a) are
largely the `residue' of the pre-1948, more limited removal
statutes now entirely encompassed by the general removal
provision of the first clause of subsection (1)." Mesa, 489
____
U.S. at 134. The Court further noted that subsection (3)
should be interpreted consistently with subsection (1). Id.
___
at 135. Consequently, the present case was properly removed
if defendant asserted a federal right or raised a question of
federal law in his defense. Id. at 126-27 (citing Tennessee
___ _________
v. Davis, 100 U.S. 257, 262 (1880)).
_____
In his Answer, defendant alleged that plaintiff
"served at the pleasure of the [District] Court," was no
longer acceptable to the court because of poor performance,
and was properly dismissed by Judge Acosta. Answer to
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Complaint at A-C & E. Defendant's removal petition
_________
averred that the dispute arose "out of the laws and
regulations of the United States . . . which govern and set
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4. Section 1442(a)(1) permits removal of an action to
federal court by:
Any officer of the United States or any
agency thereof, or person acting under
him, for any act under color of such
office or on account of any right, title
or authority claimed under any Act of
Congress for the apprehension or
punishment of criminals or the collection
of revenue.
28 U.S.C. 1442(a)(1).
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the relationship between the United States Courts and the
court reporters [who] perform duties for said courts,
including the power to dismiss or terminate the duties of
said court reporters." Notice of Removal at 2. The
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removal petition also stated that,
[i]n order to determine whether the
defendants are or [are] not liable in
this civil action . . . any court . . .
must construe the terms [and] provisions
of those Acts of Congress dealing with
the United States Courts and those
regulations issued by the Administrative
Office of the United States dealing with
court reporters and the supervisory
powers of the courts over federal court
reporters. . . .
Id. Finally, in opposition to plaintiff's motion to remand,
___
defendant elaborated on the statutes and regulations adverted
to in his removal petition. In particular, defendant argued
that court reporting and court reporters in federal courts
are regulated by 28 U.S.C. 753 and the Court Reporter's
Manual issued by the Administrative Office of the United
States Courts (AO). Opposition to Motion to Remand at 4.
_______________________________
Defendant further maintained that he was not personally
liable to plaintiff, that Judge Acosta was authorized to
discharge plaintiff under 753 and the AO guidelines, and
that the judge did so as a result of plaintiff's inadequate
performance. Id. at 5.
___
We believe that these allegations were sufficient
to satisfy the statutory requirements, and thus the case was
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properly removed. Venezia v. Robinson, 16 F.3d 209, 212 (7th
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Cir. 1994) ("Once the federal defendant has a plausible
federal defense, removal is appropriate so that the federal
court may determine whether the defense succeeds. A federal
defendant need not show that he is entitled to prevail in
order to have access to the federal forum."). Plaintiff
insists, however, that this is a state law breach of contract
action that was properly filed in superior court and should
have remained there. We disagree. By raising a colorable
federal defense, a defendant-official converts an otherwise
nonremovable state law action into one that falls within the
federal court's jurisdiction. See Mesa 489 U.S. at 136-37.
___ ____
The federal officer removal statute does not require that the
case be one that could have originally been filed in federal
court. Williams v. Brooks, 945 F.2d 1322, 1325 (5th Cir.
________ ______
1991) (citing cases); see Mesa, 489 U.S. at 136 ("The removal
___ ____
statute . . . serves to overcome the `well-pleaded complaint'
rule which would otherwise preclude removal even if a federal
defense is alleged."). Moreover, that this is a breach of
contract case arising under Puerto Rico law is not alone a
bar to removal. See Camacho v. Autoridad de Telefonos de
___ _______ ___________________________
Puerto Rico, 868 F.2d 482, 487 (1st Cir. 1989) (under the
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federal removal statute "the right to remove is not vitiated
even if the case necessitates the construction and
interpretation of state or local law").
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10
Finally, although plaintiff has pointed to the
ultimate failure of defendant's federal defense as a ground
for remand, it is irrelevant for purposes of removal under
1442(a) that Pineda did not prevail on his federal defense.
See 28 U.S.C. 1447(c); see also Jamison v. Wiley, 14 F.3d
___ ___ ____ _______ _____
222, 239 (4th Cir. 1994) ("Nothing in the federal removal
statutes authorizes the remand of a case that has been
properly removed under 1442(a)(1) on the ground that the
federal employee's . . . defense is later rejected.").
