Court Opinion

ID: 198894
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:01:59+00
Date Added: 2024-06-11T13:13:13.402700
License: Public Domain

[NOT FOR PUBLICATION--NOT TO BE CITED AS PRECEDENT]

          United States Court of Appeals
                     For the First Circuit

No. 99-1643

                       ALLEN D. BRAGDON,

                      Plaintiff, Appellee,

                               v.

    DEWITT DAVENPORT, PALMER DAVENPORT AND JOHN DAVENPORT,
INDIVIDUALLY AND AS THEY ARE TRUSTEES OF THE DAVENPORT REALTY
                             TRUST,
                    Defendants, Appellants.

         APPEAL FROM THE UNITED STATES DISTRICT COURT

               FOR THE DISTRICT OF MASSACHUSETTS

       [Hon. Edward F. Harrington, U.S. District Judge]

                             Before

                    Boudin, Stahl, and Lynch,
                         Circuit Judges.

     Robert W. Harrington, with whom Robert J. Harrington,
Kimberly E. Atkins, and Law Offices of Robert W. Harrington,
were on brief for appellants.
     Janis M. Berry, with whom Conway T. Dodge, Jr. and Rubin and
Rudman LLP, were on brief for appellee.
                             April 18, 2000

          Per Curiam.       Defendants-appellants DeWitt Davenport,

Palmer   Davenport,   and    John   Davenport,   individually   and   as

trustees of the Davenport Realty Trust ("DRT" or "the Trust"),

appeal a jury verdict in favor of plaintiff-appellee Allen

Bragdon on his claims of securities fraud, common law fraud, and

breach of fiduciary duty.       We affirm.

                                    I.

          We set forth the facts as the jury might have found

them, consistent with the record but in a light most favorable

to the verdict.   See, e.g., Grajales-Romero v. American Airlines

Inc., 194 F.3d 288, 292 (1st Cir. 1999).

          The DRT is a Massachusetts realty trust founded in the

1950s as a family business.         The DRT's assets and subsidiary

operating companies are now valued at nearly $50 million.        There

are approximately 5800 to 6000 outstanding shares of the Trust.

The Davenports manage the Trust and collectively own a majority

of its shares.

          In 1984, Bragdon inherited 310 shares of the Trust from

his mother.   In April 1991, Bragdon contemplated selling his

shares, and asked the Davenports about the financial condition

                                    -2-
of   the    Trust.      The    Davenports         gave   Bragdon     some   general

financial information, but refused to show him the Trust's

financial statements.          By way of explanation, Palmer Davenport

showed him an amendment to the Declaration of Trust which stated

that shareholders are not entitled to receive past or present

financial statements.

             In February 1994, Bragdon hired independent counsel for

assistance in his communications with the Davenports.                       In May

1994,      Bragdon   wrote     to    DeWitt     Davenport      and   requested   an

estimate     of   the   fair    market     value    of   his    shares.     DeWitt

responded, during a meeting at Bragdon's home, that the Trust

had experienced financial difficulties during the last four to

five years, and that it recently had purchased some of its own

shares for approximately $525 apiece.                Once again, however, the

Davenports resisted providing Bragdon with further financial

information about the Trust.

             During a subsequent telephone conversation, DeWitt

Davenport      stated   that        the   Trust    would    purchase      Bragdon's

holdings at $600 per share.                 While Bragdon considered this

offer, his attorney advised him that his right to sue the DRT

would survive any purchase at this price if the Davenports were

misrepresenting the value of the shares.                   In June 1994, Bragdon

and his attorney went to DeWitt's office to discuss the sale.

                                          -3-
Davenport again declined to provide any financial information

regarding the value of the DRT.         Bragdon’s attorney stated to

DeWitt during that meeting that the Trustees, as fiduciaries,

must accurately disclose the fair market value of the shares,

and that failing to do so would be a breach of their duty to

Bragdon.

           On June 9, 1994, DeWitt Davenport spoke with Bragdon

over the phone.   During this conversation, DeWitt stated that

the fair market value of the Trust was $600 per share.            On July

27, 1994, Bragdon sold his shares to DRT for $186,000 ($600 per

share) despite never having received the specific financial

information he requested.      In 1996, Bragdon learned that the

estimated value for his shares at the time of the sale actually

ranged between $1.45 and $2.42 million.

           On April 1, 1996, Bragdon brought the present action

charging   defendants   with   breach    of   fiduciary   duty;   unjust

enrichment; violation of the Securities Act of 1934, 15 U.S.C.

