USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________________

Nos. 95-1146
95-1203

PAUL F. AHERN, D/B/A AHERN ASSOCIATES,

Plaintiff - Appellee,

v.

DONALD THOMAS SCHOLZ,

Defendant - Appellant.

____________________

Nos. 95-1147
95-1204

PAUL F. AHERN, D/B/A AHERN ASSOCIATES,

Plaintiff - Appellant,

v.

DONALD THOMAS SCHOLZ,

Defendant - Appellee.

____________________

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]

___________________

____________________

Before

Torruella, Chief Judge,

___________

Bownes, Senior Circuit Judge,

____________________

and Stahl, Circuit Judge.

_____________

_____________________

Donald S. Engel, with whom

________________

Mark D. Passin,
______________

Engel & Engel,

_____________

Lawrence G. Green, Susan E. Stenger and Perkins, Smith & Cohen

__________________ _________________
_______________________
were on brief for Donald Thomas Scholz.

David C. Phillips, with whom David M. Given and Goldstein &

__________________
______________
___________
Phillips were on brief for Paul F. Ahern.
________

____________________

June 4, 1996
____________________

-2-

TORRUELLA, Chief Judge.

TORRUELLA, Chief Judge.
___________

contract

case, a

successful

musician and

dispute whether royalties from

for and paid to each other.

The parties in this breach

The

his former

of

manager,

record albums have been accounted

appeal is from a final judgment

by the district court after a jury trial, disposing of all claims

in respect to all parties.

BACKGROUND:
BACKGROUND:

A BAND OUT OF BOSTON

A BAND OUT OF BOSTON

In this case, the parties dispute many of the facts and

the

inferences to

be drawn

sketch of the basic

more detail

Thus

we start

facts, and address the individual

below.

Scholz ("Scholz")

from them.

Appellant and cross-appellee

is a

musician, composer, and

with a

issues in

Donald Thomas

record producer

who was, and is, a member of the musical group BOSTON ("BOSTON").

In late 1975, Scholz entered into three

and cross-appellant Paul F.

agreements with appellee

Ahern ("Ahern"), who was engaged

in

the business of promoting and managing music groups, and his then

partner,

Charles McKenzie ("McKenzie")

Agreements").

"Recording

First,

Agreement")

Productions, to

was

also

Scholz

with

made a

Ahern

Second

was

recording agreement

and

which Bradley Delp,

party.

(collectively, the "1975

McKenzie

the lead singer

d/b/a

(the

P.C.

of BOSTON,

management agreement

(the

"Management

Agreement"),

Productions,

under

Scholz'

agreement

exclusive

was a

which

personal

songwriter

also

between

Ahern

and

managers

Scholz

McKenzie

worldwide.

agreement made

were

and

P.C.

appointed

The

third

between Scholz

and

furnish Ahern

his

-3-

Ahern, under

which Scholz

was

obligated to

exclusive songwriting services for a period of five years.

In

early

1976,

CBS

Records

("CBS")

and

Ahern

Associates, a business name of Ahern and McKenzie, entered into a

recording

BOSTON.

agreement

for

the

exclusive

recording

services of

The group's first album (the "first album") was released

in 1976, and sold approximately

11 million copies -- one

highest-selling debut albums ever.

album") was

released in

of the

Its second album (the "second

August 1978,

and sold

approximately 6

million copies.

In 1978, Scholz and the other members of BOSTON entered

into a

modification agreement

dated April 24, 1978.

with Ahern and

P.C. Productions,

Among other things, the First Modification

Agreement modified the 1975

Agreements and changed the financial

relationship between Scholz and his managers.

Ahern and McKenzie

dissolved their partnership.

A few

Ahern and Scholz, individually

entered

into

Modification

dispute.

further

years later, in May of 1981,

and under various business names,

modification

agreement (the

"Further

Agreement" or "FMA"), which is at the heart of this

Ahern ceased to be Scholz' manager.

In 1982, with the third album not yet released, CBS cut

off

the payment of royalties generated from the first and second

albums.

In 1983, CBS brought suit against Scholz, Ahern, and the

members of

Scholz'

Ahern

BOSTON for failure

counsel in

to timely deliver

that action

had his own counsel.

was Donald S.

While that

-4-

record albums.

Engel ("Engel");

litigation was pending,

the third album

sold

years

was released by MCA Records

well over 4 million copies.

after

the CBS

("MCA") in 1986 and

At the close of trial -- seven

litigation began

Scholz was not in breach of contract.

--

the jury

found that

Scholz incurred legal fees

of about $3.4 million dollars.

In February 1991,

Scholz for

Ahern commenced this

action against

breach of the FMA claiming a failure to pay royalties

due under the

third album.

Scholz asserted

various affirmative

defenses and counterclaims against Ahern, including breach of the

FMA.

During trial, Engel, Scholz' lead trial counsel, was twice

called

as a witness.

