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Burgess v. Premier Corp, 727 F.2d 826 | Casetext
Burgess v. Premier Corp.
727 F.2d 826 (9th Cir. 1984)
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Burgessv.Premier Corp.
United States Court of Appeals, Ninth CircuitMar 5, 1984
Ron J. Perey, James A. Smith, Jr., Mark Roellig, Perey Smith, Seattle, Wash., for plaintiffs-appellees.
Theodore J. Collins, Perkins, Coie, Stone, Olsen Williams, Seattle, Wash., James L. Magee and Bob M. Schwartz, Sax MacIver, Seattle, Wash., Leonard L. Scott Eichenbaum, Scott, Miller, Crockett, Darr Hawk, Little Rock, Ark., for defendants-appellants.
Doctors filed this action on June 21, 1978. Under applicable statutes of limitation, Premier et al. moved for summary judgment on the ground that there was no disputing that the doctors had actual or constructive notice of their fraud claims more than three years before filing this action; i.e., before June 21, 1975.
A claim under the Washington Consumer Protection Act must be brought within four years of accrual of the cause of action. RCW 19.86.120. Appellants contest only the three year limitations period. See Jablon v. Dean Witter Co., 614 F.2d 677, 682 (9th Cir. 1980); Errion v. Connell, 236 F.2d 447, 455 (9th Cir. 1956). See Jablon, 614 F.2d at 682, (using three year limitations period for federal securities actions in California); RCW 21.20.420(4)(b) (three year limitations period for state securities act in Washington); RCW 4.16.080(4) (three year limitations period for fraud actions).
Summary judgment was properly denied because there was a genuine issue of material fact as to when the doctors knew or had notice of their claim. Subsequently, the issue of the statute of limitations was submitted to the jury pursuant to instruction number 38. The jury necessarily found that the statute of limitations had not barred the action when it affirmatively answered a general question finding Premier et al. liable. To emphasize the importance of the time-bar question to the jury, either party could have had a special verdict question directly addressing the statute of limitations. However, under Fed.R.Civ.P. 49(a) a party waives its right to demand submission of a special verdict question on an issue unless it objects to the failure to submit the special question before the jury retires. 9 Wright and Miller, Federal Practice and Procedure: Civil § 2507. Premier et al. did not so object.
In Jablon v. Dean Witter Co., 614 F.2d 677, 682 (9th Cir. 1980), we upheld the trial court's dismissal of plaintiff's 10b-5 action on the ground that "the trial court correctly held that a reasonably prudent person would have realized within two years" that a securities salesman's predictions were incorrect. 614 F.2d at 682. In this case plaintiffs' knowledge or notice was sufficiently less clear cut that it appropriately went to the jury.
A release is valid for purposes of federal securities claims only if the doctors had "actual knowledge" that such claims existed. Royal Air Properties, Inc. v. Smith, 333 F.2d 568 (9th Cir. 1964). Since each doctor indicated by affidavit and trial testimony that he did not know of any claims he could have raised until after he signed the release, there was a material issue of fact for the jury. Thus, the motion for summary judgment was properly denied. Because a reasonable juror could have concluded that the doctors actually were unaware of their claims, the motion for directed verdict was also properly denied.
While there are no cases on releases of claims under the Washington Securities Act, Washington courts would apply the "actual knowledge" test because the state Act provides that it is to be coordinated with related federal law. RCW 21.20.900. Washington's anti-waiver provision is very similar to the federal anti-waiver provision. Cf. RCW 21.20.430(5) with 15 U.S.C. § 78cc(a). Because Royal Air Properties, supra, provides the relevant federal law for Washington state, the motions for summary judgment and directed verdict were properly denied.
Under Washington law, a release is valid unless there was fraud, misrepresentation, or overreaching in its procurement. Metropolitan Life Insurance Company v. Ritz, 70 Wn.2d 317, 422 P.2d 780, 783 (1967).
