Chipser v. Kohlmeyer & Co.

• Decision Date: 20 July 1979
• Docket Number: No. 76-4116,76-4116
• Citation: 600 F.2d 1061
• Parties: S. John CHIPSER, Plaintiff-Appellant, v. KOHLMEYER & CO., a partnership, and Thomson & McKinnon Auchincloss Kohlmeyer, Inc., a corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1061

600 F.2d 1061

S. John CHIPSER, Plaintiff-Appellant, v. KOHLMEYER & CO., a partnership, and Thomson & McKinnon Auchincloss Kohlmeyer, Inc., a corporation Defendants-Appellees.

No. 76-4116.

United States Court of Appeals, Fifth Circuit.

July 20, 1979.

Ernest L. Potter, Jr., Huntsville, Ala., for plaintiff-appellant.

E. Cutter Hughes, Jr., Huntsville, Ala., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before RONEY, TJOFLAT and HILL, Circuit Judges.

TJOFLAT, Circuit Judge:

The plaintiff in this action is a speculator in commodities who alleges that the defendant, a brokerage partnership, improperly handled his account. He appeals from the entry against him of a judgment notwithstanding the verdict and the alternative grant of a new trial. We reverse the judgment n. o. v. and send the case back to be tried again. Before reaching the merits, however, we must confirm that we have jurisdiction over this appeal.

I

The jury returned a verdict for the plaintiff, John Chipser. The defendant, Kohlmeyer & Co., ¹ moved alternatively for judgment n. o. v. and a new trial. On August 25, 1976, the trial judge ruled:

Accordingly, it is ORDERED, ADJUDGED and DECREED that the defendant's motion for judgment notwithstanding the verdict be and the same hereby is granted and judgment is entered for the defendant.

It is further ORDERED that the defendant's motion for a new trial be and the same hereby is granted and the judgment heretofore entered herein for the plaintiff is set aside.

Record, vol. 1, at 27.

On September 3, 1976, Chipser's counsel wrote to the trial judge, "I have received your order in the above case granting the defendant's motion for new trial, and I would appreciate your advising when the case may be re-set for trial." Id. at 32. Three days later the judge wrote back, "The case has been reassigned to Judge Lynne. Judge Lynne would like for you to contact him while he is in Decatur for pre-trials commencing October 6, 1976 to discuss a new trial date." Id. at 31. On October 12, 1976, after the thirty-day period for filing a notice of appeal had expired, the court sua sponte amended its order of August 25, 1976, to make it clear that the grant of a new trial was alternative and would take effect only if the judgment n. o. v. were reversed on appeal. Chipser's motion for extension of time in which to appeal, which alleged the foregoing facts as excusable neglect, was filed October 15, 1976, and granted the same day.

We review extensions of time under Fed.R.App.P. 4(a) for abuse of discretion. See Wansor v. George Hantscho Co., 570 F.2d 1202, 1206-07 (5th Cir.), Cert. denied, 439 U.S. 953, 99 S.Ct. 350, 58 L.Ed.2d 344 (1978); Lowry v. Long Island Rail Road, 370 F.2d 911, 912 (2d Cir. 1966); 16 C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice & Procedure § 3950, at 367 (1977). The "excusable neglect" standard of that rule is intended to be a "strict one." Stern, Changes in the Federal Appellate Rules, 41 F.R.D. 297, 298-99 (1967). Failure to learn of the entry of judgment is the major, but not the only, reason for finding excusable neglect. Dugan v. Missouri Neon & Plastic Advertising Co., 472 F.2d 944, 948 (8th Cir. 1973). A showing of other unique circumstances may render it unfair to dismiss an appeal because of late filing of the notice. See Thompson v. Immigration & Naturalization Service, 375 U.S. 384, 387, 84 S.Ct. 397, 399, 11 L.Ed.2d 404 (1964) (per curiam); Harris Truck Lines, Inc. v. Cherry Meat Packers, Inc., 371 U.S. 215, 217, 83 S.Ct. 283, 285, 9 L.Ed.2d 261 (1962).

