Gerli v. G.K. Hall & Co., 87-1210
| Decision Date | 07 April 1988 |
| Docket Number | No. 87-1210,87-1210 |
| Parties | 25 Fed. R. Evid. Serv. 1244 E. Michael GERLI, et al., Plaintiffs, Appellants, v. G.K. HALL & CO., et al., Defendants, Appellees. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Joseph A. Bosco with whom Bosco, Curry & Tesoro, Boston, Mass., was on brief for plaintiffs, appellants.
Michael J. Liston with whom Palmer & Dodge, Boston, Mass., was on brief for defendants, appellees.
Before COFFIN, TORRUELLA and SELYA, Circuit Judges.
Plaintiffs entered into contracts with defendant, a publisher, to publish their academic manuscripts. When defendant later cancelled publication, plaintiffs sued for breach of contract, fraud, and violation of an unfair-and-deceptive trade practices statute, Mass.Gen.L.Ann. Ch. 93A, Secs. 1-11 (1984). Before trial, defendant admitted contract liability; at the close of the evidence, the court directed a verdict on the fraud claim and on the claim for a willful and knowing violation of Ch. 93A. The ordinary Ch. 93A claim was submitted to the jury, which returned a verdict for defendant. Plaintiffs now appeal from various rulings and instructions of the district court. We find no error and affirm.
Plaintiffs are twenty-two academic authors who, between 1973 and 1978, entered into contracts with a Massachusetts publisher, defendant G.K. Hall & Co., to publish their manuscripts as a part of Hall's "Twayne World Author Series." The contracts obligated Hall to publish the manuscripts unless prevented "by circumstances beyond the publisher's control." Twenty of the authors submitted their completed manuscripts either before the contract deadline or within an extension agreed to by Hall. In May and June of 1982, however, Hall notified the plaintiffs that, due to a "change in market conditions," it would not publish any of the manuscripts. Hall explained that libraries, which constituted the primary market for the Twayne series, were reducing their purchases because of budget cuts, thus requiring Hall to scale back its Twayne publications.
Plaintiffs then brought this diversity action for breach of contract, fraud, and unfair and deceptive trade practices in violation of Mass.Gen.L.Ann. Ch. 93A. The gist of plaintiffs' claims was that Hall had known at the time it entered into or extended the contracts, or at least well before it actually cancelled the contracts, of the likelihood that a decline in demand for its publications would cause it to cancel. Plaintiffs asserted that Hall's failure to disclose this information earlier constituted fraud and a willful or knowing violation of Ch. 93A, entitling plaintiffs to double or treble damages under Ch. 93A, section 11. Plaintiffs also sought damages for harm to reputation and for emotional distress, although they filed no separate claim for damage to reputation or for infliction of emotional harm.
On the day before trial, plaintiffs moved to add as defendants the ITT Corporation, which owned Hall at the time of the cancellations, and Macmillan, Inc., which acquired Hall in 1985. The district court denied the motion. On the first day of trial, Hall admitted contract liability. The district court then bifurcated the trial into liability and damage phases, and the parties proceeded to try the fraud and Ch. 93A liability issues to a jury. At the close of the evidence the court directed a verdict for Hall on the fraud and willful-and-knowing Ch. 93A claims. The jury then found for Hall on the ordinary Ch. 93A claim. The parties then settled the issue of contract damages, thus obviating the need for a trial on any damages issue. Plaintiffs renewed their motion to add ITT and Macmillan as defendants, and the district court denied the motion.
Plaintiffs now appeal. They assert that the district court misinterpreted Ch. 93A and thus erred in certain evidentiary rulings and jury instructions and in directing a verdict on the willful-and-knowing issue. They complain that they were unfairly precluded from offering evidence of emotional distress and harm to reputation. They claim that the court should not have directed a verdict on the fraud count. Finally, they argue that the district court should have permitted them to add ITT and Macmillan as defendants. We address each of these claims in turn.
Under Ch. 93A, "unfair or deceptive acts or practices in the conduct of any trade or commerce are ... declared unlawful." Mass.Gen.L.Ann. Ch. 93A, Sec. 2. A regulation of the Massachusetts Attorney General, issued under the authority of Ch. 93A Sec. 2(c), makes it a Ch. 93A violation to "fail[ ] to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction." Mass.Regs.Code tit. 940, Sec. 3.16(2). Ch. 93A, section 11 permits private persons engaged in trade or commerce to bring a civil action for legal and equitable relief for Ch. 93A violations.
Plaintiffs claim that the district court erroneously instructed the jury, both before and after the presentation of evidence, that a mere breach of contract is insufficient to establish Ch. 93A liability. Plaintiffs never objected to these instructions, however, as required by Fed.R.Civ.P. 51, and we see no plain error, so we do not reach this issue. Plaintiffs also complain of an instruction suggesting that conduct only violates Ch. 93A if it is within some established concept of unfairness or deception, and is immoral, unethical, oppressive, or unscrupulous, and causes substantial injury to others. Plaintiffs argued in the district court that all three factors need not be present; the court then reinstructed the jury to this effect, and plaintiffs specifically stated their satisfaction with the clarified instruction. We therefore will not consider plaintiffs' claim, raised for the first time on appeal, that this clarification was inadequate.
Plaintiffs also requested two instructions directing the jury to consider whether Hall acted unfairly or deceptively after the execution of the contracts. Plaintiffs wanted the jury to determine whether, during this period, Hall knew or should have known of the risk that it might cancel the contracts because of changed market conditions, and either (1) failed to inform plaintiffs of this risk, or (2) by granting contract extensions, induced plaintiffs to continue to believe that their manuscripts would be published. The court refused the requested instructions and instead told the jury to focus on what was or was not disclosed "at the time these contracts were entered into." Plaintiffs renewed their objection after this instruction and have thus preserved the point.
We think that the district court's instruction and its refusal of plaintiffs' instructions were proper. The Attorney General's regulation, Mass.Regs.Code tit. 940, Sec. 3.16(2), which we have quoted above, clearly focuses on the duty to disclose only at the time a transaction is entered into. Plaintiffs cite no case, and we know of none, that extends the duty that this regulation creates into a continuing duty to disclose and update during the period after a transaction is entered into.
Plaintiffs assert that, this regulation aside, Ch. 93A's more general proscription of unfair or deceptive acts and practices applies to Hall's conduct after it entered into the contracts. Although this would appear to be true, there was still no evidentiary predicate for the submission of either of plaintiffs' theories to the jury. That is, there was no evidence that, after entering the contracts, Hall knew or should have known that changed market conditions might cause it to cancel plaintiffs' contracts--and thus no basis for instructing the jury to consider whether Hall failed to disclose such knowledge or unfairly or deceptively extended plaintiffs' contracts. Our brief summary of the pertinent evidence follows.
There was uncontradicted testimony that, up until the time of the cancellations, Hall had every intention of publishing the manuscripts. The evidence was similarly uncontradicted that it was not until the spring of 1982 that Hall received an analysis of changed market conditions for its World Authors series, along with legal advice that such changed market conditions would justify cancellation of plaintiffs' contracts. Although Hall had in 1976 cancelled a different series--the World Leader Series--because of lower-than-expected sales, Hall had not cancelled the contract of any individual author in that series, and Hall had published any work then under contract that any individual author chose to complete. And in November of 1981 Hall had cancelled a Chinese series because of poor sales and cancelled the contracts of...
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