USCA1 Opinion
UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
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Nos. 95-2286
95-2287
95-2288
IN RE: THREE ADDITIONAL APPEALS ARISING OUT OF THE
SAN JUAN DUPONT PLAZA HOTEL FIRE LITIGATION.
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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Raymond L. Acosta, Senior U.S. District Judge]
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Before
Selya, Cyr and Lynch,
Circuit Judges.
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Peter B. Ackerman, with whom W. Mark Wood and O'Melveny &
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Myers were on brief, for appellants California Union Ins. Co.,
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Central Nat'l Ins. Co. of Omaha, Ins. Co. of N. Am., and Pacific
Employers Ins. Co.
Paul K. Connolly, Jr., with whom Damian R. LaPlaca, LeBoeuf,
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Lamb, Greene & MacRae, L.L.P., Andrew K. Epting, Jr., G. Trenholm
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Walker, and The Wise Law Firm were on brief, for the remaining
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appellants.
Joseph L. Golden for appellees Tertiary, Inc. et al.
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Theodore A. Pianko and Christie, Parker & Hale on brief for
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appellees Hotel Systems International, et al.
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August 19, 1996
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SELYA, Circuit Judge. These appeals commemorate the
SELYA, Circuit Judge.
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latest flight of the phoenix that rises repeatedly from the ashes
of the tragic fire that engulfed the San Juan Dupont Plaza Hotel
a decade ago. Today, we review the district court's actions
following the remand that we ordered in an earlier opinion. See
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In re Two Appeals Arising Out of the San Juan Dupont Plaza Hotel
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Fire Litig., 994 F.2d 956 (1st Cir. 1993). Finding, as we do,
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that the district court's determinations comport with the
parameters that we set in Two Appeals and fall squarely within
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the realm of judicial discretion, we affirm.
I. BACKGROUND
I. BACKGROUND
We sketch the background of these appeals, cognizant
that readers who hunger for more detail can find it in a myriad
of reported cases, including our earlier opinion. See, e.g., id.
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at 959-60.
The sprawling litigation that burst forth from the
smoldering embers of the charred hotel encompassed wrongful
death, personal injury, property damage, and other claims brought
by more than 2,000 plaintiffs against more than 200 defendants.
In an effort to tame this behemoth and to orchestrate the
proceedings, the district court devised an innovative case-
management system. The system included the appointment of
liaison counsels (to facilitate interactions both between the
court and the legion of lawyers linked to the litigation as well
as among the lawyers themselves); the formation of a Joint
Discovery Committee ("JDC") to coordinate discovery initiatives;
2
and the creation of a Joint Document Depository ("JDD") as a
resting place for all pleadings, discovery materials, and the
like. See id. at 959. To pay for this case-management system,
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the trial judge imposed mandatory assessments on all litigants.
The appellants (whom we shall call "the pre-fire
insurers") comprise thirteen insurance companies that had issued
liability policies to firms which eventually became defendants in
the underlying litigation.1 The quondam insureds settled with
various claimants and then sued the pre-fire insurers for
indemnification, notwithstanding that all the policies had
expired prior to the conflagration. Not to be outdone, the
original plaintiffs joined the pre-fire insurers as direct
defendants. Though they had been brought late into the fray, the
district court levied an assessment against each pre-fire insurer
for a standard "defendant's share" (which, over time, amounted to
roughly $41,500). Like all such assessments, these funds were
slated for use in defraying the expenses associated with the
case-management scheme.
Fairly early in the game, the pre-fire insurers moved
for summary judgment on all claims against them. After a lengthy
interval, the district court granted their motions but ordered
sua sponte that they bear their own costs. The court afforded
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the pre-fire insurers no opportunity to be heard. Moreover, it
did not specifically mention the cost-sharing assessments.
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1Nineteen pre-fire insurers were sued. Only fourteen
appealed. One of them, Puerto Rico American Insurance Co., has
since capitulated.
3
The pre-fire insurers appealed the denial of costs. In
deciding those appeals, we ruled, inter alia, that a trial court
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has the power to reallocate monetary assessments imposed as part
of a case-management system. See id. at 965. Because the
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district court did not give the pre-fire insurers a fair chance
to seek reallocation of those costs, we remanded so that they
might ask the district court to determine whether the
circumstances warranted some redistribution of the payment
burden. See id. at 969. The pre-fire insurers made the request,
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but, in the end, it went unrequited. See In re San Juan Dupont
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Plaza Hotel Fire Litig., MDL-721, Order No. 581 (D.P.R. Aug. 17,
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1995).
