Macsherry v. Sparrows Point, LLC

• Decision Date: 01 September 2020
• Docket Number: No. 19-1321,No. 19-1281,19-1281
• Citation: 973 F.3d 212
• Parties: John H. MACSHERRY, Jr., Plaintiff - Appellee, v. SPARROWS POINT, LLC; Commercial Development Company, Inc.; Michael Roberts, Defendants – Appellants. John H. Macsherry, Jr., Plaintiff - Appellant, v. Sparrows Point, LLC; Commercial Development Company, Inc.; Michael Roberts, Defendants – Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

973 F.3d 212

John H. MACSHERRY, Jr., Plaintiff - Appellee,

v.SPARROWS POINT, LLC; Commercial Development Company, Inc.; Michael Roberts, Defendants – Appellants.

John H. Macsherry, Jr., Plaintiff - Appellant,

v.Sparrows Point, LLC; Commercial Development Company, Inc.; Michael Roberts, Defendants – Appellees.

No. 19-1281

No. 19-1321

United States Court of Appeals, Fourth Circuit.

Argued: May 27, 2020

Decided: September 1, 2020

Joshua J. Gayfield, Megan J. McGinnis, MILES & STOCKBRIDGE P.C., Baltimore, Maryland, for Appellants/Cross-Appellees. Andrew K. O'Connell, THOMAS & LIBOWITZ, P.A., Baltimore, Maryland, for Appellee/Cross-Appellant.

Before MOTZ and DIAZ, Circuit Judges, and Max O. COGBURN, Jr., United States District Judge for the Western District of North Carolina, sitting by designation.

Vacated and remanded by published opinion. Judge Diaz wrote the opinion, in which Judge Motz and Judge Cogburn joined.

DIAZ, Circuit Judge:

A jury awarded John Macsherry, Jr. $1 million on his claims against Sparrows Point, LLC; Commercial Development Company, Inc.; and Michael Roberts (collectively "the defendants") for nonpayment of a commission on the sale of a large parcel of industrial property located on the Sparrows Point peninsula, which juts out from Baltimore Harbor.¹ The defendants (who are based in St. Louis) employed Macsherry for approximately two years as their local, boots-on-the-ground representative in Baltimore while they performed environmental cleanup on the parcel, and upon its sale for $110 million, the jury found that they were contractually obligated to pay Macsherry 0.75% of that price.

On appeal, the defendants contend that the evidence is insufficient to support the jury's verdict as to all claims. Alternatively, they seek a new trial on two grounds, contending that the district court erred both in admitting evidence (under Fed. R. Evid. 408 ) of an alleged effort to compromise Macsherry's claim to a commission and in granting Macsherry a jury trial under Fed. Rs. Civ. P. 38(b) and 39(b).

As we explain, we agree that the evidence of the defendants’ effort to compromise Macsherry's claim wasn't admissible for any purpose under Rule 408 and that the error wasn't harmless. That is, even assuming that the evidence is sufficient as a matter of law to support the jury's verdict, we cannot be confident that the jury was not substantially swayed by the evidentiary error. Accordingly, the defendants are entitled to a new trial. But as we also find that the district court enjoyed ample discretion to grant Macsherry's untimely request for a jury trial under Rule 39(b), the new trial may remain before a jury.²

I.

We begin with the facts, many of which are contested, and the procedural history.

A.

1.

In the late 1980s, Michael Roberts bought his first piece of industrial real estate in the form of a defunct brewery. Within a year, he had demolished the facility, sold the scrap, remediated the property's environmental liabilities, and resold it for a huge profit. Looking to replicate the success of that venture, in 1990, Michael Roberts and his brother, Thomas,³ founded Commercial Development Company, Inc. ("CDC"), a Missouri-based company, to facilitate the remediation and resale of other such ‘brownfield’ properties.

In the years since, the Roberts brothers have developed a business model whereby they form single-purpose companies to purchase individual brownfield properties, whose environmental liabilities are then remediated by CDC. The brothers then resell the parcels through their respective single-purpose companies. And while the brothers share control of all companies involved in the process, one of them is assigned principal responsibility for each property.

So it was that, in September 2012, the Roberts brothers formed Sparrows Point, LLC, another Missouri-based company, for the purpose of acquiring about 3,100 acres of highly contaminated industrial property on the Sparrows Point peninsula, where the Bethlehem Steel mill formerly stood. Michael Roberts was assigned responsibility for the Sparrows Point site, which was purchased in tandem with an unaffiliated, Chicago-based liquidation firm called Hilco Global. The transaction was structured so that Hilco acquired the site from the railroad tracks up, while Sparrows Point, LLC acquired it from the land down, including all of the environmental liabilities. As usual, the defendants planned to redevelop the land and then sell or lease their interest.

2.

