Court Opinion

ID: 3016868
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:16:14.078201+00
Date Added: 2024-06-11T11:39:57.327062
License: Public Domain

___________

                             Nos. 95-1857/1956
                                ___________

Ralph L. Gray,                        *
                                      *
     Appellant/Cross-Appellee,        *
                                      *   Appeal from the United States
     v.                               *   District Court for the
                                      *   Western District of Missouri.
O. Gene Bicknell,                     *
                                      *
     Appellee/Cross-Appellant.        *

                                  __________

                    Submitted:    December 11, 1995

                         Filed:   June 25, 1996
                                  __________

Before MAGILL, GOODWIN,* and MURPHY, Circuit Judges.

                                  ___________

MAGILL, Circuit Judge.

     Ralph Gray and Gene Bicknell entered into a series of contracts in
connection with the formation of a restaurant joint venture.      After the
joint venture failed, Gray commenced this diversity action against Bicknell
for payment on two promissory notes, breach of contract, and breach of
fiduciary duty.     Bicknell counterclaimed for breach of contract and
contribution on joint obligations.

     Gray now appeals from a jury verdict, arguing, in part, that Bicknell
failed to provide adequate notice of breach as required by their contract
and that Bicknell waived his attorney-client

     *THE HONORABLE ALFRED T. GOODWIN, United States Circuit
     Judge for the Ninth Circuit, sitting by designation.
privilege by inadvertently disclosing two letters written to him by his
attorney.     Bicknell cross-appeals, asserting that Gray lacks standing to
bring a breach of fiduciary duty claim.    We affirm in part and reverse in
part.

                                      I.

        In 1983, Ralph Gray, a real estate broker, entered the restaurant
business when a client withdrew from a deal to purchase a restaurant site,
leaving Gray with the property.   Gray converted the property into a Mexican
restaurant called Raphael's Mexican Restaurant.

        Over the next five years the business expanded, and by early 1988
Gray owned and operated three Raphael's Mexican Restaurants through a
holding company called RMR #1, Inc. (RMR).       Gray also owned Raphael's
Management, Inc. (RMI), which provided general management services to the
restaurants in exchange for five percent of RMR's gross sales.     Both RMR
and RMI were organized under Missouri law.

        On March 8, 1988, Bicknell purchased fifty percent of RMR from Gray.
Gray initially approached Bicknell about buying a stake in RMR in 1986.
Bicknell's involvement in the enterprise would, Gray believed, have three
primary benefits: (1) Bicknell had significant experience in restaurant
management, (2) Bicknell possessed the financial resources to expand the
business, and (3) Bicknell's involvement would reduce the work load for
Gray, freeing him to pursue other interests.   Bicknell presumably believed
that RMR offered the prospect of future growth and favorable return on
investment.

        The central component of the agreement between Gray and Bicknell was
a stock purchase agreement (SPA).     Bicknell purchased 500 shares of RMR
stock from Gray in exchange for $500,000 in cash

                                     -2-
and a $261,380 promissory note payable in two annual installments.                Under
the terms of the SPA, RMR was required to cancel its management contracts
with RMI.    Gray and Bicknell also entered into two ancillary agreements on
March 8.    First, a real estate agreement (REA) transferred half ownership
of the Battlefield restaurant property to Bicknell in exchange for a
$114,312 promissory note.1       Second, a stock transfer restriction agreement
established the terms by which RMR stock could be transferred upon the
death of a party or a disagreement or breach between the parties.               In case
of a breach of the SPA by one of the parties, the restriction agreement
limited     the   nonbreaching    party's    remedy   to   requiring    the   other   to
repurchase the stock of the nonbreaching party.

       Gray and Bicknell divided responsibility for controlling and managing
RMR.   Both parties acted as directors of the company.              Gray remained the
president of RMR, while Bicknell became chairman of the board of directors.
Day-to-day operations of the restaurants were the responsibility of the on-
site   managers.      To   handle    the   bookkeeping     and   management   functions
previously done by RMI, Gray and Bicknell agreed to form a new company.

       Not long after the parties concluded the March agreements, the
business began to flounder.         A new restaurant failed to perform up to RMR's
expectations, placing a financial and operational strain on RMR.                   More
significantly, the relationship between Gray and Bicknell began to sour
over   the payment of management fees and the division of management
responsibilities.

       For a variety of reasons, the responsibilities of RMI never fully
shifted to its newly-formed replacement.          Consequently, RMI

       1
      RMR opened its third restaurant site on Battlefield Road in
Springfield, Missouri. This real estate is referred to as the
Battlefield restaurant property.

                                           -3-
continued to take five percent of RMR's revenues as a management fee
despite the SPA's provision that this practice would cease once Bicknell
became a fifty percent owner.     In May 1988, after Bicknell realized that
RMR was still paying RMI a management fee, he voiced his objection to Gray
during a directors' meeting, and he asked that Gray repay RMR the full
amount   of management fees received by RMI since March 8, 1988 and
discontinue paying RMI these fees in the future.         Bicknell also asked Gray
to buy back his 500 RMR shares.          On June 23, 1988, Bicknell's attorney
wrote Gray to reiterate Bicknell's requests.      Gray did neither and Bicknell
apparently did not pursue the issue further.

     From   August   1988   to   March    1989,   Gray    and    Bicknell   did   not
communicate.   In the first part of 1989, Gray called several board meetings
with the stated purpose of reducing the distrust that had grown between him
and Bicknell and addressing RMR's financial problems.                 According to
Bicknell, he did not attend because he believed that Gray's intention was
to pressure him into increasing his investment in RMR and forgiving Gray's
breach of the SPA.     He did, however, offer to sign consents and other
resolutions necessary for the board to continue its business.               In June
1989, Gray and Bicknell finally met to discuss RMR.             Bicknell offered to
purchase Gray's share of RMR, but, after protracted negotiations, the
parties could not reach agreement.        Three months later, on September 14,
1989, Bicknell, and then Gray, resigned as directors of RMR.

     The damage to RMR from the management impasse was exacerbated by
RMR's continuing cash flow problems.       By late 1989, RMR was delinquent on
its lease and mortgage obligations on the restaurant buildings.               RMR's
accounts payable were $300,000 in arrears and vendors required RMR to
purchase food and supplies C.O.D.        The business continued to deteriorate
until May 10, 1990, when creditors placed RMR into involuntary bankruptcy.

                                      -4-
     The    bankruptcy court appointed a trustee to run RMR.         In the
trustee's judgment, RMR did not have enough cash at the time of filing to
meet its ongoing operational needs.       The trustee therefore went about
selling the company's assets.    Eventually, the trustee sold RMR's assets
to Bicknell for $575,000.       A separate corporation owned by Bicknell
purchased RMR's real estate.