On appeal, the pre-fire insurers contend that the
district court ignored the guideposts we erected in Two Appeals
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for evaluating case-management cost-reallocation claims. They
also contend that the lower court failed to recognize that they
had established a prima facie case for reallocation. Finally,
they complain that they did not receive any benefit from the
case-management system, and that, therefore, the court improperly
refused to relieve them from the standardized assessments.2
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2In a reply brief, certain of the pre-fire insurers complain
that they have not been given access to the depository accounts
to determine how funds were spent, or how much, if any, money
remains on hand. They develop no legal argument out of this
complaint, and it is beyond peradventure that we will not address
an issue when the party raising it fails to treat it seriously.
See, e.g., United States v. Zannino, 895 F.2d 1, 17 (1st Cir.)
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(describing the "settled appellate rule that issues adverted to
in a perfunctory manner, unaccompanied by some effort at
developed argumentation, are deemed waived"), cert. denied, 494
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U.S. 1082 (1990).
4
II. DISCUSSION
II. DISCUSSION
Because the district court has spelled out an
acceptable basis for its cost-sharing orders and for its refusal
to grant a special dispensation to the pre-fire insurers, we
affirm principally on the strength of its rescript, adding only a
few amplificative comments.
First: The pre-fire insurers have incorrectly
First:
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identified the legal standard applicable to appellate review of
Order No. 581. They insist that plenary review is appropriate
here because the trial judge ignored and/or mishandled the
general guides for evaluating cost-reallocation claims that we
limned in Two Appeals, thereby committing an error of law. This
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argument elevates form over substance.
In Two Appeals we delineated several factors that might
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be considered in mulling whether to reallocate court-ordered
case-management expenses. See 994 F.2d at 966-68. Although we
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hoped that these suggestions would provide "a modicum of general
guidance to the district courts," id. at 967, we made it very
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clear that the trier's judgment is inevitably a critical element
in determining which factors have relevance in a particular case,
what other factors may be pertinent, and what weights to assign
to various factors. In that connection we wrote:
By definition, cost-sharing orders originate
with the district court as a component of the
court's case-management function. Given the
district judge's intimate knowledge of the
circumstances under which the imposts were
conceived, his familiarity with the nature
and purposes of the assessments, his front
row seat throughout the litigation, and his
5
matchless ability to measure the benefits and
burdens of cost-sharing to the parties in
light of the litigation's progress and
stakes, we are convinced that the district
judge has the coign of vantage best suited to
determining, in the first instance, whether,
and if so, how, the initial cost-sharing
orders should be modified.
Id. at 968.
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This issue is fact-sensitive, and even a cursory
reading of the record reveals that the district court stayed well
within the broad contours of the inquiry that we had suggested.
Stripped of rhetorical flourishes, the pre-fire insurers' real
complaint is not that the judge misunderstood the relevant
factors but that he weighed them haphazardly. Emblematic of this
focus is the undeniable fact that, at bottom, the appellants
challenge the court's factbound conclusion that the pre-fire
insurers actually benefitted from the elaborate network of case-
management devices (like the JDD) that their payments helped to
subsidize. So viewed, these appeals raise fact-sensitive
disputes that invite discretionary judgments. In circumstances
where, as here, a matter is committed to the trial judge's
equitable discretion, see id. at 965, deference is due. See,
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e.g., Koon v. United States, 64 U.S.L.W. 4512, 4517 (U.S. June
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13, 1996).
That ends the standard-of-review contretemps. Here, as
in Koon, the pre-fire insurers merely seek to recharacterize a
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factbound dispute on "a higher level of generality." Id. An
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appellate court therefore ought to limit its review to a search
for abuse of the trial court's discretion. See id.; see also
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6
Texaco P.R., Inc. v. Department of Consumer Affairs, 60 F.3d 867,
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875 (1st Cir. 1995) (reviewing a trial court's choice among
equitable remedies for abuse of discretion because "the trial
judge, `who has had first-hand exposure to the litigants and the
evidence, is in a considerably better position to bring the
scales into balance than an appellate tribunal'") (quoting
Rosario-Torres v. Hernandez-Colon, 889 F.2d 314, 323 (1st Cir.
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1989) (en banc)). And the pre-fire insurers' attempt to
transform what are essentially factual findings into legal
conclusions by the alchemy of words is insufficient to alter this
standard of review. Since appellate courts "will not permit
parties to profit by dressing factual disputes in `legal'
costumery," Reliance Steel Prods., Inc. v. National Fire Ins.
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Co., 880 F.2d 575, 577 (1st Cir. 1989), abuse of discretion
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remains the appropriate benchmark against which the district
court's ruling must be measured.
Second: The pre-fire insurers misconstrue our comment
Second:
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that they had previously established "at least a prima facie case
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for some reallocation of the assessments." Two Appeals, 994 F.2d
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at 968. They interpret this language as signifying that on
remand the appellees had a burden to proffer evidence sufficient
to rebut this prima facie case, and that the district court
should have responded in terms both to the prima facie case and
to the lack of any formal rebuttal. This self-serving reading of
Two Appeals injects more into the quoted comment than the context
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will bear.
