Opinion ID: 507127
Heading Depth: 2
Heading Rank: 2

Heading: Directed Verdict on the Nereus Settlement

Text: 10 Before voir dire, Occidental stipulated that the amount Nissho had paid Nereus and the $43,000 in related attorneys' fees it had incurred constituted a reasonable sum. Occidental did not stipulate to causation and mitigation. At the time of the stipulation, Occidental stated [w]e do not admit that we, therefore, are liable for it, but we admit that it was reasonable. In a telephone conference later that day Occidental argued to the judge that causation and mitigation remained at issue despite its stipulation to reasonableness. At the close of all the evidence, however, the judge granted Nissho's motion for a directed verdict on the grounds that the stipulation to reasonableness resolved the only issue regarding the Nereus settlement which our prior opinion left open for retrial. Despite Occidental's protestations to the contrary, the district court properly interpreted the prior opinion. It may be that Occidental made a tactical error by entering the stipulation. If it did, it cannot rue back the bargain it made. We affirm the directed verdict on the Nereus settlement in the amount of $2,268,000 and remand to the district court with directions to enter judgment in accord with this opinion. 11 Occidental raises three other points of error that we now address. The first point relates to the district court's offer to let Occidental withdraw its stipulation to the reasonableness of the Nereus settlement. Occidental declined to do so unless the court would rule inadmissible certain testimony by Hattrick, the British solicitor who represented Nissho during the Nereus arbitration. Hattrick would have testified that Occidental withheld certain information from Nissho during the arbitration proceedings. The district court ruled that if Occidental withdrew its stipulation to the reasonableness of the settlement amount, Hattrick's testimony would be admissible. Occidental contends that this ruling would permit the issue of fraud to creep back into the case in contravention of our earlier mandate. Occidental also argues that this ruling violates Federal Rule of Evidence 403 because Hattrick had stated that the Nereus settlement would not have been different had he been apprised of the withheld information. Neither argument is well taken. 12 The information that became available to Hattrick during negotiations with Nereus is relevant to the reasonableness of the settlement. While its admission would reflect on Occidental's behavior, such prejudice does not preclude its use. Rather, it calls for precisely the sort of balancing of probative value and unfair prejudice which was made here. The district court did not abuse its discretion by ruling that Hattrick's testimony did not violate Rule 403. Sprankle v. Bower Ammonia & Chemical Co., 824 F.2d 409, 416 (5th Cir.1987). Hattrick's statement that additional information would not have influenced the settlement went to the weight of the evidence. It did not ipso facto preclude its admissibility. In this context, admission of this evidence would not have violated our prior mandate which only preempted Nissho from maintaining a fraud-based cause of action. Sufficient judicial resources have been expended on procedural gyrations in which Occidental has previously acknowledged the reasonableness of the Nereus settlement. Nissho, 729 F.2d at 1549. Occidental had ample opportunity to withdraw its stipulation and the district court did not err by rejecting the conditions Occidental placed on withdrawal. 13 Occidental also claims that it withdrew its suspension and termination defenses in response to rulings by the trial court which would have allowed the issue of fraud to be reinjected back in the case. The panel directed that [a]t retrial, Nissho may attempt to prove that the contract was not in fact suspended between October 1, 1976 and March 31, 1977. The record before us only supports a finding that there was a suspension; but it is conceivable that there is some evidence not previously introduced that disproves the suspension. Id. at 1548 n. 29. On remand, Nissho amended its complaint to allege that the suspension was not mutual and termination was ineffective because of misrepresentations made by Occidental. Occidental moved to exclude the evidence offered by Nissho, all of which was duplicative of or cumulative to the evidence submitted on the fraud claim at the second trial. The district court ordered Nissho not to use the word fraud, but ruled that the evidence would be admitted to rebut the suspension and termination defenses. In support of its claim that the district court's action was improper, Occidental would have us read the panel's directions to stand for two propositions. First, the evidence of misrepresentations is not relevant to the suspension defense because this evidence was before the panel which held that the record supported a finding of mutual suspension. Second, only evidence not previously introduced could be adduced on retrial. We disagree with both propositions for the same reason. The panel never discussed the misrepresentations in relation to suspension or termination. Such misrepresentations are clearly relevant to these defenses. We hold that the district court correctly construed the panel opinion and that Occidental waived its suspension and termination defenses by amending its answer to withdraw these defenses. See Fed.R.Civ.P. 8(c); Henry v. First Nat'l Bank, 595 F.2d 291, 298 n. 1 (5th Cir.1979) (affirmative defenses are considered waived if not pleaded in the trial court). 14 Lastly, Occidental contends that, as a matter of law, its breach of contract did not cause Nissho to sustain damages under the contract with Nereus. California law requires consequential damages to be foreseeable as of the time the contract was entered into and not as of the time of the breach or some other subsequent event. Gerwin v. Southeastern Calif. Ass'n of Seventh Day Adventists, 14 Cal.App.3d 209, 220, 92 Cal.Rptr. 111, 118, (1971). Occidental maintains that it cannot be found to have reasonably contemplated in October 1973 that breach of Contract 1038 might cause damage to Nissho by reason of a settlement relieving Nissho of obligations under a subsequently extended contract of affreightment. This argument has no merit. On the date Occidental executed Contract 1038 it should reasonably have foreseen that Nissho would make arrangements to transport the oil from Libya to Japan, and that if Occidental failed to deliver oil, such nonperformance would cause Nissho to breach its transportation contracts.