At oral argument plaintiff argued that our recent
decision in American Policyholders precludes application of
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the federal removal statute in this case. Our reading of
that case leads us to the opposite conclusion. In American
________
Policyholders we held that a suit against a federal officer
_____________
exclusively in his or her official capacity is a suit against
the agency for purposes of removal under 1442(a)(1).
American Policyholders, 989 F.2d at 1260. And, because an
_______________________
agency may not remove a case under the statute, id. at 1259,
___
"a federal officer sued solely in his or her official
capacity may not remove a suit to federal court under the
aegis of 28 U.S.C. 1442(a)(1)." Id. at 1261. Because this
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action was brought against defendant solely in his individual
and not his official capacity, it was subject to removal
under 1442(a)(3).
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B. Remittitur or A New Trial on Damages
B. Remittitur or A New Trial on Damages
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Plaintiff argues that the district court erred in
vacating the original judgment of $225,000 and ordering a
remittitur of $140,000 or, alternatively, a new trial on
damages. According to plaintiff, the district court was not
entitled to substitute its judgment for that of the jury.
Under Federal Rule of Civil Procedure 59(a), "[a]
new trial may be granted . . . on all or part of the issues
. . . ." Fed. R. Civ. P. 59(a); Allen v. Chance Mfg. Co.,
_____ _______________
873 F.2d 465, 474 (1st Cir. 1989). On the issue of damages
the court found that the "[d]amages awarded to plaintiff by
the jury were so clearly excessive . . . as to require a new
trial on damages, unless a remittitur would be appropriate
and acceptable to plaintiff . . . ." Conjugal I, 798 F.
___________
Supp. at 900. We have recognized that a district court's
discretion to grant a new trial extends to cases in which the
court determines that the damages awarded by the jury are
excessive. See Perez-Perez v. Popular Leasing Rental, Inc.,
___ ___________ ____________________________
993 F.2d 281, 283 (1st Cir. 1993) ("`The motion for a new
trial may invoke the discretion of the court in so far as it
is bottomed on the claim . . . that the damages are
excessive.'" (quoting Montgomery Ward & Co. v. Duncan, 311
______________________ ______
U.S. 243, 251 (1940))); McIsaac v. Didriksen Fishing Corp.,
_______ _______________________
809 F.2d 129, 135 (1st Cir. 1987).
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12
"Under the practice of remittitur . . . the court
may also condition the denial of a motion for a new trial on
the filing by plaintiff of a remittitur in a stated amount."
Phelan v. Local 305, 973 F.2d 1050, 1064 (2d Cir. 1992); see
______ _________ ___
also Catullo v. Metzner, 834 F.2d 1075, 1082 (1st Cir. 1987)
____ _______ _______
("Rule 59 empowers the trial court to order remittitur where
a damage award is not supported by the weight of the
evidence."). The court must, however, hold out the option of
a new trial. Phelan, 973 F.2d at 1064 (collecting cases).
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We will reverse a district court's decision to
order a remittitur or a partial new trial due to an excessive
damage award, only where the court abused its discretion.
Quinones-Pacheco v. American Airlines, Inc., 979 F.2d 1 (1st
________________ ________________________
Cir. 1992); Catullo, 834 F.2d at 1082. Here, we must analyze
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the district court's decision against the proper measure of
damages under Puerto Rico law. The Supreme Court of Puerto
Rico has held that,
"the measure of damages sustained by
reason of failure on the part of an
employer to comply with a contract for
services is, prima facie, the
compensation stipulated in the contract,
subject to reduction upon proof by the
defendant as to the amount the employee
did gain or could have gained during the
time the contract remained in force."
Villar & Co. v. Conde, 30 F.2d 588, 590 (1st Cir. 1929)
_____________ _____
(quoting Hardouin v. Krajawsky-Pesant Co., 22 P.R.R. 641
________ _____________________
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(1923)). This standard was correctly identified by the
district court. Conjugal I, 798 F. Supp. at 901.
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Here the district court engaged in a detailed
examination of the evidence pertaining to damages, and
concluded that the jury's excessive generosity was traceable
to two errors. First, the court determined that the jury, in
computing plaintiff's damages, failed to deduct the fees
generated during phase I of the Dupont trial, $112,083 (of
which plaintiff received his share), from the total fees
earned during the entire trial, $465,787.75. Therefore, the
jury used $465,787.75 as a starting point instead of
$353,704.25 (i.e., $465,787.75 - $112,083).