7
In Two Appeals, we remanded the question of
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reallocation because the district court had not given the pre-
fire insurers the opportunity to argue their position. See id.
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at 969. We did not use the phrase "prima facie case" as a
talisman indicating that the pre-fire insurers had proved a
point, but, rather, as a means of describing the arguments that
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they had tendered in support of reallocation. Id. at 968. This
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usage was intended merely to demonstrate that a remand was
advisable because, on the exiguous record then before us, the
pre-fire insurers had offered enough of an argument to warrant
the district court's consideration of their claim. We had at
hand neither a precise knowledge of the facts nor a valid means
of testing the integrity of the pre-fire insurers' asseverations.
Thus, we could say no more than that "it appears from the record
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before us that appellants have a colorable basis for arguing that
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they derived minimal benefits from the assessments." Id.
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(emphasis supplied). And, in words that should have erased any
doubt, we added:
Nonetheless, this hypothesis remains
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unproven. There may be more here than meets
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the eye; for one thing, the appellate record
does not speak in any detail to the equities.
. . . [T]here are pregnant questions to be
mulled on remand questions on which the
trial judge's viewpoint is especially
important. We conclude, therefore, that the
case must be returned to the district court
for further proceedings before Judge Acosta.
We intimate no opinion as to the appropriate
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outcome of these proceedings.
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Id. at 968-69 (emphasis supplied). Judge Acosta, therefore, had
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authority to exercise discretion in both marshalling and
8
balancing the relevant factors. He was not compelled to attach
any special significance to the largely theoretical "prima facie
case" language that the pre-fire insurers pluck out of context
from our earlier opinion.
Third: The district court's finding that the pre-fire
Third:
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insurers did in fact receive a significant benefit from the
existence of the case-management system withstands review under
an abuse-of-discretion test. The pre-fire insurers assert that
they received no benefit from the devices because (1) discovery
already had been completed at the time they were brought into the
case, (2) they were perfectly capable of doing for themselves
what the JDD accomplished for them, and (3) they did not need to
rely on the material in the JDD since they sought (and were
granted) summary judgment as a matter of law on the claims lodged
against them.3 We agree with the district court, see Order No.
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581, supra, at 9, that these assertions stem from an overly
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simplistic view of the pre-fire insurers' situation.
For one thing, Judge Acosta specifically found that the
timing of discovery did not warrant a reduction of charges to the
pre-fire insurers. See id. at 10. We think that this finding,
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though perhaps not inevitable, is supportable. The fact that
discovery had been concluded was a two-edged sword. While it
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3The pre-fire insurers concentrate their fire on the JDD
because, in their view, nothing else mattered. This is a myopic
outlook. The case-management system functioned as an integrated
whole. The JDC played a pivotal role in producing the
information stored in the JDD, and the liaison consuls saved all
parties time and money at every stage of the farflung litigation.
9
meant that the pre-fire insurers did not have to use the JDD to
keep track of ongoing discovery, it also meant that they "had
available to them in a single location all pleadings, discovery,
service lists, pretrial documents, records of all court
proceedings, trial transcripts, evidence utilized at trials,
memoranda, as well as docket reference[s] as to all that had
transpired up to that time." Id. at 8.
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For another thing, it is of no moment that the pre-fire
insurers might have preferred to go it alone. The case-
management system that the district court so painstakingly
devised could not have operated on a voluntary basis. It
depended on the court's authority to order all parties both to
participate and to share the associated costs. Since the court
acted within the scope of its case-management powers in
establishing the overall paradigm, see Two Appeals, 994 F.2d at
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965; In re Recticel Foam Corp., 859 F.2d 1000, 1004 (1st Cir.
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1988), we give short shrift to the notion that the pre-fire
insurers would have been better off conducting their defense in
more traditional surroundings.
Finally, the district court found specially that the
materials in the JDD were of significant benefit to the pre-fire
insurers. See Order No. 581, supra, at 8-9. This finding is
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also supportable. After all, the allegations against the pre-
fire insurers developed during, and arose from the results of,
the discovery process. Thus, materials in the JDD had to be
searched, and some were directly relevant to the claims asserted
10
and/or to the pre-fire insurers' defenses. As the district court
put it, "upon being served with [a] copy of the claims asserted
against them two or three years after the initial complaint [in
the underlying litigation] had been filed [the pre-fire
insurers] could, through the availability of a well-organized and
efficient Joint Document Depository, ascertain the status of the
proceedings and have readily available all documentation
pertinent to their case." Id. at 9.
