Œ Judge Moody, of the Northern District of Indiana, sitting by

designation.

In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 01-4026

R.J. O’BRIEN & ASSOCIATES, INC.,

Plaintiff-Appellant,

v.

RONALD FORMAN,

Defendant-Third Party

 Plaintiff-Appellee,

v.

CHRISTOPHER LONGWORTH, doing

business as OZARK FUTURES & OPTIONS,

Third Party

 Defendant-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 96 C 2711—James T. Moody, Judge.Œ

____________

ARGUED MAY 29, 2002—DECIDED JULY 29, 2002 

____________

Before RIPPLE, DIANE P. WOOD, and EVANS, Circuit

Judges.
2 No. 01-4026

EVANS, Circuit Judge. At first glance, the verdicts in

this case look inconsistent, so inconsistent, in fact, that

both sides moved to have them set aside. And had this case

been litigated differently, there is a chance—though far

from a certainty—that we might have found them inconsistent. But as the case comes before us, we find that they

are not. More than anything, the case is another illustration that the principles and rules by which the federal

courts operate have teeth.

R.J. O’Brien and Associates, Inc. (RJO) is a futures commission merchant (FCM) that clears trades for commodity

futures and options contracts on commodity exchanges

such as the Chicago Mercantile Exchange and the Chicago

Board of Trade. Christopher Longworth is an introducing

broker who had a clearing and guarantee agreement with

RJO. Ronald Forman is a Texas real estate developer who,

in 1995, decided to enter the commodities market. His

cousin introduced him to Longworth and, through Longworth, Forman opened an account with RJO. He signed

a customer agreement which states in part:

Customer understands that RJO will not be responsible

for delays or inaccuracies in the electronic preparation

of statements or the distribution of market information.

Further, the agreement states:

Customer understands that RJO, among other requirements, is financially liable to the contract market clearing houses for debit balances occurring in the Customer’s account. Because RJO is the guarantor to the

clearing house, Customer agrees to hold RJO, its principals, officers, directors, employees, its affiliates and

agents harmless with respect to any and all losses sustained by the latter resulting from the Customer’s

account, or any related activity, and to indemnify RJO

for all costs incurred, including reasonable attorney’s

fees.
No. 01-4026 3

In commodities trading, speculators like Forman must pay

what is a margin to the FCM when the contract is first

entered. As time passes, it often becomes necessary for the

speculator to make additional margin payments to cover

payments that FCM would have to pay to the clearing

houses to cover losses.

Forman’s initial forays into the market were unsuccessful,

and for a few months he dropped out of trading. But

he reactivated his account with Longworth in April 1996.

Then things really went south.

In the commodity futures market, the rules of the exchange establish trading limits which govern the amount

of movement a particular commodity can sustain in any

given day. At the time of Forman’s trades, trading limits on

corn were 12 cents or 18 cents a day. What this means

is that the price of corn could not fluctuate either higher

or lower than the limit amount from the prior day’s closing figure. But immediately prior to the first day of the

delivery month (May for May corn), there is a “first notice

day,” at which time there are no trading limits on a particular commodity and the price can fluctuate much higher

or lower than the prior day’s closing price.

At the close of the market on Friday, April 26, 1996,

Forman’s account had a market value of about $180,630,

which he quite naturally wanted to protect. On Sunday,

April 28, 1996, Forman called Longworth at home to discuss

how to best protect his market position. Forman asked

Longworth what the market limits would be on Monday,

April 29, for May corn. Longworth said he did not know.

He had not found out when Forman called him later that

evening. Longworth said he would call RJO prior to the

opening of trading on the 29th. In the morning, Longworth

called RJO and was told that normal limits would apply,

which Longworth thought would be 12 cents. He informed

Forman, who promptly ordered an additional 250,000 bushels of May corn and 250,000 bushels of July corn.
4 No. 01-4026

As it turns out, April 29, 1996, was the first notice day

for May corn. At about 10:15 in the morning, after Forman’s order was placed, Longworth saw that the price for

May corn had dropped below the 12 cent limit. At that

point, Longworth again called RJO and was told that there

were no limits on May corn that day. By 10:30, when Longworth called Forman, the price of May corn had dropped

17 to 18 cents below the Friday closing price. Forman

was not happy about these developments and demanded

that Longworth and RJO “fix it.” He demanded reinstatement of the $180,630 he had in his account prior to the

opening of the market.

