Court Opinion

ID: 9853659
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:51:46.426896+00
Date Added: 2024-06-11T09:19:58.467597
License: Public Domain

BYE, Circuit Judge,
concurring in part, dissenting in part.
I would reverse in part by holding the district court erred when it (1) dismissed eight counts from Scenic’s third amended complaint, (2) improperly placed the burden of proof on Scenic to prove the New Board had authority to bind Tabernacle, and (3) excluded certain evidence at trial. I therefore write separately to dissent in part.
A
I join the majority opinion with respect to Part A. The district court did not abuse its discretion when it denied Scenic’s motion to recuse the judge based on religious bias.
B
Federal law applies to issues of party joinder in a diversity case. The district court abused its discretion when it dismissed eight causes of action based on an Arkansas procedural statute. Moreover, the court abused its discretion when it further justified the dismissal as a sanction under Federal Rule of Civil Procedure Rule 41(b).
Questions of indispensable party joinder are procedural issues governed by federal law. Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 125 n. 22, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968). *669Rule 19 of the Federal Rules of Civil Procedure governs the joinder issue in this case. The district court’s failure to apply Rule 19, and its application of Arkansas statute § 16-61-112(a) instead, was an error of law. See Shelter v. Amerada Hess Corp., 14 F.3d 934, 937 (3d Cir.1994) (holding, under Provident Tradesmens Bank & Trust Co., Rule 19 applied even in the face of a state statute mandating joinder). Under Rule 19(a), Arvest Bank is not a necessary party because it does not have an interest in the proceeding, will not be affected by any judgment rendered by the court, and is not needed for the court to fully dispose of the case. The court erred when it engaged in a Rule 19(b) indispensable party analysis after first finding Arvest Bank was not a necessary party under Rule 19(a). See Gwartz v. Jefferson Memorial Hosp. Ass’n, 23 F.3d 1426, 1430 (8th Cir.1994); Shetter, 14 F.3d at 941.
The district court found Scenic’s new causes of action were based on the Second Assignment, which was executed on the Friday before trial began. Because the Second Assignment occurred after the Third Amended Complaint was filed, it is logically impossible for the eight new causes of action in the Third Amended Complaint to be based on the Second Assignment, rather than on the First Assignment. Nevertheless, the district court dismissed Scenic’s eight causes of action as a Rule 41 sanction for non-compliance with Rule 26(a)(1)(B)5, based on its failure to disclose an assignment which had not yet occurred.
The Eighth Circuit has recognized “dismissal with prejudice is an extreme sanction that should be used only in cases of willful disobedience of a court order or where a litigant exhibits a pattern of intentional delay” and requires a litigant “acted intentionally as opposed to accidentally or involuntarily.” Hunt v. City of Minneapolis, 203 F.3d 524, 527 (8th Cir.2000) (internal citation and quotation omitted). The district court’s finding of willfulness in this case was not based on any facts in the record. The district court did not point to an order Scenic willfully disobeyed, nor does the record reveal any. The district court did not consider less severe penalties than dismissal. See Mann v. Lewis, 108 F.3d 145, 147 (8th Cir.1997) (requiring a district court to “consider whether any less-severe sanction could adequately remedy the effect of the delay on the court and the prejudice to the opposing party.”); Denton v. Mr. Swiss of Missouri, Inc., 564 F.2d 236, 239 (8th Cir.1977) (recognizing the due process clause of the Fifth Amendment limits the power of courts to dismiss an action without affording a party the opportunity for a hearing on the merits).
The record contains no evidence Scenic’s counsel was even aware of the Second Assignment, which was executed the Friday prior to the beginning of the trial. Scenic based its Third Amended Complaint on the First Assignment. The court abused its discretion is dismissing eight of Scenic’s causes of actions under these facts.
C
The district court also erred by improperly placing on Scenic the burden to prove the New Board had authority to execute the mortgage and could bind Tabernacle. Placing the burden of proof on the incorrect party is reversible error, unless it results in no prejudice. West Platte R-II School Dist. v. Wilson, 439 F.3d 782, 785 *670(8th Cir.2006). The majority is correct in pointing out the weight of evidence at trial showed Tabernacle’s congregation did not approve any mortgage on Tabernacle’s property and the New Board representatives were not properly elected trustees. As a result of the district court’s improper refusal to admit evidence Scenic offered to prove New Board’s ability to bind Tabernacle, further discussed infra in Part D, the weight of the evidence favored the defendants. Because of the erroneous evi-dentiary rulings made by the district court in this case and its improper dismissal of Scenic’s other common law claims, I cannot conclude the shifting of the evidentiary burden was a harmless error.
