Cigna Fire Insurance v. MacDonald & Johnson
Case Date: 06/28/1996
Court: United States Court of Appeals
Docket No: 95-1061
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UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT ____________________ Nos. 95-1061 95-1145 95-1570 95-1648 CIGNA FIRE UNDERWRITERS COMPANY, ET AL., Plaintiffs, Appellees, Cross-Appellants, v. MACDONALD & JOHNSON, INC., Defendant, Appellant, Cross-Appellee. ____________________ APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Frank H. Freedman, Senior U.S. District Judge] __________________________ ____________________ Before Selya, Circuit Judge, _____________ Bownes, Senior Circuit Judge, ____________________ and Boudin, Circuit Judge. _____________ ____________________ John B. Stewart, with whom Edward V. Leja and Moriarty, Donoghue _______________ _______________ ___________________ & Leja, P.C. were on brief for CIGNA Fire Insurance, et al. ____________ F. Michael Joseph, with whom Joseph, St. Clair & Cava was on __________________ __________________________ brief for MacDonald & Johnson, Inc. ____________________ June 28, 1996 ____________________ BOWNES, Senior Circuit Judge. Before us are BOWNES, Senior Circuit Judge. ______________________ appeals by both parties after two jury trials. CIGNA Fire Insurance Company ("CIGNA") is a large insurance conglomerate. MacDonald & Johnson, Inc., ("M&J") is an independent insurance agent that sold, inter alia, CIGNA ___________ insurance. CIGNA sued M&J for breach of contract alleging failure to remit insurance premiums due it by M&J. M&J brought a counterclaim against CIGNA alleging: breach of contract; intentional interference with contractual relations; intentional interference with economic gain; and violation of Mass. Gen. L. ch. 93A, 11, and 93A generally. After a four-day trial, the jury returned special verdicts: Judgment for the defendant on plaintiffs' claim of breach of contract. Judgment for the defendant against the plaintiffs on its counterclaim alleging breach of contract with damages awarded in the amount of $780,000.00. Judgment for the defendant against the plaintiffs on its counterclaim alleging interference with contractual relations with damages awarded in the amount of $500,000.00. Adding interest, the total award to M&J came to $1,544,106.73. The district court found for CIGNA on M&J's claimed violations of Mass. Gen. L. ch. 93A. After a hearing, the district court set aside the jury verdict and ordered a new trial. -2- 2 After another four-day trial the second jury found in favor of M&J and awarded it damages in the amount of $250,000.00. Judgment for M&J, including interest, came to $321,333.28. Early in the second trial, the district judge, based on a stipulation by the parties, ruled that M&J had breached its contract with CIGNA and that the amount due CIGNA was $169,798.14. Adding interest to this resulted in a judgment for CIGNA in the sum of $219,888.60. The judge denied both parties' post-trial motions. Before starting our exposition of the evidence and analysis of the issues, we state the standard of review that controls our assessment of the district court's decision to set aside the jury verdicts and order a new trial in the first case and decline to do so the second time around. Fed. R. Civ. P. 59(a) provides in pertinent part: (a) Grounds. A new trial may be (a) Grounds. granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States; The Court has described the scope of the rule as follows: The motion for a new trial may invoke the discretion of the court in so far as it is bottomed on the claim that the verdict is against the weight of the evidence, that the damages are excessive, or that, for other reasons, the trial was not fair to the party moving; and may raise -3- 3 questions of law arising out of alleged substantial errors in admission or rejection of evidence or instructions to the jury. Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940). _______________________________ First Circuit precedent is clear. A district court may set aside a jury's verdict and order a new trial only if the verdict is so clearly against the weight of the evidence as to amount to a manifest miscarriage of justice. See, ___ e.g., Lama v. Borras, 16 F.3d 473, 477 ____ _______________ (1st Cir. 1994). A trial judge's refusal to disturb a jury verdict is reversed only for abuse of discretion. Federico v. Order of Saint Benedict in Rhode Island, 64 F.3d ____________________________________________________ 1, 5 (1st Cir. 1995). See also Fleet Nat'l Bank v. Anchor ___ ____ ___________________________ Media Television, Inc., 45 F.3d 546, 552 (1st Cir. 1995). ______________________ There can be no doubt that the