Court Opinion

ID: 6982525
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:33:50.989618+00
Date Added: 2024-06-11T16:09:16.737682
License: Public Domain

NOONAN, Circuit Judge,
dissenting:
Summary judgment is a useful tool for federal trial courts, but summary judgment is abused when in determining disputed facts it becomes a substitute for trial by jury. The abuse is abetted when an appellate court chooses to overlook the *667clash of facts present in the trial record. Summary judgment for the defendants in this case is contrary to the standards established by the Supreme Court for summary judgment, contrary to the Federal Rules of Civil Procedure as they must be applied even in a case based on diversity jurisdiction, contrary to the specific provisions of Federal Rules of Civil Procedure 8(c) and 16(e), and contrary to the requirements of justice.
Clifford Robinson, a star basketball player for the Portland Trailblazers, was swindled by his sports agent, Larry Gill-man. The swindling occurred in Gillman’s supervision of the construction in Connecticut of a house for Robinson. This fraud, undisputed in this case, is tied to the fraud that Robinson contends was committed by 389 Orange Street Partners (OSP) and the individual defendants.
It will be helpful to sort out two types of facts — those facts undisputed on the record in this case and facts which might be disputed if the case were tried but now have the status of facts that a rational juror could infer from the undisputed facts.

UNDISPUTED FACTS

OSP was an ad hoc creation, brought into existence sometime between May 19, 1993 and June 24, 1993 for the purpose of refinancing the construction costs of Robinson’s house. The general partners of OSP were Richard L. Arnold, Kyle Arnold, J. Regis Conlon, Francis Conlon, Francis Conlon II, Storm and Robert Kuchta, and Stillwater Pond Partners. The significance of Stillwater Pond Partners’ share in OSP will be stated later. The attorney for OSP in making the loan to Robinson was Sebastian S. Ciarcia.
On June 25, 1993 OSP loaned Robinson $468,000 to refinance the construction. The term was three years, the rate of interest was 10.875%, and the security was a second mortgage on the property, and the assignment of Robinson’s wages as a basketball player. None of the lenders knew Robinson personally, and Gillman dealt only with Kyle Arnold. As Gillman put it, “It was Arnold’s pool.”
Under the headings of “Loan Brokerage Fees” and “Origination Fees,” 5.5% of the OSP loan or $25,740 was paid immediately to Kyle Arnold. An additional $234,756 was listed as “Payoff to 369[sic] Orange St. Partners,” that is, OSP itself. The “Payoff’ was for a loan to Robinson made a month earlier, on May 18, 1993. This loan was from “Conlon and Arnold Partners.” It was in the amount of $250,000, payable July 3, 1993, at the rate of 12%, and secured by a second mortgage of the property and the assignment of Robinson’s wages. The note was not signed by Robinson but by Larry Gillman as his “Attorney-in-Fact” under a power of attorney.
The loan on its face furnished by Conlon and Arnold Partners was actually disbursed by a different entity, Stillwater Pond Partners. This entity had been organized three months earlier, in February 1993, as a real estate development company. It was not a bank, mortgage company, or commercial lender. Among its general partners were Kyle Arnold, J. Regis Con-lon, and Sebastian S. Ciarcia. The partnership agreement made Kyle Arnold the partnership’s attorney-in-fact to act in its name. On May 18, 1993 a Closing Statement Refinance showed specific disbursements of $60,000 chargeable to this loan, among them $1,000 “Legal Fee” to Ciarcia, $7,000 “Private Mortgage Fee” and $4,000 “Origination Fee,” the payees of the latter two fees unnamed. In addition $80,000 is shown as “Advances Made” with no payees identified, and $110,000 is shown as “Advances Not Made.” Gillman, acting for Robinson, “accepted and approved” these disbursements.
