Opinion ID: 746462
Heading Depth: 2
Heading Rank: 2

Heading: Special Interrogatories Regarding Fraud

Text: 32 Orix next claims that the district court failed to instruct the jury regarding the proper legal standard for fraud in Illinois. Specifically, the court refused to instruct the jury that Orix could prove its fraud case by demonstrating that Taylor acted with a reckless disregard for the truth or falsity of its representations. Instead, the court only instructed the jury that Orix could prove its case by showing that Taylor knowingly or intentionally misrepresented material facts. Because we agree that the district court erred in refusing to instruct the jury about reckless disregard, we reverse and remand for a new trial on the fraud count. 33 Before we can discuss the merits of Orix's claim, however, we must consider whether Orix waived this argument by failing to object adequately to the special verdict questions and the court's refusal to give Orix's proposed supplemental instructions regarding the special verdicts. Taylor asserts that Orix waived any argument regarding the instructions and special verdicts because Orix's mere submission of proposed instructions does not sufficiently preserve an error in failing to give those instructions; the party who wants the instruction given must object to the refusal to give the instruction. Salazar v. City of Chicago, 940 F.2d 233, 242 (7th Cir.1991); see also Gordon v. Degelmann, 29 F.3d 295, 298 (7th Cir.1994). Federal Rule of Civil Procedure 51 requires such objections so that parties will alert the judge [of] their reasons, so that the court may resolve legal disputes with full information and avoid all errors that are avoidable. Hebron v. Touhy, 18 F.3d 421, 424 (7th Cir.1994). In Hebron, for example, we assumed that a proposed instruction served as an objection but nonetheless found waiver because the party that proposed the instruction did not discuss the relevant issues or otherwise furnish the district judge with the tools of decision. Id.; see also Gordon, 29 F.3d at 298. 34 This case is plainly distinguishable from both Hebron and Gordon. Here, Orix provided proposed instructions to supplement the special verdicts that had been previously drafted by the court and the parties. The court then refused to give Orix's supplemental instructions, stating that this is not a case of reckless disregard. At that point, Orix asked the court if it could comment on the court's ruling regarding the reckless disregard instructions corresponding to the first two special verdict questions. 3 Orix then argued at length that the facts of this case illustrate reckless disregard and that Illinois law deems such reckless and careless representations as actionable. The court responded, Okay, I have your point. Motion denied. Unlike the parties in Hebron and Gordon, Orix stated distinctly the matter objected to and the grounds of the objection, Fed.R.Civ.P. 51, and therefore provided the court with full information so that the court could avoid all errors that are avoidable, Hebron, 18 F.3d at 424. See also Gordon, 29 F.3d at 298. 35 If Orix had addressed the court using the word objection rather than comment, or if it had noted its objection to the original special verdicts on the record once the court continued the proceedings after the jury instruction conference, no one could have disputed that Orix would have preserved its right to appeal the court's rulings. We are not overly formalistic about the proper way to preserve issues for appeal-a proposition clearly demonstrated by this opinion--but we note that simple use of the words I object would likely have saved everyone from having to address the waiver issues in this case. 36 Now that we have determined that Orix did not waive its arguments regarding the reckless disregard instructions, we can entertain the merits of Orix's contention. Even though a district court has broad discretion to frame a special verdict question, we must reverse a judgment entered upon an answer to a question which inaccurately frames the issue to be resolved by the jury. Umpleby v. Potter & Brumfield, Inc., 69 F.3d 209, 214 (7th Cir.1995). We therefore review a district court's jury instructions and special verdicts as a whole and reverse when they convey an inadequate or misleading impression of the law that affects the jury's understanding of those issues to the prejudice of the complaining party. See Heller Int'l Corp. v. Sharp, 974 F.2d 850, 856 (7th Cir.1992). 37 As noted above, the district court refused to give Orix's proposed reckless disregard instructions to supplement the special verdict form. Illinois law, 4 however, provides that a party need not demonstrate an express fraudulent intent in order to prove its fraud claim. Duhl v. Nash Realty Inc., 102 Ill.App.3d 483, 57 Ill.Dec. 904, 911, 429 N.E.2d 1267, 1274 (1981); see also Gerill Corp. v. Jack L. Hargrove Builders, Inc., 128 Ill.2d 179, 131 Ill.Dec. 155, 161-62, 538 N.E.2d 530, 536-37 (1989). Rather, a party can satisfy the fraudulent intent element 5 by proving that a misrepresentation was made knowingly or with a reckless disregard for its truth or falsity. Gerill Corp, 131 Ill.Dec. at 161, 538 N.E.2d at 536; Duhl, 57 Ill.Dec. at 911, 429 N.E.2d at 1274. In other words, statements made in culpable ignorance of their truth or falsity are fraudulent. Duhl, 57 Ill.Dec. at 911, 429 N.E.2d at 1274. 