district court here understood the constraints applicable to setting aside a verdict and ordering a new trial. The new trial ruling states, inter alia: _____ ____ A jury verdict may not be set aside as a matter of law under Fed. R. Civ. P. 50(b) except on a "determination that the evidence could lead a reasonable person to only one conclusion." Acevedo-Diaz v. ___________________ _______________ Aponte, 1 F.3d 62, 66 (1st Cir. 1993) ______ (quoting Hiraldo-Cancel v. Aponte, 925 _________________________ F.2d 10, 12 n.2 (1st Cir. 1991)). I. I. ISSUES COMMON TO BOTH TRIALS ISSUES COMMON TO BOTH TRIALS ____________________________ The evidence adduced at both trials was essentially the same. CIGNA has raised two issues on appeal which are -4- 4 common to both trials: (1) Whether the district court erred in refusing to grant its motions for judgment as a matter of law on M&J's breach of contract claim at the conclusion of both trials. (2) Whether the district court erred in ruling that M&J's claims "were not barred or diminished" for its failure to exhaust its administrative remedies provided under Mass. Gen. L. ch. 175, 163. Submission of M&J's Breach of Submission of M&J's Breach of _____________________________ Contract Claim to the Jury Contract Claim to the Jury __________________________ The question, of course, is whether there was sufficient evidence for M&J's breach of contract claim to be decided by the juries. The relevant evidence which was substantially the same for both trials is summarized as follows. Frank Lombard, president and owner of M&J, testified that M&J encountered serious financial problems when the Bank of New England collapsed causing M&J's line of credit to terminate on May 30, 1991. Lombard testified that it was usual for M&J, and other insurance agencies, to use bank loans to meet its premium obligations to insurance companies for premiums owed by the insureds. In other words, the agency would carry its clients by borrowing money from a bank, pay the premiums due the company and wait for payments from the clients. The collapse of the Bank of New England stripped M&J of any cash reserves. Lombard testified that other insurance companies with whom M&J did business agreed -5- 5 to accept monthly installment premium payments or extended the due date for the payment of premiums. Another factor that impacted on M&J's financial condition was the loss of its biggest insurance account, F.L. Roberts Co. ("Roberts"). Premiums on this account amounted to between $800,000.00 and $1,000,000.00 a year. Roberts was a large wholesaler and retailer of petroleum products and operator of service stations and car washes in southern New England. The evidence discloses the following sequence of events. Lombard was an insurance consultant for Roberts, not an agent, from 1979 through 1986. In late 1986, Roberts did not have a carrier for 1987. Lombard suggested that Roberts try to obtain insurance coverage for a three-year period with the premiums being determined on the basis of the carrier's expenses and Roberts' losses. Under such a program the insured, who paid a deposit premium initially, might be owed refunds by the carrier at the end of the insurance year or vice versa. The amount due either the carrier or Roberts would be determined each year. In January of 1987, such a program was entered into between Roberts and CIGNA for three years with M&J acting as agent. The amount of premiums due would be determined in September 1988, 1989, and 1990. In July or August of 1990 Lombard calculated that CIGNA owed Roberts $200,000.00 under the program. He contacted CIGNA on -6- 6 September 30, 1990, and was told that it would look into it. Lombard called the CIGNA department in charge of the program and was reprimanded for doing so. A new program was set to go into effect in January of 1991. The down payment required by CIGNA from Roberts was $250,000.00. Roberts informed Lombard that it would not pay the $250,000.00 unless it was credited with the $200,000.00 refund. Laurie Scanlan, who worked in the special risk division of CIGNA, acknowledged that CIGNA owed Roberts money under the program, but would not pay it because she asserted that Roberts also owed a surcharge of $56,000.00. Lombard told Scanlan the surcharge was not part of the insurance program. She told him to collect it. He refused. An inter-office CIGNA memo states its position: Per our discussion, the following strategy will be utilized in solving the F.L. Roberts FVC surcharge dispute. Number one, Insured Meeting. Set up a meeting with F.L. Roberts and invite the agent. Number two, Program Intent. Discuss the need for the surcharge in vague terms. Provide the proposal for the '89 and '90 years to