     On June 18, 1990, Gray sued Bicknell in federal court based on
diversity jurisdiction, asserting four claims.   Three of Gray's claims were
for breach of contract, alleging respectively that Bicknell failed to pay
the $261,380 promissory note given as consideration for the stock purchase,
failed to pay the promissory note given as consideration in the REA, and
failed to pay one-half of the debt secured by the real estate.    Gray also
claimed that Bicknell breached a fiduciary duty owed to him by failing to
adequately direct RMR and by forcing RMR into bankruptcy for Bicknell's own
benefit.

     In response, Bicknell asserted three counterclaims.       In Count I,
Bicknell argued that Gray had materially breached the SPA by continuing to
take management fees and that, after the cure period had expired without
action by Gray, the SPA obligated Gray to repurchase RMR stock owned by
Bicknell.   In Count II, Bicknell asserted a claim for contribution arising
from loan guarantees signed by both parties.     In his final counterclaim,
Count III, Bicknell argued that Gray, as guarantor of the note held by
Bicknell Properties, Inc., must cover any deficiency after foreclosure.

     On December 9, 1994, the jury returned verdicts in favor of Bicknell
on all counts except Gray's claim for breach of fiduciary duty.   After the
jury returned its verdict, Gray filed a Renewed Motion for Judgment as a
Matter of Law pursuant to Rule 50(b) of the Federal Rules of Civil
Procedure, contending that, as a matter of law, there was insufficient
evidence to support Counts I and III

                                    -5-
                                     5
of Bicknell's counterclaim.        Specifically, Gray argued that he could not
have an obligation under the SPA to repurchase Bicknell's RMR stock because
the evidence was insufficient to show that Bicknell had provided adequate
notice   of   an   SPA   breach.    Gray    also   argued    that   the   evidence   was
insufficient to establish his obligation to pay the deficiency on a note
he guaranteed because the merger doctrine operated to extinguish the debt
when both the promissory note and the underlying real property came into
Bicknell's control.       The district court found both of Gray's contentions
to be without merit and denied the motion.

     In addition to filing his Renewed Motion for Judgment as a Matter of
Law, Gray also filed a motion for new trial under Federal Rule of Civil
Procedure 59(a).         According to Gray, the district court made eight
prejudicial errors in the course of the trial that, to be remedied, require
a new trial.   The district court disagreed with all of the grounds offered
by Gray and denied the motion for a new trial.              Gray now appeals.

                                           II.

     We review de novo a district court's denial of a renewed motion for
judgment as a matter of law, applying the same standard as the district
court.   Fox v. T-H Continental L.P., 78 F.3d 409, 413 (8th Cir. 1996);
Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1505 (8th Cir. 1992).                   A
motion for judgment as a matter of law presents a legal question of
"whether there is sufficient evidence to support a jury verdict."               Fox, 78
F.3d at 413 (citing White v. Pence, 961 F.2d 776, 779 (8th Cir. 1992)).
It is properly granted only when the nonmoving party has not offered
sufficient evidence "to support a jury verdict in his or her favor."
Abbott v. City of Crocker, 30 F.3d 994, 997 (8th Cir. 1994).              In evaluating
such a motion, the court must: (1) resolve direct factual conflicts in
favor of the nonmovant, (2) assume as true all facts supporting the
nonmovant which the evidence tended to prove, (3) give the

                                           -6-
                                            6
nonmovant the benefit of all reasonable inferences, and (4) deny the motion
if the evidence would allow reasonable jurors to differ            as to the
conclusions that could be drawn.     Sherlock v. Quality Control Equip. Co.,
79 F.3d 731, 735 (8th Cir. 1996).

                                       A.

     Through Count I of his counterclaim, Bicknell sought to compel Gray
to buy back Bicknell's RMR stock in accordance with the stock transfer
restriction agreement.    Gray insists that the buy back provision was never
triggered because, if he breached the SPA, he never received adequate
notice of that breach.

     In late June 1988, Gray received a registered letter from Bicknell's
lawyer expressing "extreme concern about the Company, and the way it is
being operated."    Pl. Ex. 62.   It continued by citing three problems: RMR's
continuing payment of management fees to RMI (about $30,000 per month over
three months), incomplete profit and loss statements provided to Bicknell
prior to the stock purchase, and the "cannibalization" of customer base by
a Raphael's opened in the vicinity of an existing restaurant.      The letter
went on to state:

     Ralph [Gray], trouble is brewing here! You stated during the
     negotiation stage that you didn't want to get into a legal
     hassle with Gene [Bicknell], and if that sort of possibility
     developed, you would just repurchase Gene's interest. In light
     of the above [three problems] and in light of Gene's present
     attitude, I suggest that you take immediate steps to accomplish
     the repurchase of Gene's shares, and real estate interest.

Pl. Ex. 62.   It is this letter that Bicknell claimed, and the jury found,
constituted notice of breach.

     On appeal, Gray argues that, in light of the provisions of the SPA
and Missouri law, this letter cannot be viewed as legally

                                      -7-
                                       7
adequate notice of breach.      While the letter lists Bicknell's grievances,
it does not, Gray contends, unequivocally assert that a material breach
occurred or that the contract was terminated.              He notes that the letter
never mentions the SPA or uses the words "breach" or "termination."                  He
also notes that while the SPA provides only for a stock repurchase in case
of breach and allows a twenty-day cure period, Bicknell's letter demands
that Gray repay the $90,000 in management fees in eight days.              The intent
of the letter is further confused, Gray argues, by Bicknell's concern with
the   future   operation   of   RMR:    if    Bicknell   wanted   to   trigger   Gray's
obligations to repurchase RMR stock, he would not care how RMR would be
operated in the future because he would no longer have a stake.                      We
disagree with Gray's contentions.

      In this diversity action, we follow the substantive law of Missouri.
See Burke v. Deere & Co., 6 F.3d 497, 511 (8th Cir. 1993), cert. denied,
114 S. Ct. 1063 (1994).    Under Missouri law, the nature of notice required
by contract depends upon the provisions of that contract.                    Baker v.
Missouri Nat'l Life Ins. Co., 372 S.W.2d 147, 152 (Mo. App. 1963). Where
the manner of exercising a power of termination is specified in a contract,
notice   will be effective only if given in the stated form, unless
compliance has been waived.       Id.