Here, the initial order of August 25, 1976, was at least somewhat confusing and prompted counsel's inquiry as to when a new trial date would be set. The confusion was compounded by the judge's response, which implied that a new trial had been granted without qualification. That the order was alternative was not made explicit until after time for appeal had expired. While counsel's initial misapprehension of the import of the August 25 order might not alone rise to the level of excusable neglect, See Wansor v. George Hantscho Co., 570 F.2d at 1207; Spound v. Mohasco Industries, Inc., 534 F.2d 404, 411 (1st Cir.), Cert. denied, 429 U.S. 886, 97 S.Ct. 238, 50 L.Ed.2d 167 (1976) ("mere palpable mistake by experienced counsel" is not excusable neglect), we cannot say that an extension of time is unwarranted when counsel is misled by good faith reliance on a statement of the district court. The circumstances of this case are sufficiently unique to justify a finding of excusable neglect. Cf. Thompson v. Immigration & Naturalization Service (court's assurance to counsel that post judgment motions were timely when in fact they were not was unique circumstance justifying allowance of untimely appeal). The appeal is thus properly before us. ²

II

A

The essential facts in this case are not in dispute. In August 1971 Chipser opened a commodities trading account with Kohlmeyer in Huntsville, Alabama. At that time he signed a Commodity Account Agreement that provided, in part, that all transactions for the account would be subject to the rules, regulations, customs and usages of the exchange or market where executed. The contract also provided that whenever Kohlmeyer considered it necessary for its protection it had the right to close out and liquidate any and all of Chipser's outstanding contracts without notice or demand of any kind. Chipser also executed an authorization for Kohlmeyer to transfer funds from his commodity account to his stock accounts to avoid margin calls. He made several successful commodity speculations through Kohlmeyer without incident until 1973.

In early May 1973, on the advice of his broker at Kohlmeyer, Chipser purchased ten wheat spread contracts, July/December. ³ He deposited with Kohlmeyer the required margin of $100 per contract. Chipser was knowledgeable as to the workings of the commodities markets and computed the spread on the wheat contracts daily. Whenever he left town he left word with his broker where he could be reached.

In the period of May and June 1973 the wheat market was quite volatile. For the four days prior to June 1, 1973, prices moved the limit, ⁴ although the spread on Chipser's contracts remained fairly constant at between 3 and 4 cents, July over December. On June 1, a Friday, the spread increased dramatically, and Kohlmeyer liquidated five of the wheat spreads without notice or demand for margin. Chipser's account was charged with a $3,500 loss for the transaction. On Monday morning, June 4, Chipser received a call from his broker demanding $5,000 additional margin on his ten wheat spread contracts. ⁵ Chipser had only $3,000 in his checking account and could not come up with the additional cash right away. ⁶ Consequently, his five remaining contracts were liquidated and the $2,842.50 loss charged to his account.

When Chipser checked his mail on the evening of June 4 he found a confirmation notice from Kohlmeyer regarding the sale of the five wheat spreads on June 1. This was his first notice that these contracts had been closed out before the margin call he had received that morning. He called his broker the next day and was told that the broker knew nothing about the June 1 sale and would check into it. Chipser neither bought back into the market nor requested that his wheat contracts be reinstated. He subsequently paid $1,000 to Kohlmeyer to cover the excess of his loss on the wheat spreads over the equity in his commodity account.

B

The errors in this case derive in large measure from the inartfulness of the pleadings and the failure of the parties to define the issues or the theories of recovery and the measure of damages for each. The complaint alleged that Chipser and Kohlmeyer had a customer-broker relationship but set forth only a part of their dealings: the purchase of the wheat spreads, the inter-account transfers, the demand for additional margin, and the liquidations. The complaint made no mention of either the Commodity Account Agreement or the transfer-of-funds authorization; it simply alleged that the transfers and the liquidations were wrongful and that Chipser "suffered a loss thereby." Record, vol. 1, at 2. The prayer for relief stated "plaintiff demands judgment of the defendants in the sum of $25,000.00." Id.

The pretrial order tersely stated the plaintiff's theories of recovery in the following terms: "breach of contract, breach of the general duty of a broker, and violation of the provisions of 7 U.S.C. §§ 6(b) and 6(d) (Sic §§ 6b and 6d)." ⁷ The order shed no light on how Chipser intended to calculate his damages. In apparent recognition that this brief statement was an inadequate basis on which to try the case, the order also provided that Chipser was to file a trial memorandum setting forth explicitly his theories of recovery. Since neither Chipser's memorandum nor Kohlmeyer's response were made part of the record on appeal, we cannot tell whether they would have aided the trial judge, who had no involvement in the case prior to trial, in understanding what this case is about.

Chipser proceeded at trial on four separate claims for relief: breach of the Commodity Account Agreement, breach of the transfer-of-funds authorization, breach of the fiduciary duty of a broker, and violation of the Commodity Exchange Act. He was permitted to amend his complaint on the day of trial to demand punitive damages, but there was no specification of the amount or the theory of recovery to which they related. ⁸

It became clear at trial that Chipser was seeking compensatory damages in at least the amount of the charges made to his account on the liquidation of his wheat spread contracts. In addition, Chipser testified that he had consistently made money on his commodities speculations by following a well-known investment plan known as the three point reversal charting method. He...