Filed: Apr. 27, 2000
Latest Update: Feb. 21, 2020
Summary: fraud, and breach of fiduciary duty claims.law fraud claim;1, Although we explicitly address only the preserved challenge, to the district courts decision to permit Bragdons experts to, testify, we believe it worth stating explicitly that the courts, decision was not otherwise plainly erroneous.
[NOT FOR PUBLICATION--NOT TO BE CITED AS PRECEDENT]
United States Court of Appeals
For the First Circuit
No. 99-1643
ALLEN D. BRAGDON,
Plaintiff, Appellee,
v.
DEWITT DAVENPORT, PALMER DAVENPORT AND JOHN DAVENPORT,
INDIVIDUALLY AND AS THEY ARE TRUSTEES OF THE DAVENPORT REALTY
TRUST,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
Before
Boudin, Stahl, and Lynch,
Circuit Judges.
Robert W. Harrington, with whom Robert J. Harrington,
Kimberly E. Atkins, and Law Offices of Robert W. Harrington,
were on brief for appellants.
Janis M. Berry, with whom Conway T. Dodge, Jr. and Rubin and
Rudman LLP, were on brief for appellee.
April 18, 2000
Per Curiam. Defendants-appellants DeWitt Davenport,
Palmer Davenport, and John Davenport, individually and as
trustees of the Davenport Realty Trust ("DRT" or "the Trust"),
appeal a jury verdict in favor of plaintiff-appellee Allen
Bragdon on his claims of securities fraud, common law fraud, and
breach of fiduciary duty. We affirm.
I.
We set forth the facts as the jury might have found
them, consistent with the record but in a light most favorable
to the verdict. See, e.g., Grajales-Romero v. American Airlines
Inc., 194 F.3d 288, 292 (1st Cir. 1999).
The DRT is a Massachusetts realty trust founded in the
1950s as a family business. The DRT's assets and subsidiary
operating companies are now valued at nearly $50 million. There
are approximately 5800 to 6000 outstanding shares of the Trust.
The Davenports manage the Trust and collectively own a majority
of its shares.
In 1984, Bragdon inherited 310 shares of the Trust from
his mother. In April 1991, Bragdon contemplated selling his
shares, and asked the Davenports about the financial condition
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of the Trust. The Davenports gave Bragdon some general
financial information, but refused to show him the Trust's
financial statements. By way of explanation, Palmer Davenport
showed him an amendment to the Declaration of Trust which stated
that shareholders are not entitled to receive past or present
financial statements.
In February 1994, Bragdon hired independent counsel for
assistance in his communications with the Davenports. In May
1994, Bragdon wrote to DeWitt Davenport and requested an
estimate of the fair market value of his shares. DeWitt
responded, during a meeting at Bragdon's home, that the Trust
had experienced financial difficulties during the last four to
five years, and that it recently had purchased some of its own
shares for approximately $525 apiece. Once again, however, the
Davenports resisted providing Bragdon with further financial
information about the Trust.
During a subsequent telephone conversation, DeWitt
Davenport stated that the Trust would purchase Bragdon's
holdings at $600 per share. While Bragdon considered this
offer, his attorney advised him that his right to sue the DRT
would survive any purchase at this price if the Davenports were
misrepresenting the value of the shares. In June 1994, Bragdon
and his attorney went to DeWitt's office to discuss the sale.
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Davenport again declined to provide any financial information
regarding the value of the DRT. Bragdon’s attorney stated to
DeWitt during that meeting that the Trustees, as fiduciaries,
must accurately disclose the fair market value of the shares,
and that failing to do so would be a breach of their duty to
Bragdon.
On June 9, 1994, DeWitt Davenport spoke with Bragdon
over the phone. During this conversation, DeWitt stated that
the fair market value of the Trust was $600 per share. On July
27, 1994, Bragdon sold his shares to DRT for $186,000 ($600 per
share) despite never having received the specific financial
information he requested. In 1996, Bragdon learned that the
estimated value for his shares at the time of the sale actually
ranged between $1.45 and $2.42 million.
On April 1, 1996, Bragdon brought the present action
charging defendants with breach of fiduciary duty; unjust
enrichment; violation of the Securities Act of 1934, 15 U.S.C.
