Bonilla v. Trebol Motors Corp.
| Decision Date | 02 December 1997 |
| Docket Number | Nos. 97-1140,97-1143,97-1145,s. 97-1140 |
| Citation | 150 F.3d 77 |
| Parties | Bankr. L. Rep. P 77,756 Luis BONILLA, et al., Plaintiffs, Appellees, v. TREBOL MOTORS CORPORATION, et al., Defendants, Appellees. Ricardo Gonzalez-Navarro and Conchita Navarro De Gonzalez, Defendants, Appellants. Luis BONILLA, et al., Plaintiffs, Appellees, v. TREBOL MOTORS CORPORATION, et al., Defendants, Appellants. Luis BONILLA, et al., Plaintiffs, Appellants, v. TREBOL MOTORS CORPORATION, et al., Defendants, Appellees. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Michael J. Rovell and Charles A. Cuprill-Hernandez with whom Jewel N. Klein, Law Offices of Michael J. Rovell, and Law Offices of Charles A. Cuprill-Hernandez were on joint brief for defendants Ricardo Gonzalez-Navarro, Conchita Navarro de Gonzalez, Trebol Motors Corporation and Trebol Motors Distributor Corporation.
Allan Kanner with whom Conlee Schell Whiteley, Allan Kanner & Associates, P.C., Paul H. Hulsey, Frederick J. Jekel, Theodore H. Huge, Ness, Motley, Loadholt, Richardson & Poole, P.A., Jose F. Quetglas Jordan, Eric Quetglas Jordan, Zygmunt Slominski, Quetglas Law Offices, Daniel Harris and Law Offices of Daniel Harris were on brief for plaintiffs Luis Bonilla, et al.
Gael Mahony with whom Michael D. Vhay, Andres W. Lopez, Anne L. Showalter, Hill & Barlow, P.C., Rafael Perez-Bachs, Nereida Melendez-Rivera and McConnell Valdes were on brief for defendant Volvo Car Corporation.
Before SELYA, Circuit Judge, CAMPBELL, * Senior Circuit Judge, and BOUDIN, Circuit Judge.
This opinion, the second in a series of three, is a companion to our decision in Bonilla v. Volvo Car Corporation, No. 97-1135, 150 F.3d 62 (1st Cir.1998), decided this day ("Volvo "). That decision sets forth a description of the litigation, including the allegations made by the plaintiffs, the course of proceedings, and the disposition of claims in the district court. This opinion is directed to the merits appeal of the defendants other than Volvo, specifically Trebol and the Gonzalez defendants, and the cross-appeal by the plaintiffs. We assume the reader's familiarity with the Volvo opinion.
In the district court, Trebol and the Gonzalez defendants litigated actively through discovery and summary judgment proceedings during the four years between the filing of the complaint and the trial. But, as recounted in Volvo, three days before the trial scheduled for June 24, 1996, Trebol and the Gonzalez defendants consented to the entry of default against them "as to the factual averments of the Third Amended Complaint." After the liability verdict and the subsequent damage verdict against Volvo, Trebol and the Gonzalez defendants resumed their participation in the case.
Whether and to what extent Trebol and the Gonzalez defendants may have monitored the Volvo trial is unclear, but they were not invited to participate in the damage phase of the Volvo trial; that phase was itself abbreviated because--despite the original bifurcation order--the plaintiffs and Volvo relied entirely on liability-phase evidence and simply presented arguments to the jury. The jury then assessed damages only against Volvo and not against Trebol or the Gonzalez defendants.
The damage verdict against Volvo was delivered by the jury on August 1, 1996. On August 19, the plaintiffs filed a motion to assess damages against Trebol and the Gonzalez defendants. The next day, August 20, these defendants were given telephone notice that a hearing on the matter was scheduled for August 29, nine days hence. The Gonzalez defendants immediately filed a motion (on August 20) requesting a postponement of the hearing, pointing to the very short notice and the fact that counsel would be out of the country taking depositions in Finland and Spain during the two weeks surrounding the proposed hearing. Counsel suggested September 26 and 27 as convenient dates for the hearing.