III. Schrock and Darby [21] 1. Federal securities claims
Schrock and Darby moved for directed verdicts on the grounds that there was insufficient evidence to establish the scienter required for violation of § 10(b) of the Securities Act of 1934, 15 U.S.C. § 78j, and S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5, and that their lack of involvement with Premier precludes any derivative liability as controlling persons. The district court should have granted these motions.
Scienter is a necessary element of a violation of § 10(b) and Rule 10b-5. Aaron v. SEC, 446 U.S. 680, 695, 100 S.Ct. 1945, 1955, 64 L.Ed.2d 611 (1980). The scienter requirement encompasses knowing or reckless conduct, Kiernan v. Homeland, Inc., 611 F.2d 785, 787 (9th Cir. 1980) (citing Nelson v. Serwold, 576 F.2d 1332, 1337 (9th Cir.), cert. denied, 439 U.S. 970, 99 S.Ct. 464, 58 L.Ed.2d 431 (1978)), but not negligence. Aaron, 446 U.S. at 690, 100 S.Ct. at 1952 (citing Ernst Ernst v. Hochfelder, 425 U.S. 185, 194, 197-99, 96 S.Ct. 1375, 1381, 1383-84, 47 L.Ed.2d 668 (1976)). A person possesses the requisite scienter if the person either deliberately misrepresents or omits material information, or acts recklessly, i.e., if the person
A controlling person is liable for the acts of another if the controlling person "acted in bad faith and directly or indirectly induced the conduct constituting a violation or cause of action." Strong v. France, 474 F.2d 747, 752 (9th Cir. 1973). This court has indicated that there can be no liability if the controlling person "was not a participant in . . . activities which are claimed to violate the securities laws." Christoffel v. E.F. Hutton Co. Inc., 588 F.2d 665, 669 (9th Cir. 1978). A director "is not automatically liable as a controlling person. There must be some showing of actual participation in the corporation's operation or some influence before the consequences of control may be imposed." Herm v. Stafford, 663 F.2d 669, 684 (6th Cir. 1981). See Cameron v. Outdoor Resorts of America, Inc., 608 F.2d 187, 194-195 (5th Cir. 1979), modified, 611 F.2d 105 (5th Cir. 1980) (per curiam).
Nor does there appear to be any evidence of participation sufficient to show that Schrock or Darby were reckless with regard to representations or omissions made to the doctors by Premier's other directors. Kiernan, 611 F.2d at 787-88. Thus, they could not be found to have possessed the requisite scienter under federal securities laws. Because "the evidence permits only one reasonable conclusion as to the proper result," Maheu v. Hughes Tool Co., 569 F.2d 459 at 464 (9th Cir. 1977), the district court should have granted their motions for a direct verdict. Accordingly, we vacate the judgment against Schrock and Darby with regard to federal securities law claims and direct the entry of a judgment in their favor.
Darby's and Schrock's motions for directed verdict on the ground that they could not be found liable under the Washington Securities Act, RCW 21.20.010 and 21.20.430 also should have been granted. First, 21.20.010 closely resembles its federal counterpart, Rule 10b-5. Although scienter is not required under Washington law, Kittilson v. Ford, 93 Wn.2d 223, 225-27, 608 P.2d 264, 265 (1980), some liability-producing action by Darby and Schrock themselves is required. And because there is no evidence that either Schrock or Darby made any misrepresentations, they are not subject to liability under this statute. Second, while a controlling person could be liable under RCW 21.20.430(3) on derivative liability, there is no reason to infer that "controlling person" has a different meaning in Washington law than in federal law. Since Schrock and Darby were not controlling persons under the federal definition, they could not properly be liable under Washington law.