document the stated surcharge, in parentheses, '87 and '88: FVC not mentioned. Close parentheses. Number 3, CIGNA's Needs. If we cannot collect the surcharge, we cannot be a market for such coverages. Number 4, Payment Intentions. After discuss needs for surcharge, determine if -7- 7 F.L. Roberts is willing to pay the FVC surcharge. Number five, Refusal to Pay. Legally, we cannot enforce the payment of the FVC surcharge. Therefore, back-off if they refuse to pay. But we should then seriously consider non-renewal. Hopefully, we can satisfy our insured and collect the surcharge at the same time. Good luck. M&J expected a proposal from CIGNA for the 1992 Roberts insurance program. Scanlan was supposed to work up the figures. Lombard received a letter from Scanlan on December 16, stating that CIGNA would not negotiate renewal terms unless CIGNA was paid the 1991 premiums due. The letter further stated that CIGNA would issue cancellation notices the next day, but if Roberts paid CIGNA within ten days, the notices would be rescinded. Roberts' insurance was cancelled as per the letter. Lombard immediately faxed to CIGNA a statement by CIGNA showing a credit due Roberts of $28,903.58 as of December 20, 1991. After the fax, CIGNA reinstated Roberts' insurance. CIGNA sent a renewal proposal for 1992 that cost about $500,000.00 more than the prior program. Lombard was given until noon the next day to make up his mind. He found the proposal totally unacceptable. Lombard tried to work out an alternative program with CIGNA. With the permission of Joann White of CIGNA, he issued temporary binders effective January 1, 1992. Scanlan notified Roberts that the temporary -8- 8 policies were not valid. Lombard received a letter from Scanlan that a new agent, Palmer Goodell Insurance, would be Roberts' new broker unless Lombard was notified otherwise by the close of business on January 17. No such notification was received. M&J's commissions on the Roberts account amounted to about $80,000.00 per year. The third aspect of the evidence involved two unexecuted promissory notes from M&J to CIGNA. As M&J's financial problems increased, it approached CIGNA and asked to pay the premiums due in twelve regular monthly installments. CIGNA told M&J in September of 1991 that it would draw up a promissory note providing for payment of the past due premiums in regular monthly installments. The note was brought to Lombard by Charles Glaser on February 6, 1992. Lombard approved it orally, but did not sign it because the word "draft" was written across the top of it. This note had a principal sum of $115,507.05. During his discussion with Glaser, Lombard told him about the Roberts account. Glaser asked Lombard what he was planning to do. Lombard replied, "I don't know, I'm seeking a legal remedy." A second note was presented to Lombard on March 23 by Robert Purdy. The principal was $105,324.14, but the payment terms and interest were the same as the first note.1 This note, however, ____________________ 1. There is no explanation in the record as to the difference between the principal in each note. -9- 9 included a waiver and release of all claims that M&J might have against CIGNA. Lombard, still smarting because of the loss of the Roberts account, refused to sign the note. Remmy Martens, a marketing official for CIGNA, who had dealt with Lombard for an appreciable length of time, told Purdy at the time the waiver and release were added to the note that, based on his knowledge of Lombard, Purdy would have difficulty getting Lombard to sign the note as redrafted. CIGNA cancelled its agency contract with M&J forthwith after Lombard refused to sign the note. It shut down all of M&J's computers wired into the CIGNA net. It put all of the policies heretofore handled by M&J on direct billing; i.e., premiums were paid directly to CIGNA. M&J notified CIGNA that the forthwith cancellation was prohibited by Massachusetts law, which it was. Mass. Gen. L. ch. 175, 163 prohibits the cancellation of an agency contract without 180 days notice.2 After CIGNA ____________________ 2. No company shall cancel the authority of any independent insurance agent for fire or casualty insurance, or both, if said agent is not an employee of said company and no company shall modify a contract with such an agent unless the company gives written notice of its intent to cancel such agent or its intent to modify such contract at least one hundred and eighty days before the proposed effective date of any such cancellation or modification. -10- 10 checked the Massachusetts statute, it deferred the cancellation for 180 days. We rule that there was sufficient evidence from which a jury could find that CIGNA breached the agency contract