§ 78 et seq. (1997); violation of the Massachusetts Uniform
Securities Act ("MUSA"), Mass. Gen. Laws ch. 110A (1999); and
intentional misrepresentation. The unjust enrichment claim was
tried to the court; all other claims were tried to a jury.
At the conclusion of Bragdon's case, the Davenports
moved for judgment as a matter of law, or in the alternative for
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a new trial, on all counts. See Fed. R. Civ. P. 50(a), 59. The
district court granted their motion as to Bragdon's claim under
the MUSA, but otherwise denied it. The Davenports
unsuccessfully renewed their motion after presenting their case.
Eventually, the jury returned a verdict for Bragdon in
the amount of $1,730,760 on his securities fraud, common law
fraud, and breach of fiduciary duty claims. After the verdict,
the Davenports again moved for judgment as a matter of law, or
for a new trial. As to the claim for unjust enrichment, the
district court ruled that there was no need for an independent
determination because the jury verdict adequately compensated
plaintiff. In all other respects, the court denied the motion.
This appeal followed.
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II.
On appeal, the Davenports argue that (1) Bragdon's
securities fraud claim is time-barred; (2) Bragdon's
representation by independent counsel precluded his claim for
breach of fiduciary duty; (3) the trial court erred in allowing
testimony by plaintiff's experts concerning the value of the
DRT; (4) Bragdon presented insufficient evidence of reliance to
support a common law fraud claim; (5) Bragdon presented
insufficient evidence of a misrepresentation to support a common
law fraud claim; (6) the court erred in allowing testimony
concerning the Davenports’ personal assets and Trust assets of
which the Davenports made use; and (7) the evidence of damages
was insufficient to support the jury award. At oral argument,
however, the Davenports’ counsel conceded that an affirmation of
the jury’s verdict on the breach of fiduciary duty claim would
obviate the need to consider unrelated appellate issues.
Concluding that such an affirmation is appropriate, we confine
our discussion to appellate issues which implicate this verdict.
A. Standard of Review
We start with the standards that govern our review of
the preserved appellate issues. We review de novo a district
court's grant or denial of a Fed. R. Civ. P. 50(a) motion. See
Collazo-Santiago v. Toyota Motor Corp., 149 F.3d 23, 27 (1st
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Cir. 1998). In determining the propriety of the district
court's action, we view the evidence "in the light most
favorable to the non-moving party, drawing all reasonable
inferences in its favor". Id. (internal citations omitted). We
thus will not reverse a denial of a motion for judgment as a
matter of law “unless the facts, seen in the light most
favorable to the plaintiff, as well as inferences reasonably
drawn therefrom 'lead to but one conclusion - that there is a
total failure of evidence to prove the plaintiff’s case.’”
TransAmerica Premier Ins. Co. v. Ober,
107 F.3d 925, 929 (1st
Cir. 1997) (citations omitted). In a similar vein, we will not
reverse a denial of a motion for a new trial unless "the verdict
is so seriously mistaken, so clearly against the law or the
evidence, as to constitute a miscarriage of justice".
Id.
As to arguments the Davenports raise for the first time
on appeal, we review only for "plain error." See, e.g., Beal
Bank, SSB v. Pittorino,
177 F.3d 65, 71 (1st Cir. 1999)
(considering challenge to unobjected-to jury instruction in a
civil case). In this context, error is plain if it causes a
miscarriage of justice or somehow undermines the integrity of
the judicial process. See
id. (citing Play Time, Inc. v. LDDS
Metromedia Communications, Inc.,
123 F.3d 23, 29 (1st Cir.
1997)).
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B. Challenge to the Finding of Liability for Breach of
Fiduciary Duty
The Davenports assert that the jury’s finding of
liability for a breach a fiduciary duty was infected by legal
error. Specifically, the Davenports contend that the district
court, in instructing the jury, erroneously placed the burden on
them to prove that their conduct in purchasing Bragdon’s shares
"conformed to their fiduciary obligations." In making this
argument, the Davenports acknowledge that the burden is
presumptively theirs under Massachusetts law, see Cleary v.