§ 78 et seq. (1997); violation of the Massachusetts Uniform

Securities Act ("MUSA"), Mass. Gen. Laws ch. 110A (1999); and

intentional misrepresentation.     The unjust enrichment claim was

tried to the court; all other claims were tried to a jury.

           At the conclusion of Bragdon's case, the Davenports

moved for judgment as a matter of law, or in the alternative for

                                 -4-
a new trial, on all counts.      See Fed. R. Civ. P. 50(a), 59.   The

district court granted their motion as to Bragdon's claim under

the   MUSA,    but   otherwise    denied   it.     The   Davenports

unsuccessfully renewed their motion after presenting their case.

          Eventually, the jury returned a verdict for Bragdon in

the amount of $1,730,760 on his securities fraud, common law

fraud, and breach of fiduciary duty claims.      After the verdict,

the Davenports again moved for judgment as a matter of law, or

for a new trial.     As to the claim for unjust enrichment, the

district court ruled that there was no need for an independent

determination because the jury verdict adequately compensated

plaintiff.    In all other respects, the court denied the motion.

This appeal followed.

                                  -5-
                                       II.

          On appeal, the Davenports argue that (1) Bragdon's

securities      fraud   claim     is         time-barred;     (2)   Bragdon's

representation by independent counsel precluded his claim for

breach of fiduciary duty; (3) the trial court erred in allowing

testimony by plaintiff's experts concerning the value of the

DRT; (4) Bragdon presented insufficient evidence of reliance to

support   a   common    law    fraud    claim;     (5)   Bragdon    presented

insufficient evidence of a misrepresentation to support a common

law fraud claim; (6) the court erred in allowing testimony

concerning the Davenports’ personal assets and Trust assets of

which the Davenports made use; and (7) the evidence of damages

was insufficient to support the jury award.                 At oral argument,

however, the Davenports’ counsel conceded that an affirmation of

the jury’s verdict on the breach of fiduciary duty claim would

obviate   the    need   to    consider       unrelated   appellate    issues.

Concluding that such an affirmation is appropriate, we confine

our discussion to appellate issues which implicate this verdict.

A. Standard of Review

          We start with the standards that govern our review of

the preserved appellate issues.              We review de novo a district

court's grant or denial of a Fed. R. Civ. P. 50(a) motion.                See

Collazo-Santiago v. Toyota Motor Corp., 149 F.3d 23, 27 (1st

                                       -6-
Cir.    1998).       In   determining       the   propriety       of    the   district

court's    action,        we   view   the    evidence       "in   the    light      most

favorable      to   the    non-moving       party,    drawing      all    reasonable

inferences in its favor".             Id. (internal citations omitted).               We

thus will not reverse a denial of a motion for judgment as a

matter    of   law    “unless     the    facts,      seen    in   the    light      most

favorable to the plaintiff, as well as inferences reasonably

drawn therefrom 'lead to but one conclusion - that there is a

total failure of evidence to prove the plaintiff’s case.’”

TransAmerica Premier Ins. Co. v. Ober, 107 F.3d 925, 929 (1st

Cir. 1997) (citations omitted).                In a similar vein, we will not

reverse a denial of a motion for a new trial unless "the verdict

is so seriously mistaken, so clearly against the law or the

evidence, as to constitute a miscarriage of justice".                         Id.

            As to arguments the Davenports raise for the first time

on appeal, we review only for "plain error."                       See, e.g., Beal

Bank,    SSB   v.    Pittorino,       177   F.3d     65,    71    (1st   Cir.    1999)

(considering challenge to unobjected-to jury instruction in a

civil case).         In this context, error is plain if it causes a

miscarriage of justice or somehow undermines the integrity of

the judicial process.           See id. (citing Play Time, Inc. v. LDDS

Metromedia Communications, Inc., 123 F.3d 23, 29 (1st Cir.

1997)).

                                         -7-
B.   Challenge         to   the    Finding    of    Liability     for    Breach    of

Fiduciary Duty

            The       Davenports    assert    that       the   jury’s   finding    of

liability for a breach a fiduciary duty was infected by legal

error.   Specifically, the Davenports contend that the district

court, in instructing the jury, erroneously placed the burden on

them to prove that their conduct in purchasing Bragdon’s shares

"conformed to their fiduciary obligations."                       In making this

argument,    the       Davenports     acknowledge         that    the    burden    is

presumptively theirs under Massachusetts law,                      see Cleary v.