At the

close of the

evidence, the court

granted Scholz' directed verdict dismissing Ahern's Count III for

fraud and IV

fair dealing.

for breach

of implied covenant

of good faith

and

The court also granted Ahern's motion for directed

verdict dismissing Scholz' First, Second, and Third Counterclaims

and his, Third, Fourth, and Fifth affirmative defenses.

Only the

parties' respective breach

of contract claims went to

The jury found that Scholz

breached section 5.2.1 of the

pay

Ahern royalties from the

the jury.

FMA to

third album, and

found that Ahern

had not breached the FMA to account for and pay

Scholz royalties

due from the

in damages.

first and second albums.

It awarded Ahern $547,007

The

Scholz

had

trial

court sitting

breached the

FMA, and

without

heard

jury also

Ahern's Count

found

II for

declaratory relief and Count V for violation of Mass. Gen. L. ch.

93A and Scholz'

Fifth Counterclaim for recision of

contract for

-5-

failure

to obtain a license.

relief Ahern sought in

The court

denied the declaratory

Count I, and awarded him

costs, interest

and

attorney's fees pursuant to

Gen. L. ch. 93A

Scholz

in his

Counts VI and

2 & 11.

Count V for

violation of Mass.

The court denied the relief sought by

Fifth Counterclaim

and held

VII at oral argument.

After

bill of costs and application for

that he

waived his

a hearing on Ahern's

reasonable attorney's fees and

interest, the court awarded Ahern $265,000 in attorney's fees and

$135,000 in costs.

The district court

motion

and

for a new trial,

order and

judgment

evidence, and motion

and

the

judgment

Counterclaim.

denied, without a hearing,

motion to amend

entered thereon,

to amend the

entered

This appeal followed.

the court's memorandum

motion

to admit

court's memorandum and

thereon

Scholz'

regarding

Scholz'

new

order

Sixth

MOTION FOR A NEW TRIAL

MOTION FOR A NEW TRIAL

Appellant first argues that the district court erred in

denying his motion for a new trial, made pursuant to Fed. R. Civ.

P.

59(a).

We therefore

whether the evidence

motion

for a

new trial.

record of the 16-day

extensive evidence.

spans

two

record below

required that the district

Maestro, 910 F.2d 1004,

_______

that

review the

See Vda. de P rez

___ ______________

1006 (1st Cir. 1990).

trial, we note that both

to determine

court grant the

v. Hospital del
_____________

In

reviewing the

parties presented

The jury heard testimony regarding a history

decades,

involves at

least

seven

contracts,

includes detailed numerical accounting, and references more

-6-

than

half a dozen other legal battles.

fifteen witnesses,

Engel,

faced

seven of

Scholz' counsel,

The parties called

whom, including Ahern,

testified

twice.

a total of

Scholz, and

In short,

the jury

a complex and sometimes conflicting set of facts in making

its decision

as

to whether

either,

neither, or

breached the 1981 Further Modification Agreement.

find that

both

parties

Ultimately, we

the jury's verdict was not against the clear weight of

the evidence, and the district court did not abuse its discretion

in so finding.

A.
A.

Standard of Review
Standard of Review
__________________

"A verdict may be set aside and new trial ordered 'when

the verdict is against

based upon evidence

the clear weight

which is

miscarriage of justice.'"

766

(1st Cir.

of the evidence, or

false, or will

result in a

is

clear

Phav v. Trueblood, Inc., 915 F.2d 764,

____
_______________

1990) (quoting

Torres-Troche v.
_____________

Yauco, 873 F.2d 499 (1st Cir. 1989)); see Fed. R.

_____
___

Municipality of
_______________

Civ. P. 59(a);

S nchez v. Puerto Rico Oil Co., 37 F.3d 712, 717 (1st Cir. 1994).
_______
___________________

In reaching

its decision,

"the district

court has

broad legal

authority to determine whether or not a jury's verdict is against

the 'clear

weight of the evidence.'"

Vda. de P rez, 910 F.2d at

_____________

1006.

Nonetheless,

great, must be

"the

trial

judge's

exercised with due regard

parties to have questions which are fairly

by the jury

Inc., 683
____

at a

F.2d

single trial."

5, 6

(1st Cir.),

discretion,

although

to the rights of

both

open resolved finally

Coffran v. Hitchcock Clinic,

_______
__________________

cert. denied,
____________

459 U.S.

1087

(1982); see Kearns v. Keystone Shipping Co., 863 F.2d 177, 178-79
___ ______
_____________________

-7-

(1st Cir. 1988).

Thus, the district court judge "cannot displace

a jury's verdict

merely because

he disagrees with

have found otherwise in a bench

trial."

see
___

"The mere

Coffran, 683
_______

verdict

may

supportable

trial."

have

F.2d at

6.

been

equally

furnishes no

Freeman
_______

--

or

it or

would

Milone, 847 F.2d at 37;

______

fact that

even

cognizable ground

more

a contrary

easily

for granting

v. Package Mach. Co., 865

__________________

F.2d 1331,

--

a new

1333-34

(1st Cir. 1988).

Our

district

review

is circumscribed:

court's ruling

we

on appellant's motion

will disturb

the

for a

new trial

only where there has been a clear abuse of discretion.