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According to the district court, the jury's error
was almost certainly attributable to counsels' "casual
treatment of the evidence pertaining to damages." Conjugal
________
I, 798 F. Supp. at 900. The figures show that the jury
_
likely committed this oversight. If we take the higher
figure, deduct $15,000 for expenses5 and divide the
difference ($450,787.75) by two, the quotient (i.e.,
____
plaintiff's "prima facie" loss) comes out to approximately
$225,000 -- the amount actually awarded by the jury.
The second defect in the damage award identified by
the district court was the jury's apparent failure to reduce
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5. This is the minimum amount of expenses, supported by the
record, incurred by defendant after plaintiff's discharge.
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plaintiff's damages by the amount plaintiff earned after his
discharge on June 30, 1989, and before the termination of the
Dupont trial in December 1991. It was undisputed that
plaintiff earned approximately $50,000 in 1990 and $40,000 in
1991 from court reporting sources. There was no direct
testimony as to plaintiff's court reporting income for the
balance of 1989. Because Puerto Rico law requires that a
damage award be reduced by the amount of the plaintiff's gain
during the remaining life of the contract, the jury's failure
to do so here resulted in an excessive damage award.
After scanning the trial record, we agree with the
district court that these deficiencies infected the jury's
damage calculation and resulted in an excessive damage award.
Therefore, a new trial or a partial remittitur was warranted.
With respect to the remittitur, plaintiff argues
that he was willing to remit a lesser amount, and that the
court's remittitur was excessive. The rule in this circuit
for computing a remittitur is the "least intrusive" standard.
See Catullo, 834 F.2d at 1083; see also Earl v. Bouchard
___ _______ ___ ____ ____ ________
Transp. Co., 917 F.2d 1320, 1328 (2d Cir. 1990) (explaining
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three different rules for computing remittitur and adopting
the least intrusive method). Under this standard, the
remittitur amount should reduce the verdict "only to the
maximum that would be upheld by the trial court as not
excessive." Earl, 917 F.2d at 1330. The district court used
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this standard in calculating its remittitur. Conjugal I, 798
__________
F. Supp. at 902-03. We can find nothing in the record to
substantiate plaintiff's claim that the trial judge abused
his discretion by remitting the amount that he did, $140,000.
As our discussion above indicates, see supra, p.
___ _____
14, the maximum amount of plaintiff's prima facie loss
supported by the evidence was $169,350 (i.e., ($353,705-
____
$15,000)/2). Under Puerto Rico law, this figure must be
reduced by the minimum amount of mitigation proved by
defendant at trial, approximately $90,000.6 Consequently,
we are left with a maximum damage award of approximately
$80,000. Plaintiff's attack on the amount left in place by
the district court, $85,000, is therefore without force.
C. Mitigation of Damages
C. Mitigation of Damages
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Plaintiff maintains that he is entitled to a third
trial on damages because the district court improperly
admitted, at both trials, evidence pertaining to the issue of
mitigation of damages. According to plaintiff this
constituted reversible error because the defendant never
pleaded mitigation as an affirmative defense.
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6. Because plaintiff was only able to estimate his annual
earnings for 1990 and 1991, the district court discounted the
figures provided by plaintiff. The court reasonably
concluded from the evidence that plaintiff earned a total of
$85,000 from court reporting between the time he was
terminated until the end of the Dupont trial. Conjugal I,
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798 F. Supp. at 903.
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It is true that defendant did not plead mitigation
of damages as an affirmative defense in his complaint. Nor
does it appear that the issue was addressed in any pretrial
orders prior to the first trial. Plaintiff did, however,
include a proposed jury instruction concerning mitigation of
damages in his proposed charge submitted in anticipation of
the first trial.7
At the first trial, the issue of mitigation was
initially raised during defense counsel's cross-examination
of plaintiff, when he asked plaintiff about income from court
reporting sources subsequent to being discharged. At no time
during this line of questioning did plaintiff's counsel
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7. Plaintiff's proposed instruction number 25 states:
The measure of damages sustained by
reason of failure on the part of an
employer to comply with a contract,
subject to reduction upon proof by the
defendant as to the amount the employee
did gain or could have gained during the
time the contract remained in force.
Hardouin v. Krajewski-Pesant Co., 22
________ _____________________
P.R.R. 641.
In an action for damages for breach
of a contract for services it devolves
upon the defendant to prove that the
plaintiff secured or could have secured
another position, and while the
discharged employee is bound to look for
other work or take the risk of having the
amount claimed reduced by the amount
which he could have earned, he is not
required to look for work of a different
nature, or in another locality, or in the
service of an unsuitable employer. Id.