Cleary, 692 N.E.2d 955, 958 (Mass. 1998), but make a strained

argument for a burden shift on the basis of a statement in

Cleary   that     a    fiduciary’s    burden       "is    generally     met   if   the

fiduciary shows . . . [that the questioned transaction was made]

with the advice of independent legal counsel."                     Id. at 959.

            The Davenports have little reason to complain about the

district court’s burden-of-proof instruction.                     Prior to trial,

they submitted to the court a proposed instruction which stated

that it was       their burden to show that the transaction "was

advantageous for the Plaintiff."                   Moreover, at trial, they

failed to articulate a coherent objection to the instruction

given.   Finally, they failed to object to the Fed. R. Civ. P.

49(a) breach of fiduciary duty question that was put to the

                                        -8-
jury, which asked whether the Davenports had established by a

preponderance        of   evidence     that      they    had    carried      out     their

fiduciary      obligations      to   Bragdon.           In    view    of   this    triple

waiver, we ask only whether the jury’s conclusion that there had

been a breach of fiduciary duty constitutes a miscarriage of

justice or calls into question the integrity of the judicial

process.      See Beal Bank, SSB, 177 F.3d at 71.                    Patently, it does

neither.

              Under Massachusetts law, "the general rule is that one

acting in a fiduciary capacity for another has the burden of

showing that a transaction with himself was advantageous for the

person for whom he was acting."                   Cleary, 692 N.E.2d at 958.

Here, there was overwhelming evidence to support the jury’s

conclusion      that      the   Davenports’            deal     with       Bragdon     was

advantageous for them but disadvantageous for Bragdon, and thus

constituted      a   breach     of   the     Davenports’        fiduciary      duty     to

Bragdon.      Moreover, our review of the record as a whole does not

lead     us    to    conclude        that,       the    Davenports’          deceptions

notwithstanding,          Bragdon     unjustifiably           proceeded       with    the

purchase.       Under these circumstances, there is no basis for

upsetting the jury’s liability determination.

C.     Challenge to the Damages Award for Breach of Fiduciary Duty

                                           -9-
                The Davenports assail the jury’s damages award on three

grounds.        First, they contend that the district court erred in

permitting Bragdon’s expert witnesses to testify because these

witnesses, in combination, used an improper and prejudicial

method to assess the true worth of plaintiff’s DRT shares.

Second, they assert that the court erred in allowing Bragdon to

cross-examine DeWitt Davenport about the value of defendants’

personal assets and Trust assets of which the Davenports made

use.        Third, they argue that the jury’s damages award was

insufficiently grounded in the evidence and grossly excessive.

Each of these arguments merits only the briefest of responses.

                The only challenge the Davenports made to Bragdon’s

experts below was grounded on the fact that Bragdon’s first

expert, a real estate appraiser named William Curley, used a

valuation methodology that initially valued in toto all holdings

in which DRT had an interest, and Bragdon’s second expert, an

accountant named Stephen Grizey, then reduced this figure to

account for the fact that DRT only had a partial interest in

some       of   the   holdings. 1   In    the   Davenports’   view,   Curley’s

testimony regarding the total value of the holdings in which DRT

       1
     Although we explicitly address only the preserved challenge
to the district court’s decision to permit Bragdon’s experts to
testify, we believe it worth stating explicitly that the court’s
decision was not otherwise plainly erroneous.     See Beal Bank
SSB, 177 F.3d at 71.

                                         -10-
had an interest somehow created a possibility that the jury was

misled into thinking that DRT was far more valuable than was in

fact the case.         Our review of the record persuades us, however,

that    there    is    no    reason    for    concern    about    jury     confusion;

Bragdon’s       experts       clearly     and      coherently     explained        their

methodology       and       conclusions       as    to   DRT’s    value,     and     the

conclusions      were       amply   supported       by   record   evidence.         The

district court thus acted well within its wide discretion in

permitting Bragdon’s experts to present the jury with their

conclusions.          See Kumho Tire Co., Ltd. v. Carmichael, 526 U.S.

137, 141-42 (1999) (reviewing for abuse of discretion decision

whether to admit challenged expert testimony).

            As to the Davenports’ second argument, our review of

the record persuades us that, due to the overwhelming evidence

of a breach of fiduciary duty and the ample evidence supporting

the    damages    award,      any     error   in    admitting     evidence    of     the

Davenports’ personal assets and/or Trust assets of which the

Davenports made use was harmless.                  See Fed. R. Civ. P. 61.           And

given what we have just said about the evidence supporting the

damages award, we summarily reject the Davenports’ challenge to

the foundation and size of the damages award – a challenge, we

add, that was levied only on appeal.

            Affirmed.         Costs to appellee.

                                          -11-