Ansam Associates, Inc. v. Cola Petroleum, Ltd.

• Decision Date: 24 April 1985
• Docket Number: No. 725,D,725
• Parties: ANSAM ASSOCIATES, INC. and Ansam Associates, Inc., as Nominee for Frank Dickstein, Gerald Acker, Jules Becker, Harold Cagen, Joan Keyloun, Irma Wertheimer, Andrew Tananbaum, Andrea Nouryeh, Samuel Spielberg, Richard Kaplan, Philip Kaplan, Barbara Burstin, Patricia Berman (as Trustee for Lynn Berman, Andrew Berman and Abby Berman) and Meyer Berman, Plaintiffs-Appellants, v. COLA PETROLEUM, LTD., Defendant-Appellee. ockets 84-7546, 84-7660.
• Court: U.S. Court of Appeals — Second Circuit

Page 442

760 F.2d 442

1 Fed.R.Serv.3d 1071

ANSAM ASSOCIATES, INC. and Ansam Associates, Inc., as

Nominee for Frank Dickstein, Gerald Acker, Jules Becker,

Harold Cagen, Joan Keyloun, Irma Wertheimer, Andrew

Tananbaum, Andrea Nouryeh, Samuel Spielberg, Richard Kaplan,

Philip Kaplan, Barbara Burstin, Patricia Berman (as Trustee

for Lynn Berman, Andrew Berman and Abby Berman) and Meyer

Berman, Plaintiffs-Appellants, v. COLA PETROLEUM, LTD., Defendant-Appellee.

No. 725, Dockets 84-7546, 84-7660.

United States Court of Appeals, Second Circuit.

Argued Feb. 5, 1985.

Decided April 24, 1985.

Clinton W. Walker, New York City (Spengler Carlson Gubar Brodsky & Frischling, Pat R. Shapiro, New York City, of counsel), for plaintiffs-appellants.

Joseph P. Zammit, New York City (Reavis & McGrath, P.C., Kimberlee S. Bogen, Lawrence A. Spector, New York City, of counsel), for defendant-appellee.

Before LUMBARD, MANSFIELD and PIERCE, Circuit Judges.

LUMBARD, Circuit Judge:

Plaintiffs, Ansam Associates, Inc. and Ansam Associates, Inc. as nominee for several individual investors (collectively "Ansam"), appeal from judgments of the Eastern District of New York, John R. Bartels, Judge, entered on July 1, 1983 and May 24, 1984, that denied the plaintiffs' motion to amend their amended complaint, granted defendant summary judgment on the fraud, accounting, and negligence claims, and dismissed, after a two-day non-jury trial, plaintiffs' reformation claim. Subject matter jurisdiction is based upon section 22 of the Securities Act of 1933, 15 U.S.C. Sec. 77v (1976). Judge Bartels ruled that amending the amended complaint after discovery was completed and after the defendant had moved for summary judgment would unfairly prejudice the defendant. The court granted summary judgment on the fraud and negligence claims on the ground that plaintiffs had come forward with no evidence of specific facts that could support a finding that the defendant's statements were misrepresentations or that the defendant's allegedly negligent conduct caused a loss. Finally, the court refused to reform the contract because the plaintiffs offered no evidence of mistake on the part of either party. On appeal, plaintiffs contend (1) that they should have been permitted to amend their complaint to conform to the evidence; (2) that summary judgment on the newly proposed fraud claim would have been inappropriate; (3) that a triable issue of fact existed on the negligence claim; and (4) that the court should have fashioned some alternate equitable remedy other than reformation. For reasons that follow, we affirm the judgments of the district court.

In November, 1980, pursuant to three letter agreements, Jack Wilder purchased from Cola Petroleum, Inc. ("Cola") a 20% "working interest" in three oil properties (the "Cole Creek Prospects") in Natroma County, Wyoming. Each letter agreement was signed by Wilder and Thomas Garber, then the president of Cola. Wilder then assigned his "working interest" to Ansam Associates, Inc., a corporation of which he is chairman of the board and a 50% shareholder.

On December 10, 1980, Wilder returned to Cola three signed authorizations for expenditure setting forth the estimated expenses for the oil production in the Cole Creek Prospects. At the bottom of each authorization was a provision noting that the estimated expenses were only estimates, and that the "approval of this authorization shall extend to the actual costs incurred in conducting the operations specified, whether more or less than herein set out." On December 30, 1980, Ansam mailed two checks, totalling $274,500, to Cola, and stated in the covering letter: "[e]nclosed are two (2) checks, one in the amount of $124,500.00 and the other in the amount of $150,000.00 in partial payment of the above wells. The balance due of $25,500.00 will follow shortly."

In June, 1981, after completion of the drilling of the Cole Creek Prospects, Cola demanded that Ansam pay $143,164.79, an amount which included 20% of the cost overruns. Ansam refused to make such payment and contended that the agreement with Garber limited its liability to $300,000; Ansam asserted that because it had already paid $274,500, it only owed $25,500.