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object on the grounds that the defendant had waived this
defense by failing to plead it in accordance with Fed. R.
Civ. P. 8(c). The sole objections raised by plaintiff's
counsel were that the questions exceeded the scope of the
direct examination, and that plaintiff's income was not
pertinent to the case. At the end of the trial, the district
court instructed the jury, without objection from plaintiff,
on the doctrine of mitigation.
After the district court granted defendant's
postjudgment motion, plaintiff moved for reconsideration
based in part on defendant's failure to plead mitigation of
damages as an affirmative defense. The district court denied
the motion on the ground that, "mitigation was referred to
repeatedly during trial and in the Court's instructions to
the Jury without any objection being interposed by
plaintiffs. Plaintiffs' conduct during trial amounted in our
opinion to a waiver of the ground they now assert."
Between the first and second trials, defendant
engaged in extensive discovery on the issue of mitigation of
damages. Questions concerning mitigation were posed by
defendant in written interrogatories and at plaintiff's
deposition. Both parties retained experts (certified public
accountants) who authored reports on plaintiff's damages, and
later testified at trial on the issue of mitigation.
Additionally, both parties submitted trial memoranda in
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which, at the court's direction, the issue of mitigation was
briefed. The parties also filed a joint trial memorandum in
which plaintiff included, among his claims and defenses, the
statement that "[p]laintiffs made every effort to mitigate
the damages caused by the breach of contract by defendants,
but were set back by the unilateral termination of the
contract by defendants, which affected plaintiffs' good name
and reputation in the industry."
Furthermore, in the opening statement plaintiff
proposed that the judge give to the jury, he specifically
asked the court to address the issue of mitigation:
Once the amount due to plaintiffs is
determined, then, you must consider[]
whether or not plaintiffs had the duty to
mitigate the damages suffered as a
consequence of the breach of contract by
defendants. Also, you must consider the
steps taken by plaintiffs to mitigate
these damages. Then, you must determine
whether an amount for mitigation of
damages, if any, is to be deducted from
plaintiffs' award.
Finally, in a proposed jury charge submitted prior to the
second trial, plaintiff devoted seven instructions
exclusively to the issue of mitigation of damages. At no
time during the activities leading up to the second trial did
plaintiff argue that defendant had waived the defense of
mitigation of damages by omitting it from his answer.
On the opening day of the second trial, defendant
moved to amend his answer, pursuant to Fed. R. Civ. P. 15(b),
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to include mitigation of damages as an affirmative defense.
Plaintiff objected. The court overruled plaintiff's
objection and allowed the amendment:
[O]n mitigation, the law of Puerto
Rico and every other jurisdiction is so
clear that prima facie damage for breach
of contract places on the injured party
the obligation to mitigate.
But it is more than that. It is
that part of plaintiffs' proof in a
breach of contract case, as in every
case, is causation, liability, and
liability causing damage to the extent
that an injured plaintiff can avoid that
damage by working himself. To that
extent his damage is not caused by the
defendant, but is, rather, caused, if
this is the evidence, by plaintiffs'
failure to exert reasonable effort to
make up for this loss of income.
* * *
Now, basically it is the defendants'
burden to prove mitigation. In the way
this case stands the defendant will go
forward and have the burden of proof.
But to eliminate from the case the
mitigation issue, and implicitly, the
importance of the plaintiff establishing
causation between liability and damage
requires, in my view, the amendment of
the pleading that the defendant has
proposed.
Transcript of Second Trial, Vol. I, pp. 34-35. At the start
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of the third and final day of trial, after the issue of
mitigation had been litigated, the court revisited its prior
ruling:
[T]he Court now vacates its
allowance . . . [of] defendant's motion
to amend its answer by adding the
affirmative defense of mitigation of
damages. This order does not affect the
evidence at this trial or the evidence
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that will go to the jury, but, rather,
the state of the pleadings.
Transcript of Second Trial, Vol. III, p. 3. The court then
___________________________
explained that defendant was not required to plead mitigation
of damages as an affirmative defense, and that the court had
granted defendant's motion to amend because it did not think
that the amendment had any real significance. The court
added, however, that it realized that there was support for
the position that mitigation was an affirmative defense.
Therefore, the court "un-amended" defendant's answer so that
plaintiff could raise the present issue on appeal.
