Court Opinion

ID: 2961849
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:48:49.41028+00
Date Added: 2024-06-11T11:42:22.306080
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                        _____          No. 91-2220                              RAUL F. RODRIGUEZ, ET AL.,                               Plaintiffs, Appellants,                                          v.                          BANCO CENTRAL CORPORATION, ET AL.,                                Defendants, Appellees.                                     ___________                                     ERRATA SHEET               The  opinion of  this  Court issued  on  March 30,  1993  is          amended as follows:               On page 4, line 1:  "finansite" should be "site".        March 30, 1993      UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 91-2220                              RAUL F. RODRIGUEZ, ET AL.,                               Plaintiffs, Appellants,                                          v.                          BANCO CENTRAL CORPORATION, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                    [Hon. Jose Antonio Fuste, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                            Aldrich, Senior Circuit Judge,                                     ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            Harry E. Woods  with whom Fernando  L. Gallardo  was on brief  for            ______________            _____________________        appellant.            James  G.  McLaughlin  Torres  with  whom  Luis  Sanchez-Betances,            _____________________________              ______________________        Ivonne Cruz-Serrano,  and Luis  A. Melendez-Albizu  were on brief  for        ___________________       ________________________        appellee.                                 ____________________                                    March 30, 1993                                 ____________________                 BOUDIN,  Circuit  Judge.   In  the  district court,  152                          ______________            buyers  of lots of undeveloped real estate in Florida charged            the real estate company, the  bank that financed the company,            and certain individuals with  securities fraud under RICO, 18            U.S.C.   1962(c).1   Describing their land  sale contracts as            "securities," the  buyers claimed  that their  purchases were            induced by  false representations that the  land was suitable            for home sites and that  the surrounding areas would  develop            into  a thriving community.  In fact, the property turned out            to  be worthless swamp land  unfit for development.   After a            lengthy jury trial, the district court directed a verdict for            the defendants, ruling that the  land sale contracts were not            securities.    The buyers  appeal.   We  affirm  the district            court.                                    I.  BACKGROUND                 The underlying facts, viewing  the evidence in the light            most favorable to  the buyers,  can be briefly  stated.   The            buyers, most of whom  are residents of Puerto Rico,  acquired            their lots in  Florida beginning  in the  early 1970's  after            being  approached   by  the   real  estate   company's  sales            representatives.    During  these meetings,  the  prospective                                            ____________________                 1RICO  is   the  Racketeering  Influenced   and  Corrupt            Organizations chapter  of the Organized Crime  Control Act of            1970, 18 U.S.C.    1961-68.  The real estate company was J.C.            Investments,  Inc.    The  original financing  was  by  Banco            Economias  and a group of investors.  Banco Central succeeded            Banco Economias.                                           -2-                                         -2-            buyers were offered  the opportunity  to purchase  subdivided            lots  in an undeveloped site that would eventually, they were            told, include roads, schools, churches, stores and  elaborate            recreational  facilities.    The  project was  touted  as  an            excellent investment due not only to prospective development,            but also to its close proximity to  Disney World.  These oral            assurances  were bolstered by promotional brochures depicting            sporting activities at nearby locations  and other literature            informing buyers of the development's progress.                 A cautionary statement, written in small print in one of            the promotional brochures,  advised that the  development was            "not  a homesite  offering."   Another  pamphlet warned  that            "[i]mprovements such as roads  and drainage are not presently            on  the property  and  are not  contemplated."   Yet  another            warning,  this one  prominently  featured in  a Florida  Land            Sales  Board Offering  Statement and  included as  well  in a            brochure, advised buyers that the property was not usable for            building purposes,  that  the  seller  neither  promised  nor            contemplated any improvements, and  that 35% of the  land was            "marshy or swampy" and subject to flooding.                 Most buyers  did not read  these warnings and  those who            did  were   often  told  that  the   warnings  were  standard            boilerplate  required for  all Florida  land sales.   Another            response was that the  swampy sites would be drained  and the            water  diverted  to  form  ponds  and  lakes.    The  buyers,                                         -3-                                         -3-            according to  their testimony,  were assured that  their land            could be  used as  a  home site  or  for any  other  purpose.            Several  chose  their  lots  from a  map  which  divided  the            development  into "residential"  and "commercial"  sections.             