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The proof of the pudding is in the pre-fire insurers'
admission that their confidence knew certain limits. Faced with
upward of $200,000,000 in claims, the pre-fire insurers undertook
full-scale trial preparations notwithstanding the pendency of
their dispositive motions. The preparations envisioned reopening
discovery, and as a necessary prelude (under the terms of the
applicable pretrial orders) entailed heavy use of the JDD,
resulting, for example, in making copies of over 275,000
documents and ordering in excess of 110 computer disks that
contained stored information. In light of these statistics, the
"no benefit" claim rings hollow.
The pre-fire insurers attempt to downplay the district
court's finding and the statistics that support it on the basis
that they eventually succeeded in obtaining judgment as a matter
of law. In their view, this outcome signifies that they had
little need to rely on the JDD. In an allied vein, they note
that they did not refer to any documents contained in the JDD in
their summary judgment motions. We believe that these rejoinders
11
miss the point. Although the pre-fire insurers ultimately proved
themselves able to defeat the claims without relying on discovery
materials, simple prudence required them carefully to check those
materials (if for no other reason than to guard against the
possible denial of their Rule 56 motions), and it was to their
advantage that the materials were pre-assembled, catalogued,
cross-indexed, and readily accessible. In a similar vein, the
compilation of those materials necessarily assisted in the
processing of their motions.
Furthermore, as the district court explained, previous
litigation of other issues earlier in the trial (including
extensive discovery) had framed the issues, thereby enabling the
court to resolve the claims against the pre-fire insurers with
relative ease. The pre-fire insurers (who have the burden to
prove they are entitled to reallocation) offer no convincing
answer to this observation in their appellate briefs, but,
rather, ask us to accept on faith their assumption that the
district court did not rely on its knowledge of the litigation,
gleaned in large part through the case-management system, to rule
in their favor. We are unwilling to buy so large a pig in so
recondite a poke.
Fourth: The pre-fire insurers refuse to recognize
Fourth:
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the extent to which the size and complexity of the underlying
litigation affected the district court's evaluation of the
relative benefits and burdens imposed by the case-management
system. In our judgment, it is this blind spot that explains
12
their contention that the district court failed adequately to
compare relative costs and benefits between and among the
parties.
To be sure, we stated in Two Appeals that the principle
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which "dominates the constellation of factors bearing on the
decision to reallocate" is that a district court should consider
reallocating case-management assessments if and when "it
determines that a party or group of parties has significantly
failed to derive the expected benefits from burdens imposed under
cost-sharing orders entered earlier in the litigation, or has
derived those benefits to a significantly greater or lesser
extent than other similarly situated parties." Two Appeals, 994
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F.2d at 966. But at the same time we emphasized that "the
relative weight and impact of relevant considerations will vary
from situation to situation." Id. at 967. Even though
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comparative benefits are always a salient aspect of the
reallocation calculus, see id. at 966, district courts cannot be
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expected to measure benefits and burdens with the precision of a
micrometer in an antiseptic laboratory setting.
This vastly complicated case (or, more accurately put,
compendium of cases) which involves upwards of 2,000 plaintiffs
whose claims have run the gamut of imaginable and unimaginable
theories of liability illustrates the need for a flexible
standard. In such circumstances, it is simply not practicable to
contrive a clean matrix of benefits and burdens. The best that a
trial court can do is to determine, as a matter of rough remedial
13
justice, whether significant disparities in the distribution of
benefits and burdens demand readjustment of a generic formula.
See id. at 966. This is precisely the approach that the district
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court took on remand.
III. CONCLUSION
III. CONCLUSION
We need go no further.4 Based on its experience with
this convoluted case, its familiarity with the evidence, its
knowledge of the issues, and its awareness of the parties'
strategies, the trial court is in the best position to make
delicate case-management judgments, including judgments about the
reallocation of expenses previously assessed.
Here, the trial court determined that each pre-fire
insurer should bear a full "defendant's share" of case-management
expenses. Because the district court's refusal to reallocate the
expense shares does not constitute a serious lapse in judgment of
the kind that must occur before we will reverse under an abuse-
of-discretion standard, see Texaco P.R., 60 F.3d at 875; Anderson
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v. Cryovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988), we are not
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at liberty to second-guess it. Though we, if writing on a
pristine page, might have balanced some of the factors
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4The pre-fire insurers harp on what they term the
"frivolousness" of the claims against them. While the strength
or weakness of the claims is one of many factors that may
influence the outcome of a quest for reallocation, see Two
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Appeals, 994 F.2d at 967, that factor does not carry the
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decretory significance that the pre-fire insurers attach to it.
Reallocating cost-sharing assessments is a matter of equity; it
is not a substitute for, and should not be confused with, an
award of sanctions for filing groundless claims under Fed. R.
Civ. P. 11.
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differently or taken a divergent view of the importance of the
systemic benefits received by the pre-fire insurers, we made
clear in Two Appeals that the call is not ours to make.
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Affirmed.
Affirmed.
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