After the jury returned its $20,000 verdict,
plaintiff moved to set aside the judgment based primarily on
the trial court's admission of mitigation evidence. The
court denied the motion:
At the first trial plaintiffs
offered evidence of damage to their
reputation for having been "kicked out of
Puerto Rico", which was relevant only to
mitigation and did not object to
instructions submitting the issue to the
jury. The retrial on damages was
preceded by abundant discovery as to
mitigation, at the Court's direction the
parties briefed the law applicable to
this issue and both parties called
alleged experts to testify about
plaintiffs' actual and potential
earnings. In our opinion any error in
the Court's reception of evidence on
mitigation could not have been
prejudicial.
Conjugal Partnership Comprised by Jones v. Conjugal
_____________________________________________ ________
Partnership Comprised by Pineda, No. 90-1051 (D. Mass. Dec.
________________________________
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15, 1992) (order denying motion to set aside new judgment).
We review plaintiff's claim of error against this backdrop.
There is some question as to whether or not we
should look to state law in determining if failure to
mitigate damages is an affirmative defense under Fed. R. Civ.
P. 8(c),8 compare Sayre v. Musicland Group, Inc., 850 F.2d
_______ _____ _____________________
350, 354 (8th Cir. 1988) (whether mitigation is an
affirmative defense under Rule 8(c) is a federal procedural
matter and is governed by the federal rules), with 999 v.
____ ___
C.I.T. Corp., 776 F.2d 866, 870 n.2 (9th Cir. 1985) (citing
____________
California law for the proposition that mitigation of damages
is an affirmative defense under Rule 8(c)). We need not,
however, dwell on this dilemma. Failure to mitigate is an
affirmative defense as a matter of federal procedural law,
see Lennon v. U.S. Theatre Corp., 920 F.2d 996, 1000 (D.C.
___ ______ ___________________
Cir. 1990); Modern Leasing v. Falcon Mfg. of California, 888
_______________ _________________________
F.2d 59, 62 (8th Cir. 1989), as well as Puerto Rico law, see
___
Odriozola v. S. Cosmetic Dist. Corp., 116 D.P.R. 485 (1985),
_________ _______________________
and therefore must be pleaded.
Generally speaking, failure to plead an affirmative
defense results in a waiver of the defense and the exclusion
of all evidence relevant to it. See Federal Deposit Ins. Co.
___ ________________________
____________________
8. Under Rule 8(c), certain enumerated defenses, of which
mitigation is not one, and "any other matter constituting an
avoidance or an affirmative defense," must be pleaded by the
defendant.
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22
v. Ramirez-Rivera, 869 F.2d 624, 626 (1st Cir. 1989);
______________
Depositors Trust Co. v. Slobusky, 692 F.2d 205, 208 (1st Cir.
____________________ ________
1982). Nevertheless, it is settled that "[w]hen there is no
prejudice and when fairness dictates, the strictures of [the
raise or waive] rule may be relaxed." Jakobsen v.
________
Massachusetts Port Authority, 520 F.2d 810, 813 (1st Cir.
_____________________________
1975). Under Fed. R. Civ. P. 15(b),9 the trial court may
and should liberally allow amendments to the pleadings if
prejudice does not result. Id. Moreover, when an
___
affirmative defense that has not been raised in the pleadings
has actually been tried by implied consent of the parties,
____________________
9. Rule 15(b) provides as follows:
When issues not raised by the pleadings
are tried by express or implied consent
of the parties, they shall be treated in
all respects as if they had been raised
in the pleadings. Such amendment of the
pleadings as may be necessary to cause
them to conform to the evidence and to
raise these issues may be made upon
motion of any party at any time even
after judgment; but failure to do so does
not affect the result of the trial of
these issues. If evidence is objected to
at trial on the ground that it is not
within the issues made by the pleadings,
the court may allow the pleadings to be
amended and shall do so freely when the
presentation of the merits of the action
will be subserved thereby and the
objecting party fails to satisfy the
court that the admission of such evidence
would prejudice the party in maintaining
the party's action or defense upon the
merits. The court may grant a
continuance to enable the objecting party
to meet such evidence.
