Opinion ID: 172000
Heading Depth: 3
Heading Rank: 2

Heading: Right to a Jury on Damages

Text: HaynesTSA's final argument is that the district court erred in not having the jury determine Trane's fraud damages. Our opinion in Haynes I held that this case is one where the accounts are so complicated that an equitable accounting [of damages] may be warranted. 51 Fed.Appx. at 800. We added, however, that an equitable remedysuch as an accountingis not proper if there is an adequate remedy at law. Id. Therefore, we instructed the district court to make findings on remand regarding whether computing damages would be too complicated for a jury. Id. On remand the district court found as follows: [R]equir[ing] the jury to go through the detail of what each one of these claim-back things meant in terms of damages would prolong the trial unduly, and that makes it an inadequate legal remedy. Aplts. App. Vol. IV at 1712-13. On this basis, and over HaynesTSA's objection, the district court appointed a special master to determine Trane's damages. Although the parties ultimately stipulated to a damages figure of $1,770,000, HaynesTSA reserved the right to challenge the underlying appointment of a special master and, more generally, the court's decision to take damages away from the jury. HaynesTSA now raises those challenges on appeal. We agree that the determination of damages was a matter for the jury. The Seventh Amendment to the United States Constitution preserves to litigants the right to a jury trial in suits at common law. Ross v. Bernhard, 396 U.S. 531, 533, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970). A fraud claim seeking only damages is an action at law to which the right to a jury inheres. See Curriden v. Middleton, 232 U.S. 633, 636, 34 S.Ct. 458, 58 L.Ed. 765 (1914); 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2311, at 150 (3d ed.2008); 8 James Wm. Moore et al., Moore's Federal Practice § 38.30[1][e][ii], at 38-71 (3d ed.2008). In an action at law, parties are entitled ... to have a jury properly determine the question of liability and the extent of the injury by an assessment of damages. Dimick v. Schiedt, 293 U.S. 474, 486, 55 S.Ct. 296, 79 L.Ed. 603 (1935); accord Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 353, 118 S.Ct. 1279, 140 L.Ed.2d 438 (1998). This final proposition is subject to a narrow exception. An accounting is proper when there exists no adequate remedy at law. Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962). Accordingly, damages can be taken from the jury and an equitable accounting performed when the accounts between the parties are of such a complicated nature that only a court of equity can satisfactorily unravel them. Id. (internal quotation marks omitted). In Dairy Queen the Court explained that modern procedural toolssuch as the appointment of special masters to assist the jury with difficult mattersmake it a rare case when computational complexities will render a legal remedy inadequate. Id. at 478, 82 S.Ct. 894; see id. at 480-81, 82 S.Ct. 894 (Harlan, J., concurring) (noting that jury can also be assisted by proper instructions from the court). In Dairy Queen itself the Court reversed the district court's decision to strike a jury-trial demand. Id. at 479, 82 S.Ct. 894. The respondent in Dairy Queen sought monetary damages arising from trademark infringement and a contractual breach. Id. at 476-77, 82 S.Ct. 894. Although the complaint had been cast in terms of an `accounting,' the petitioner requested a jury trial. Id. at 477, 82 S.Ct. 894. The district court denied that request on the ground that the action was purely equitable or, alternatively, that any legal issues raised were incidental to the equitable issues. Id. at 470, 82 S.Ct. 894 (internal quotation marks omitted). The Supreme Court disagreed, holding that the action was legal in nature and that the constitutional right to trial by jury cannot be made to depend upon the choice of words used in the pleadings. Id. at 477-78, 82 S.Ct. 894. Moreover, the Court ruled that the parties' accounts were not sufficiently complicated to require an accounting. Id. at 478-79, 82 S.Ct. 894. Determining damages would require a look into petitioner's business records. Id. at 479, 82 S.Ct. 894. But that task, the court concluded, could be performed by a jury. Id. Although Dairy Queen did not eradicate the equitable-accounting remedy in actions at law, it is widely acknowledged that its analysis severely limited the circumstances in which it would be available. See generally Charles Alan Wright, supra § 2310, at 148 (noting that after Dairy Queen, federal courts consistently have refused to accept [the need for an accounting] as a ground for the denial of a jury trial demand); James Wm. Moore, supra § 38.30[1][e][ii], at 38-71 ([E]ven when there is some measure of complexity, a jury trial will be required if a legal remedy is sought.); see also Bruce v. Bohanon, 436 F.2d 733, 737 (10th Cir. 1970) (Holloway, J., concurring) (assessment of damages arising from wrongful appropriation of confidential information not sufficiently complicated to warrant an accounting). Trane has not cited to us a single case decided