So far as the record reveals, the court denied this motion for continuance on August 21, but this order was not entered until August 27. That day, the Gonzalez defendants filed a joint motion requesting a pretrial conference "prior to the hearing scheduled for August 29 ... to discuss the parameter [sic] of the hearing and to discuss the applicability of a jury." Similarly, on August 27, the Trebol defendants filed their own motion for a continuance. Neither motion was acted upon prior to August 29, when the parties appeared for the hearing, and the district judge then denied both motions. His rationale, set forth in the order entered August 27 denying a continuance, was this: "If Trebol and Gonzalez codefendants were prepared to go to trial on June 24, 1996, they should be prepared for a Hearing on the issue of damages more than two months later."
At the August 29 hearing, plaintiffs again relied upon the evidence presented against Volvo, urging that the defaulting defendants had abandoned any right to contest that evidence by failing to appear for the damages phase at the trial. The defaulting defendants offered to present evidence that the district court had excused them from attending the liability trial against Volvo after the default, pointed to the original order for a bifurcated trial on damages and asserted that they were entitled to a jury trial on damages against them. They also complained that the plaintiffs were relying for damage evidence on witnesses from the Volvo liability trial whom the defaulting defendants had never had occasion to cross-examine.
What is most important to these appeals is that the defaulting defendants also renewed their request for an effective opportunity to oppose plaintiffs' damage claim. That damage claim, as we explain below, depended primarily on plaintiffs' contention that the lower retail prices of Volvo cars in sales on the U.S. mainland reflected the "real" value of the cars in Puerto Rico. The defaulting defendants made a specific offer of proof that, if allowed to collect and present evidence, they would show that this price disparity was a common occurrence for luxury car sales and did not prove the value of the same cars in the Puerto Rico market. The court scheduled no further hearing but took the case under submission.
In an opinion and order dated October 7 but entered October 10, 1996, the district judge determined that Trebol and the Gonzalez defendants were liable for the same damages assessed against Volvo by the jury. The court said briefly that the complaint had charged a conspiracy among all of the defendants and since the four remaining defendants had defaulted on the complaint, they were liable for all damages assessed against Volvo on the ground that a conspirator is responsible for offenses committed by his fellow conspirators. On October 10, the district court entered judgment against Trebol and the Gonzalez defendants in the same amount as that previously entered against Volvo, namely, $129,591,300.
The defaulting defendants' arguments in these appeals fall into three categories. First, despite their default, they challenge the adequacy of the allegations in the complaint to set forth a cause of action. Second, they claim that they were entitled to a jury trial on damages and that they were improperly denied an opportunity to present evidence at the damages hearing on August 29, 1996. 1 Third, Trebol (but not the Gonzalezes) say that the proceedings against them should have been stayed because the two Trebol corporate defendants filed for bankruptcy (on September 30, 1996) before judgment was entered (on October 10, 1996).
The default judgment and the adequacy of the complaint. Generally speaking, a default judgment bars the defaulting party from disputing the facts alleged in the complaint, but it preserves for appeal arguments of law made below as to whether the facts as alleged state a claim. 10 Moore's Federal Practice, § 55.12, at 55-18 to 55-19 (Coquillette et al. eds., 3d ed.1997); see also McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 229-30 (1st Cir.1980); Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.1988), cert. denied, 493 U.S. 858, 110 S.Ct. 168, 107 L.Ed.2d 124 (1989).
In this case, prior to their default in the district court, the defaulting defendants presented a barrage of legal attacks on the complaint in conjunction with motions for summary judgment, and the district court generally rejected these challenges in denying the summary judgment motions. 2 Although the summary judgment motions were directed to the Second Amended Complaint, the Third Amended Complaint on which the case went to trial was not different in any respect material here. The complaint set forth two different claims of fraud against Trebol and the Gonzalezes.
The first, rather tersely stated, was that the defendants had modified or altered 240 DL models by providing some new accessories and upgraded emblems and then sold these "disguised" vehicles "as if they were factory made models" and for much more than the price that the defendants "would have normally charged for the 240 DL Volvo models with such alterations or modifications." The second claim was that the defendants had a statutory duty under both federal and Puerto Rico law to disclose on a label a range of material facts that they omitted and failed to disclose, including the cars' manufacture as DL (rather than GL or GLE) models, the manufacturer's suggested retail price, the suggested retail price for optional equipment, and the factory cost of the 240 DL models. 3
In the district court, Trebol and the Gonzalez defendants made numerous legal attacks on the adequacy of the complaint, but on this appeal they have confined themselves to three: first, that the emblem altering practice and addition of port accessories did not constitute a scheme to defraud and that there was no duty to disclose that final emblems and certain accessories had been added in Puerto Rico. Next, th...
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