A second document, headed “Accounting for Loan # 2 to Clifford Robinson May 18, 1993 by Conlon & Arnold Partners,” shows $2,000 paid to “Atty. S. Ciarcia”; $10,000 paid to “F.X. Conlon II certified funds”; $23,000 paid to “FX and K Conlon”; and *668$13,000 paid to “JR Conlon/FX Conlon II.” There are also items under the heading “Plus.” Under Plus is a $10,000 “Discount fee to partner (Conlon & Arnold)”; an $11,500 “broker.fee to K. Arnold 5 %”; and “Interest” of $3,924. As fees on a loan for six weeks, Arnold and Conlon have charged up front $21,500. The total disbursements recorded were $234,756. Close to $60,000 of the disbursements were to Conlon and Arnold, and $11,500 were disbursed to Arnold alone. All the disbursements are attributed to Stillwater Pond Partners. According to the deposition of J. Regis Conlon, this sum was treated as Stillwater Pond Partners’ “capital contribution” to OSP. It is the same amount listed on the June 25, 1993 Closing Statement Refinance as the “Payoff’ made OSP from its own loan of $468,000 to Robinson.
The record to this point shows a tangled web of finance in which Kyle Arnold plays a prominent pai-t and Sebastian S. Ciarcia is visibly present. In little over a month three different entities, none of them commercial lenders and none of them philanthropists, had a hand in financing Robinson. Arnold and Conlon have already been paid a total of over 97,000 ($71,500 plus $25,740). Robinson remains liable for $468,000.
More is provided by the roles of Kyle Arnold, Sebastian S. Ciarcia, and Larry Gillman. Kyle Arnold had been the originator of the initial construction loan from the Shawmut in Boston. He left the Shawmut and in March 1993 was contacted by Larry Gillman to arrange further financing of the construction. He had ten to twelve conversations with Gillman between March and June 25, 1993. He was the only partner in OSP familiar with Gill-man.
Arnold’s “primary partner” was Conlon, and they worked together with Ciarcia, who drafted the loan documents. Arnold or Ciarcia made all the disbursements from the loans. Ciarcia acted as Robinson’s trustee in disbursing the Stillwater Pond Partners loan. Ciarcia was also paid $2,000 as Robinson’s attorney on the May 18, 1993 loan, and $1,000 as Robinson’s attorney in the June 25, 1992 loan. Ciar-cia, however, met Robinson only at the time of the closing of the June 25,' 1993 loan. According to Ciarcia, he then told Robinson that he was representing both Robinson and OSP. He did not disclose to Robinson that he was a general partner in Stillwater Pond Partners, although Stillwa-ter Pond Partners was a partner of OSP.
Ciarcia was also the lawyer for Conlon Arnold Partners in the May 18, 1993 loan to Robinson. As he did not meet Robinson until June 25, he did not disclose his dual role in this loan which was the foundation of the June 25 loan. In his answer to Robinson’s interrogatories, Ciarcia maintained, “Cliff Robinson is the only person that I received payment for services as indicated in the Closing statement refinance.” He was paid by Robinson, but worked for both sides.
The success of Stillwater Pond Partners and OSP in becoming Robinson’s creditors could not have happened without Larry Gillman. What did Gillman get out of their arrangements? The disbursements made by Ciarcia shows Stillwater Pond Partners on July 13, 1993 paying $10,000 to Sports Review Association; Sports Review was Gillman’s enterprise. Beginning on August 13,1993 and continuing over the next year Stillwater Pond Partners made advances to Larry Gillman. For three years nothing was collected on the advances. As of April 16, 1997, “the principal balance is approximately $130,000 plus accrued interest.” No effort at collection had been made. In short, Larry Gillman received $10,000 for Sports Review and a loan of $130,000 from OSP, the ad hoc partnership formed to loan money to Robinson.