38 Relying on its view of the evidence, the district court refused to give Orix's additional instructions concerning reckless disregard and prevented Orix from discussing the reckless disregard standard in its closing argument. In so ruling, the court stated that this is a case where Metts either knew or didn't know that the letters on the letterhead referred to wholesale values.... He didn't recklessly disregard anything in that conversation.... That is not a case of reckless disregard. For this reason, the court limited the jury's consideration to whether Taylor knowingly or intentionally misrepresented material facts regarding whether the appraised values were wholesale or retail. 39 While we understand the district court's laudable desire to narrow the issues in this complicated case through the use of special verdicts and although we agree that carelessness, by itself, cannot support an inference of fraud, see Brazell v. First Nat. Bank and Trust Co. of Rockford, 982 F.2d 206, 208 (7th Cir.1992), we nonetheless believe that Orix should have been able to present its reckless disregard theory to the jury. The district court appears to have excluded reckless disregard from this case because Spoczynski and Metts testified differently regarding the content of their June 19 telephone conversation. Specifically, the two provided conflicting testimony regarding whether Metts ever confirmed that the appraisals were at wholesale value. Based on this testimony, the court apparently reasoned that the jury could find one of two things--that Metts either lied or did not lie about his knowledge of whether the values provided to Orix were wholesale values. The district court thus thought that this was a case of either knowing misrepresentation or no misrepresentation at all. This view of the facts, however, overlooks another possible basis for liability--even if Metts did not lie about the wholesale value issue, Taylor and Metts may have been culpably ignorant about the truth or falsity of the representations made in the letter sent to Orix. 40 First of all, Metts sent Ron Gallo the blank Taylor letterhead with his signature and title, and he did so knowing that Gallo would use the letterhead to forward appraisals of Taylor-manufactured equipment that Metts never inspected. Despite giving Ron Gallo the blank letterhead, Metts never asked for copies of the appraisal letters sent to Orix, he never asked what language was used in these letters, and he never verified the exact equipment and corresponding value described in the letters. Even more telling, Metts commented that it was really no concern of his what Gallo did with the appraisal letters even though he was well aware of Gallo Florida's dire financial straights and desperate need for financing. 41 The June 19, 1991 telephone conversation between Metts and Spoczynski arguably provides further evidence of Metts's reckless disregard for the truth or falsity of the representations in the appraisal letters. In essence, Metts asked no questions and he informed Spoczynski that everything in the letters was accurate. According to Spoczynski, Metts assured him that he signed the appraisal letter, that he had the authority to sign the letter, and that he verified the wholesale prices in the letter. Metts disputes this testimony, claiming that their conversation was short and that he told Spoczynski only that he provided appraisals to Ron Gallo. Nonetheless, Metts failed to tell Spoczynski that he never saw the letters containing the appraisals, that the appraisal values were retail rather than wholesale, or that the appraisal values were based on the assumption that the equipment was rebuilt to factory specifications. 42 As a whole, the evidence reveals that Metts represented the values of various machines to Ron Gallo, Metts knew that Ron Gallo--whose company was in dire financial straits--provided those representations to Orix on Taylor letterhead, but Metts never checked to see what representations were actually made to Orix under his name. While this evidence may not convince the jury that Taylor and Metts recklessly disregarded the truth or falsity of their representations, we believe that the jury should have been able to make that determination. 43 Finally, the omission in the special verdicts was crystallized by defense counsel's closing argument, see Bronk v. Ineichen, 54 F.3d 425, 431 (7th Cir.1995), which maintained that Metts's actions may have been a mistake, but they did not constitute intentional fraud. Considering these factors, we find that the district court erred in refusing to permit Orix to present its reckless disregard theory to the jury. We additionally note that our decision here was not an easy one, and it admittedly requires both the district court and the jury in the next trial to make difficult determinations regarding Taylor's and Metts's recklessness throughout these communications. Nonetheless, we believe that Illinois precedent requires that a jury consider such recklessness. 44