See Simon
___ _____

v. Navon, 71 F.3d 9, 13 (1st Cir. 1995); Newell Puerto Rico, Ltd.

_____
________________________

v. Rubbermaid Inc., 20 F.3d 15, 22 (1st Cir. 1994).

_______________

In order

to

determine whether

abuse occurred here,

record below.
of

"a

we must review

an
the

We do this not in the role

thirteenth juror,"

credibility

of

testimony,

but

factual

such

witnesses
rather

basis

for

to

the

assessing the
and

weighing

isolate
trial

the

court's

ruling and provide the foundation for our

action today.

Kearns,
______

for

863 F.2d at 179.

"So

long as a reasonable basis exists

the jury's verdict, we will not disturb the district court's

ruling on appeal."

With

Newell Puerto Rico, Ltd., 20 F.3d at 22.

________________________

our standard

Scholz' argument and the

of review

record below.

established, we

turn to

We address each of

two breach of contract claims the jury decided in turn.

the

B.
B.

Did Ahern Breach the FMA?

Did Ahern Breach the FMA?
_________________________

-8-

Scholz argues that Ahern breached his obligations under

the

1981 FMA to

both account for

months, his share of

and pay to

Scholz, every six

the royalties from the compositions

on the

first and second albums:

had failed

The

to make some payments

he owed Scholz under

the FMA.

jury and the trial court disagreed with Scholz, however, and

found that Ahern's

question

its

indeed, Ahern admitted at trial that he

breach of the

facing us, then,

discretion

in finding

against the weight

record,

we

FMA was not

is whether the

that

the

of the evidence.

find no

abuse of

material.1

The

district court abused

jury's decision

was

not

After careful review of the

discretion

in the

lower court's

on appeal

that Ahern's

decision not to disturb the jury's finding.

Scholz

breach

was

by

argues at

definition

some length

material, both

account and his failure to pay.

note

Ahern

that while

Scholz' reading

render Scholz

for

his

failure to

As for the first contention, we

of the

direct accountings

FMA as

every

requiring that

six months

is a

convincing one,

it is not the only plausible one.

Indeed, Ahern

____________________

Regarding substantial performance, the court's instructions to

the jury stated that

The term "performance" contains within it

substantial

performance.

Namely,

if a

person has substantially performed, that,

in

the

eyes

performance

of

when I've used

of

the

one's

law,

is

obligations.

full
So

the term "performance" or

"breach of the obligations," just include

within
what

those
is

the

concepts

the question

definition

of

the

of
term

"substantial performance" or "substantial

breach."

-9-

contends

that

the FMA

letters of direction to

only

required him

to

send irrevocable

various entities involved directing them

to send Scholz his share of the royalties when collected.

end, it would not be against the clear weight of

find that letters of

obligations

Therefore,

under the

In the

the evidence to

directions would satisfy Ahern's accounting

FMA,

and that

such

letters were

sent.

Ahern's failure to account every six months was not a

material breach.

As

position

for

the

that Ahern's

second contention,

failure

to pay

Scholz

supports

constitutes a

his

separate,

material breach

case law.

summary

by drawing on

both New York2

and Massachusetts

He points to the Second Circuit's refusal to

judgment

in ARP Films, Inc.

_________________

Group, Inc., 952 F.2d

____________

643, 649 (2d

overturn

v. Marvel Entertainment
_____________________

Cir. 1991).

In that case,

where plaintiffs failed to account and pay royalties in excess of

$400,000, the court stated that

the

district

concluded

court

that

the

plaintiffs in failing
payments

and

correctly
breach

by

to make

the

provide the

required .

. . was

matter

of

law,

Marvel

to terminate

reports

material as

thus

authorizing
the contract.

[The parties' agreement] explicitly

____________________

The FMA provides that it

shall be "governed by and construed

and enforced in accordance with the laws of the State of New York

applicable to agreements made and to be performed entirely in New

York."

"In

the

absence

of

Massachusetts honors choice-of-law

in this diversity

conflict

of

public

policy,

provisions in contracts, and,

case, so must we."

Northeast Data Sys., Inc.

__________________________

v. McDonnell Douglass Computer Sys., Inc., 986 F.2d 607, 610 (1st
______________________________________
Cir. 1993) (citation omitted).
is

implicated by this

As we find no public policy issue

private dispute, we

choice-of-law provision.

respect the parties'

See id.
___ ___

-10-

singled out plaintiffs'

to provide

"prompt accounting" for

distributions
condition

obligation

of

as
the

term

agreement,

and
the

substantial

breach

of

which

authorized Marvel

to terminate the

license provided

by the agreement.

In

addition,

payment
material

is

failure
generally

breach

Finally,

as

found,

and

accounting

the

of

tender

deemed

the

contract.

district

confirmed,

withheld from

to

court

subsequent
the amounts

Marvel by plaintiffs

were very substantial.

Id. (citations
___

omitted).