The vast majority  of buyers, many of whom hoped to retire to            Florida, purchased their lots  with the intention of building            a  home.   According  to their  testimony,  only a  few  were            concerned solely with the re-sale value of their property and            had  no  intention  of residing  on  or  developing  the lots            themselves.                 The projected  improvements were  not made.   The buyers            eventually learned, some through a local newspaper, that they            were  the  owners  of swamp  land  worth  a  fraction of  the            purchase price.   At trial,  the buyers produced  experts who            testified that, as a result of zoning restrictions applicable            to  flood-prone  areas, few  of the  lots  could be  built on            legally.     The   experts   said  that,   even  absent   the            restrictions,  the  area was  physically  unsuitable for  any            broad-scale development.                 On  August  2, 1982,  the  buyers  brought  suit in  the            district  court,  making  claims   against  the  real  estate            company,  the financing  bank, and  a number  of individuals.            The complaint asserted claims under the Interstate Land Sales            Full  Disclosure  Act,  15  U.S.C.      1701  et   seq.,  the                                                          ________            Securities Exchange  Act, section 10(b), 15  U.S.C.   78j(b),                                         -4-                                         -4-            and RICO, 18  U.S.C.   1962(a)  (use of racketeering  derived            income).   Much time was consumed with class action disputes,            discovery,  statute   of  limitations  issues,   and  various            attempts to  amend the  complaint.  Eventually,  the district            court in November 1989 dismissed all these claims but allowed            the buyers to amend in order to  allege a RICO claim charging            securities  fraud as  predicate  acts.2   Rodriquez v.  Banco                                                      _________     _____            Central,  727 F. Supp. 759  (D.P.R. 1989), aff'd  in part and            _______                                    __________________            vacated in part, 917 F.2d 664 (1st Cir. 1990).            _______________                 On  January  25, 1990,  the  district  court refused  to            dismiss the  new  RICO  claim  based  on  predicate  acts  of            securities fraud introduced by the new amended complaint.  At            the  same  time the  court declined  to  allow the  buyers to            allege mail fraud under RICO.   The distinction, the district            court explained, was that securities fraud had been  an issue            in some form  from the  outset;3 mail fraud,  in the  court's            view,  had  not  been  alleged  until  after seven  years  of            litigation, including extensive discovery.                 Trial  commenced on  August  5, 1991,  and concluded  on            September  24, 1991.  The evidence submitted has already been                                            ____________________                 2The Land  Sales Act and Securities  Exchange Act claims            were dismissed on statute of  limitations grounds.  The  RICO            claim under    1962(a), charging use  of racketeering derived            income, was dismissed for lack of standing.                 3In addition to the claim of  securities fraud under the            Securities  Act  of 1934,  the  original  complaint had  also            mentioned securities  fraud as  part of the  improvident RICO            claim under 18 U.S.C.   1962(a).                                         -5-                                         -5-            described briefly and  is discussed  further below.   At  the            conclusion  of the evidence,  the court on  October 10, 1991,            granted a motion for judgment as  a matter of law and ordered            judgment for all defendants,  Rodriguez v. Banco Central, 777                                          _________    _____________            F.  Supp. 1043  (D.P.R.  1991), giving  rise  to the  present            appeal.   In  its  lengthy opinion,  the district  court held            inter  alia that the land  sale contracts were not securities            _____  ____            under  the  federal securities  laws.    In consequence,  the            buyers' RICO claim failed for lack of the necessary predicate            acts.                                 II. THE RICO CLAIMS                 RICO  makes  it unlawful  for  a  person to  conduct  an            enterprise  in or  affecting  interstate  commerce through  a            pattern  of "racketeering  activity."   18 U.S.C.    1962(c).            "Racketeering activity"  is defined to include  "fraud in the            sale of securities."   Id.    1961(1)(D).   For a  "pattern,"                                   __            there must  be  at least  two acts  of racketeering  activity            within ten years of each other, id.   1961(5), here, fraud in                                            __            the  sale of  securities.   In this  case, the  buyers  had a            sufficient case of fraud to put before a  jury.  The question            is whether it was fraud in the sale of "securities."                 The  district  court concluded  that no  reasonable jury            could  find  the  land sale  contracts  in  this  case to  be            "securities," a term that  the federal securities laws define                                         -6-                                         -6-            to include "investment contracts."4   Rodriquez, 777 F. Supp.                                                  _________            at 1060-61.    Our analysis  on  appeal therefore  begins  by            parsing  the terms  "securities" and  "investment contracts,"            distinguishing   them  from   other  forms  of   property  or            contractual arrangements.   