with M&J. The evidence provided two grounds for such a finding. One, that the "forthwith" cancellation was contrary to Massachusetts law, of which CIGNA must be presumed to have knowledge. It also could be found that CIGNA cancelled its agency contract with M&J by refusing to honor the binders that one of its officials (White) had authorized. The Application of Mass. Gen. L. ch. 175, 163 The Application of Mass. Gen. L. ch. 175, 163 _______________________________________________ This issue does not merit extended discussion. CIGNA claims "that the unexhausted administrative remedy available under M.G.L. ch. 175, Sec. 163 eclipsed or diminished M&J's claim for damages." CIGNA brief at 37. First, we do not understand what the terms "eclipsed or diminished" mean in the context of this case. The statute provides in pertinent part: Except as otherwise provided herein, any agent receiving notice of such cancellation, modification or expiration MAY, within fifteen days after receipt ___ thereof, make a written demand for reference to three referees of the question as to whether or not such cancellation, modification or expiration will so affect the renewal, continuation or replacement of any policies placed with the company through the efforts of the agent, or the services needed by any -11- 11 policyholder doing business with the company as a result of the efforts of the agent, as to justify renewal or continuation of any policies then in effect having been placed with such company by such agent. (Emphasis added.) It cannot be reasonably doubted that the statute is permissive. M&J had no duty to invoke it. CIGNA has cited no cases holding even tangentially that the statute applies in a situation similar to the one that confronts us. The two cases it cites are completely inapposite; they involve different statutes and different claims. We have been unable to find any cases in this Circuit or in Massachusetts requiring an agent to invoke Mass. Gen. L. Ch. 175 163 prior to asserting claims against an insurance company, and CIGNA has cited none. CIGNA's argument is without merit. II. II. THE FIRST TRIAL THE FIRST TRIAL _______________ The district court ordered a new trial for three reasons. It ruled that the jury finding that M&J had not breached its contract with CIGNA to pay premiums as due "is against the clear weight of the evidence and enforcing it would result in a miscarriage of justice." The court found that the jury "rendered an improper 'sympathy' verdict." The court found that the amount awarded M&J on its breach of contract claim was "outrageous." It held that M&J -12- 12 "failed to introduce evidence at trial that established its entitlement to over $700,000 in damages." The court set aside the jury verdict awarding $500,000.00 to M&J for intentional interference by CIGNA with M&J's contractual relations with Roberts. It ruled: that "there was no evidence of a contract between M&J and Roberts;" that "even if there was a contract . . . there was no evidence that CIGNA knowingly induced Roberts to break that contract," and that M&J failed to show that even if there was a contract and interference with it by CIGNA, M&J "failed to show that CIGNA's interference was improper in motive or means." The court concluded: In fine, after considering the jury's verdict in conjunction with its ruling on CIGNA's breach of contract claim, above, the Court surmises that the jury's decision on the MacDonald & Johnson breach of contract claim "could only have been a sympathy" verdict. See Phav v. ___ ________ Trueblood, Inc., 915 F.2d at 767. In ________________ addition, because the issues of liability and damages are so interwoven both issues must be re-tried. M&J, as would be expected, objects strenuously to the district court's rulings and findings. We discuss them seriatim. The Jury Verdict that M&J did not The Jury Verdict that M&J did not _________________________________ Breach its Contract with CIGNA Breach its Contract with CIGNA ______________________________ The question is, could the evidence lead a reasonable person to only one conclusion. Acevedo-Diaz v. _______________ -13- 13 Aponte, 1 F.3d 62, 66 (1st Cir. 1993). We think so. As the ______ district court pointed out in its memorandum opinion, the evidence was clear and not disputed by M&J that it owed CIGNA about $111,000.00 in premiums. This evidence came not only from CIGNA but from the testimony of John Januska, the comptroller and assistant treasurer of M&J. He stated that there was no question that $111,000.00 was due CIGNA in July of 1991. And although strictly speaking it was not evidence, counsel for M&J told the jury in his opening statement that premiums due CIGNA had not been paid. In its appellate