In addition, Arnold was aware from his days at the Shawmut that Robinson had given Gillman a broad power of attorney to enable Gillman to act for him in supervis*669ing the construction of the house. Arnold knew that Gillman signed the promissory-note on May 18, 1993 in Robinson’s name. Arnold or Ciarcia made a series of disbursements from the construction loans in checks simply made out to Robinson and delivered to Gillman. Gillman was then in a position to endorse and deposit these checks and draw upon them as he saw fit. Stillwater Pond Partners delivered such checks to Gillman in the amount of $45,-172, and OSP delivered checks in the amount of $22,000, so that Gillman received a total of $67,172 in no way tied to construction costs. When Kyle Arnold was questioned in his deposition as to what he thought was being done with such checks, he replied that disbursements were made “to Larry with checks made out to Cliff Robinson hoping that that money was supposedly going into the house, but Larry had mentioned to us on several occasions that it was going for other things as well.” According to Arnold, the lenders made disbursements at Larry Gillman’s direction “freely because we were collateralized by his [Robinson’s] NBA contract.” Arnold, in fact, relied on Gillman’s estimate of what the loan should be when the figure of $250,000 for the May 18 loan was arrived at, even when Gillman said the money was “being used by Cliff not only for the property but for other uses.” At no time before June 25, 1993 did Arnold talk to Robinson himself.
In a separate suit brought against Larry Gillman in 1995, Robinson obtained the affidavits of several contractors who worked on Robinson’s house. These affidavits were introduced into the record in this case. Thomas Borges stated that he furnished framing and carpentry work in the construction of Robinson’s house and that as a condition of receiving payment and keeping the job he had to pay Larry Gillman “approximately 30%-40% of the value of each check I received” and that, in addition, Borges was compelled by Gillman to do $30,000 worth of carpentry on Gill-man’s own house. Andrew Morin swore that he provided climate control services for the Robinson house. His contract for this work included an explicit provision that he provide heating and air conditioning at Gillman’s residence as well; the contract is part of the record in this case. Wayne Burritt did excavation work on the Robinson property for $58,800; in his affidavit he stated he was compelled to pay Gillman a kickback of $5,000. Both Bur-ritt and Borges stated that it was reported to them that other contractors made similar kickbacks. Borges, Burritt and Morin’s company were all recipients of payments disbursed by Ciarcia as trustee for Robinson.
All of the above facts were part of the record at the time the district court granted summary judgment. None of the these facts were disputed. The inferences that could reasonably be drawn were disputed. The following inferences could reasonably be drawn in favor of Robinson:

INFERENCES A RATIONAL JUROR COULD DRAW IN ROBINSON’S FAVOR

(As these inferences would not be beyond dispute if the case went to trial, they are set off to indicate this disputable status).
Robinson was being served by a crooked agent, who was corrupt, greedy, and so sure of not being caught that he could insert in a contract for Robinson a provision for work on his own home. This agent, Larry Gillman, needed more financing to finish the construction and to pay the contractors who were giving kickbacks to him. Gillman contacted Kyle Arnold, who arranged the needed financing, which was staged in two steps, May 18, 1993 and. June 25, 1993. Multiple entities were used, permitting Arnold and Conlon to earn large fees and to disguise the first set of fees by not specifically noting them in the disbursements of the June 25 loan. Arnold successfully hid from Robinson that of the $468,000 outstanding debt as of June *67025, 1993, over $97,000 had gone to Arnold and Conlon.
Robinson’s representative, Gillman, was a willing party to this fraud because he received $10,000 from Stillwater Pond Partners for his Sports Review and the use of three checks unrestricted to construction purposes that he could convert to his own use. Schedule A, which was attached to the June 25, 1993 Closing Statement Refinance and documented “Construction costs” already incurred, shows $22,000 disbursed to Cliff Robinson. The accounting for the May 18, 1993 loan shows two checks totaling $45,172 payable to Cliff Robinson. The total checks shown as made out in this fashion and not paid for any construction costs total $67,172. In addition, the refinancing enabled Gillman to pay contractors who were making kickbacks to him. '
Giliman’s close association with Arnold, whom he had not known before the Shawmut loan, is confirmed by the large advances Stillwater Pond Partners, dominated by Arnold, began to make to Gillman beginning in August 1993. Arnold and Gillman worked hand and glove in the refinancing of the Robinson house and a close financial relation followed after the June 25 closing, cemented by the $10,000 in July 1993 to Sports Review and the subsequent stream of advances from Stillwater Pond Partners to Gillman.