Scholz also points

to a New York case

holding that a licensee's failure to pay franchise fees totalling

$40,129

over

four

months

constituted a

breach

of

contract,

McDonald's Corp. v. Robert Makin, Inc., 653 F. Supp. 401, 402-04

_________________
__________________

(W.D.N.Y. 1986),

as well

as

Massachusetts language

that "[a] material breach of an agreement occurs

breach of 'an essential

indicating

when there is a

and inducing feature of the

contract.'"

Lease-it, Inc. v. Massachusetts Port Auth., 600 N.E.2d

______________
_________________________

(Mass.

App. Ct.

concession

and

1992) (holding

rental

fees

that

was a

Bulcholz v. Green Bros. Co., 172

________
_______________

argues

that Ahern's

egregious

than

breach,

these

cases

599, 602

six-month refusal

material

breach)

to pay

(quoting

N.E. 101 (Mass. 1930)).

spanning thirteen

of

six-month

Scholz

years, is

failure

more

to

pay

concession and rental fees, four-month failure to pay license and

lease

fees,

failure

to

and

seven-month

account).3

failure to

Therefore, Scholz

pay

(and

five-month

concludes,

Ahern's

____________________

Scholz states

that

this is

transfer of copyrights are

that this

imposed on

especially true

here, where

involved, and notes Ahern's admission

him a heightened

-11-

duty to account

and pay

failure

to pay Scholz at least $459,000 is clearly a substantial

breach.

We

our

are not convinced.

standard of

review, we

credibility and weighing

Rather, we

clear

abuse

remind appellant that under

do not sit

as a

juror, evaluating

evidence, as he seems to ask

simply weigh whether

of

We

its discretion

the district court

in

determining

us to do.

committed a

that the

verdict was not against the clear weight of the evidence.

jury

Newell
______

Puerto Rico, 20 F.3d at 22; Kearns, 863 F.2d at 179.

___________
______

of the

record reveals

questioning, to

the estimate

owed

that Ahern's counsel

varying degrees, nine

Scholz' accounting expert

Scholz.

accountant who

Phillip

served

park

presented testimony

of the thirteen

made of

("Ames"),

as business

BOSTON from 1976 through

estimates

Ames

Our review

items of

how much

certified

manager for

Ahern

public

both Ahern

sometime in 1981 or 1982,

and

made several

of how much Ahern owed Scholz, which he labelled "ball

figures."

While

we note

that

Ames' final

estimate was

$277,000, for a total of $459,000 with interest, we cannot assume

that the jury

sought

over a

accepted this figure as gospel.

million dollars

Scholz, the jury may

in principal

Given that Ahern

and interest

reasonably have found that the

from

Ames figure

was

case.

owed,

not a substantial breach

It may

taken

in the particular

have determined that

in

the

perspective

the amount

of

the

context of this

of money

contract,

Ahern

Ahern's

obligations, and the total amounts of money concerned, was not so

____________________

royalties.

-12-

significant

a breach

as to violate

"an essential

and inducing

feature of the contract."

addressing the case

Lease-it, 600 N.E.2d at 602.

________

law Scholz

relies on for

Finally,

support, we

note

that here, unlike in those cases, the amount of money owed was in

question.

Ultimately,

clearly

provides the

examining the record in full, the evidence

jury

and trial

court

with a

basis

finding that Ahern did not substantially breach the FMA.

Circuit stated on another occasion,

We

can understand how a jury might

have decided for [defendant] on the

basis
jury

of this
did not

evidence.
do this;

for [plaintiff].

But the
it decided

We do not see how

one could say that the jury clearly

made a mistake.
one

could

say

overwhelmingly

We do not see how

that the
favored

evidence
the

for

As this

[defendant].

Rather, the evidence

simply was mixed and contradictory.

Vda. de P rez, 910 F.2d at

______________

the

1008.

Therefore we

cannot say that

district court committed a clear breach of its discretion on

this point.

C.
C.

Did Scholz Breach the FMA?

Did Scholz Breach the FMA?
__________________________

Ahern claimed below that Scholz breached his obligation

under section

5.2.1 of the

royalties due from the

FMA to

pay Ahern his

third album.4

The evidence

____________________

That provision provided, in pertinent part,

With

respect

commercial
embodying

to

release

the

future

of any

albums

the musical

performance

of the group "Boston" . . . , Ahern

share of

the

presented at

-13-

trial centered on a

("the

Scholz

document entitled "Artist Royalty Statement"

Statement"),

which Scholz

presented

____________________

shall

be

eighteen

entitled
percent

royalties
payment
royalty
according

after
of

(18%)

to

receive
of

deduction

only (i)
to

to

Scholz
the

gross
and

a producer's
(computed
terms

and

to

Ahern.5

provisions of the agreement between

CBS

and

Ahern

amended, at
percent

(6%)

royalty

base

commercially
expenses,
recording

Associates,

basic rate
of

the

price) and
reasonable

including

Tom

of

as
six

wholesale
(ii) all
recording
Scholz'

services

(i.e.

commercially reasonable engineering

and

other recording

recording expenses

services), or
incurred by CBS

or such other company

and deducted

from royalties payable . . . .