The absence of any act or omission by Schrock or Darby in connection with the representations of which the doctors complained precludes finding either one liable for common law fraud or negligent misrepresentation. For the elements of these offenses in Washington, see J J Food Centers, Inc. v. Selig, 76 Wn.2d 304, 309, 311, 456 P.2d 691, 695 (1969) (negligent misrepresentation); Farrell v. Score, 67 Wn.2d 957, 958-959, 411 P.2d 146, 148 (1966) (fraud).
In deciding whether to admit or exclude evidence, including expert evidence, the trial court has broad discretion. Lies v. Farrell Lines, Inc., 641 F.2d 765 (9th Cir. 1981); Burlington Northern, Inc. v. Boxberger, 529 F.2d 284 (9th Cir. 1975). On appeal, a ruling which admits or excludes evidence, even if an abuse of discretion, will not be overturned if the error is harmless. Fed.R. Civ.P. 61.
Because Tilton was testifying as an expert witness, the books on cattle investments were admissible under the learned treatise exception to the hearsay rule. Fed. R.Evid. 803(18). Tilton indicated that the author was the preeminent industry expert; this was not disputed. Tilton also testified that Premier required its salesmen to read the books and to recommend them to investors. These facts substantiate the idea that the books were accepted authority. Furthermore, Premier et al. raised no objection to the books on the ground that they were not "learned treatises."
Premier et al. also cite as error the admission on redirect of Tilton's opinion as to how and by whom the fraud — in which Tilton admitted unwitting participation — was perpetrated. However, Premier's counsel waived this objection by first raising the subject himself on cross-examination. Doctors could properly pursue this line of questioning on redirect where defense counsel had "opened the door." 1 J. Weinstein M. Berger, Weinstein's Evidence ¶ 103[02] at 12-15 (1982) (attorney can waive client's right to raise error on appeal by eliciting inadmissible evidence himself). Thus, while Tilton's testimony did indeed contain a legal conclusion, Premier et al. waived its right to object.
Arguing that cross-examination on collateral matters is limited to discrediting the witness, Premier et al. claim that McCalla, a former vice-president of Premier, should not have been allowed to be questioned on any prior lawsuits. Martin v. United States, 404 F.2d 640 (10th Cir. 1968), cited by Premier et al., is inapposite. Martin was a criminal case in which the defendant brought up his prior felony conviction on direct examination. The question in this case is whether the plaintiff doctors should have been allowed to raise the question of civil suits against Premier and Dr. McCalla on cross-examination.
It was not an abuse of discretion to permit this cross-examination. Rule 611(b) of the Federal Rules of Evidence defines the scope of cross-examination.
Premier et al.'s objection that the questioning was "improper" did not sufficiently state grounds for excluding the testimony. Premier et al. cite no relevant authority to support the argument here. See United States v. Hutcher, 622 F.2d 1083, 1087 (2d Cir.), cert. denied, 449 U.S. 875, 101 S.Ct. 218, 66 L.Ed.2d 96 (1980) (mere statement of objection without stating grounds was insufficient to preserve error, where the specific grounds were not apparent); 1 J. Weinstein M. Berger, Weinstein's Evidence ¶ 103[02] at 22 (1982).
The doctors introduced various articles to show notice of a related cattle investment scandal. Premier et al. contend that "no plaintiff was ever asked if he had read any of these . . . articles." However, plaintiff Morgan was asked, "Do you remember seeing those articles in newspapers?" The reply was, "Yes. I believe it was publicized in the Wall Street Journal, which I read." Plaintiff Burgess also mentioned having read it in the newspaper. Finally, the trial court was careful to indicate to the jury that the articles were not admitted to show the truth of their allegations.
Premier et al. cite as error the admission of exhibits 11, 86, 94-97, 247, 258, 401 and 424 on the grounds that they were authenticated only by the fact that they were found in Premier's warehouse. Under Fed.R.Evid. 901(a) "[t]he requirement of authentication . . . as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims." Although for some of the exhibits there was additional authentication, in this case the district court could properly have found that all of the exhibits were adequately authenticated by the fact of being found in Premier et al.'s warehouse.