This  legal furrow has  been well            plowed  in  prior  opinions, but  imaginative  promoters  are            constantly devising new lures and promises to tempt investors            and perplex the courts.                  The  definition   of  "investment  contract"   has  been            bracketed by a  set of Supreme  Court decisions which,  while            they  involve facts quite  different than ours,  mark out our            path.   SEC v. W.J. Howey  Co., 328 U.S. 293 (1946) (interest                    ___    ______________            in  citrus   enterprise  a  security);  and   United  Housing                                                          _______________            Foundation, Inc. v. Forman, 421  U.S. 837 (1975) (interest in            _______________     ______            apartment  cooperative not a security).   In essence, we have            been  told  by  these  cases  that  in  defining  securities,            substance governs  form, and  the substance of  an investment            contract is a security-like interest in a "common enterprise"            that,  through  the efforts  of  the promoter  or  others, is            expected to generate profits  for the security holder, either                                            ____________________                 4The  courts have  construed  the  term "securities"  in            light  of  the  definitions  of  the  term  provided  by  the            Securities  Act  of 1933,  15 U.S.C.   77a  et seq.,  and the                                                        ______            Securities Exchange Act of 1934, 15 U.S.C.   78a et seq.  See                                                             ______   ___            Landreth  Timber Co. v. Landreth,  471 U.S. 681  (1985).  The            ___________________     ________            definitions  appear respectively  in  the  1933 Act,  section            2(1),   15  U.S.C.     77b(1),  and  the  1934  Act,  section            3(a)(10), 15 U.S.C.   78c(a)(10).                                         -7-                                         -7-            for direct distribution or as an increase in the value of the            investment.  Howey, 328  U.S. at 298-99; Forman, 421  U.S. at                         _____                       ______            852-53.                 Each component  in the concept matters.   There are many            investments obtained  by contract,  such as one's  home, that            are not an  interest in an enterprise.    Forman, 421 U.S. at                                                      ______            858.    One   may  have  an  interest  in  an  enterprise--an            employment contract, for example--that is  not an entitlement            to  profits or  increased  value.    Conversely,  in  a  sole            proprietorship the owner could have a claim on all profits of            the enterprise  but there  might be no  contract or  security            involved.    Further, the  Supreme  Court  cases mark  out  a            concept, not a precise definition.  The term "securities," we            _______            are   told,  must   be  flexibly   applied  to   capture  new            arrangements  comprising the  essence of  securities, however            they may  be named.   SEC v.  C.M. Joiner Leasing  Corp., 320                                  ___     _________________________            U.S. 344, 351  (1943).  But not  all property is a  security,            and fuzzy edges do not mean that the concept is unbounded.                 In this case, apart from the generality of the statutory            language, a further, two-fold  problem exists in applying the            concept to the land sale contracts at issue.  First, what the            contracts say  is not all  that the  buyers were told  by the            salespersons; the  evidence  reveals that  many  buyers  were            shown materials and given oral assurances that went beyond or            even contradicted  the formal legal documents.   Second, what                                         -8-                                         -8-            the  buyers  were   shown  or  told,   and  what  their   own            understandings and  intentions  were, varied  from  buyer  to            buyer.  We start with some legal rules of thumb.                 A simple sale of land, whether for investment or use, is            not a "security."  E.g., Hocking v. Dubois, 839 F.2d 560, 564                               ___   _______    ______            (9th Cir. 1988),  modified on  reh'g en banc,  885 F.2d  1449                              __________________________            (9th Cir.  1989)  (en  banc), cert.  denied,  494  U.S.  1078                                          _____________            (1990).   Even if bought for investment, the land itself does            not  constitute a business  enterprise, and  "securities" are            interests  in  an enterprise.    Howey, 328  U.S.  at 298-99.                                             _____            Thus, one  who buys raw  land or  even a building,  hoping to            profit from rents  or the  natural increase in  the value  of            property,  is  not  under  normal  circumstances  treated  as            purchasing a  "security."   Aldrich v.  McCulloch Properties,                                        _______     _____________________            Inc.,  627   F.2d  1036,  1039   n.  1   (10th  Cir.   1980).            ___            Conventional incidentals,  such  as the  seller's promise  to            install  a road or  electricity, is  similarly not  enough to            elevate an  ordinary real estate transaction to the status of            a security.  Id. at 1040.                           __                 At  some point,  however, the  commitments and  promises            incident to a land transfer, and the network of relationships            related to the project, can cross  over the line and make the            interest acquired one in an ongoing business enterprise.  