      According to the SPA, "Buyer's sole remedy for any and all damages
. . . arising out of any misrepresentation . . . or any breach or default
by Seller . . . shall be limited to the requirement of Seller to repurchase
the Shares, pursuant to the terms and conditions contained in the Stock
Transfer Restriction Agreement."             Pl. Ex. 12.    Section 7 of the Stock
Transfer Restriction Agreement defines the terms of the repurchase.

            A. Breach by Gray. If it is determined that Gray has
      made a material default of or under any of the representations,
      warranties, covenants, agreements or other provisions contained
      in that certain Stock Purchase

                                         -8-
                                          8
     Agreement dated of even date between Gray and Bicknell, then
     Gray shall be bound to buy-back the Shares of Stock purchased
     by Bicknell . . . under the terms and conditions of this
     Section 7.;

           B. Notice of Breach.      Bicknell shall, promptly upon
     becoming aware thereof, give detailed written notice to Gray
     (the "Breach Notice") of the occurrence of, or the impending or
     threatened occurrence of, any event which would cause or
     constitute a breach;

           C. Cure Period. Gray shall, for a period of twenty (20)
     days after his receipt of the Breach Notice have the
     opportunity to cure the existing breach.

Pl. Ex. 12.

     Bicknell's letter meets the SPA's criteria for notice of breach.    The
letter explicitly states Bicknell's objection to the continuing payment of
management fees to RMI which was a clear breach of the SPA.   Under the SPA,
"all management contracts between the company and Raphael Management Co.,
Inc., shall be terminated."   Pl. Ex. 12.   The letter also asks Gray to take
immediate steps to repurchase Bicknell's shares.       Nowhere does the SPA
require Bicknell to state that the letter constitutes a breach notice or
that Gray has twenty days to cure, and it is not our task to redraft the
parties' contract to add procedural niceties that, in retrospect, one party
would now prefer.

     In addition, a notice of termination must be "clear, definite,
unambiguous and unequivocal, and it properly may not be so characterized
unless its meaning can be apprehended without explanation or argument" in
order to be effective.     Baker, 372 S.W.2d at 152 (internal quotations
omitted).     We do not find Bicknell's notice letter to be indefinite or
unclear.      In no uncertain terms, Bicknell, citing to the payment of
management fees in violation of the SPA, requests that Gray repurchase his
stock as Gray agreed to do.    The fact that Gray can construct a clearer
notice of breach by adding the words "breach" and "termination" to

                                    -9-
                                     9
Bicknell's letter does not mean that Bicknell's letter is inadequate.
Baker does not require that notice of breach, to be effective, must be the
clearest statement possible.      While Bicknell certainly displays concern
about the ongoing operation of RMR, this does not make his request that
Gray repurchase his stock any less clear.2

                                      B.

     Count III of Bicknell's counterclaim asks for damages in the amount
of the deficiency that remained after Bicknell Properties, Inc. sold the
Battlefield property in a foreclosure sale.

     Gray and Bicknell jointly owned the Battlefield property, one of the
three RMR restaurant sites.   The property was encumbered by a deed of trust
securing a note originally held by Community Federal Savings and Loan.
Some time after RMR's bankruptcy on May 10, 1990, Bicknell Properties came
to hold the deed of trust and note.         When the note went into default,
Bicknell Properties foreclosed on the Battlefield property and sold it in
a foreclosure sale to Bicknell.    The proceeds of the sale, however, did not
fully cover the note.    Bicknell Properties then assigned the foreclosure
deficiency to Bicknell and Bicknell sued Gray to recover.

     At trial, the jury found that Gray owed Bicknell the amount of the
deficiency.   Gray now argues that, as a matter of law, he has no obligation
to pay Bicknell for the foreclosure deficiency because the merger doctrine
operated to extinguish the debt.     According to Gray, Bicknell effected a
merger by purchasing the deed of trust while he remained the part-owner of
the Battlefield

     2
      Under the SPA, Gray had twenty days to cure the breach.
Had Gray done so, the repurchase provision would have been
avoided and Bicknell would have remained an owner of RMR.
Bicknell's demand for repayment in eight days, while not
following the terms of the SPA, does not undermine the clarity of
the letter's purpose.

                                     -10-
                                      10
property.   Gray cannot succeed in this argument.

     The merger doctrine acts to merge the equitable title to real
property into the legal title, thereby destroying the lesser estate.     Riggs
v. Kellner, 716 S.W.2d 3, 5 (Mo. App. 1986).    Under Missouri law, when the
owner of a fee of land which is subject to an encumbrance acquires the
encumbrance, that encumbrance is extinguished by merger.          Stevenson v.
Stevenson, 618 S.W.2d 715, 718 (Mo. App. 1981).        Because merger is an
affirmative defense, it must be raised in the pleadings or waived.         See
Fed. R. Civ. P. 8(c); see also Overholt Crop Ins. Serv. Co. v. Travis, 941
F.2d 1361, 1368 (8th Cir. 1991).    Gray failed to raise the doctrine of
merger at trial and therefore it is waived.3

                                   III.

     Gray asserts that the district court made eight prejudicial errors
which require a new trial to be remedied.      The authority to

     3
      In addition, the evidence does not indicate that there was
a merger of ownership of the equitable and the legal title to the
Battlefield property since Bicknell Properties acquired the deed
of trust whereas Gray and Bicknell owned the real property
individually. Order at 2. Missouri law unambiguously requires
that "legal title and the mortgage lien must vest in one and the
same person" in order to effect a merger. City of Gallatin v.
Feurt, 50 S.W.2d 1027, 1030 (Mo. 1932).

     Gray acknowledges that unity of ownership in the strict
sense of the concept did not occur, but argues that "the fact
that Bicknell accomplished this goal [the purchase of the
Battlefield property deed of trust] through the form of
transferring the property to a corporation which he wholly owned
or controlled, should not defeat the merger." Appellant's Br. at
24. Gray asks us to ignore the legal distinction between
Bicknell and Bicknell Properties by piercing the corporate veil;
however, he has offered no sound reason to do so. Absent a
showing that Bicknell Properties served merely as an alter ego of
Bicknell through piercing of the corporate veil, we accept that
Bicknell and Bicknell Properties are the separate legal entities
they purport to be, and therefore no merger could be demonstrated
under the facts of this case.