Standard Oil Co. of California v. Moore, 251 F.2d 188 (9th Cir. 1957), the authority cited by Premier et al., states that
"The existence of a document or its presence in the files of a corporation does not, without more, render it admissible. . . ." 251 F.2d at 215 n. 34.
This passage, however, does not deal with the Rule 901 authentication problem. Instead, it deals with 28 U.S.C. § 1732, the predecessor to Fed.R.Evid. 803(6), which establishes the business records exception to the hearsay rule.
7. Ernst Ernst worksheets
Under N.L.R.B. v. First Termite Control Co., Inc., 646 F.2d 424 (9th Cir. 1981), the doctors should have produced someone to testify as to the recordkeeping methods employed with regard to Premier's file at its auditor, Ernst Ernst. Id. at 427. According to Premier et al., doctors' counsel stipulated that the custodian of records could not do so. However, even though the documents were used later to establish the connections between Premier and the purchase of inferior quality cattle, any error in admitting the documents without testimony by a qualified witness was not prejudicial because there was no real dispute as to the trustworthiness of the records.
8. Exhibits 572, 653-662 compiled in reliance upon the Ernst Ernst worksheets
Because there was no dispute as to the trustworthiness of the Ernst Ernst worksheets, admission of the charts prepared by doctors' accountant from those worksheets was also not prejudicial error. Although the record shows that use of the Ernst Ernst documents led to some inconsistencies in the accountant's calculations, such inconsistencies went to the weight, not the admissibility of the evidence.
During pretrial proceedings, Premier et al. objected to the admissibility of admissions by defendant Bohlen against his co-defendants on the ground that admissions are admissible only against the declarant. Fed.R.Evid. 801(d)(2)(A); United States v. Eubanks, 591 F.2d 513, 519 (9th Cir. 1979). The court ruled preliminarily that the admissions could come in under the co-conspirator exception to the hearsay rule, Fed.R.Evid. 801(d)(2)(E), and that they would be admitted provisionally subject to Premier et al.'s motion to strike at the appropriate time. Eubanks, 591 F.2d at 519, n. 6. Premier et al. now argue that a conspiracy was never shown and that the admissions were therefore unduly prejudicial. However, Premier never objected or moved to strike during trial and has therefore waived the objection. Id.; Fed.R.Evid. 103(a)(1).
At trial, the court admitted evidence of the plan without objection. It is not clear whether Premier's pretrial motion in limine preserves the objection for appeal. See Sheehy v. Southern Pac. Transp. Co., 631 F.2d 649, 652 (9th Cir. 1980). See also Collins v. Wayne Corp., 621 F.2d 777, 784 (5th Cir. 1980). However, if there was error, it was harmless.
Because we affirm the trial court's holding that tax benefits are not to be set off in assessing damages, the doctor's tax returns, which the district court excluded, were irrelevant on the issue of damages. Premier et al. note that tax information could shed light on doctors' investment motives and sophistication as investors. See Kramas v. Security Gas Oil, Inc., 672 F.2d 766, 772 (9th Cir.) cert. denied, 459 U.S. 1035, 103 S.Ct. 444, 74 L.Ed.2d 600 (1982); Smith v. Bader, 83 F.R.D. 437, 438-439 (S.D.N.Y. 1979). However, a decision to exclude evidence should not be disturbed unless the district court abused its discretion. Lies v. Farrell Lines, Inc., 641 F.2d 765, 773 (9th Cir. 1981); Cohn v. Papke, 655 F.2d 191, 194 (9th Cir. 1981). We find no abuse of discretion.
VI. Damages [72] 1. One loss — one recovery
Rescission was an appropriate remedy for the doctors' claims. Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) cert. denied, 429 U.S. 816, 97 S.Ct. 57, 50 L.Ed.2d 75 (1976); RCW 21.20.430(1); Salter v. Heiser, 39 Wn.2d 826, 239 P.2d 327 (1951); Prescott v. Matthews, 20 Wn. App. 266, 579 P.2d 407 (1978).