See                                                                      ___            Howey, 328  U.S. at 299-300.  At that point, the interest may            _____            be treated as  a security, even  if not so  labeled.  Id.  at                                                                  __                                         -9-                                         -9-            300.   And in making this appraisal, the promoter properly is            held to his representations as to what he is selling, Joiner,                                                                  ______            320 U.S. at 353, even where those promises go well beyond the            legal  terms of  the  contracts and  the  fine print  of  the            disclaimers.                 In this case the promoters offered the land primarily as            an  "investment."  A number of buyers testified at trial that            the  salespeople  emphasized  the  investment  value  of  the            project, a  contention supported  by a company  sales' manual            introduced into evidence, stressing capital appreciation as a            prime selling point.   Compare Rice v. Branigar Organization,                                   _______ ____    ______________________            Inc., 922  F.2d 788, (11th Cir.  1991) (promotional materials            ___            emphasized personal use over  investment).  A complication is            now introduced:  while the lots were offered as an investment            by the seller, most  buyers intended to live on  the property            and  purchased  primarily for  use.   A  purchase for  use or            consumption, it  is  said, is  not a  security or  investment            contract.  Forman, 421 U.S. at  852-53.  We need not sort out                       ______            the  problem of  opposing  buyer and  seller viewpoints,  nor            search out buyers who had investment in mind, because another            aspect of the matter decides the case.                 In our  view even if every buyer  bought for investment,            what was purchased in this case was not a share of a business            enterprise and so not  a security.  Taking the  evidence most            favorably to the  buyers, they were  sold land in  individual                                         -10-                                         -10-            parcels  with  strong  and  repeated   suggestions  that  the            surrounding  area would develop  into a  thriving residential            community.  But apart  from the promise of an  existing lodge            or a new  country club, the  evidence did not  show that  the            promoter  or  any  other   obligated  person  or  entity  was            promising the buyers  to build  or provide anything.   A  few            scraps of  evidence, usually  ambiguous, may point  the other            way but we do not think that a reasonable jury could conclude            on  this  record  that   the  defendants  were  promising  to            construct a community.                 A security  might exist if the  defendants had promised,                             _____            along  with   the  land  sales,  to   develop  the  community            themselves.   Then each buyer might be  acquiring an interest            not only in land but in  a package of commitments that, taken            together, could comprise  a business  venture harnessing  the            entrepreneurship of the  promoter.  Each parcel of land would            still  have a different  value, unlike  the typical  share of            stock, but most  of the  potential gain might  depend on  the            development of the  community as  a whole.   Cf. Joiner,  320                                                         __  ______            U.S. at 348-49  (promised oil well gave mineral  leases "most            of  their  value and  all of  their  lure").   The promoter's            commitment to build the  community, in turn, could constitute            the  "common  enterprise"  financed  jointly  by the  buyers.            Howey,  328 U.S. at 299.   Several decisions  have taken this            _____            view, and we  think they may be correct in  principle.  E.g.,                                                                    ___                                         -11-                                         -11-            McCown v. Heidler, 527  F.2d 204 (10th Cir. 1975);  Miller v.            ______    _______                                   ______            Woodmoor,  CCH Fed. Secur. L. Rep.   96,109, 91,998-999 (D.C.            ________            Colo. 1976); Aldrich, 627 F.2d at 1038-1040.                         _______                 In this case, however, the most that can be said is that            the  promoter   left  the  distinct,  and  distinctly  false,            impression  that a  community  was going  to develop  through            natural forces.   Many buyers were  told that Disney  World's            presence  nearby  would  spur  growth.    Others  were  shown            pictures  of specific sports  facilities already  existing at            specific  distances.   But  aside from  the lodge  or country            club, there was little  testimony that specific promises were            made  by anyone to do specific things.5  Accordingly, what we            have is  sales of property based on  false representations as            to  its  prospects, but  there is  no  pretence of  a "common            enterprise" managed by the  promoter and hence no "security."            See, e.g., Woodward  v. Terracor, 574  F.2d 1023, 1025  (10th            ___  ___   ________     ________            Cir. 1978);  Happy Investment Group  v. Lakewood  Properties,                         ______________________     _____________________            Inc., 396 F. Supp. 175, 180-81 (N.D. Cal. 1975).            ___                 One  might  ask why  the  absence of  a  security should            matter.  