Because McKenzie was entitled to

a percentage of the

royalties,

Ahern's actual rate was 12 percent.

In fact, Scholz

sent Ahern two

the first dated from inception to

"Artist Royalty Statements,"

June 30, 1990, the second from

inception through December 31, 1993.

as being more recent.

We address the second here,

It listed the following figures:

Total Gross Royalties Reported by MCA Records

Gross Royalties - Audit Settlement
Less Producer Share
Gross Artist Royalties

$6,604,048.14
170,000.00
(2,257,862.05)
______________
4,516,186.09

less MCA Costs Deducted

508.566.22

less MCA Costs - Audit Settlement

(210,000.00)

less Artist Costs (Schedule 1)

4,360,447.00
____________

Net Artist Royalties

Of this

(142,827.13)

final "Net Artist Royalties"

share was

12 percent,

minus

$17,139.26.

hours

of

engineering

studio

so that

his share of

"Artist Costs"
time

in

Scholz'

and equipment for

hour; and $1.7 million in legal

figure, Ahern's percentage

the royalties

included charges
studio

at

the studio, at a

$125

was

for 11,971
an

hour;

total of $60 an

fees to Engel's law firm for the

CBS litigation and negotiation of the agreement with MCA.

-14-

That statement listed over $6 million in gross royalties reported

by MCA prior

to December

31, 1993, but

reduced that figure

by

deducting, among other things, a producer share and artist costs,

so that the net artist royalties fell to below zero

was not

entitled to any money.

did not

breach

the

FMA,

-- and Ahern

Scholz argued at

but the

jury

and

trial that he

the

trial

court

disagreed.

against

On

appeal,

the

weight

Scholz

of

material breaches excused

Modification Agreement.

the

contends

evidence,

that

their

because

Ahern's

Scholz' performance under the

Scholz points

wishes

to

guarantee

that

is

prior

Further

out that paragraph

the FMA states that

Scholz

finding

2 of

Ahern

shall

certain

receive at

amounts

connection

with

embodying

of

a minimum
monies

future recordings

the performances

group "BOSTON" . . . .
for the agreement

in

of the

in exchange

of Ahern as

set

forth herein.

Scholz shapes his argument

only

on appeal as follows:

Since Ahern's

agreement of substance was his agreement to account for and

pay royalties to Scholz

of his

for prior BOSTON albums, Ahern's

commitment excused

Scholz' performance.

breach

Indeed, Scholz

notes, the parties' mutual commitments to account to and pay each

other

In

are expressly stated to be in consideration of each other.

such

"bilateral

contracts

for

performances, even though the promises

an

agreed

exchange

of

are in form absolute, the

law regards them as constructively conditioned in order

to avoid

an

v. Daisy

unjust

result."

Industrial

Mercantile Fac.

Co.

________________________________

_____

-15-

Sportswear,
__________

288 N.Y.S.2d

aff'd, 289
_____

N.Y.S.2d 332

(Second) of

Contracts,

209, 211 (N.Y.

(N.Y. Sup.

Civ. Ct.

Ct. 1968);

1967), order
_____

see Restatement
___

237

cmt. a (1979).

Moreover,

continues, the non-occurrence

of a condition

of a party's

excuses

the non-breaching

party's

obligation to

perform

Scholz

duty

even

though that party does not know of its non-occurrence, id.,

___

cmt. c,

and the intention or

scienter of a

not considered in the elements of

v.

breaching party are

breach of contract.

The Trustees of Columbia Univ., 1993

________________________________

237

WL 118495

See Agron
___ _____

(S.D.N.Y.,

April 12, 1993).

Considering this,

royalty

points out

statement regarding the third album

on April 1, 1987.

Ahern

Scholz

Thus the

his

first

was rendered by MCA

earliest he could have owed money to

under the FMA was August 15,

argues,

that

1987 -- and by that date, he

Ahern had already failed to account to Scholz or pay him

royalties

with respect

to the

first two

years.

Therefore,

Scholz maintains

until

Ahern tendered

payment, from

he

albums for

over five

was excused,

at least

rendering an

accounting or

paying royalties

least,

to Ahern

Scholz argues,

from the

he

could have

$459,000 admittedly owed him

owed

Ahern.

third album.

withheld

At

payment of

as a set-off against any

See Record Club of America

___ _________________________

the very

the

amount he

v. United Artists
_______________

Records, Inc., 80 B.R. 271, 276 (S.D.N.Y. 1987), vacated on other

_____________
________________

grounds, 890 F.2d 1264 (1989).

_______

In

in fact

so arguing, Scholz does not contend that he did not

breach the FMA:

he simply maintains that

-16-

Ahern did so

first.