The lawyer who purported to be Robinson’s lawyer in both the May 18, 1993 and June 25, 1993 loans and was paid by Robinson for his legal services, was also the lawyer for the lenders. Ciarcia did not disclose his dual role to Robinson at the time of the May 18 loan which was the foundation of the June 25 deal. Ciarcia did disclose his representation of OSP on June 25 when he met Robinson for the first time. At all times he concealed from Robinson his own interest in Stillwater Pond Partners. Ciarcia has continued his concealment into this case by submitting pro se a “Concise Statement of Material Facts In Support of Motion for Summary Judgment,” in which he listed the partners of OSP, but omitted Stillwater Pond Partnership of which he is a partner.
In summary, reasonable inferences from the undisputed facts are that Arnold and Ciarcia conspired with Gillman to set up the May-June financing in a way to enrich Arnold and Gillman to the detriment of Robinson and concealed from Robinson the deceit of his agent Gillman and the dual role of his lawyer and trustee, Ciarcia. $174,172 of the total $468,000 for which Robinson became responsible by the note of June 25, 1993 had not gone for the construction of his house, but had gone to Sports Review ($10,000), to Larry Gillman as his attorney without restriction ($67,172), and to Arnold and Conlon as loan brokers ($97,000).
According to the affidavit of Dale Glasser, the accountant who prepared Robinson’s 1993 tax return, he did not receive from Gillman a copy of the May 18, 1993 Closing Statement Refinance, nor did he receive a copy of Schedule A allegedly attached to the June 25, 1993 Closing Statement Refinance. The fraud was thus concealed from Robinson’s representative. Confirming the inferences of fraud are the records of disbursements and the kind of accountings made by Conlon and Arnold Partners, Stillwater Pond Partners, and OSP: the records submitted by them in this case are sketchy, and the dates that these records were compiled are not certain. As the district court observed: it is difficult to accept the fact that the lenders (Arnold and Ciarcia) who undertook the duty of disbursing the loan funds on Robinson’s behalf “would not keep copies of the bills they are paying.” Further, there is evidence to suggest the records have been doctored. The Closing Statement Refinance for the May 18, 1993 loan shows check number 265 for $10,000 already disbursed from Stillwa-*671ter Pond Partners to Sports Review, yet an exhibit entitled “Funds Provided and Unpaid Fees Earned” attached to Kyle Arnold’s Supplemental Affidavit dates check 265 for $10,000 to Sports Review as paid on July 13, 1993. The inference is almost irresistible that the May 18 statement was made up after July 13.
The majority opinion treats the summary judgment granted by the district court as though it could be resolved by alleged deficiencies in Robinson’s pleading. It compounds this error by depending, in part, on Connecticut law on pleading. For example, the majority states that “[fjraud-ulent concealment under Connecticut law requires that Robinson plead and prove three elements” and concludes that it is “unable to ascertain any allegation of fraudulent concealment as required by Connecticut law.” The majority relies on two Connecticut cases to reach this conclusion. This search for the proper pleading under Connecticut law is contrary to the Federal Rules of Civil Procedure that simply require that the circumstances constituting fraud be stated with particularity. Fed.R.Civ.P. 9(b). The majority’s quotations from Robinson’s cross-claims show them to be sufficiently particular to meet the standard.
As the foregoing summary of these facts has made clear, there was abundant evidence before the district court that the defendants had concealéd their fraud from Robinson. The majority refers to these facts as “arguments.” They were not arguments. They were facts plainly in the record and facts that a reasonable jury could infer from the facts plainly in the record.