after Dairy Queen in which equitable accounting was employed to calculate damages from fraud. In this case the district court did not make (and based on the record on appeal, could not have made) findings establishing that only a court of equity [could] satisfactorily unravel the parties' accounts. Dairy Queen, 369 U.S. at 478, 82 S.Ct. 894. All the district court found was that having a jury tediously slog through individual claimbacks would prolong the trial. Aplts. App. Vol. IV at 1712. We can locate no support, however, for the view that a prolonged trial in itself provides an inadequate remedy at law. In any event, we see no reason why summaries could not have been used to shorten the proceedings and relieve the jury from the task of reviewing each individual claimback. See Fed.R.Evid. 1006 (allowing summaries); United States v. Thompson, 518 F.3d 832, 858-59 (10th Cir.2008) (discussing use of summaries to condense financial data that otherwise would have been incomprehensible to the jury). The right to a jury trial is not to be lightly denied; and before deeming a remedy at law inadequate, we must consider whether techniques are available to assist a jury in completing difficult tasks. See Dairy Queen, 369 U.S. at 478, 82 S.Ct. 894. Furthermore, the record developed in the second trial revealed that few, if any, computational headaches were destined for the jury. Most significantly, Trane's expert prepared a report before the second trial that analyzed a sample of claimbacks. The report divided HaynesTSA's unsupported, or erroneous, claimbacks into four categories: (1) claimbacks for a greater quantity of items than were actually sold; (2) claimbacks for items that were sold at a higher price than originally approved by Trane (sell-ups); (3) claimbacks for items sold to HaynesTSA personnel; and (4) claimbacks with inadequate or conflicting documentation. Aplts. App. Vol. II at 897. HaynesTSA's posttrial submissions reveal that it had few disagreements with the expert's report. Indeed, HaynesTSA stated that a report by its own chief financial officer, Steven Moss, reached numbers that were not much different. Id. Vol. II at 872. What HaynesTSA principally challenged was whether each of the four identified categories of unsupported claimbacks represented fraudulent claims. True, in Haynes I we remarked that an equitable accounting may be proper in this case. 51 Fed.Appx. at 800. But the record developed on remand made plain otherwise. Although its error was understandable, the district court should not have appointed a special master for an equitable accounting. The Seventh Amendment entitled HaynesTSA to a jury determination of Trane's fraud damages. We now turn to the remedy for the Seventh Amendment violation. Retrial to some extent is obviously necessary. The question is whether retrial of the fraud counterclaim can properly be limited to the issue of damages. The general rule is that a retrial may be limited to an issue only if the issue is so distinct and separable from the others that a trial of it alone may be had without injustice. Gasoline Prods. Co. v. Champlin Ref. Co., 283 U.S. 494, 500, 51 S.Ct. 513, 75 L.Ed. 1188 (1931); see Morrison Knudsen Corp. v. Fireman's Fund Ins. Co., 175 F.3d 1221, 1256 (10th Cir.1999). If the question of damages ... is [too] interwoven with that of liability, attempting to retry only damages could lead to confusion and uncertainty, which would amount to a denial of a fair trial. Gasoline Prods., 283 U.S. at 500-01, 51 S.Ct. 513. Here the damages issue cannot be separated from the merits of the liability claim. The jury found that HaynesTSA had followed a pattern or practice of fraudulent conduct in submitting claims for payment under the price assistance program. Aplts. App. Vol. II at 684. But that finding does not distinguish among the four categories of erroneous claimbacks identified by Trane's expert: (1) quantity discrepancies; (2) sell-ups; (3) intracompany sales; and (4) inadequate documentation. HaynesTSA's counsel made distinct arguments to the jury regarding why the claimbacks in each category were not fraudulent. For example, he contended that claimbacks lacking adequate documentation were the product of human error, not fraud. And sell-ups and intracompany sales, he said, were not fraudulent because Trane encouraged the former and openly permitted the latter. The jury's pattern or practice verdict does not reveal whether it credited some of these arguments but not others. The jury could have rationally concluded that HaynesTSA followed a fraudulent practice with respect to sell-ups but that the other categories of claimback error did not rest on fraud. Or, alternatively, the jury could have found that claimbacks merely lacking adequate documentation were not the product of fraud, but that all other claimback errors were. In short, the general verdict in this case does not fix the scope of HaynesTSA's liability. A new jury could not calculate Trane's damages without resolving the specifics of that liability. See Gasoline Prods., 283 U.S. at 499-500, 51 S.Ct. 513. Accordingly, Trane's entire fraud claim, and not simply the question of Trane's damages, must be retried.