                                   -11-
                                    11
grant a new trial is within the discretion of the district court.     Citizens
Bank of Batesville, Ark. v. Ford Motor Co., 16 F.3d 965, 967 (8th Cir.
1994).   Federal Rule of Civil Procedure 59 confirms the trial court's
historic power to grant a new trial based on its appraisal of the fairness
of   the trial and the reliability of the jury's verdict.             Smith v.
Transworld Drilling Co., 773 F.2d 610, 612 (8th Cir. 1985).       A new trial
is appropriate when the first trial, through a verdict against the weight
of the evidence, an excessive damage award, or legal errors at trial,
resulted in a miscarriage of justice.       See White v. Pence, 961 F.2d 776,
780 (8th Cir. 1992); Fireman's Fund Ins. Co. v. AALCO Wrecking Co., 466
F.2d 179, 187 (8th Cir. 1972), cert. denied, 410 U.S. 930 (1973).           We
review the trial court's denial of a new trial under an abuse of discretion
standard.   Citizens Bank, 16 F.3d at 967.

                                      A.

      Aside from seeking judgment as a matter of law on Bicknell's Counts
I and III, Gray also moved for a new trial on the basis that submission of
Bicknell's Counts I and III to the jury amounted to prejudicial error.     The
district court found Gray's positions to be without merit and denied the
motion, noting that "the evidence adduced at trial support submitting
Counts I and III of defendant's counterclaims to the jury."       Order at 9.
On appeal, Gray argues that the district court, by submitting Counts I and
III to the jury, "allowed numerous collateral issues and irrelevant
evidence to taint and confuse the jury."     Appellant's Br. at 26.   According
to Gray, this error mandates a new trial.

      We do not agree.   The issues and evidence introduced on the basis of
Counts I and III are, by and large, central to the complicated contractual
dispute between Gray and Bicknell.    To the degree that "collateral issues
and irrelevant evidence" can be traced solely to Counts I and III, Gray
offered no reason to believe that it disrupted the jury's deliberative
process or that

                                     -12-
                                      12
it resulted in prejudice to his cause.     We are not willing to hold that the
district court abused its discretion on such thin proof.

                                      B.

        On December 28, 1993, Gray filed a Motion for Leave to File a Fourth
Amended Complaint under Rule 15(a) of the Federal Rules of Civil Procedure
in which he sought to add two claims.      First, Gray made a prima facie tort
claim as an alternative to his claim that Bicknell breached a fiduciary
duty owed to him.   Second, he asked for an award of punitive damages based
on the breach of fiduciary duty claim and the prima facie tort claim,
alleging that Bicknell acted with an evil motive or reckless indifference.
The district court denied the motion.       At the end of the testimony, Gray
moved, under Rule 15(b) of the Federal Rules of Civil Procedure, to amend
the pleadings to conform to the evidence during trial.         This, too, was
denied.

        Gray then filed a motion for new trial on the basis of the denial of
leave to amend the complaint.     The district court denied this motion as
well.     The court ruled that "plaintiff has failed to state a cause of
action against defendant for prima facie tort, and that the evidence at
trial failed to show any actions by defendant that proved any intent on the
part of defendant to injure plaintiff or to act with an evil motive."
Order at 3.    Additionally, the court noted that Gray's request to file a
fourth amended complaint occurred after the close of discovery and that
granting the motion would have caused further delay in a case overdue for
trial.

        Gray appeals, arguing that he had offered evidence sufficient to
support his prima facie tort claim and his punitive damages claim, and that
the Federal Rules of Civil Procedure's liberal view to amending pleadings
required the district court to grant his motion for a new trial.           In
denying the motions, according to Gray, the district court abused its
discretion.    Because the claims Gray

                                    -13-
                                     13
sought to add lacked substance, we believe the court acted within its
discretion in denying Gray's motion to amend.

     Under Missouri law, a prima facie tort consists of four elements: (1)
an intentional, lawful act by the defendant, (2) an intent to cause injury
by the defendant, (3) injury to the plaintiff, and (4) an absence of
justification or an insufficient justification for the defendant's act.
Bandag of Springfield v. Bandag, Inc., 662 S.W.2d 546, 552 (Mo. App. 1984).
The evidence presented at trial did not establish the components of a prima
facie tort claim.     There is no compelling proof that Bicknell intended to
cause injury to Gray or that Bicknell acted without legitimate business
justifications.

     Nor can it be said that the prima facie tort claim was tried by the
implied consent of the parties.      Gray asserts that he "presented sufficient
evidence to support his claims for prima facie tort . . . during trial."
Appellant's Br. at 49.      Even if Gray had presented sufficient evidence, a
Rule 15(b) amendment to conform with the evidence requires some level of
consent by both parties.      See Pariser v. Christian Health Care Sys., Inc.,
816 F.2d 1248, 1253 (8th Cir. 1983).               There has been no consent by
Bicknell.    Many of the issues in a prima facie tort claim are duplicative
of issues in other properly pled claims.              See id.        Furthermore, the
district court's denial of Gray's motion to file a fourth amended complaint
clearly     placed   the   prima   facie    tort   claim   outside    of   the   proper
considerations at trial.

     The evidential support for a punitive damage claim is also lacking.
Punitive damages require a showing of a culpable mental state on the part
of the defendant, either by a wanton, willful, or outrageous act, or
reckless disregard for an act's consequences.         See Burnett v. Griffith, 769
S.W.2d 780, 787 (Mo. banc 1989).            If the evidence failed to show that
Bicknell placed RMR into bankruptcy and took other actions to harm Gray,
then it surely

                                           -14-
                                            14
cannot go further and show a higher degree of culpability.

                                      C.

     In the course of providing discovery documents, Bicknell gave Gray
two letters written to Bicknell by his attorney.      The letters addressed a
wide range of matters relating to the litigation.       Both sides agree that
absent this disclosure, the letters would have been subject to attorney-
client privilege.     Gray maintained that Bicknell intended to produce the
letters, thereby deliberately and voluntarily waiving his attorney-client
privilege with respect to all related documents.      Bicknell countered that
the litigation involved vast numbers of documents and that, in the course
of responding to document requests, paralegals inadvertently included the
letters.    Bicknell argues that he waived his attorney-client privilege only
with respect to those two letters.   The district court agreed with Bicknell
and held that the disclosure of the letters was inadvertent and that
attorney-client privilege continued to protect other, related, documents.

     In his motion for a new trial, Gray challenged the district court's
ruling on the scope of Bicknell's attorney-client privilege, asserting that
his right to a fair trial was materially prejudiced by the district court's
denial of his request to review the files and records of Bicknell's
attorney.     The district court denied the motion.    Noting that the Eighth
Circuit had yet to define how inadvertent disclosure affects attorney-
client privilege, the court followed what it called the "middle of the
road" approach which involved an ad hoc balancing of several factors.
Order at 5.