Under Arkansas law, Scenic made a prima facie case for recovery on the defaulted mortgage when it introduced evidence of the executed mortgage. Smith v. Ryan, 175 Ark. 23, 298 S.W. 498, 500 (1927) (holding in an action on a note, the plaintiff made a prima facie case when he introduced the note, and defendant had the burden of proving the notes were invalid); Johnson v. Ankrum, 131 Ark. 557, 199 S.W. 897, 897 (1917) (holding a signed note makes plaintiffs prima facie case for recovery and burden then shifts to defendant to show the note was executed without consideration). As an affirmative defense, defendants argue the mortgage is invalid. The burden of proving a defense of an affirmative nature is upon the defendant. Smith, 298 S.W. at 500. Under Arkansas law, the burden of proof is upon a person attacking the validity of the mortgage to show it is void and was executed without authority. Austin v. Dermott Canning Co., 182 Ark. 1128, 34 S.W.2d 773, 778 (1931). The district court erred when it placed the burden of proof on Scenic to prove New Board was authorized to enter into agreements on behalf of Tabernacle.
D
The district court abused its discretion, affecting the substantial rights of the parties, when it improperly excluded evidence: (1) on relevancy grounds, (2) for lack of foundation, and (3) as inadmissible settlement discussions. See Goss Intern. Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 434 F.3d 1081, 1098 (8th Cir.2006) (standard).
The district court erred in refusing to admit evidence pertaining to conduct occurring before 1999, which showed a “course of dealing,” as irrelevant. Under Federal Rule of Evidence 401, evidence is relevant if it has any tendency to make the existence of any fact of consequence to the determination of the action more probable or less probable than it would be without the evidence. United States v. Gianakos, 415 F.3d 912, 924 (8th Cir.2005); Fed.R.Evid. 401. The evidence Scenic planned to introduce was intended to show the members of New Board had authority to enter agreements on behalf of Tabernacle, addressing the very core of the defendants’ affirmative defense. The evidence the district court improperly excluded was relevant to several of Scenic’s new claims, including, but not limited to, quasi-contract, unjust enrichment, and fraud. It was an abuse of discretion to exclude this evidence.
The district court refused to allow Scenic to introduce evidence describing persons as Tabernacle trustees without first proving the individuals were authorized to conduct business on behalf of Tabernacle. The court sustained defendant’s objections to the evidence, which the defendants characterized as foundational, and excluded most of Scenic’s exhibits, including the initial 1997 mortgage, the 1999 mortgage, the refinancing note, correspondence between Superior and the purported trustees regarding the 1999 mortgage and later *671modification, and Superior’s business records regarding its several transactions with Tabernacle. The district court had no basis for a finding of lack of foundation and improperly characterized its exclusion of evidence in that way. The practical effect of the court’s ruling was to require Scenic to prove the merits of its case before it could admit evidence to support its claim. As discussed supra in Part C, the law does not require a plaintiff to first disprove a defendant’s affirmative defense in order to present its case; the burden is on the defendant to prove it is entitled to the defense. Baumgartner v. Rogers, 233 Ark. 387, 345 S.W.2d 476, 478-79 (1961); Rodgers v. Show, 191 Ark. 266, 84 S.W.2d 611, 612-13 (1935) (holding, in action on a note, the burden of proving affirmative defense that notes were void was on the defendant pleading the affirmative defense); Harbison v. Hammons, 113 Ark. 120, 167 S.W. 849, 850 (1914) (holding, in an action on a note, burden of proof is on defendants to establish their affirmative defense not on the plaintiff to disprove it). The district court erred by placing the burden on Scenic to disprove Tabernacle’s affirmative defense and by further requiring Scenic to prove the merits of its case as a foundational predicate for the admission of evidence.
Finally, the district court erred when it excluded evidence of discussions between Scenic and Tabernacle following the default on the loan as impermissible evidence of settlement discussions. Under Federal Rule of Evidence 408, not all evidence relating to settlement negotiations is necessarily inadmissible. The district court must determine the purpose for which the evidence is being proffered. While evidence introduced to prove “liability for or invalidity of the claim or its amount” is inadmissible, evidence being proffered for other purposes is admissible. Fed.R.Evid. 408. In this case, Scenic proffered evidence of discussions between Scenic and Tabernacle to show those persons who negotiated with Scenic purported to be representatives of both New Board and Tabernacle, not to prove Tabernacle defaulted on the note. Such evidence was admissible.
For the above reasons, I dissent in part.

. Rule 26(a)(1)(B) requires a party to disclose documents it may use to support its claims or defenses.