It was not error to use the words "net loss" to calculate the amount of the rescission recovery. Rescission voids the transaction and returns to both parties the consideration they paid. Prescott, 20 Wn. App. at 268-70, 579 P.2d at 409. The term "net loss" was used to mean just that at trial. It was neither incorrect nor misleading.
The jury improperly calculated the negligent misrepresentation damage awards. For each doctor, the misrepresentation damage amount equals the sum of the statutory claim amounts and the common law fraud amount. The wording of the relevant jury question caused this odd result. For each negligent misrepresentation claim, the jury was asked to find: "With respect to [each defendant] the total amount of this plaintiff's damages in connection with this investment proximately caused by misrepresentations of facts by this defendant equals $ ____." (Emphasis added.)
To avoid unnecessary second trials, losing parties should be discouraged from voicing objections to the form or consistency of a jury verdict after the jury has been dismissed. See Stancil v. McKenzie Tank Lines, Inc., 497 F.2d 529, 534-5 (5th Cir. 1974); Skillen v. Kimball, 643 F.2d 19 (1st Cir. 1981); Fed.R.Civ.P. 49. However, in this case, setting aside the excessive misrepresentation award by way of remittitur leaves the doctors fully compensated because of their recovery under the securities law claims. Therefore, we do so. Because we set aside the misrepresentation award based on the preceding discussion, we do not address Premier et al.'s other rationales for claiming the award is erroneous.
We are aware that in other circumstances tax consequences have been considered in determining damages. Tax liability on earnings lost because of premature deaths has been considered relevant in determining damages arising from a plane crash. In Re Air Crash Disaster near Chicago, Ill., 701 F.2d 1189 (7th Cir.), cert. denied, ___ U.S. ___, 104 S.Ct. 204, 78 L.Ed.2d 178 (1983). In such cases where there is prospective calculation of damages for which no past tax benefits have been claimed, it is appropriate to calculate damages net of taxes, especially since a personal injury judgment is not taxed. 26 U.S.C. § 104(a)(2). This situation is clearly different from the present tax shelter situation in which the doctors have received substantial benefits at government expense.
The Eighth Circuit in Austin v. Loftsgaarden, 675 F.2d 168 (8th Cir. 1982), did allow tax benefits to be offset against damages in a securities fraud arising from a real estate tax shelter. The court approvingly quoted Bridgen v. Scott, 456 F. Supp. 1048 (S.D.Tex. 1978) for the proposition that
"Requiring the jury or this Court to try this case without reference to the tax consequences of the transaction would be requiring the jury and the Court to live in an artificial `never-never land'." 456 F. Supp. at 1061.
While we agree that consideration of tax consequences is relevant for certain purposes, we decline to make the government the banker for fraudulent tax shelter activity. Judge Hardy's analysis in Western Federal Corp. v. Davis, 553 F. Supp. 818, 820 (D.Ariz. 1982), is correct in discerning that the economic benefit by way of tax deductions is illusory because amended returns will have to be filed under the tax benefit rule. Mertens Law of Federal Income Tax, § 7.37.
The court did not abuse its discretion in refusing to award interest on the federal securities claims and the Washington Consumer Protection Act claims. Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir.) cert. denied, 454 U.S. 1031, 102 S.Ct. 566, 70 L.Ed.2d 473 (1981); Wessel v. Buhler, 437 F.2d 279 (9th Cir. 1971); Cf. Young v. Whidbey Island Bd. of Realtors, 96 Wn.2d 729, 638 P.2d 1235 (1982) (refusal to treble damages under Consumer Protection Act within court's discretion). The court's decision, which is based on questions of fairness, will be upset only if it is so unfair or inequitable as to require it. Whittaker, 639 F.2d at 533; Wessel, 437 F.2d at 284.