Since Scholz does not revisit the merits of the

presented

here.6

at trial

However,

that Ahern did not

the clear

fail.

the

find

weight

Clearly, it

regarding

since we

breach.

we

have already found

will not

that the

substantially breach the FMA was

of the

evidence, Scholz'

Accordingly, we affirm

excused by

verdict

must

acceptance of

the FMA to

Ahern's material

the district court's decision to

refuse the motion for a new trial on this issue.7

D.
D.

so

not against

not substantially breach

performance was

do

argument here

would be inconsistent with our

verdict that Ahern did

that Scholz'

his breach,

evidence

Sufficiency of the Evidence

Sufficiency of the Evidence

___________________________

In a

footnote, Scholz adds

verdict not only in

did

is appealing

terms of the denial of his

trial, as discussed above, but

jury's

that he

the

motion for a new

also that he appeals each of

the

findings -- i.e. that Scholz breached the FMA, that Ahern

not breach

damages --

on

the Agreement,

the grounds

and that

of

Ahern was

insufficiency of

entitled to

the

evidence.

____________________

We note, however, that our review of the record convinces us

that the verdict is not against the clear weight of the evidence,
and

so

the district

court's

ruling was

not

an abuse

of its

discretion.

Scholz argues, in a footnote, that the jury's verdict violates

the premise that a

obtained
his

party cannot recover more than he

had no breach occurred.

contention.

Scholz provides

citations to flesh out his position:

However, we
no

more

would have

need not address

than

a couple

of

he does not explain how the

jury verdict places Ahern in a better position than he would have

been if Scholz had not

that "issues
by some

breached the FMA.

adverted to in a

effort at

United States v.
______________

It is by now axiomatic

perfunctory manner, unaccompanied

developed argumentation, are

Zannino,
_______

895 F.2d

1,

17 (1st

deemed waived."
Cir.),

cert.
_____

denied, 494 U.S. 1082 (1990).

______

-17-

Scholz relies on Engine Specialties, Inc. v. Bombadier Ltd.,

________________________
______________

F.2d

1,

Distribs.,

(1st

Cir.

1979),

cert. denied sub nom.

________________________

605

Durham
______

Inc. v. Bombadier Ltd., 449 U.S. 983 (1983), to claim

________________

that

_______________

our review of his alternative argument is limited to asking

whether

there is sufficient support in the record for the jury's

finding.

Engine Specialties outlines the

__________________

standard of review

follows:

If we can

reach but one conclusion

after

reviewing

the evidence

all

inferences

drawn

therefrom
favorable

in

the

to

prevailing

the

fairly

light
plaintiff

party)

and

and

if

most
(the
that

conclusion differs from the jury's,

only
aside.
was

then can
Even

the finding
if contrary

presented

inferences

could

for the jury

not

evidence

conflicting

be drawn,

to draw the

conclusion, and
will

and

be set

it is

ultimate

such determination

be disturbed

unless the

condition described above is met.

as

Id.;
___

see Fleet Nat'l Bank

___ ________________

F.3d

546,

552-53

(1st

v. Anchor Media Television, Inc., 45

______________________________

Cir. 1995)

(outlining

application

of

standard).

We note that, in fact, this is the standard of review

applicable

to

motions for

Federal Rule of

review, it is

judgment as

Civil Procedure 50.

nonetheless not as

court's disposition of the

S nchez,
_______

37

review).

We

at 716-17

find nothing

appellant Scholz made a

the

our review of

motion for new

the

record

two

trial.

the

See
___

standards of

to establish

motion for judgment as a

-18-

law under

While it is a circumscribed

(comparing

in

matter of

limited as

district

F.3d

that

matter of law,

so that he would be entitled to this less deferential standard of

review.

Rather,

he argues

motion

for a new

trial.

must be under

the abuse of

sufficiency of the

Our

review of

evidence in

his

the record, therefore,

discretion standard outlined

above.

See MacQuarrie v. Howard Johnson Co., 877 F.2d 126, 131 (1st Cir.
___ __________
__________________

1989) (noting

that the strict "abuse of discretion" standard "is

especially appropriate

if the motion for a new trial is based on

a claim that the verdict is against the weight of the evidence");

Freeman,
_______

865

F.2d at

1341-43

(evaluating

the weight

of

the

evidence as part of a motion for a new trial, separately from its

review of the

denial of the motion

for judgment notwithstanding

the verdict).

Irrespective

of

which standard

of

however, Scholz' alternative argument fails.

review we

apply,

First, the evidence

was overwhelming that he breached the FMA by failing to pay Ahern

his share of the

does

of

royalties from the third album;

not attempt to argue otherwise.

the

materiality

of

Ahern's

indeed, Scholz

Second, although the issue

breach

is

fairly

close,

discussed above, there was sufficient evidence in the record

the

jury to determine that

Further Modification

Ahern did not

Agreement.

as

for

materially breach the

Finally, having

made these two

determinations, the award of damages was appropriate.

given the scope of

the evidence as

Therefore,

described, we find that

the

district court's denial of appellant's motion for a new trial was

amply supported and not an abuse of discretion.