     On appeal, Gray argues that the district court erred in

                                     -15-
                                      15
employing the "middle of the road" approach.4                We note initially that the
district court is in error when it looks to federal common law precedent
to   assess   whether      Bicknell     inadvertently      waived   his   attorney-client
privilege.       In diversity actions, state law determines the existence and
scope of attorney-client privilege.              Fed. R. Evid. 501; see also Simon v.
G.D. Searle & Co., 816 F.2d 397, 402 (8th Cir.), cert. denied, 484 U.S. 917
(1987).   Under Missouri law, documents falling within the attorney-client
privilege cannot be discovered absent waiver.               Mo. R. Civ. P. 56.01(b)(1).
A voluntary disclosure of information which is inconsistent with the
confidential      nature    of    the   attorney-client       relationship     waives   the
privilege.    State ex rel. Chase Resorts, Inc. v. Campbell, 913 S.W.2d 832,
838 (Mo. App. 1996); Lipton Realty, Inc. v. St. Louis Hous. Auth., 705
S.W.2d 565,    570   (Mo.     App.   1986).     The    ramification    of   inadvertent
disclosure are less clear.         Neither the Missouri legislature nor the courts
have had occasion to address the degree to which inadvertent disclosure of
privileged documents constitutes waiver.                 Where a state court has yet to
decide an issue, we must place ourselves in the position of the state
supreme court and determine how that institution would likely resolve the
matter.    See B.B. v. Continental Ins. Co., 8 F.3d 1288, 1291 (8th Cir.
1993).

      As noted by this Court in Pavlik v. Cargill, Inc., 9 F.3d 710,

      4
      On appeal from the denial of a new trial, Gray makes two
other arguments: (1) the district court erred in determining that
Bicknell inadvertently disclosed the letters, and (2) the
district court erred in its application of the "middle of the
road" test to the facts of this case.

     Given the deference afforded district court denials of new
trial, these arguments must be rejected. It cannot be said that
the district court abused its discretion in finding the
disclosure to be inadvertent. Nor is Gray persuasive in arguing
that the court, when applying the "middle of the road" test,
failed to properly consider the impact of the disclosed
information. See Hydraflow, Inc. v. Enidine Inc., 145 F.R.D.
626, 637 (W.D.N.Y. 1993).

                                            -16-
                                             16
713 (8th Cir. 1993), courts have generally followed one of three distinct
approaches     to    attorney-client      privilege      waiver   based   on   inadvertent
disclosures: (1) the lenient approach, (2) the "middle of the road"
approach, which is also called the Hydraflow approach, and (3) the strict
approach.

      Under     the   lenient       approach,   attorney-client     privilege        must   be
knowingly waived.        Here, the determination of inadvertence is the end of
the analysis.       The attorney-client privilege exists for the benefit of the
client   and    cannot    be    waived    except    by   an   intentional      and   knowing
relinquishment.       Georgetown Manor, Inc. v. Ethan Allen, Inc., 753 F. Supp.
936, 938 (S.D. Fla. 1991); see also Mendenhall v. Barber-Greene Co., 531
F. Supp. 951, 954 (N.D. Ill. 1982) (holding that the better rule is that
mere inadvertent production does not waive attorney-client privilege).
This Court has reasonably rejected this approach and we believe that the
Missouri Supreme Court would do so as well.               See Lutheran Medical Ctr. v.
Contractors, Laborers, Teamsters & Eng'rs Health & Welfare Plan, 25 F.3d
616 (8th Cir. 1994); Pavlik, 9 F.3d at 713.                   The lenient test creates
little incentive for lawyers to maintain tight control over privileged
material.      While the lenient test remains true to the core principle of
attorney-client privilege, which is that it exists to protect the client
and   must     be   waived     by   the   client,   it    ignores   the   importance        of
confidentiality.        To be privileged, attorney-client communications must
remain confidential, State v. Lingar, 726 S.W.2d 728, 740 (Mo.), cert.
denied, 484 U.S. 872 (1987); Lipton Realty, Inc., 705 S.W.2d at 570, and
yet, under this test, the lack of confidentiality becomes meaningless so
long as it occurred inadvertently.

      The second approach is known as the strict test.                    Gray urges the
Court to adopt such a test and refers to In re Sealed Case, 877 F.2d 976
(D.C. 1989), a case describing the D.C. Circuit's strict test.                         In re
Sealed Case creates a strong incentive for careful document management,
stating that "[t]he courts will grant no

                                            -17-
                                             17
greater protection to those who assert the privilege than their own
precautions warrant."      Id. at 980.   Under the strict test, any document
produced, either intentionally or otherwise, loses its privileged status
with the possible exception of situations where all precautions were taken.
Once waiver has occurred, it extends "'to all other communications relating
to the same subject matter.'"     Id. at 981 (quoting In Re Sealed Case, 676
F.2d 783, 809 (D.C. Cir. 1982)); Texaco Puerto Rico v. Dep't of Consumer
Affairs, 60 F.3d 867 (1st Cir. 1995).

        While the strict test has some appeal in that it makes attorneys and
clients accountable for their carelessness in handling privileged matters,
we believe that Missouri courts would reject it because of its pronounced
lack of flexibility and its significant intrusion on the attorney-client
relationship.      See State ex. rel Great Am. Ins. Co. v. Smith, 574 S.W.2d
379, 383 (Mo. 1978).      The strict test sacrifices the value of protecting
client confidences for the sake of certainty of results.     Hydraflow, Inc.
v. Enidine Inc., 145 F.R.D. 626, 637 (W.D.N.Y. 1993).           There is an
important societal need for people to be able to employ and fully consult
with those trained in the law for advice and guidance.   State ex rel. Great
Am. Ins. Co., 574 S.W.2d at 383.     The strict test would likely impede the
ability of attorneys to fill this need by chilling communications between
attorneys and clients.       If, when a document stamped "attorney-client
privileged" is inadvertently released, it and all related documents lose
their privileged status, then clients will have much greater hesitancy to
fully inform their attorney.

        Finally, there is the middle test, sometimes called the Hydraflow
test,       which served as the basis for the district court's position.
Hydraflow, 145 F.R.D. at 637.5     Under the Hydraflow

        5
      This is what the district court referred to as the "middle
of the road" approach. Order at 5.

                                     -18-
                                      18
test, the court undertakes a five-step analysis of the unintentionally
disclosed document to determine the proper range of privilege to extend.
These considerations are (1) the reasonableness of the precautions taken
to prevent inadvertent disclosure in view of the extent of document
production, (2) the number of inadvertent disclosures, (3) the extent of
the disclosures, (4) the promptness of measures taken to rectify the
disclosure, and (5) whether the overriding interest of justice would be
served by relieving the party of its error.   Id.; see also Alldread v. City
of Grenada, 988 F.2d 1425, 1433 (5th Cir. 1993).   If, after completing this
analysis, the court determines that waiver occurred, then those documents
are no longer privileged.   At the court's discretion, the privilege may
also be determined to have been waived for related, but-as-yet undisclosed,
documents.