Soon after the acquisition of the Sparrows Point site, CDC's then Vice President of Asset Management, Robert Schoelch, approached Michael Roberts to discuss, as Michael later testified, "hiring a local representative to act as boots on the ground in Baltimore." J.A. 782. In Schoelch's view, the defendants needed someone with a solid network in the community to help "move the project forward" by dealing with brokers, tenants, and state and local officials, among other responsibilities. J.A. 1421. According to Schoelch, they also discussed the need for a "commission component" to the position's compensation package, J.A. 1435, though Michael testified to the contrary and that he "never authorized" Schoelch to offer a commission component, J.A. 786.

Enter Macsherry, who, on September 20, 2012, sent an email to CDC's Chief Executive Officer, Randall Jostes, to inquire about working for "the owners of Sparrows Point." J.A. 440. As if reading Schoelch's mind, Macsherry billed himself as "a Baltimore person who ha[d] been in the real estate industry for close to 30 years," with "excellent experience" in "master planning" and "development," "excellent contacts in the community," and valuable "knowledge" of the Baltimore Harbor. J.A. 1611.

Macsherry's email was forwarded to Schoelch, who then called Macsherry. Over the ensuing weeks, the two men exchanged half a dozen more calls and emails regarding the boots-on-the-ground position—until, on December 4, 2012, Schoelch called Macsherry to say that the defendants wanted to make him an offer.

What happened next is somewhat disputed. Macsherry testified that Schoelch sent him an email (which, however, was never produced in discovery), along with a one-page term sheet attached (a copy of which was produced), that same day. See J.A. 1673 (the "Original Term Sheet"). Though it contains no date, names, or signature lines, the Original Term Sheet lists the relevant position as Sparrows Point, LLC's "Vice President of Leasing and Development" and recites, among other terms, a "Salary" of $50,000 per year and a "Commission" of "75 basis points paid on the total net value of any sales/leases or parcels." Id. Michael Roberts, Schoelch, and Macsherry all testified that they understood "75 basis points" to mean three-quarters of one percent, i.e., a 0.75% commission.

After receiving the Original Term Sheet, Macsherry sought to negotiate better terms, especially with respect to pay and vacation time. According to Macsherry, Schoelch said he would need to obtain Michael's approval for any changes, and shortly thereafter sent Macsherry (in another email that was never produced in discovery) a red-lined version of the term sheet (a copy of which was produced in discovery). See J.A. 1657 (the "Red-Lined Term Sheet").

In addition to a newly listed start date of Monday, December 10, 2012, the Red-Lined Term Sheet recites a salary of $77,000 and two extra vacation days, while the commission term remains substantially the same at "75 basis points paid on the total value of any sales/leases or parcels on any deals closed after the Start Date." Id. Further, while the Red-Lined Term Sheet still lacks any date, names, or signature lines, the Tracked Changes panel of the Microsoft Word document that Macsherry received reflects that the changes were entered by "R. Schoelch" on December 4, 2012. Id.

After receiving the Red-Lined Term Sheet, Macsherry attempted again to negotiate better pay, but Schoelch told him that the revised deal was the best one that Michael Roberts "w[ould] agree to." J.A. 465. At that point, Macsherry said that he "[woul]d accept these terms and conditions." Id.

For his part, Schoelch recalled little about his interactions with Macsherry between September 20 and December 4, but conceded to having created and sent the Red-Lined Term Sheet to Macsherry. Not in dispute, however, was that no employment contract was formed on December 4 because the Red-Lined Term Sheet wasn't a formal offer, as Michael Roberts had not yet approved it.

On December 6, CDC flew Macsherry out to their headquarters in St. Louis. He spent about an hour meeting with the Roberts brothers, during which time they discussed such generalities as the redevelopment of the Sparrows Point site and the Baltimore real estate scene, but not such details as Macsherry's compensation. "That kind of stuff," Michael Roberts would later testify, "was all ... up to [Schoelch]." J.A. 785–86.

Macsherry then met with CDC's Chief Operating Officer and Director of Human Resources, Becky Lydon. According to Macsherry, after telling him that he was officially hired, Lydon gave him a "clean version" of the Red-Lined Term Sheet—that is, one without the redlines but with all the same terms—to sign. J.A. 469–70. Macsherry knew the clean version memorialized the same terms as the Red-Lined Term Sheet (including with respect to commission) because he had brought a copy of the latter along with him to St. Louis, and "compared the two documents" side-by-side right then and there. J.A. 470. Macsherry added that after he'd signed the clean version, Lydon said she would "get Mike Roberts to sign it" too and "send [him] a copy." J.A. 471. But Macsherry never received a copy, and no clean version of the Red-Lined Term Sheet—nor any other document purporting to be Macsherry's employment agreement—was ever produced in discovery.

Lydon's testimony paints an entirely different picture of this meeting. She never told Macsherry he was hired and, in fact,...