For the same reasons, the trial court did not err in refusing to award interest under the Washington Securities Act. Under federal Securities laws, an interest award is granted "in response to considerations of fairness" and "is denied when its exaction would be inequitable." Blau v. Lehman, 368 U.S. 403, 414, 82 S.Ct. 451, 457, 7 L.Ed.2d 403 (1961). Such sound standards of justice should not be ignored in the interpretation of Washington law. The purpose of the Washington Securities Act, RCW 21.20.430(1), is only "to reimburse a purchaser for his actual out-of-pocket loss." Garretson v. Red-Co, Inc., 9 Wn. App. 923, 516 P.2d 1039, 1042 (1973).
"Any person, who offers or sells a security in violation of any provisions of RCW 21.20.010 or 21.20.140 through 21.20.230, is liable to the person buying the security . . . to recover the consideration paid for the security, together with interest at 8 percent per annum from the date of payment, costs, and reasonable attorneys' fees . . . ." RCW 21.20.430(1) (Emphasis added.)
The general interest statute in Washington, RCW 19.52.010, provides that a loan or forbearance "shall bear interest" at a statutorily fixed rate. Despite use of the mandatory "shall," it is clearly established that interest is awarded only if the forbearance is liquidated in amount. See Mall Tool Co. v. Far West Equipment Co., 45 Wn.2d 158, 273 P.2d 652 (1954). Thus, even use of the word "shall" does not mean interest must be awarded in all cases.
VIII. Attorney fees [97] 1. Allowability under Washington law
When first enacted in 1959, RCW 21.20.430(1) created civil liability for any person who offered or sold securities by means of fraud or misrepresentation, or in violation of RCW 21.20.140 through 21.20.230, the registration provisions of the Washington Securities Act. RCW 21.20.430(1) provided that the buyer of the securities was entitled to attorney fees, in addition to rescission or damages. When first enacted, it did not provide statutory civil liability or grant attorney fees for violations of RCW 21.20.010, which is Washington's "Anti-fraud Act," the counterpart of federal Rule 10b-5. See Wash.Laws 1959, Ch. 282, § 43(a). In 1977 RCW 21.20.430(1) was amended. Express statutory civil liability for violations of RCW 21.20.010 was added, and the liability for sales of securities by means of fraud or misrepresentation was deleted. Wash.Laws 1977, 1st Ex.Sess., Ch. 172, § 4.
The trial court correctly held that the statute in effect at the termination of an action, rather than the statute in effect at the commencement of an action, determines whether attorney fees should be awarded. Petersen v. Port of Seattle, 94 Wn.2d 479, 618 P.2d 67 (1980). Accord Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974); Verrilli v. City of Concord, 557 F.2d 664 (9th Cir. 1977); Stanford Daily v. Zurcher, 550 F.2d 464 (9th Cir. 1977) rev'd. on other grounds, 436 U.S. 547, 98 S.Ct. 1970, 56 L.Ed.2d 525 (1978). The statute in effect at the termination of this action, i.e., RCW 21.20.430(1) as amended in 1977, provided for attorney fees for violations of RCW 21.20.010.
Nelson v. Serwold, 687 F.2d 278 (9th Cir. 1982) does not require a contrary result on this point. In that case this court refused to award attorney fees under RCW 21.20.430(2), but the facts in Nelson differ significantly from those in the instant case. In Nelson, an aggrieved seller of securities brought suit for material omissions made by the purchaser of the securities. On our first consideration of the action we held the seller had a right to recover damages under Rule 10b-5. Nelson v. Serwold, 576 F.2d 1332 (9th Cir. 1978). However, we later denied the seller's request for attorney fees under RCW 21.20.430 because the conduct of which the seller complained, material omissions in the sale of securities, was not actionable under Washington law until 1977, at which time both a cause of action and attorney fees were provided by an amendment to RCW 21.20.430(2). 687 F.2d at 284. That contrasts with the situation in this case where buyers of securities complain of fraud or misrepresentation in the sale of securities. As already discussed, buyers of securities had an express statutory cause of action for sales made by means of fraud or misrepresentation well before 1977. In addition, buyers of securities had an implied right of action for such sales under RCW 21.20.010. Clausing v. DeHart, 83 Wn.2d 70, 515 P.2d 982 (1973); Hilton v. Mumaw, 522 F.2d 588 (9th Cir. 1975); contra Ludwig v. Mutual Real Estate Investors, 18 Wn. App. 33, 567 P.2d 658 (1977), overruled on other grounds, Kittilson v. Ford, 93 Wn.2d 223, 608 P.2d 264 (1980).