argument, M&J seeks to shift the focus from the agency contract to the unexecuted promissory notes. It contends that the notes constituted a modification of the agency contract and that both parties agreed to payment of the overdue premiums in monthly installments. Lombard testified that he agreed to the terms of the first note and that CIGNA did also. CIGNA says that the first note was only a tentative proposal for Lombard's consideration and therefore the note was not signed by the parties. Lombard refused to sign the second note, the one with the added waiver and release. Lombard's assumption that he would be given an opportunity to pay the premiums owed CIGNA in monthly installments may have caused him not to pursue other options for payment, but it is not a valid basis for finding either a modification of the agency contract or a new -14- 14 contract between the parties. Such a finding is foreclosed by the two unexecuted promissory notes. The district court did not err in ruling that the jury's verdict was contrary to the evidence and upholding it would result in a miscarriage of justice. Moreover, there is another reason for upholding the district court on this issue. Early in the second trial the parties stipulated that judgment would be entered for CIGNA against M&J on CIGNA's breach of contract claim in the amount of $169,798.14 plus interest. By so doing, M&J waived any objections to CIGNA's contract claim in the first trial. The Amount of Damages Awarded on M&J's The Amount of Damages Awarded on M&J's ______________________________________ Breach of Contract Claim Against CIGNA Breach of Contract Claim Against CIGNA ______________________________________ The jury awarded M&J $780,000.00 on its breach of contract claim. The court set this aside because M&J's evidence failed to establish that it was entitled to over $700,000.00 in damages and because it was a "sympathy" verdict. Lombard estimated that he lost a little over $200,000.00 as a result of the termination of the agency contract by CIGNA. He managed to salvage $30,000.00 to $40,000.00, making a net loss of $160,000.00. In addition, Lombard testified that he lost $161,158.00 on his commercial accounts, $39,046.00 on "Market Dyne" Business, and a $215,490.00 loss was sustained on personal accounts. The loss of commissions on the Roberts account came to $80,000.00, and there was a loss of profit sharing with CIGNA -15- 15 amounting to $44,000.00. Lombard testified that his salary dropped about $60,000.00 a year after the CIGNA termination. These figures, even if taken at face value and with no allowance for what appears to be double counting, total $699,694.00, not including the reduction in Lombard's salary. The suit was brought in the name of M&J so we do not think that Lombard's reduction in salary is a proper item to be considered. Thus, the total amount of damages, taking Lombard's testimony at face value, did not, as the district court pointed out, exceed $700,000.00. It was not error for the district court to set aside as excessive the breach of contract damages awarded M&J. We point out that the court found that the verdict on damages for M&J was infected by the jury's complete disregard of the evidence on CIGNA's breach of contract claim. This appears to be a sensible assessment of the first jury's verdict. The second jury was not so influenced. The Jury Award of $500,000.00 for CIGNA's The Jury Award of $500,000.00 for CIGNA's _________________________________________ Intentional Interference with Intentional Interference with _____________________________ M&J's Contractual Relationship with Roberts M&J's Contractual Relationship with Roberts ___________________________________________ The district court correctly applied Massachusetts law to a claim for intentional interference with contractual relations. The party making the claim must prove four elements: (1) that there was a contract with a third party; (2) that defendant knowingly induced that party to break the contract; (3) that defendant's interference was intentional -16- 16 and improper in motive or means; and (4) that the claimant was harmed by defendant's action. Wright v. Shriner's _____________________ Hospital for Crippled Children, 412 Mass. 469, 476, 589 ________________________________ N.E.2d 1241, 1245 (1992); see also G.S. Enterprises, Inc. v. ___ ____ __________________________ Falmouth Marine, Inc., 410 Mass. 262, 272, 571 N.E.2d 1363, _____________________ 1369 (1991); United Truck Leasing Corp. v. Geltman, 406 Mass. _____________________________________ 811, 812, 551 N.E.2d 20, 21 (1990). Our reading of the record confirms the ruling of the district court that there was no contract between Roberts and M&J. A