The  property was made attractive by  the promoter's                                            ____________________                 5The promoter  proposed to  convey an existing  house to            the community for  use as  a lodge by  buyers visiting  their            land and offered  memberships in a to-be-constructed  country            club.   The  latter offer  was accepted  by none  of the  152            buyers  who  are  plaintiffs in  this  case.    In any  case,            scattered  references to  these limited  amenities would  not            transform the purchase of a lot into a share in a development            venture.  See Rice, 922 F.2d at 790-91.                      ___ ____                                         -12-                                         -12-            claims that a  community would arise,  and those claims  were            blatantly false, or so a jury could  find.  But this is not a            simple "fraud"  case:   the buyers, seemingly  through delay,            have apparently  lost their fraud remedies,  except for their            RICO  claim based  on supposed  predicate acts  of securities            fraud.   Without securities, this RICO  claim evaporates.  It            is disagreeable for  a court  to turn away  victims who  have            been wronged.   But  we cannot disregard  controlling Supreme            Court  decisions or  distort  the securities  laws to  rescue            plaintiffs who have themselves cast their legitimate remedies            away.                 Puerto Rico  law provides  ample remedies for  defrauded            buyers of land.  See 31 L.P.R.A.   3408-3409.  The Interstate                             ___            Land  Sales Full Disclosure Act,  15 U.S.C.     1701 et seq.,                                                                 ______            offers  a broad gauged federal remedy, modeled in part on the            Securities Act of 1933.  Indeed, RICO itself makes mail fraud            a  predicate act, 18 U.S.C.   1961(1)(A), but the buyers here            delayed  too  long in  asserting this  claim.   All  of these            possible claims, federal and  local, could have been asserted            in a timely filed complaint in this case.   Sometimes the law            itself is at fault; this time the fault is with the lawyers.                                   III.  MISCELLANY                 Ignoring their own defaults, the buyers' lawyers instead            assail  the district  judge.   They  devote the  first thirty            pages of argument in  their brief (no reply brief  was filed)                                         -13-                                         -13-            not to the difficult legal issues of RICO and securities law,            but  to  claims  that   the  district  judge  barred  leading            questions, helped certain defendants with their answers,  and            otherwise misconducted the trial.                   There is some reason to believe that the district judge,            far  from tilting against the buyers,  took steps to preserve            what  claims he could for the buyers.   One effort he made to            expedite the case through certified  questions was frustrated            in  part by the buyers' neglect to follow a simple procedural            rule. See Rodriguez v. Banco Central, 917 F.2d at 668-69.  He                  ___ _________    _____________            also  permitted the buyers to  go to trial  on their marginal            RICO  security  claim,  allowing  them  to  flesh  out  their            "securities"   allegation   through   evidence    of   actual            representations; many  other judges, we are  confident, would            have dismissed the securities claims before trial in light of            the Supreme Court decisions already discussed.                 In all events, the instances  offered to show error  and            partiality  by the district judge in his conduct of the trial            are close to  trivial.   Trial judges  are constantly  making            judgments about  the use  of leading questions,  the need  to            clarify  witness  answers,  and   similar  matters  of  trial            management.  In  this realm the  widest possible latitude  is            given to the judge on the  scene.  Borges v. Our Lady  of the                                               ______    ________________            Sea Corp.,  935 F.2d  436,  442 (1st  Cir.  1991).   We  have            ________            examined  the many examples and transcript citations provided                                         -14-                                         -14-            in the buyers' brief.  Almost all are routine  "calls" by the            district judge, who  must make hundreds of snap  judgments in            the course of a long trial, and are well within the bounds of            propriety.                 The  only legal  point worth  mentioning is  the buyers'            complaint  that the  trial judge  limited or  forbade leading            questions when the buyers as part of their direct case called            certain  defendants as witnesses.   The buyers  urge that the            judge erred  by refusing  to declare the  witnesses "hostile"            and to allow the use of leading questions on direct.  On this            point they  themselves  err.   A  "hostile" witness,  in  the            jargon of evidence law, is not an adverse party but a witness            who  shows  himself  or   herself  so  adverse  to  answering            questions,  whatever  the  source  of  the  antagonism,  that            leading questions  may be used  to press the  questions home.            See  United States v. Brown, 603 F.2d 1022, 1025-26 (1st Cir.            ___  _____________    _____            1979).                 The buyers  are on stronger  ground in arguing  that the            rules generally  permit leading questions to  be used against            an opposing  party.   Fed.  R.  Evid. 611(c).   