Ash v. Wallenmeyer
| Decision Date | 03 August 1989 |
| Docket Number | No. 88-1253,88-1253 |
| Citation | 879 F.2d 272 |
| Parties | Myron ASH, as trustee of the J & W Corporation Liquidating Trust, Plaintiff-Appellant, v. Donald E. WALLENMEYER, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Nicholas P. Iavarone, Bellows & Bellows, Michael J. Carey, Chicago, Ill., for plaintiff-appellant.
Garrett B. Johnson, Kirkland & Ellis, Randall A. Hack, B. John Mix, Jr., Chicago, Ill., Donald E. Wallenmeyer, Orland Hills, Ill., for defendants-appellees.
Before POSNER, FLAUM, and RIPPLE, Circuit Judges.
This appeal by a disappointed plaintiff illustrates the potential conflict between adversarial and substantive justice. The plaintiff, Myron Ash, is the former president and principal owner, and the present trustee in bankruptcy, of the J & W Corporation, a motor common carrier with headquarters in Chicago. One of J & W's customers was a facility in Gary, Indiana, owned by Georgia-Pacific Corporation, the paper producer, which is a defendant in this case along with Raymond Iverson and Chester Adamczyk, respectively the traffic and plant managers of the Gary facility. In 1980 Ash decided to expand J & W's business and specifically to try to get more business from the Gary facility. To this end he hired Donald Wallenmeyer (another defendant), who was experienced in obtaining ICC approval of routes and rates. Through Wallenmeyer, J & W successfully applied to the ICC for authority to carry paper products interstate.
Because of his wife's chronic illness, Ash moved to Florida in 1982, leaving Wallenmeyer in charge of J & W. With the cat away, the mice began to play. Wallenmeyer created S.M.F. Lines, Inc. (another defendant) and with Iverson's connivance submitted freight bills on behalf of S.M.F. to Georgia-Pacific for work done by J & W. In addition, although Wallenmeyer had promised Ash to enroll J & W in an ICC-approved freight bureau and charge Georgia-Pacific the tariffed rates set by the bureau, he did not enroll J & W in the freight bureau and he charged Georgia-Pacific rates far below the tariff level. By carrying freight for Georgia-Pacific at discount rates, Wallenmeyer made Iverson and Adamczyk look good to their superiors; the quid for this quo was the siphoning of payments due J & W to Wallenmeyer's phony corporation, S.M.F.
In 1984 Ash discovered the part of the fraud involving S.M.F. (that is, the diversion of Georgia-Pacific freight business from J & W, as distinct from the charging on J & W's behalf of bargain rates to Georgia-Pacific), and he filed this suit in 1985. It was only in the course of pretrial discovery that Ash learned of the other part of the fraud, the unauthorized sale of J & W services to Georgia-Pacific at below-tariff rates. Ash was able to document only $12,000 in J & W revenues diverted to S.M.F., but the pretrial discovery revealed that as a result of Wallenmeyer's failing to charge tariff rates J & W had underbilled Georgia-Pacific by $137,000.
On the eve of trial, the district judge ruled that Ash could not obtain damages on the underbilling from Georgia-Pacific, Iverson, or Adamczyk, but could from Wallenmeyer and S.M.F.--although only because these two had defaulted. The default judgments were worthless, Wallenmeyer being an assetless bankrupt and S.M.F. what the Germans call an ausgeblasenes Ei (an eggshell from which the contents have been sucked out through a hole). Ash didn't want to pursue a lawsuit for $12,000--his attorney's fees would greatly exceed that amount--so he requested the judge to dismiss the case with prejudice, which the judge did, and Ash appeals.
The defendants question the propriety of Ash's appealing from a judgment that he himself asked the judge to enter. But they misconstrue the nature of the appeal. Ash wanted to appeal from the ruling that he could not obtain underbilling damages--the principal damages he sought--from any of the solvent defendants. Had he prosecuted the case to judgment and won $12,000, he could have appealed, claiming that the damages were inadequate and that the ruling excluding the underbilling damages should be reversed. See, e.g., Disher v. Information Resources, Inc., 873 F.2d 136, 138-39 (7th Cir.1989); LaBuhn v. Bulkmatic Transport Co., 865 F.2d 119, 121-22 (7th Cir.1988). He took a proper shortcut. United States v. Procter & Gamble Co., 356 U.S. 677, 680-81, 78 S.Ct. 983, 985-86, 2 L.Ed.2d 1077 (1958). If he had taken the longer route and lost on appeal, he would have wasted everyone's time with a futile trial; if he had taken the longer route and won, then it would have taken two trials to give him the relief he deserved. He should not be penalized for trying to save everyone time and money.
The ruling that he seeks to challenge came in response to (1) the defendants' insistence that Ash should have moved to amend his complaint as soon as he realized there were potential underbilling damages as well as the diversion damages specified in the complaint, and (2) Ash's concession during discovery that "this is not a rate case," although the underbilling damages that he seeks are the difference between the tariffed rates for the shipments in question and the lower rates that Wallenmeyer actually charged Georgia-Pacific. Neither point justified the district judge's refusing to allow Ash to pursue the major element of his case and the only one worth the costs of trial. The complaint does specify diversion damages based on Wallenmeyer's shenanigans with S.M.F. but in addition and repeatedly asks for "an accounting for all services rendered to Georgia Pacific by J & W, Wallenmeyer and S.M.F." plus "compensatory damages in the amount determined by reason of the foregoing accounting" plus "such other and further relief as the Court and jury deem appropriate." The regime created by the Federal Rules of Civil Procedure is one of notice pleading, and the passages we have just quoted from the complaint gave the defendants notice enough that Ash was not confining his damages claim to the diversion of business to S.M.F. Hence there was no occasion for him to move to amend the complaint when discovery--specifically an audit of J & W freight bills in Georgia-Pacific's possession (J & W's own records having been destroyed in a fire)--revealed that the damages resulting from the...
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