Opinion ID: 676040
Heading Depth: 2
Heading Rank: 2

Heading: The Testimony from Former Franchisees

Text: 25 California Smoothie objected to the admission of the testimony of former California Smoothie franchisees on multiple occasions. See e.g., supp. app. at 13 (motion in limine), id. at 283 (prior to testimony of former franchisees), id. at 505 (charge conference), id. at 517-18 (post-trial motion). Nevertheless, J & R Ice Cream argues that we should not address California Smoothie's claim that the district court erred in admitting this testimony. In this regard, J & R Ice Cream contends that even if the testimony was inadmissible for purposes of its Consumer Fraud Act claim, California Smoothie is barred from challenging the admission of this testimony on appeal, because the evidence was admissible for purposes of its equitable fraud claim and California Smoothie failed to request a limiting or curative instruction after J & R Ice Cream voluntarily dismissed its equitable fraud claim. See br. at 23. However, the record indicates that California Smoothie continued to object to the admission of the testimony after J & R Ice Cream dismissed its equitable fraud claim, see supp. app. at 505 (charge conference), that the district court continued to hold that the testimony was admissible, id. at 505 (charge conference), 517-18 (post-trial motion), and that J & R Ice Cream capitalized on the admission of the testimony by arguing in its closing that the former franchisees's testimony regarding misrepresentations made to them by California Smoothie was evidence that California Smoothie made misrepresentations to Baugher and Rossetti, id. at 509. 8 Thus, California Smoothie is not barred from challenging the admission of this testimony on appeal. 26 The district court allowed J & R Ice Cream to introduce testimony by two former California Smoothie franchisees, Jean Dunlop and Charles McRae, both of whom testified that California Smoothie made representations to them regarding the sales and profits a franchise would produce. See id. at 280-355. Although California Smoothie objected to this testimony, the district court ruled that it was admissible as evidence of intent and a common plan or scheme. Id. at 283, 307, 517-18. Subsequently, during argument on the post-trial motions, the court stated that it became clear at the charge conference that intent was not an element of a Consumer Fraud Act violation, but it reiterated that the testimony of the two former franchisees was admissible as evidence of California's common plan or scheme or business practice of representing sales and profit figures to potential franchisees. Id. at 517. 27 We review the district court's decision to admit testimony by former California Smoothie franchisees regarding California Smoothie's prior bad acts for abuse of discretion. See United States v. Console, 13 F.3d 641, 659 (3d Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1660, 128 L.Ed.2d 377 (1994). As we indicated in Console, 13 F.3d at 659 (quoting United States v. Sampson, 980 F.2d 883, 886 (3d Cir.1992)): 28 [f]our guidelines set forth by the Supreme Court govern the admission of prior 'bad acts': '(1) the evidence must have a proper purpose under Rule 404(b); (2) it must be relevant under Rule 402; (3) its probative value must outweigh its prejudicial effect under Rule 403; and (4) the court must charge the jury to consider the evidence only for the limited purpose for which it is admitted.' Rule 404(b) provides that: 29 [e]vidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident. 30 The testimony given by Dunlop and McRae was not admissible as evidence of intent because, as the district court recognized subsequent to its initial ruling on the evidence, intent is not an essential element of a Consumer Fraud Act violation consisting of an affirmative act. See Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 371 A.2d 13, 16 (1977); D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J.Super. 11, 501 A.2d 990, 996 (App.Div.1985). There is no doubt that the alleged Consumer Fraud Act violations in this case consist of affirmative misrepresentations. 31 Moreover, the testimony was not admissible as evidence of a common plan or scheme. 32 Ordinarily, when courts speak of 'common plan or scheme,' they are referring to a situation in which the charged and the uncharged ... [acts] are parts of a single series of events. In this context, evidence that the defendant was involved in the uncharged ... [act] may tend to show a motive for the charged ... [act] and hence establish the commission of the ... [act], the identity of the actor, or his intention. 33 Government of the Virgin Islands v. Pinney, 967 F.2d 912, 916 (3d Cir.1992) (citing Edward W. Cleary et al., McCormick on Evidence Sec. 190, at 559 (3d ed. 1984)). Alternatively a common plan or scheme may consist of incidents [that] were sufficiently similar to earmark them as the handiwork of the same actor, and thus constitute  'signature evidence'  of identity. Id. 9 With the possible exception of prosecutions for conspiracy, plan or design is not an element of the offense; therefore, evidence that shows a plan must be relevant to some ultimate issue in the case. See 22 Wright and Graham, Federal Practice and Procedure Sec. 5244, at 500-01 (1978). 34 Dunlop and McRae testified that California Smoothie made representations to them regarding the sales and profits they would achieve if they acquired franchises. This testimony was not relevant to an ultimate issue in this case, such as motive, identity or intent. These issues were not in dispute. See Pinney, 967 F.2d at 917. Furthermore, the testimony was not germane to the negligence count. Therefore, the evidence was admitted for exactly the purpose Rule 404(b) declared to be improper, id., namely to establish the defendants' propensity to commit the charged act. See United States v. Jemal, 26 F.3d 1267, 1272 (3d Cir.1994). The district court acknowledged that it admitted the former franchisees' testimony for this purpose, stating: in the context of this case, I believe that it was proper to show that it was more likely that representations of sales figures were made to ... [J & R Ice Cream] by demonstrating that the officials of California Smoothie had a practice of making such representations. See supp. app. at 518. Thus, the district court abused its discretion in admitting this testimony for an improper purpose. 35 Although J & R Ice Cream contends that the testimony was harmless because it was cumulative and accounted for only half an hour of a two-week trial, see br. at 28-29, we conclude that the testimony was prejudicial because it portrayed California Smoothie as an organization engaged in a large-scale scheme to defraud prospective franchisees by using misrepresentations to persuade them to acquire franchises. 10 Although the testimony of the former franchisees only addressed representations made by California Smoothie regarding the sales and profits that a franchise would produce, we are satisfied that the testimony prejudiced California Smoothie on the two aspects of the Consumer Fraud Act verdict which the testimony did not address directly, the representations with respect to California Smoothie's expertise in site selection and the representation regarding the limitation on the maintenance charges. We take this view because we believe that the jury could have used the highly prejudicial, indeed almost inflammatory evidence to conclude that California Smoothie used misrepresentations in multiple aspects of its sales efforts. At the very least, we cannot say with any confidence that it is highly probable that the error did not substantially affect California Smoothie's rights on all the Consumer Fraud Act issues. See Lippay v. Christos, 996 F.2d 1490, 1500 (3d Cir.1993). Thus, the district court's abuse of discretion requires reversal of the judgment against California Smoothie on the Consumer Fraud Act count. 36 The admission of this testimony does not, however, require reversal of the judgment against California Smoothie on the negligence count because the evidence of California Smoothie's alleged misrepresentations was quite distinct from the evidence supporting the jury's determination that California Smoothie was negligent in its selection of a franchise site and negotiation of a Pompano mall lease. We also point out that there was sufficient evidence supporting this determination. 11