     We believe that Missouri courts would adopt the middle test.      This
test strikes the appropriate balance between protecting attorney-client
privilege and allowing, in certain situations, the unintended release of
privileged documents to waive that privilege.      The middle test is best
suited to achieving a fair result.        It accounts for the errors that
inevitably occur in modern, document-intensive litigation, but treats
carelessness with privileged material as an indication of waiver.       The
middle test provides the most thoughtful approach, leaving the trial court
broad discretion as to whether waiver occurred and, if so, the scope of
that waiver.   It requires a detailed court inquiry into the document
practices of the party who inadvertently released the document.          We
therefore conclude that the district court did not abuse its discretion in
refusing to grant a new trial.

                                    D.

     At trial, Gray's attorney sought to question Bicknell about the
meaning and effect of a joint venture agreement (JVA) that the parties
entered into some months after the three central

                                   -19-
                                    19
agreements, but was prohibited from doing so because the district court
sustained an objection from Bicknell's attorney.6       The JVA provided that
in the event that either party wished to terminate the JVA, one party could
compel the other to either buy or sell his one-half interest in the real
estate.   Pl. Ex. 329, sec. 6.     According to Gray, this JVA provision
supported his view that a breach of the SPA was expressly excluded as a
basis for terminating obligations created by the REA.    In this appeal, Gray

     6
      During the trial, Mr. Mann, representing Bicknell, objected
to the cross-examination of Bicknell by Gray's attorney, Mr.
Stingley, on the relationship between the JVA and the other three
contracts. The following bench conference ensued.

          MR MANN: This joint venture agreement, which the
     Court has admitted into evidence over my objection, is
     not an issue in this case. There is no claim for any
     breach of that agreement, so this is clearly going
     beyond any relevancy. He's admitted it was executed.
     It's already been admitted into evidence. To ask this
     witness what his understanding of the interrelationship
     between a number of agreements, one of which is there
     is no claim for in this proceeding, is simply
     irrelevant and it is obviously designed to try to
     confuse the witness.

          MR. STINGLEY: Your Honor, a week ago, when we
     introduced the joint venture agreement, we told you,
     and we stand by it, we're not bringing a cause of
     action on the joint venture agreement, we agree. But
     it deals with the Battlefield property and what the
     rights were between the parties. It also has buy-out
     provisions. We didn't sue Mr. Bicknell. We told you
     wouldn't amend the pleadings. We never amended - -
     moved to amend the pleadings to ask for a cause of
     action against that. But Mr. Bicknell said I executed
     four agreements. He said that an hour ago. Now, he
     says three are interrelated and obviously that means
     one of them is not. I think we're entitled to know is
     it one of the three, or is it the joint venture
     agreement, or which one stood independent.

          THE COURT: I think it's confusing, a collateral
     issue. I'll sustain the objection.

VIII Trial Tr. at 38-39.

                                   -20-
                                    20
contends that the district court erred in cutting short this line of
questioning.

                               -21-
                                21
     While it is true that the REA and the JVA concern the same real
estate and that the JVA establishes a mechanism for ending the tenancy in
common between Gray and Bicknell should either party wish, the district
court did not abuse its discretion by refusing to allow Bicknell to be
cross-examined on the subject.       The JVA was absent from Gray's pleadings.
If the court had admitted more evidence concerning the JVA, there would
have been substantial risk of confusing the jury or allowing the jury to
find for Gray based on the JVA despite its absence from the pleadings.           The
district court has broad discretion in deciding questions of evidence, and
we believe it acted with the reasonable grounds of that discretion.
                                        E.

     Gray asserts that his right to a fair trial was materially prejudiced
by the district court's improper instructions to the jury.          He enumerates
five specific errors: (1) the instructions concerning material breach, (2)
the instructions concerning Bicknell's affirmative defenses of failure to
perform, (3) the instructions concerning Gray's waiver and estoppel
"avoidance   of   defenses,"   (4)    the    verdict   directing   instruction   on
Bicknell's Count I, and (5) the instructions concerning Gray's affirmative
defense to all of Bicknell's counterclaims.

     The purpose of instructing the jury is to focus attention on the
essential issues of the case.            The district court has broad discretion
to instruct the jury in the form and language it considers fair and
adequate to present the substantive law.        Grogan v. Garner, 806 F.2d 829,
836 (8th Cir. 1986); James E. Brady & Co., Inc. v. Eno, 992 F.2d 864, 868
(8th Cir. 1993).    A party is entitled to an instruction reflecting that
party's theory of the case if the instruction is legally correct and there
is evidence to support it.     Bursch v. Beardsley & Piper, 971 F.2d 108, 112
(8th Cir. 1992).      A party is not, however, entitled to a specific
formulation of an instruction.       United States v. Ribaste, 905 F.2d

                                       -22-
                                        22
1140, 1143 (8th Cir. 1990).

     In reviewing the district court's instructions, we consider whether
the charges, taken as a whole and viewed in light of the          evidence and the
applicable law, fairly and adequately submitted the issues in the case to
the jury.    Jones v. Board of Police Comm'rs, 844 F.2d 500, 504 (8th Cir.
1988), cert. denied, 490 U.S. 1092 (1989).           We will not reverse absent
harmful error.       There is no harmful error if the charge, in general,
correctly instructs the jury, even if one portion is technically incorrect.
Westborough Mall, Inc. v. City of Cape Girardeau, 794 F.2d 330, 335 (8th
Cir. 1986), cert. denied, 480 U.S. 918 (1987).         "'The test is not whether
the charge was faultless in every particular but whether the jury was
misled in any way and whether it had understanding of the issues and its
duty to determine those issues.'"           Id. (quoting Houston v. Herring, 562
F.2d 347, 359 (5th Cir. 1977) (per curiam)).

                                        i.

