Opinion ID: 198977
Heading Depth: 2
Heading Rank: 1

Heading: Equity or Jury

Text: 18 The first issue, whether the district court abused its discretion by ruling sua sponte at the close of the trial that neither party was entitled to a jury trial on Counts I, II, and IV, has two parts: One, whether the court was correct legally in its ruling, and two, whether the procedure it followed constituted an abuse of discretion. 19 We start with the equitable ruling. We have read our prior opinion carefully. Although it does mention jury several times, see Ed Peters I, 124 F.3d at 262, 268, 269, 270, 275, it is obvious that we were not deciding whether the counts alleged were equitable or came within the ambit of the Seventh Amendment right to a jury trial. Moreover, in discussing successor liability we stated that it is an equitable doctrine both in origin and nature. 124 F.3d at 267. It is important to point out that our prior opinion was on an appeal from judgment as a matter of law under Fed. R. Civ. P. 50(a). Neither party adverted to the equity versus jury issue. 20 We think the district court in the case at bar was correct in ruling that Counts I, II, and IV were equitable. In Gallagher v. Wilton Enters., 960 F.2d 120 (1st Cir. 1992), we stated: 21 Maintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care. Chauffeurs, Teamsters & Helpers Local No. 391 v. Terry, 494 U.S. 558, 565, 110 S. Ct. 1339, 1345, 108 L. Ed. 2d 519 (1990) (quoting Dimick v. Schiedt, 293 U.S. 474, 486, 55 S. Ct. 296, 301, 79 L. Ed. 603 (1935)). The touchstone of our inquiry is the Seventh Amendment, which, while it does not apply to state court proceedings, nonetheless controls when a federal court is enlisted to adjudicate a claim brought pursuant to a state's substantive law. See Byrd v. Blue Ridge Rural Elec. Coop., Inc., 356 U.S. 525, 536-38, 78 S. Ct. 893, 900-01, 2 L. Ed. 2d 953 (1958), overruled on other grounds, Hanna v. Plumer, 380 U.S. 460, 85 S. Ct. 1136, 14 L. Ed. 2d 8 (1965). Id. at 122 (footnote omitted). We further ruled that the right to a jury trial in the federal courts is to be determined as a matter of federal law in diversity as well as other actions. Id. We also directed that [a] federal court must look first to state law to determine the elements of the cause of action and the propriety of the remedies sought. Id. 22 In In Re Frank J. Evangelist, Jr., 760 F.2d 27, 29 (1st Cir. 1985), Justice Breyer, then Circuit Judge, stated: Actions for breach of fiduciary duty, historically speaking, are almost uniformly actions 'in equity' - carrying with them no right to trial by jury. 23 We point out that this case does not involve the computation of damages, which is often considered a determination to be made by a jury. Cf. Gallagher, 960 F.2d at 122. This is an action to recover on debts, the amounts of which have been reduced to judgments by the courts of Rhode Island. 24 We uphold the district court's ruling that the successor liability and breach of fiduciary duty counts were equitable and not subject to jury determination for the reasons stated in its opinion. See Ed Peters Jewelry Co. v. C & J Jewelry Co., 51 F. Supp. 2d 81, 89-90 (D.R.I. 1999) (hereinafter Ed Peters II). 25 The second part of this issue is whether the district court abused its discretion in not submitting three of the four counts to the jury. We reiterate what occurred. At the close of the evidence and before the case went to the jury the district court sua sponte, without prior notice to the parties, ruled that Counts One, Two, and Four sounded in equity and would not be submitted to the jury. The district court subsequently ruled that Count One would be submitted to the jury but on an advisory basis, and that Count Three, tortious interference, would be decided by the jury. 26 Most of the cases cited by Peters as evidence of abuse of discretion are ones in which the ruling disqualifying the jury came after the jury had returned verdicts and/or answered interrogatories. These cases are inapposite. 27 We are bothered by the lack of notice to the parties and any discussion with the parties by the court prior to its ruling. We first examine Fed R. Civ. P. 39 to determine if the court's conduct was in any way proscribed by the rule. The rule states: Rule 39. Trial by Jury or by the Court 28 (a) By Jury. When trial by jury has been demanded as provided in Rule 38, the action shall be designated upon the docket as a jury action. The trial of all issues so demanded shall be by jury, unless (1) the parties or their attorneys of record, by written stipulation filed with the court or by an oral stipulation made in open court and entered in the record, consent to trial by the court sitting without a jury or (2) the court upon motion or of its own initiative finds that a right of trial by jury of some or all of those issues does not exist under the Constitution or statutes of the United States. 29 (b) By the Court. Issues not demanded for trial by jury as provided in Rule 38 shall be tried by the court; but, notwithstanding the failure of a party to demand a jury in an action in which such a demand might have been made of right, the court in its discretion upon motion may order a trial by a jury of any or all issues. 