long-standing business relationship does not become a contractual relationship automatically, as M&J seems to argue. The last insurance program issued to Roberts by CIGNA through M&J was for a term of three years. None of the parties had a contractual obligation to continue the insurance coverage after its term expired. The evidence suggests strongly that Roberts decided to use a broker other than M&J because it would be less expensive. There was also evidence that one of the owners of the new agency was a neighbor of the president of Roberts. We need go no further than the lack of a contract between Roberts and M&J to uphold the ruling of the district court setting aside the jury verdict awarding M&J $500,000.00 for intentional interference with a contractual relationship by CIGNA. At the trial the court reserved to itself the decision on the claim by M&J against CIGNA for violations of -17- 17 Mass. Gen. L. ch. 93A. It found in favor of CIGNA. M&J moved for a new trial. Our review of the record reveals no basis for reversing the judgment of the district court. We do not find it necessary to delve into the nuances of chapter 93A law. Suffice it to say that the sparsity of the evidence was a firm basis for the court to conclude that M&J had failed to meet its burden of proof on its 93A claims. Denial of M&J's Motion to Amend Denial of M&J's Motion to Amend _______________________________ Count III of its Counterclaim Count III of its Counterclaim _____________________________ This issue requires some exposition. Count III of M&J's counterclaim was entitled, "Intentional Interference with Economic Gain." In a pretrial memorandum and order dated February 17, 1993, the district court said: Defendant's third counterclaim against CIGNA admittedly is mislabeled, but this problem is not fatal. The Court will interpret the cause of action as one for intentional interference with advantageous business relations, a claim recognized by the Massachusetts courts.2 Here, too, defendant has pleaded the requisite elements. The footnote stated: "Defendant shall amend its counterclaim within ten days, substituting the correct nomenclature." Inexplicably, M&J did not amend the counterclaim as ordered. At a pretrial conference on the day the trial started, the court pointed out to M&J's counsel that the counterclaim had not been amended as ordered. The attorney said: "I thought that was right in there." The court -18- 18 replied, "No." The judge's law clerk then said, "According to the documents, that was never filed." The attorney responded by saying, "Okay." No objection was taken nor was permission requested to amend the counterclaim nunc pro tunc. ____ ___ _____ After the conclusion of the trial, M&J moved to amend its counterclaim. The motion was denied as untimely, but the court said: In the event that this case is re- tried, the Court will reconsider MacDonald & Johnson's request to amend its pleadings to include a claim for intentional interference with advantageous business relations. Six days prior to the second trial, M&J filed a motion to amend their counterclaim to include a claim for intentional interference with advantageous business relations. The court denied the motion on timeliness grounds, also noting that the pleadings failed to allege facts to support the claim, that CIGNA presented no evidence at the first trial (nor offered any at the second) to support the inference that CIGNA knowingly induced Roberts to break its contract with M&J or that any interference by CIGNA was improper. We review a denial of leave to amend for abuse of discretion. A district court, in denying such leave, may properly consider a party's undue delay, repeated failures to cure deficiencies in the pleadings, and the futility of the proposed amendment. Foman v. Davis, 371 U.S. 178, 192 _____ _____ -19- 19 (1962). Without deciding whether CIGNA had presented evidence at the first trial sufficient to enable a jury to find an intentional interference with advantageous business relations, we hold that the district court acted within its discretion in denying the motion to amend. The district court told M&J before the first trial that its complaint should be amended if M&J wanted it considered; M&J failed to do so. It was proper for the judge to deny leave to amend after the first trial where counsel was instructed to amend the complaint, failed to do so, and failed to correct this error when it was pointed out by the court. Having left an opening for M&J to try again, the court could well find that M&J had failed to exercise proper diligence because it waited virtually until the eve of trial before submitting its motion to amend. Under these circumstances, we will not disturb the ruling of the