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the court must treat the defense as if it had been raised in
the original responsive pleading. Id.; Depositors Trust Co.,
___ ____________________
692 F.2d at 208.
With respect to the first trial, it is clear that
the issue of mitigation was actually tried with plaintiff's
implied consent. "One sign of implied consent is that issues
not raised by the pleadings are presented and argued without
proper objection by opposing counsel." Matter of Prescott,
__________________
805 F.2d 719, 725 (7th Cir. 1986) (citing cases). Under Rule
15(b), lack of consent is manifested by an objection on the
ground that the evidence is not within the issues raised by
the pleadings. Id.; Hardin v. Manitowoc-Forsythe Corp., 691
___ ______ ________________________
F.2d 449, 457 (10th Cir. 1982). Here, defendant's mitigation
evidence was presented without relevant objection by
plaintiff.
Furthermore, implied consent is generally found
where the opposing party actually produced evidence on the
new issue. See Law v. Ernst & Young, 956 F.2d 364, 375 (1st
___ ___ _____________
Cir. 1992); Lynch v. Dukakis, 719 F.2d 504, 508 (1st Cir.
_____ _______
1983); Hardin, 691 F.2d at 457; see generally 6 Charles A.
______ ___ _________
Wright & Arthur R. Miller, Federal Practice and Procedure
_______________________________
1493 at 28 (1990) (citing cases). Here, as the district
court noted, plaintiff's testimony concerning alleged damage
to his reputation within court reporting circles was relevant
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only to the issue of mitigation.10 Moreover, plaintiff did
____
not object to that portion of the jury charge concerning
mitigation of damages. See Zappia v. Baltimore & Ohio R.R.
___ ______ ______________________
Co., 312 F.2d 62, 64 (6th Cir. 1962) (implied consent found
___
where party did not object to jury instruction on unpleaded
issue). Finally, plaintiff never asked for a continuance in
order to meet the evidence of mitigation, nor did he allege
any prejudice resulting from the court's admission of the
mitigation evidence at the first trial. Rhode Island Educ.
___________________
v. Secretary U.S. Dep't of Educ., 929 F.2d 844, 855 (1st Cir.
_____________________________
1991) (unpleaded issue properly raised where opposing party
failed to argue prejudice); George Cohen Sons & Co. v. Koch,
_______________________ ____
376 F.2d 629, 632-33 (1st Cir. 1967) (claim tried by implied
consent of the parties where opposing party failed to seek a
continuance to meet evidence on unpleaded issue). Moreover,
in light of the fact that plaintiff, prior to trial,
submitted a proposed jury instruction on the doctrine of
mitigation, we can reasonably conclude that plaintiff
anticipated that the issue would be litigated, and
consequently was not prejudiced when it was raised.
____________________
10. This testimony was relevant to the issue of mitigation
because while a party is under a duty to mitigate damages,
"only those who are able to mitigate must do so." Noble v
_____
Corporacion Insular de Seguros, 738 F.2d 51, 55 (1st Cir.
_______________________________
1984). It was not otherwise relevant since only economic
damages are recoverable in a breach of contract action in
Puerto Rico. See P.R. Laws Ann. tit. 31, 3023 (1990).
___
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Turning our attention to the second trial, we reach
the same conclusion. We note, however, that the district
court erred as a matter of law in holding that mitigation of
damages is not an affirmative defense under Rule 8(c).
Nevertheless, because we affirm the court's ruling that the
issue of mitigation was properly litigated, its error was
harmless.
It is hornbook law that, "`at the trial stage the
case is to be heard on the merits, and is not to be hamstrung
by faulty pleadings, unless actual, not conjectural,
prejudice results from the faulty pleadings.'" Green v.
_____
United States, 629 F.2d 581, 584 n.1 (9th Cir. 1980) (quoting
_____________
2A James W. Moore et al., Moore's Federal Practice 8.05 at
________________________
8-34 (2d ed. 1979)). Because the issue of mitigation was the
subject of substantial pretrial activity, plaintiff had ample
notice that the defense of mitigation would be litigated at
the second trial. Consequently, the district court's
decision to admit the mitigation evidence and allow the issue
to be litigated was proper. See Pane v. RCA Corp., 868 F.2d
___ ____ __________
631, 637 (3d Cir. 1989) (where unpleaded affirmative defense
was referred to repeatedly in pretrial motions and no unfair
surprise resulted, district court did not abuse its
discretion in allowing the issue to be litigated).
We have considered plaintiff's other claims --
particularly those concerning the trial court's denial of his
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motion for sanctions under Fed. R. Civ. P. 11, the court's
decision to stay the execution of judgment after the first
trial, and its refusal to compel discovery of defendant's
personal financial papers -- and find them to be without
merit.
The judgment of the district court is Affirmed.
Affirmed.
________
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