At about 1 p.m., with the market having continued to

fall throughout the day, Longworth informed Forman that

he would be facing huge margin calls because the market

had moved against his position. Forman told Longworth

to sell the May corn; Longworth was able to sell 230,000

bushels of May corn by the end of trading that day. On

April 30 the remaining May corn was sold. Forman still

had the July corn, which also was moving against his

position. Longworth informed Forman that he needed to

deposit a $100,000 maintenance margin into his RJO account. Forman did not pay the margin. In a conference call

with persons from RJO, Forman again refused to pay the

$100,000 margin. When all was said and done after Forman failed to furnish the margin and his positions were

liquidated, there was a net deficit in his account of

$152,002.

RJO sued Forman for breach of contract and fraud to

collect the deficit which occurred when Forman failed to

meet margin calls. Forman counterclaimed and brought

several third-party claims against Longworth and RJO.

The case was tried to a jury, and the jury found, as

relevant here, that Forman had breached the contract

with RJO and awarded RJO compensatory damages of

$152,002.10. The jury also found for Forman on his counter-
No. 01-4026 5

claims and third-party complaint against RJO and Longworth for negligent misrepresentation to the tune of

$139,143.00.

The issue is, how can this be? How can both sides win?

The answer supplied by the district judge is that the negligent misrepresentation and the breach of contract

claims are entirely separate animals. The negligent representation grew, not out of the contract, but rather out

of the common law duty owed by Longworth (and RJO

because Longworth is its agent) to Forman. They were

negligent in their failure to inform Forman that there were

no limits on April 29th. The judge stated:

The duty plaintiffs [a reference to RJO and Longworth]

owed Forman to provide accurate information was

an extra-contractual duty arising from the professional obligations plaintiffs owed their clients. Congregation

of the Passion v. Touche Ross & Co., 159 Ill. 2d 137, 636

N.E.2d 503, 514 (1994). Forman’s duty to meet his

margin call was a contractual duty. Consistent with the

case as it was argued and proved by the parties, the jury

could have concluded that despite his (ultimately correct) belief that he had been caused losses by plaintiffs’

negligent advice, Forman nevertheless was contractually obligated to meet his margin call, and hash out

later with plaintiffs whether their negligence led to

the margin call in the first place. [Emphasis in original.]

We agree with this explanation, especially, as we shall see,

with its emphasis on the manner in which the case

“was argued and proved by the parties.”

Yet RJO and Longworth profess to be stunned by the

result. It runs counter, they say, to the well-established

Illinois Moorman doctrine, the law of Illinois being the

governing authority for the negligent misrepresentation

claim. In Moorman Manufacturing Co. v. National Tank
6 No. 01-4026

Co., 91 Ill. 2d 69, 435 N.E.2d 443 (1982), the Illinois

Supreme Court set out its economic loss doctrine, barring tort recovery for economic losses. As with most doctrines, however, Moorman is subject to exceptions. An

exception exists for instances in which the allegedly

negligent party is in the “business of supplying information

for the guidance of others . . . .” Fireman’s Fund Ins. Co. v.

SEC Donohue, Inc., 176 Ill. 2d 160, 165, 679 N.E.2d 1197,

1200 (1997). In such a case, the party can be sued for

negligent misrepresentation. But because the Illinois courts

have not established that introducing brokers like Longworth fall within the exception, it would be wrong, RJO and

Longworth say, for the federal courts to say they do.

Besides, at least in most instances, determination as to

whether the exception applies requires a case-specific

factual inquiry, citing Continental Leavitt Communications,

Ltd. v. PaineWebber, Inc., 857 F. Supp. 1266 (N.D. Ill.

1994). The jury here was not instructed that they had

to find that Longworth was in the business of supplying

information, as no request for an instruction of the sort

was made on the record.

Recognizing that they have a waiver problem with the

jury instruction, RJO and Longworth also argue that, in

any case, the verdicts are inconsistent. They say that the

verdict on the negligent misrepresentation claim should

be set side, but, if not, both verdicts should be set aside

and a new trial ordered. As they see it, the jury found

that RJO was not responsible for the lost revenues and

therefore it prevailed on the breach of contract claim, but

the jury also found that it was responsible for the losses

and thus awarded damages to Forman.

The entire appeal—viewed from any angle—depends

on Moorman and its exceptions. Moorman dictates that,

when a contract sets out the duties between the parties,

recovery should be limited to contract damages, even

though recovery in tort would otherwise be available under
No. 01-4026 7

the common law. See Congregation of the Passion v. Touche

Ross & Co., 159 Ill. 2d 137, 636 N.E.2d 503 (1994). The

district judge’s explanation of how the verdicts can be

reconciled is correct only if there is a duty independent

of the contract, which was owed by Longworth (and RJO,

for whom Longworth was an agent), to not negligently

represent the state of trading. Where does this duty come

from? Under Illinois law, to exist it must be an exception to

the Moorman doctrine. It depends on a finding that Longworth is in the “business of supplying information for the

guidance of others.” Fireman’s Fund.