     In jury instruction nos. 9, 16, 23 and 35, the court defined a
material breach of a contract as "the failure to perform a promise
contained in the contract which is essential to the agreement of the
parties."     Gray   argues   that   this    instruction   is   legally   erroneous.
According to Gray, a fact finder considering the question of materiality
must consider five particular circumstances under Missouri law.7            This is
incorrect.   See

     7
      "Among the significant circumstances that guide the finder
of fact in that determination [of materiality] are: (1) the
extent to which the injured party will be deprived of a
reasonably expected benefit, (2) the extent to which the injured
party can be compensated for the part of that deprived benefit,
(3) the extent to which the party failing to perform will suffer
forfeiture, (4) the likelihood that the party failing to perform
will cure that failure, and (5) the extent to which the behavior
of the party failing to perform comports with standards of good
faith and fair dealing." McKnight v. Midwest Eye Inst., 799
S.W.2d 909, 915 (Mo.
App. 1990); see also Restatement (Second) of Contracts § 241
(1981).

                                       -23-
                                        23
McKnight v. Midwest Eye Inst., 799 S.W.2d 909, 915 (Mo. App. 1990) (noting
that the five factors are only significant circumstances that guide the
fact finder in evaluating whether a breach is material).            While Missouri
recognizes   the   validity     of   the     five   circumstances   as   guides   to
understanding materiality, it does not require that the five circumstances
be included in a materiality jury instruction.            While we agree that the
alternative instruction offered by Gray certainly provides the jury with
a more detailed definition of materiality, that is not the standard by
which we review jury instructions.         The court's instruction on materiality
fairly and accurately defined materiality in a fashion that did not mislead
or confuse the jury and that is sufficient.

                                       ii.

     Gray contends that the district court erred by submitting instruction
nos. 18 and 25 to the jury because they allowed the jury to find that
Gray's breach of the SPA could be an affirmative defense to Counts II and
III of Gray's complaint.8     Gray contends that the court should have found,
as a matter of law, that a breach of the SPA could not constitute a defense
to Gray's claims under the REA.

     The language of the REA indicates otherwise.            The relevant portion
of the REA states:

           The performance of this Real Estate Agreement                   is
     specifically conditioned upon and is to run concurrently

     8
      Jury instruction nos. 18 and 25 are lengthy, five-point
explanations of the law. Gray objects to the initial language in
each that states, "Your verdict must be for the defendant on
Count II (or III) of plaintiff's claims if you believe: First,
the Stock Purchase Agreement and the Real Estate Agreement are
concurrent Agreements such that a breach of one is a breach of
the other."

                                       -24-
                                        24
     with the completion and consummation of the terms of an
     Agreement executed concurrently with this Real Estate Agreement
     . . . wherein Ralph L. Gray agrees to sell and Buyer agrees to
     purchase five hundred (500) shares of the issued and
     outstanding stock of Raphael's #1, Inc., a Missouri
     corporation.   If for any reason, other than breach by the
     parties, the said Agreement is not consummated, then this Real
     Estate Agreement shall become immediately null and void, and
     thereafter shall be of no force or effect.

     Gray   latches   on   to   the   final   sentence   of   the    REA   provision,
maintaining that it provides clear and unambiguous language precluding the
use of a breach of the SPA as a defense to Gray's REA claims.              In light of
the entire provision, however, it is apparent that the parties intended the
REA to be conditioned on the completion and consummation of the SPA.
Additionally, Gray's argument simply ignores that voiding a contract is
entirely distinct from nonperformance excused by breach.            See Williston on
Contracts, 3d ed. § 1305; Village of Cairo v. Bodine Contracting Co., 685
S.W.2d 253, 260 (Mo. App. 1985); Whitman v. Livingston, 541 S.W.2d 61, 63
(Mo. App. 1976).      Accordingly, the district court did not error in
submitting instruction nos. 18 and 25 to the jury.

     Gray also complains that jury instruction nos. 11, 18 and 25, which
addressed Bicknell's affirmative defense that Gray had failed to perform
on the contract, allowed the jury "a roving commission" to conclude that
Gray breached his duty of good faith and fair dealing by continuing to take
management fees after the closing of the SPA.            Appellant's Br. at 41.
Instead, Gray argues the court should have employed instruction B, which
excluded lack of good faith as a ground for Bicknell's affirmative defense.

     We find nothing improper or prejudicial in these instructions.               They
explain in a clear and detailed fashion what the jury must find in order
to conclude that Gray's ongoing receipt of management fees relieved
Bicknell of his contractual duties.           These instructions comport with
Missouri contract law and are justified

                                       -25-
                                        25
by the evidence introduced at trial.

                                    iii.

     Finally,    Gray   asserts   three    additional    errors   in   the   jury
instructions.    We have reviewed the instructions, trial record, and
applicable law and conclude that these jury instructions meet the legal
standard.   While they may not be the instructions Gray hoped for, they are
sufficient to satisfy abuse of discretion review.         We reiterate that the
test for reviewing a jury instruction is not whether the instruction was
faultless, but whether the instruction misled the jury in any way.           See
Westborough, 794 F.2d at 335.        Gray is not entitled to a specific
formulation for the instructions.     See Ribaste, 905 F.2d at 1143.         The
instructions challenged by Gray are both legally sound and syntactically
clear.

                                     F.

     During the course of their deliberations, the jury submitted the
following question to the court: "If one partner believes the other partner
has breached the contract, but does not immediately resign from the corp.
or sue does this mean the breach is null & void."       II App. at 408 (emphasis
in original).   In response, the court answered:

     It is for you to decide whether a material breach has occurred.
     In reaching that decision, you must refer to instruction number
     nine, which is repeated in other packets.      [I]f you find a
     material breach has occurred, the failure to immediately resign
     from the corporation or sue does not mean the breach is null
     and void. It is for you to decide whether the breach has been
     waived or whether a party is estopped from asserting the
     breach.     In making that decision, you must refer to
     instructions numbers 12 and 13, which are repeated in other
     packets.

X Trial Tr. at 1.

                                    -26-
                                     26
     On appeal, Gray maintains that the court should have inserted the
word "automatically" into its answer.         That is to say, the answer should
have read, "If you find a material breach has occurred, the failure to
resign from the corp. or sue does not automatically mean the breach is null
and void."    Without the word "automatically," Gray believes the court's
answer caused the jury to believe that it could not infer that Bicknell's
failure to act could waive or estop the breach.

     One need only consider the answer as a whole to realize that Gray's
contention is meritless.     The court expressly directed the jury that it was
their duty to decide whether Bicknell waived or was estopped on Gray's
breach of contract.      Further, the answer directed the jury's attention to
instruction nos. 12 and 13, which state that the finding must be for Gray
on his failure to perform claim if the "defendant did not indicate to
plaintiff, by words or conduct, that plaintiff was thereby materially
breaching the stock purchase agreement."          II App. at 367.    The district
court did not mislead the jury when it gave this answer.

                                        IV.