First, they assert that it was error to award attorney fees based on current, rather than historical, hourly rates. The trial court used current rates to compensate for the effects of inflation and loss of use of funds over the years following initiation of litigation in 1978. Although courts have varied in the method of compensating for inflation and loss of use of funds, they generally consider these factors in determining reasonable attorney fees. Van Gemert v. Boeing Co., 516 F. Supp. 412, 417 (S.D.N.Y. 1981). See e.g., Bonner v. Coughlin, 657 F.2d 931, 937 (7th Cir. 1981); Gautreaux v. Landrieu, 523 F. Supp. 684, 691 (N.D.Ill. 1981) aff'd, 690 F.2d 601 (7th Cir. 1982), cert. denied, ___ U.S. ___, 103 S.Ct. 2438, 77 L.Ed.2d 1322 (1983); Keith v. Volpe, 501 F. Supp. 403, 414 (C.D.Cal. 1980); Lockheed Min. Sol. Coalition v. Lockheed M. S. Co., 406 F. Supp. 828, 834-835 (N.D.Cal. 1976) (compensating for inflation and loss of use of funds through the multiplier applied to the base fee); Wheeler v. Durham City Bd. of Ed., 88 F.R.D. 27, 31 (M.D.N.C. 1980); In Re Ampicillin Antitrust Litigation, 81 F.R.D. 395, 402 (D.D.C. 1978) (compensating for inflation and loss of use of funds by use of current billing rates). A court may, of course, refuse to use current hourly rates on the grounds that increased rates reflect the attorney's increased knowledge and experience, not merely inflation. However, we cannot say that the trial court exceeded its discretion in compensating for inflation and loss of use of funds in the way it did. Kerr v. Screen Extras Guild, supra; Kelly v. Guinn, 456 F.2d 100, 111 (9th Cir. 1972), cert. denied, 413 U.S. 919, 93 S.Ct. 3048, 37 L.Ed.2d 1041 (1973).
Second, Premier et al. assert that the trial court should have reduced the award of attorney fees for issues on which the doctors did not prevail and for issues other than those covered by the Washington Securities Act. The trial court correctly found that "[a]ll the claims overlapped to such an extent that the nonprevailing ones are insignificant." It was appropriate for the trial court to award attorney fees for all time reasonably spent in litigating the matter. Seattle School Dist. No. 1 v. State of Wash., 633 F.2d 1338, 1349 (9th Cir. 1980), aff'd, 458 U.S. 457, 102 S.Ct. 3187, 73 L.Ed.2d 896 (1982).
The award of sanctions was not an abuse of discretion. Chism v. National Heritage Life Ins. Co., 637 F.2d 1328, 1331 (9th Cir. 1981). The trial court based the sanctions on costs to doctors' attorneys for travel and deposition taking which Premier et al. made necessary because Premier et al. refused to admit authenticity of almost all of the proposed exhibits, even though the documents came from Premier et al.'s own offices and warehouses. The size of the attorney fee award and the sanctions illustrate how lawyers can multiply costs for both sides by insisting upon all the delaying tactics available under the law. They have a right to insist on using these tactics, but there comes a time when somebody has to pay for them.