The problem RJO and Longworth face is that their

claim that Longworth might not fit under the exception was

not raised at trial. There was no objection to the jury instruction on negligent misrepresentation or to giving such

an instruction in the first place. The case proceeded as

if there was no problem with Forman’s tort recovery theory. That is, in the district judge’s words, the way the case

“was argued and proved by the parties.”

Perhaps sensing a grave problem with waiver, after

their appeal was filed, RJO and Longworth moved the

district court to supplement the record with affidavits from

trial counsel setting out that they had, in fact, objected

off the record to the negligent misrepresentation instruction as given. The affidavits did not set out the basis of

that objection, and, especially in a situation such as this,

only a specific objection stating that Moorman prevented

the claim from proceeding would have been helpful. The

district judge denied the motion to supplement, saying:

A lengthy instruction conference was held on the record

in this case, during which the parties’ respective attorneys were given unlimited opportunity to make any

and all objections they had to the court’s instructions.

It is the court’s belief that if the objections at issue

were not made during that instruction conference, they
8 No. 01-4026

were not made at all, and RJO and Longworth’s motion

to supplement the record would actually change the

record to reflect events that did not occur.

Rule 51 of the Federal Rules of Civil Procedure could not

be clearer. It says in part,

No party may assign as error the giving or the failure to give an instruction unless that party objects

thereto before the jury retires to consider its verdict,

stating distinctly the matter objected to and the

grounds of the objection. Opportunity shall be given to

make the objection out of the hearing of the jury.

Just recently, in Chestnut v. Hall, 284 F.3d 816 (7th Cir.

2002), we again pointed out that Federal Rule of Civil

Procedure 51 requires not only that “objections to jury

instructions be made in a timely fashion and on the record,

but also with sufficient specificity to apprise the district

court of the legal and factual bases for any perceived

defect.” We also reiterated that, unlike in a criminal trial,

there is no plain error analysis in a civil trial.

That RJO and Longworth had every opportunity to object

to the jury instructions and raise their concerns that Longworth did not fit into a Moorman exception is absolutely

clear from the record. A discussion of jury instructions

began near the end of the trial. At noon on August 29, 2001,

the judge released the jury for a long lunch because the

parties had to work on the instructions. At this time,

counsel for RJO and Longworth moved to dismiss Forman’s

fraud claims and Forman voluntarily dismissed a common law fraud claim. Because the discussion of the instructions was not going as smoothly as the judge wanted, he

sent the jury home that day to return the next morning, at

the same time telling the lawyers he was “not asking you to

work fast [on the instructions]. I want you to work right.”

The next morning, an instruction conference was held

on the record. Counsel for RJO and Longworth informed
No. 01-4026 9

the court that the parties agreed on everything but one

issue regarding a fiduciary duty under the Commodities

Exchange Act. Despite that degree of agreement, the judge

went through the instructions one by one, asking as to each

one whether there were any objections. When they reached

instructions 32 and 33, which covered the negligent misrepresentation claim, counsel for RJO and Longworth asked for

minor changes, which were made. But what is notable here,

despite every opportunity, is that there was no questioning

of the legal basis for the claim, as there had been in regard

to the Commodities Exchange Act instruction. Similarly,

there was no objection when the proposed verdict on the

negligent misrepresentation count was discussed.

Therefore, the issue of error in the jury instruction is not

before us, which means that the Moorman issue is not before us. The parties had an obligation to inform the judge

at trial of their legal position on that claim. We will not

make an end run around the failure to object to the jury

instructions and find some way to reach the Moorman

issue, for as we note, there is no equivalent civil “plain

error” doctrine which applies in the trial of criminal cases.

National Org. for Women, Inc. v. Scheidler, 267 F.3d 687

(7th Cir. 2001). Furthermore, if there were, we are not

convinced that any error in giving the instruction was

anything close to plain. Whether Longworth falls into a

Moorman exception is a close question. What we have here,

then, as far as we are concerned, is a jury properly instructed on negligent misrepresentation. Because of that,

we have, as the district judge concluded, verdicts which can

be reconciled with one another.

The other issue raised regarding RJO’s entitlement

to attorney fees under the contract depends on setting

aside of the negligent misrepresentation verdict; therefore, we need not consider the issue. The judgment of the

district court is AFFIRMED.
10 No. 01-4026

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-97-C-006—7-29-02