30 (c) Advisory Jury and Trial by Consent. In all actions not triable of right by a jury the court upon motion or of its own initiative may try any issue with an advisory jury or, except in actions against the United States when a statute of the United States provides for trial without jury, the court, with the consent of both parties, may order a trial with a jury whose verdict has the same effect as if trial by jury had been a matter of right. 31 (Emphasis added.) 32 Rule 39(a)(2) clearly authorized the district court to take the action it did. There is nothing in the balance of the rule that prohibits the court from doing what it did or requiring advance notice to the parties. 33 Nor do we find any bar to the district court's procedure in the applicable case law. Although there are cases suggesting that earlier notice is required, 2 we find the Second Circuit's approach in Merex A.G. v. Fairchild Weston Sys., Inc., 29 F.3d 821 (2d Cir. 1994), more applicable to the instant facts and more persuasive. Merex was also a case for the collection of a commission. The court held that the district court did not abuse its discretion by declaring the jury finding to be advisory after plaintiff rested its case. Id. at 822. The first question was whether Merex's promissory estoppel claim was legal or equitable. The district court had found it to be equitable. The Court of Appeals found that Merex's claim was equitable rather than legal and, consequently, that Merex was not entitled to a jury trial on its claim for promissory estoppel. Id. at 826. 34 In finding that the trial court did not abuse its discretion in declaring the jury advisory, the court discussed most of the cases we have adverted to and examined carefully the wording of Fed. R. Civ. P. 39(c). The court first pointed out that the district judge did not wait until the jury returned the verdict before deciding that it would be advisory. Accordingly, there was no danger that the trial judge would veto the jury's verdict. Id. at 827. The same reasoning applies to the case before us. 35 We agree with the Second Circuit's reading of Rule 39(c). 36 Nor do we read Rule 39(c)'s provision for trial by consent to mandate the court's acceptance of the jury's verdict in this case. Rule 39(c) provides that the court, with the consent of both parties, may order a trial with a jury whose verdict has the same effect as if trial by jury had been a matter of right. Thus, when both parties consent, Rule 39(c) invests the trial court with the discretion-but not the duty-to submit an equitable claim to the jury for a binding verdict. While the litigants are free to request a jury trial on an equitable claim, they cannot impose such a trial on an unwilling court.... 37 Finally, although Rule 39(c) does not expressly require advance notice to the parties of the court's intention to treat the jury as advisory, we agree that such notice is preferable. In the absence of an express statutory mandate, however, we are not inclined to reverse on this basis alone, at least absent some demonstrable prejudice to the complaining party. Given the minimal strictures of federal pleading, it will sometimes not be clear until well into the trial whether an issue is equitable or legal. Id. (Internal citation omitted.) 38 For essentially the same reasons advanced by the Second Circuit, we find that the procedure followed by the district court here did not constitute an abuse of discretion. It would have been preferable for the court to give some prior notice of its ruling and discuss it with counsel. But viewing the ruling as a fait accompli, we cannot discern any prejudice to either party and particularly to Peters. Peters was understandably miffed when the district court changed the rules of the game at the last minute. On the assumption that this would be a jury trial, both parties undoubtedly spent more time in preparation for trial and during trial in explaining the issues carefully than would have been expended if notice of the ruling had been given prior to trial. But this, in our opinion, is not sufficient reason for establishing a hard and fast time rule limiting the judge's discretion for ruling whether issues sound in equity or law. This is certainly not the case for such a proscription. This is a unique case. Both parties and the district court assumed that the remand was for a jury trial. At some time prior to trial the parties, as well as the judge, should have recognized that there were equitable factors involved. But neither the lawyers nor the trial judge can be faulted for accepting the case on remand as a jury case. 39 We do not want our decision to be read as a blanket approval of the procedure followed by the district court. We think that advance notice should be given, if at all possible, of a ruling disqualifying a jury from considering issues in what was considered at the outset to be a jury trial. We hold only that under the special circumstances of this case, the district court did not abuse its discretion.