E.
E.

The Length of the Jury Deliberations

The Length of the Jury Deliberations
____________________________________

-19-

Scholz next contends that the jury failed to follow its

instructions.8

The district

court

instructed

damages could only be awarded if it found

FMA and the other did not.

breach, no damages could

Scholz

reiterates

obligations

accountant

to

be awarded.

his

argument

under the

one party breached the

FMA,

In making

that

his contention,

the

evidence

was

admitted he did not perform

and

maintaining that

Ahern's

admitted that he both failed to pay at least $459,000

Scholz and

mischaracterized an advance

publisher as a loan.

from a

The jury was instructed, in pertinent part, that:

party

foreign sub-

Under the jury instructions, Scholz argues,

____________________

that

If it found that both parties were in

insufficient, emphasizing that Ahern

his

the jury

which

has

performed

obligations under a contract

its

is entitled

to

have the

other

Conversely,

performed

its

contract is not
from

the

other

party

party

do the

which

has

obligations

under

entitled to
party.

same.
not
a

performance
So

once

you

understand the terms of the contract, you

should

determine

whether any

party has

failed to perform any of the terms of the

contract.
***
If your determination
the

defendant

counterclaim
that

the

should be

that

defendant

in

the contract

and

or

breached

plaintiff

or

counterclaim did not,

plaintiff

in

at that point

you

would consider the issue of damages.

***
If you find that both parties breached
their

obligations

Modification
should

under

Agreement, then

the

Further

no damages

be accorded to either party under

the contract.

(Day 15, pages 90-92).

-20-

these factors preclude the jury from finding that Scholz breached

the FMA, or at

least from awarding Ahern

any royalties.

These

contentions have been dismissed in our discussion above.

However, Scholz raises

the

jury's

verdict

deliberations

testimony

--

and

the

a new factor:

extremely

he argues

short

period

that

of

-- one and a half hours9 following fifteen days of

reveal

that

instructions and rendered an

the

jury

ignored

the

court's

erroneous and inconsistent verdict.

He cites

cruise

the fact

that one

of the

two days after the date of

jury was in

questions,10

a hurry

to finish

Scholz adds,

jurors planned

to go

on a

the verdict as proof that the

its deliberations.

demonstrates

that it

The

jury's

was determined

to award Ahern $547,000 regardless of who was in breach.

Between

____________________

For

the purposes

of

this

discussion,

we accept

Scholz'

calculation of the time the jury spent deliberating its verdict.

10

The

jury's

questions, and

the

court's answers,

follows:

Question No. 1,

if neither

breached,

are damages awarded?

[Answer:]

No.

[Question No. 2:]

the words, quote,
question three.

Verdict sheet

uses

"only if," unquote, in

I assume

this precludes

us from awarding damages or from awarding

damage, one, if both breach.

were

as

[Answer:]

If both breach, no damages.

If neither breach, no damages.

[Question No.

3:]

If one

did, do we

only take account from one side?

[Answer:]

As

I said, you

consider the claim

party,

but your

has to be based

of the

would only

non-breaching

judgment on

that claim

on all the evidence that

has been introduced.

(Day 15, page 104).

-21-

the

insufficient evidence

and

the

perfunctory

deliberations,

Scholz concludes, the

grant a new

trial.

district court had an

He seeks support for

affirmative duty to

his argument in Kearns

______

v. Keystone Shipping Co., 863 F.2d 177 (1988), where this Circuit
_____________________

held

that a

brief jury

minutes, following

contrary

deliberation --

a three-day trial

one hour

and eighteen

-- coupled with

a verdict

to the great weight of the evidence created a situation

where the district court had an affirmative duty to set aside the

verdict.

Id. at 182.
___

We

misplaced.

remain unswayed.

There,

the court explicitly required

deliberation be paired with

the evidence, noting

Scholz' reliance

on Kearns
______

that the brief

a verdict contrary to the

that "'[i]f the

is

weight of

evidence is sufficient

to

support the verdict, the

immaterial.'"

length of time the jury

deliberates is

Kearns, 863 F.2d at 182 (quoting Marx v. Hartford

______
____
________

Accident and Indemnity Co., 321 F.2d 70, 71 (5th Cir. 1963)).
__________________________

We

have already determined that, here, there was evidence sufficient

to support

the verdict.

complaint that

complaint

deliberate

the jury

is easily

for

any

Pe agar cano-Soler,
__________________

Therefore, Scholz is merely left with a

should

have deliberated

defeated, as

set length

"no rule

of

911 F.2d 833, 846

time."

longer.

requires a

His

jury to

United States
_____________

v.

n.15 (1st Cir. 1990); see

___

United States v. Brotherton, 427 F.2d 1286, 1289 (8th Cir. 1970).
_____________
__________

Indeed, we

which

have previously upheld a verdict on thirty-two counts

was reached in four

hours, following a

five weeks, incorporating more

trial that lasted

than fifty witnesses and hundreds

-22-

of

exhibits.

United States
______________

Pe agar cano-Soler,
__________________

v.

Anderson,
________

911

561 F.2d

F.2d at

1301,

846;

1303

see also
________

(9th

(holding that jury's brief deliberation does not indicate

Cir.)

it did

not give full and impartial consideration to the evidence), cert.

_____

denied,
______

434

U.S.