This action was commenced on April 2, 1982, in the New York Supreme Court, and then removed to the District Court for the Eastern District of New York on May 12, 1982. Ansam's complaint set forth five causes of action seeking: (1) damages for violations of Secs. 11, 12, and 17 of the Securities Act of 1933 resulting from material misrepresentations made by Cola to induce Wilder to acquire an interest in the Cole Creek Prospects; (2) damages for common law fraud based on the same misrepresentations; (3) declaratory judgment that the parties had agreed that Wilder's liability would be limited to $300,000 and reformation of any written documents to reflect this agreement; (4) an accounting; and (5) damages for Cola's negligence in failing to extract oil from the Cole Creek Prospects.

After granting numerous requests by Ansam to extend discovery, Judge Bartels set March 31, 1983 as the discovery deadline. On April 7, 1983, Cola moved for summary judgment. On May 5, 1983, Ansam cross-moved to amend its amended complaint in order to allege facts supposedly uncovered during discovery. Ansam also cross-moved for summary judgment on its reformation claim.

On June 9, 1983, Judge Bartels denied Ansam's motion to amend and granted Cola's motion for summary judgment on the fraud, accounting, and negligence claims. (Ansam had already abandoned its accounting claim as well as its negligence claim with regard to two of the three oil wells in issue.) Both motions for summary judgment on the reformation claim were denied. On the same day, the court filed an order, apparently pursuant to Fed.R.Civ.P. 54(b), reflecting this decision. Judgment on four of the five causes of action was entered on July 1, 1983.

After a two-day bench trial on the remaining reformation claim, that claim was dismissed on May 11, 1984, with judgment entered on May 24, 1984.

Ansam now appeals the denial of its motion to amend the amended complaint, as well as the dismissal of the fraud claims, the negligence claim as to the third well of the Cole Creek Prospects (well "13-10"), and the reformation claim.

The Rule 54(b) Certification.

We must first deal with Cola's motion to dismiss as time-barred that portion of Ansam's appeal that relates to the district court's summary judgment determination and denial of Ansam's motion to amend. We think the district court's July 1, 1983 judgment is appealable.

Cola alleges that the June 9, 1983 order contained a certification pursuant to Fed.R.Civ.P. 54(b) directing entry of a final judgment as to the claims the court dismissed. Accordingly, argues Cola, if Ansam wanted to appeal any part of the judgment, it had to do so within thirty days. See 28 U.S.C. Sec. 2107. Instead, Ansam did not file its notice of appeal until June 21, 1984, nearly one year after the July 1, 1983 judgment. Thus, Cola contends, Ansam's appeal should be limited to a review of the May 24, 1984 judgment dismissing the reformation claim.

Rule 54(b) of the Federal Rules of Civil Procedure provides in pertinent part that "the court may direct the entry of a final judgment as to one or more but fewer than all of the claims ... only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment." The propriety of a Rule 54(b) certification is reviewable by the court of appeals. Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 437, 76 S.Ct. 895, 900-01, 100 L.Ed. 1297 (1956). Ansam argues that the district court's June 9, 1983 order did not contain a proper Rule 54(b) certification; the district court merely stated, "there being no just reason for delay, the Clerk is hereby directed to enter judgment forthwith as to the said claims ...," without reference to Rule 54(b).

We have repeatedly stated that "in making the 'express determination' required under Rule 54(b), district courts should not merely repeat the formulaic language of the rule, but rather should offer a brief, reasoned explanation." Cullen v. Margiotta, 618 F.2d 226, 228 (2d Cir.1980) (citing Arlinghaus v. Ritenour, 543 F.2d 461, 464 (2d Cir.1976)); see Gumer v. Shearson, Hammill & Co., 516 F.2d 283, 286 (2d Cir.1974); Schwartz v. Compagnie General Transatlantique, 405 F.2d 270, 275 (2d Cir.1968). One of the primary policies behind requiring an articulated justification for a 54(b) certification is the desire to avoid "piecemeal appeals." Cullen, 618 F.2d at 228. Especially today, with the proliferation of appeals and consequent increased burden on appellate courts, unrestrained application of Rule 54(b) is strongly disfavored. In accordance with this policy, we have followed the reasoned rule of the Third Circuit that "54(b) orders should not be entered routinely or as a courtesy or accommodation to counsel. The power which this Rule confers upon the trial judge should be used only 'in the infrequent harsh case' ...." Panichella v. Pennsylvania R.R., 252 F.2d 452, 455 (3d Cir.1958), quoted in Cullen, 618 F.2d at 228; Brunswick Corp. v. Sheridan, 582 F.2d 175, 183 (2d Cir.1978); Arlinghaus, 543 F.2d at 463-64.

A district court should grant certification only when there exists "some danger of hardship or injustice through delay which would be alleviated by immediate appeal." Campbell v. Westmoreland Farm Inc., 403 F.2d 939, 942 (2d Cir.1968). Without a reasoned explanation for the certification, however, no adequate review can...