This  is  not            because  that party  is a  hostile witness  in the  technical            sense  but because,  however cooperative,  the witness  has a            built-in incentive to  slide away from the  question or slant            the  answer.   But  Rule 611(c)  is  arguably subject  to the            overriding  command  of Rule  611(a)  that  the court  "shall                                         -15-                                         -15-            exercise  reasonable  control  over   the  mode  .  .   .  of            interrogating witnesses"  to  elicit truth,  avoid delay  and            protect against harassment.  Fed. R. Evid. 611(a).  We cannot            believe,  for  example,  that   a  district  judge  would  be            compelled  to allow  leading  questions to  an adverse  party            where  the judge  found  that this  mode  was distorting  the            testimony of a suggestible adverse-party witness.                 In all events we need not decide whether the trial judge            in this case misread Rule 611(c) or precisely when and how it            may be overridden.  There can be no reversal on such a ground            without  a showing of prejudice, Fed. R. Evid. 103(a), and no            showing of prejudice without a proffer, ordinarily one in the            record.   Fed. R. Evid. 103(a)(2).   In this case there is no            showing  of any  specific  information that  might have  been            elicited, pertinent to  the dispositive securities issue,  if            the buyers' counsel  had been permitted to ask the defendants            leading  questions.  Without  some notion of  where a leading            question  might have led, any  error (if error  there was) is            harmless.  See Ellis  v. City of Chicago,  667 F.2d 606,  613                       ___ _____     _______________            (7th Cir. 1981).                 The buyers' final  claim is that the  trial judge abused            his  discretion in  refusing  the buyers'  requests to  amend            their  complaint.   The  amendments would  have alleged  mail            fraud as predicate acts under RICO and stated  separate fraud            or  like  claims  under Puerto  Rican  law.    Each of  these                                         -16-                                         -16-            attempted   amendments  has  a  somewhat  different  history.            Neither history  bears out  the charge that  the trial  judge            erred.                 The original complaint in this case was filed on  August            2, 1982.  No  RICO count asserting mail fraud  was included.6            On  May 1, 1985, the magistrate ordered that the buyers "will            move to amend the complaint"; for almost two years it appears            that  no amendments  were  proposed.7   Then amendments  were            proposed  by the buyers  on April 10,  1987, and  on June 10,            1988,  but  no  mail fraud  predicate  acts  under RICO  were            asserted  in either  instance.   On  December 18,  1989, over            seven years after the  start of the case and  after extensive            discovery, the buyers for  the first time sought to  add mail            fraud under RICO to the case.                 As  for fraud claims under Puerto  Rican law, no mention            was  made of such claims in the original complaint.  Contrary            to  the  buyers'  brief  in  this  court, the  first  amended            complaint,  filed in  1987, did  not assert such  claims; all            that appears is a brief reference  to unidentified violations                                            ____________________                 6The  buyers' brief says  that "averments concerning the            fraudulent  use  of   the  U.S.  mails  were  made"  in  this            complaint.   In fact, the complaint  refers to the use of the            mails  in the  securities  fraud  claim, interstate  commerce            being an element of  securities fraud, but no charge  of mail            fraud appears.                 7The  buyers'  brief asserts,  without  record citation,            that the  magistrate asked them  to delay moving  until after            the class  certification was settled.   The defendants' brief            says this is untrue.                                         -17-                                         -17-            of "the Civil  Code of Puerto  Rico and Law  145 of June  18,            1980,"  in  the  "jurisdiction  and  venue"  portion  of  the            complaint.   The Puerto Rican  law claims were  first made in            the   second  amended  complaint  submitted  June  10,  1988,            purportedly tendered  pursuant to a court  order permitting a            new  caption  to identify  plaintiffs.    The district  court            understandably  rejected  this  attempt  to  smuggle  in  new            allegations, and the Puerto Rican  claims were not raised  in            the third motion to amend filed December 18, 1989.                 This corrected version of events speaks  for itself.  No            reason is offered  in the  buyers' brief why  mail fraud  and            local-law   claims,   which    should   have   been   evident            possibilities  in 1982,  were not  asserted straightforwardly            and in  timely fashion.  The  further along a case  is toward            trial, the greater the threat of prejudice and delay when new            claims are belatedly added.  The district court did not abuse            its  considerable  discretion in  denying  leave  to add  new            claims years  after the case began, after much discovery, and            without any adequate  excuse for  the delay.   See  generally                                                           ___  _________            Tiernan v. Blyth, Eastman, Dillon & Co., 719 F.2d 1, 4-5 (1st            _______    ___________________________            Cir. 1983).                 The judgment of the district court is affirmed.                                                       ________                                         -18-                                         -18-