district court. The Second Trial The Second Trial ________________ As already explained, the second jury trial was limited to M&J's breach of contract claim against CIGNA. M&J moved for a new trial, which was denied. Both parties object to the damages award so we start with that. Damages Damages _______ CIGNA attacks the damages on two grounds: that the evidence should not have been admitted because it was based -20- 20 on hearsay and speculation and that the award was too high. M&J asserts that the award was too low because the court improperly limited M&J's damages to the period from the initial date of cancellation of the agency contract, to October 15, 1992, the extended date of cancellation required under Massachusetts law. Before discussing the claims of the parties, we rehearse the evidence on damages as reported in the second trial transcript. The evidence on damages came in through the testimony of Frank Lombard. He testified essentially as follows. Up to 1992, M&J's average commissions on premiums it received was "in the $250,000 a year range." After the cancellation, clients of M&J who were insured by CIGNA were sent letters notifying them that M&J's contract with CIGNA had been cancelled and all premiums due were to be paid directly to CIGNA. Most of these clients did not renew their policies with M&J. Lombard kept a record of all such clients. From the date of the initial cancellation, April 2, 1992, to October 15, 1992, premiums from the affected clients aggregated $1,720,495.00; M&J's loss in commissions totalled $201,294.00. This was broken down into three categories: commercial commissions -- $175,138.00; Market Dyne commissions -- $13,281.00; and personal commissions -- $12,875.00. In addition, M&J lost its annual profit sharing income from CIGNA of $12,871.00. Lombard further testified -21- 21 that the commission loss to the end of the year would have been $215,393.00.3 Lombard testified that loss of commissions was the same as loss of profits and that M&J had a renewal rate of 93% on insurance policies purchased through it. He started to testify about future loss of profits when there was an objection followed by a bench conference. The court reminded counsel for M&J that it had limited damages to October 15, 1992. M&J's counsel made an offer of proof that damages would be $215,000.00 in lost commissions a year plus loss of profit sharing of $56,000.00 for a total of $271,000.00 a year "ad infinitum." We start our analysis of M&J's objection to the court's ruling on damages with the observation that it is obvious that an "ad infinitum" claim for damages has no basis in law and confounds common sense. Confining our analysis, however, to the claim by M&J that the court's ruling that no damages could be awarded after October 15, 1992, was error, we point out that the transcript of the jury instructions shows that no such instruction was given. The court left it entirely up to the jury to determine the period of time for which damages could be awarded: In considering any claim for loss of anticipated profits resulting from a ____________________ 3. These amounts are considerably lower than the items of damages claimed in the first trial. -22- 22 breach of contract, you should consider the length of time that parties had a right to expect to receive the benefits of the contract. If you determine the contract was only for a certain period of time, or could be terminated by notice to the other party after a certain period, you may only award damages for losses incurred during that limited period of time. CIGNA did not object to the failure of the court to limit the time period for awarding damages. M&J argues that this unexpected volte-face by the __________ court on damages prevented it from introducing more extensive evidence on damages. The answer to this is that Lombard testified: "Your [sic] damages are, our loss of commission both for 1992, and these people, based on our experience, would have renewed their insurance each year and these customers are gone." It is hard to see what additional evidence could have been introduced. This sum of $271,000.00 for annual lost profits was in evidence for the jury to consider and there was no restriction in the charge limiting the period of damages. We have read the final argument for M&J carefully and there is no discussion in it of any time- period limitations on damages. The attorney for M&J, without objection, stated, "a whole year's commission was $215,000, not 201." Based on the evidence before the jury and the court's instructions, we find that M&J was not prejudiced by the court's bench ruling that damages could not be awarded -23- 23 after October 15, 1992, because this ruling was not conveyed