Cleary, 692 N.E.2d 955, 958 (Mass. 1998), but make a strained
argument for a burden shift on the basis of a statement in
Cleary that a fiduciary’s burden "is generally met if the
fiduciary shows . . . [that the questioned transaction was made]
with the advice of independent legal counsel."
Id. at 959.
The Davenports have little reason to complain about the
district court’s burden-of-proof instruction. Prior to trial,
they submitted to the court a proposed instruction which stated
that it was their burden to show that the transaction "was
advantageous for the Plaintiff." Moreover, at trial, they
failed to articulate a coherent objection to the instruction
given. Finally, they failed to object to the Fed. R. Civ. P.
49(a) breach of fiduciary duty question that was put to the
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jury, which asked whether the Davenports had established by a
preponderance of evidence that they had carried out their
fiduciary obligations to Bragdon. In view of this triple
waiver, we ask only whether the jury’s conclusion that there had
been a breach of fiduciary duty constitutes a miscarriage of
justice or calls into question the integrity of the judicial
process. See Beal Bank, SSB, 177 F.3d at 71. Patently, it does
neither.
Under Massachusetts law, "the general rule is that one
acting in a fiduciary capacity for another has the burden of
showing that a transaction with himself was advantageous for the
person for whom he was acting." Cleary, 692 N.E.2d at 958.
Here, there was overwhelming evidence to support the jury’s
conclusion that the Davenports’ deal with Bragdon was
advantageous for them but disadvantageous for Bragdon, and thus
constituted a breach of the Davenports’ fiduciary duty to
Bragdon. Moreover, our review of the record as a whole does not
lead us to conclude that, the Davenports’ deceptions
notwithstanding, Bragdon unjustifiably proceeded with the
purchase. Under these circumstances, there is no basis for
upsetting the jury’s liability determination.
C. Challenge to the Damages Award for Breach of Fiduciary Duty
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The Davenports assail the jury’s damages award on three
grounds. First, they contend that the district court erred in
permitting Bragdon’s expert witnesses to testify because these
witnesses, in combination, used an improper and prejudicial
method to assess the true worth of plaintiff’s DRT shares.
Second, they assert that the court erred in allowing Bragdon to
cross-examine DeWitt Davenport about the value of defendants’
personal assets and Trust assets of which the Davenports made
use. Third, they argue that the jury’s damages award was
insufficiently grounded in the evidence and grossly excessive.
Each of these arguments merits only the briefest of responses.
The only challenge the Davenports made to Bragdon’s
experts below was grounded on the fact that Bragdon’s first
expert, a real estate appraiser named William Curley, used a
valuation methodology that initially valued in toto all holdings
in which DRT had an interest, and Bragdon’s second expert, an
accountant named Stephen Grizey, then reduced this figure to
account for the fact that DRT only had a partial interest in
some of the holdings. 1 In the Davenports’ view, Curley’s
testimony regarding the total value of the holdings in which DRT
1
Although we explicitly address only the preserved challenge
to the district court’s decision to permit Bragdon’s experts to
testify, we believe it worth stating explicitly that the court’s
decision was not otherwise plainly erroneous. See Beal Bank
SSB, 177 F.3d at 71.
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had an interest somehow created a possibility that the jury was
misled into thinking that DRT was far more valuable than was in
fact the case. Our review of the record persuades us, however,
that there is no reason for concern about jury confusion;
Bragdon’s experts clearly and coherently explained their
methodology and conclusions as to DRT’s value, and the
conclusions were amply supported by record evidence. The
district court thus acted well within its wide discretion in
permitting Bragdon’s experts to present the jury with their
conclusions. See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S.
137, 141-42 (1999) (reviewing for abuse of discretion decision
whether to admit challenged expert testimony).
As to the Davenports’ second argument, our review of
the record persuades us that, due to the overwhelming evidence
of a breach of fiduciary duty and the ample evidence supporting
the damages award, any error in admitting evidence of the
Davenports’ personal assets and/or Trust assets of which the
Davenports made use was harmless. See Fed. R. Civ. P. 61. And
given what we have just said about the evidence supporting the
damages award, we summarily reject the Davenports’ challenge to
the foundation and size of the damages award – a challenge, we
add, that was levied only on appeal.
Affirmed. Costs to appellee.
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