     Bicknell brings a cross-appeal, arguing that Gray lacks standing to
make an individual claim for breach of fiduciary duty against Bicknell.

     At trial, Gray prevailed only on his breach of fiduciary duty claim.
Gray contended that Bicknell, as an officer and director of RMR, had a
fiduciary    duty   to   protect   Gray's   interests.   In   his   third   amended
complaint, Gray alleged that:

     As a result of Defendant's breach of his fiduciary duty as an
     officer and director and failure to manage the Companies, (a)
     the Companies were adjudicated bankrupt and the Stock of [RMR]
     is now without value; (b) Plaintiff lost all equity in real
     estate used by the

                                       -27-
                                        27
     Companies; and      (c)   Plaintiff    is    liable   on   his   personal
     guarantees.

I App. at 92.

     In a motion for partial summary judgment, Bicknell challenged Gray's
standing to bring a breach of fiduciary duty claim.             He argued that Gray
cannot have standing in this instance because the harm suffered by Gray
from Bicknell's alleged breach of fiduciary duty was not different and
distinct from that suffered by shareholders generally.            As such, Bicknell
contended that this claim can only be made in the context of a derivative
action   in the name of the corporation.              The district court denied
Bicknell's motion for summary judgment, holding that "because plaintiff has
set forth facts alleging that he was individually harmed as a result of
defendant's failure to perform his fiduciary duty as an officer and
director, plaintiff has standing to sue individually."            I App. at 228-29.

     The general rule in Missouri is that, in breach of fiduciary duty
suits, individual shareholders must sue corporate directors and officers
derivatively.      Delahoussaye v. Newhard, 785 S.W.2d 609, 613 (Mo. App.
1990).   Only under specific circumstances may an individual pursue such an
action directly.    Gieselmann v. Stegeman, 443 S.W.2d 127 (Mo. 1969); Grogan
v. Garner, 806 F.2d 829 (8th Cir. 1986).         The chief point of contention for
the parties is the scope of the exception and whether the damages alleged
by Gray come within its scope.

     Gray relies on Gieselmann and Grogan to define the exception. Under
these cases, the key element of being able to sue a corporation directly
is individual injury separate and apart from any injury the stockholder qua
stockholder sustains.       The difficult part of this analysis lies in
characterizing the injury claims.          In this case, Gray sets out three
injuries that stemmed from

                                     -28-
                                      28
Bicknell's breach of fiduciary duty: (1) RMR was adjudicated bankrupt and
Gray's stock lost all value, (2) Gray lost all equity in real estate used
by RMR, and (3) Gray became liable on personal guarantees of RMR's debt.

     The bankruptcy claim rests on the assertion that Bicknell failed to
properly oversee and direct RMR or deal with the management problems the
corporation was experiencing, causing RMR to enter bankruptcy.     Appellee's
Br. at 16.   This is not an independent personal injury.    The fact that the
bankruptcy caused Gray's RMR shares to lose all value would apply equally
to every other shareholder.   Bicknell had a duty of care to the corporation
and, through the corporation, to all shareholders.         Accepting that he
violated his fiduciary obligations, the violation in no way impacted Gray
in a manner different than the corporation as a whole.     The fact that this
corporation has only two shareholders does not affect the analysis.      See
Jones v. Rennie, 690 S.W.2d 164, 166 (Mo. App. 1985).

     The other two harms, loss of equity in real estate leased to RMR and
personal liability on loan guaranties on corporate debt, clearly exist
independently of any harm suffered by the corporation.      Gray had a unique
situation with respect to the corporation and as a result he suffered
losses.   These harms are of the individual type required for the direct
injury exception.

     There is, however, no link between the breach of fiduciary duty and
the individual harms claimed.   As a director and officer of RMR, Bicknell
has a fiduciary duty to protect the interests of the corporation and its
shareholders.   That duty does not extend to outsiders who are tied to the
corporation through contractual relationships such as loan guarantee
agreements or real estate leases.   Rather, a director's duties to outside
parties, if any, must be contractually based.   When a person wears two hats
so that he is both a shareholder and an outsider interested in corporate

                                    -29-
                                     29
decisions, the fiduciary duty exists only with respect to shareholders qua
shareholders.   The fiduciary duty does not extend to the shareholder when
he is acting in the role of an outsider.

     With respect to the individual injuries asserted by Gray, he is a
corporate outsider.   Therefore, Bicknell owed Gray no fiduciary duties with
respect to these claimed individual injuries.
     Gray admits that this disjuncture exists between the scope of the
fiduciary duty and the harms claimed.   He believes it is of no consequence,
however.   Citing Grogan, Gray states that "once individual harm was found,
Gray had standing to recover damages for any individual injury suffered as
a result of Bicknell's breach."     Appellant's Reply Br. at 19.   In other
words, it is Gray's position that a shareholder can sue on any injury
suffered as a consequence of a breach of fiduciary duty regardless of
whether the duty was owed with respect to the harm claimed.

     The facts of Grogan make it inapposite to this case.   Grogan involved
misleading statements made by the president of the corporation to the
shareholders about an offer to buy the company.     The actions between the
defendant and the plaintiff that give rise to the harm are the very same
actions that constitute the breach of fiduciary duty.

     While Missouri courts have not expressed a clear position on whether
the harm in a breach of fiduciary duty claim must concern a matter
protected by the duty itself, we conclude that this link between the duty
and the harm must exist.   Other courts have stated in definitive language
that the breach of duty must relate to the harm claimed to be actionable.
See In re Ballantyne, 166 B.R. 681, 687 (E.D. Wis. 1994); McGivern v. AMASA
Lumber Co., 252 N.W.2d 371, 380 (Wis. 1977).    Since there is no such link
in these two claims, we reverse the district court and hold that Gray lacks
standing to bring an individual action on a breach of fiduciary duty claim.

                                    -30-
                                     30
                                    V.

     We hold that, when considering the possibility of waiver of attorney-
client privilege through inadvertent disclosure, the middle balancing test
applies and that, under this analysis, the district court did not abuse its
discretion in determining that Bicknell did not waive his privilege.     We
find the other claims raised by Gray on appeal unpersuasive and we affirm
the district court.

     We agree with Bicknell's assertion that Gray lacks standing to bring
his individual claim against Bicknell for breach of fiduciary duty.   Under
Missouri law, an individual action for breach of fiduciary duty requires
an individual injury and a nexus between the injury and the breach of
fiduciary duty, and Gray did not establish facts that met this standard.
On this basis, we affirm in part and reverse in part.

     A true copy.

           Attest:

                 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                   -31-
                                    31