In any event, the defendants waived any objection to the pleadings by not moving for dismissal. Defendants brought a motion for summary judgment, not a motion to challenge the sufficiency of the pleadings. If the pleadings contained “a short and plain statement showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), Robinson’s pleadings were sufficient. Likewise, “[a]ll pleadings shall be construed to do substantial justice.” Fed. R.Civ.P. 8(f). To use the pleadings as a way of sustaining summary judgment is to bring in a major red herring. Summary judgment has to be decided on the basis of the facts undisputed and inferable on the record before the district court. To rely on the pleading requirements for fraudulent concealment under Connecticut law, as the majority does, is to violate the Supreme Court’s instructions in Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). See also 19 Charles A. Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure § 4508, p. 220 (2d ed. 1996) (“[Wjith but a few limited exceptions ..., the federal courts quite properly have held that the Civil Rules are to be followed on all matters within their sphere of coverage”). The majority seems to suppose that Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), means that in this diversity action the result must be the same as if Robinson had sued in Connecticut with its rigorous requirements for pleading fraud. But the purpose of the Erie doctrine “was never to bottle up federal courts with ‘outcome-determinative’ and ‘integral-relations stoppers’... when there is a Congressional mandate (the Rules) supported by constitutional authority.” Hanna, 380 U.S. at 473, 85 S.Ct. 1136 (quoting Lumbermen’s Mutual Casualty Co. v. Wright, 322 F.2d 759, 764 (5th Cir.1963)).
The majority acknowledges that Federal Rule of Civil Procedure 8(c) requires a district court to treat a claim misdesignat-ed as a counterclaim as an affirmative defense “if justice so requires.” The majority holds that the district court did not abuse its discretion in denying the redesig-nation. To reach this result the majority ignores the fact that the district court surprised the parties with its grant of summary judgment at the very time that the parties were preparing a joint pretrial order and had scheduled a pretrial confer*672ence. The district court had before it the same record that has been set out here. It is difficult to know what justice does require if the facts and the inferences from the facts of this case do not require that Robinson be given the opportunity to show at trial that he was swindled by his agent, by his lawyer, and by his lenders.
The majority’s focus on when Robinson requested Rule 8(c) redesignation reads into Rule 8(c) a requirement that simply is not there. Rule 8(c) provides, “When a party has mistakenly designated a defense as a counterclaim or a counterclaim as a defense, the court on terms, if justice so requires, shall treat the pleading as if there had been a proper designation.” The rule does not say, as the majority would suggest, “Upon request of the party, the court ... shall treat the pleading as if there had been a proper designation.” The rule requires the district court, with or without motion or request, to redes-ignate affirmative defenses misdesignated as counterclaims. See Reiter v. Cooper, 507 U.S. 258, 263, 113 S.Ct. 1213, 122 L.Ed.2d 604 (1993) (citing with approval 5 Charles A. Wright & Arthur r. Miller, Federal Practice and Procedure § 1275, at 459-460 (2d ed. 1990) (“Inasmuch as it is not clear whether set-offs and recoup-ments should be viewed as defenses or counterclaims, the court, by invoking the redesignation provision in Rule 8(c), should treat matter of this type as if it had been properly designated by ' defendant, and should not penalize improper labelling”)).
In deciding Ciarcia’s motion for summary judgment, the record is clear that the district court did have the pretrial order before it because the district court relied on that order in ruling against Robinson. The majority suggests, without authority, that a pretrial order signed by both parties, relied on by the district court in its decision, but unsigned by the district court, does not sufficiently raise Robinson’s breach of trust claims. Federal Rule of Civil Procedure 16(e) mandates that a pretrial order “shall control the subsequent course of the action...When the district court itself relies on the pretrial order in fashioning a further order of the court, the court adopts the pretrial order even if the judge’s signature is not attached. Even on the majority’s inaccurate reading of the rules, Federal Rule of Civil Procedure 16(e) requires that the judgment in favor of Ciareia be reversed.
The majority holds that a motion for reconsideration should not be granted “absent highly unusual circumstances, unless the district court ... committed clear error .... ” Ruling as it did on the record before it, the district court did commit clear error. The majority opinion refrains from analyzing the record, refrains from either analyzing or denying the undisputed facts, and refrains from drawing the inferences that a reasonable juror could draw from these facts. Mischaracterizing the record, misconstruing Federal Rules of Civil Procedure 8(c) and 16(e), muddling the obligation to follow the rules in a diversity case, and avoiding the requirements of justice, the majority opinion stands as a monument of legal formalism.