to the jury. We are not impressed by CIGNA's objections that the evidence on damages was based on speculation and hearsay and should have been excluded. As the court pointed out, Lombard's testimony was based on his own records and experience in the insurance business. That the testimony was self-serving went to its credibility not its admissibility. Lombard was subjected to rigorous cross-examination on damages and CIGNA introduced testimony through experts that contradicted Lombard's testimony. The jury's verdict of $250,000.00 in damages for M&J strikes us as a reasonable assessment of the evidence. Moreover, even if Lombard's testimony was hearsay in part, it did not affect the verdict. The $250,000.00 award could only have been for the year 1992. As to what happened to M&J's clients in 1992, Lombard had first-hand information. He testified as follows: A. I kept track from the day this event occurred in March of 1992. I was the one in charge. I was the one that talked to the people that got the letter from CIGNA. I was the one that handled all the commercial accounts, so I knew who was affected by that action. Any violation of the hearsay rule was de minimis. __________ CIGNA's other objection that the award was too high does not fare any better. CIGNA argues that Lombard testified only as to lost revenues but ignored the other side -24- 24 of the ledger -- savings in ongoing expenses -- thus, the damages were higher than what normally would be the case. Lombard did testify specifically, however, that M&J's expenses did not contract after the loss of the Roberts account but continued at the same level. He testified that no one was terminated, and that expenses continued at the same rate. Lombard was cross-examined intensively on this point but did not give ground. It was well within the province of the jury to believe Lombard's testimony. Our rulings and findings on damages negate CIGNA's argument that its motion for a remittitur should have been allowed. The Conduct of the Judge The Conduct of the Judge ________________________ M&J's main attack on the jury verdict is a two- pronged condemnation of the conduct of the district judge. It asserts that the judge should have recused himself from presiding over the second trial because of bias and prejudice against M&J. It also accuses the judge of secretly communicating with the jury during its deliberations. These are serious charges. Recusal Recusal _______ In its motion for recusal filed prior to the second trial, M&J states three specific reasons for recusal: 1. The very nature of a retrial order is such that it should be considered by one other than the original trial judge. -25- 25 2. At the pretrial conference held on March 13, 1994, Judge Freedman stated in open court that he thought that the Defendant, Plaintiff in counterclaim, Frank Lombard, was insincere. 3. At the pretrial conference held on March 13, 1994, Judge Freedman stated in open court that if a jury finds similarly on retrial, that he would order a third trial. -26- 26 In its brief, M&J has expanded its reasons: The trial judge not only stated his bias, but allowed it to infect his rulings. As indicated in prior arguments in this brief, he took away verdicts in favor of M & J after the first trial even though there was ample evidence to support them. In ruling on these motions he denied the existence of evidence of damages which was clearly before the jury. He failed to apply proper law in finding against M & J for the claim arising out of the loss of the F.L. Roberts account. He failed to adhere to the rules of civil procedure regarding notice pending and amendments to pleadings. He found against M & J on the c. 93A count without making any findings of fact to support his decision. M&J's Brief at 42-43. 28 U.S.C. 455(a) provides: (a) Any justice, judge, or magistrate of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned. We turn to the case law to determine when the statute is implicated. In this Circuit the question is: whether the charge of lack of impartiality is grounded on facts that would create a reasonable doubt concerning the judge's impartiality, not in the mind of the judge himself or even necessarily in the mind of the litigant filing the motion under 28 U.S.C. 455, but rather in the mind of the reasonable man. United States v. Arache, 946 F.2d 129, 140 (1st Cir. 1991) ________________________ (quoting United States v. Cowden, 545 F.2d 257, 265 (1st Cir. _______________________ 1976), cert. denied, 430 U.S. 909 (1977)). See also Town of _____ ______ ___ ____ _______ -27- 27 Norfolk v. United States Army Corps of Eng'rs, 968 F.2d 1438, _____________________________________________ 1460 (1st Cir. 1992); United States v. Lop |