943

(1977);

Brotherton,
__________

427 F.2d

at

1289

(finding

that jury deliberation of five to seven minutes did not

demonstrate

that jury

did

not

consider

court's

instructions

before reaching verdict).

We also refuse to read a determination to award Ahern a

set

amount

of money

clarified where

it could

should consider.

1991)

lengthy

credibility from

jury's task was

court

award damages,

to impute

or from

testimony

the jury's

questions,

reasonable

fact

that

which simply

and whose

Cf. Clark v. Moran, 942 F.2d

___ _____
_____

(refusing

witnesses'

from

doubt

jury

evidence it

24, 32 (1st Cir.

of

guilt

or

deliberation

of

was

questions asked).

Finally,

we note

that the

relatively simple.

Although

it heard

complex

and was asked to weigh detailed evidence, the district

had already

dismissed as a

matter of law

all the claims

except

for the respective contract claims, and the sums at issue

had been clearly defined in the evidence and closing arguments.

ENGEL'S TESTIMONY AT TRIAL

ENGEL'S TESTIMONY AT TRIAL

As noted above, Engel, Scholz' lead counsel, was called

by

both parties

Engel as

Scholz now

error

as a

an expert

witness.

Maintaining that

witness, instead

argues that the district

by, first,

permitting

of

a percipient

witness,

court committed prejudicial

Ahern to

-23-

Ahern called

do

so, and

second,

by

refusing to

allow follow-up

questioning by

Engel's co-counsel,

Passin.11

Our examination of each of

the same legal framework.

us:

first,

refusing the

was

In each analysis, two

whether the

district court

questions face

erred in

admitting or

testimony or motion; and second, whether that error

harmful.

1990).

Scholz' contentions follows

See Doty v. Sewall,

___ ____
______

Only if

we answer

908 F.2d 1053, 1057 (1st Cir.

both questions

in the

positive will

Scholz' argument on appeal prevail.

rises

trial court's

to the

level of

error in

harmful error

an evidentiary

if a

ruling only

party's substantial

right is affected.

See 28 U.S.C.
___

2111;

Fed. R. Evid. 103(a);

Lubanski v. Coleco Indus., Inc., 929 F.2d 42, 46 (1st Cir. 1991).
________
___________________

"In determining

whether an error affected

a party's substantial

right, '[t]he central question is whether this court can say with

fair

assurance .

swayed by the

F.3d

1, 9

(internal

. .

error.'"

(1st Cir.

that the

not substantially

Espeaignnette v. Gene Tierney Co.,

_____________
_________________

1994) (quoting

quotations omitted)).

determining whether

judgment was

substantial

Lubanski,
________

Factors we

rights are

929 F.2d

at 46

must consider

implicated

43

in

include

both the centrality of the evidence and the prejudicial effect of

____________________

11

Scholz also argues that, since Engel's testimony was "highly

prejudicial" to

Scholz, its improper admission is

grounds for a

new trial, citing Conway v. Chemical Leaman Tank Lines, Inc., 687
______
________________________________
F.2d 108
motion

(5th Cir.
for

new

1982) (upholding

trial on

grounds

district court's
of

testimony

from surprise expert witness).

testimony

was not

in fact

highly

unfair

grant of

surprise due

to

Since we find that the

prejudicial to

Scholz, this

sparsely drawn alternative argument fails.

-24-

its exclusion or inclusion.

these factors in "'the

record as a

whole.'"

Lubanski, 929 F.2d at 46.

________

context of the case

We weigh

as gleaned from

Id. (quoting Vincent v.

the

Louis Marx & Co.,

___

_______

874 F.2d 36, 41 (1st Cir. 1989)).

We have

________________

repeatedly noted that

"no substantial right of the party is affected where the evidence

omitted was cumulative as to other admitted evidence."

F.2d at 1057.

Doty, 908
____

Should a reviewing court be in "grave doubt" as to

the likely

effect an error had on the verdict, the error must be

treated as

if it had

in fact affected

the verdict.

O'Neal v.
______

McAninch, -- U.S. --, 115 S. Ct. 992, 994 (1995) (noting that "by
________

'grave doubt' we mean that, in the judge's mind, the matter is so

evenly

balanced as he feels

himself in virtual

equipoise as to

the harmlessness of the error.").

We note that under Federal Rule of

review the decision not

Evidence 103(a), we

only to determine whether a

substantial

right of the party is affected, but also to see

objection

"appears of

objection,

context."

if the

Fed.

record,

specific

R. Evid.

stating the

ground was

specific ground

of

apparent from

the

103(2); see Bonilla

___ _______

Corp., 955 F.2d 150, 153 (1st Cir. 1992).

____

objected

not

whether a timely

v. Yamaha Motors
______________

Here,

Scholz' counsel

at the time of the challenged rulings.

Therefore, this

element of our analysis is not at issue.

Having established the legal framework, we examine each

of Scholz' contentions in turn.

A.
A.

The Contested Testimony

The Contested Testimony
_______________________

-25-

Phillips, Ahern's

the

seventh

questioning

day

sought

counsel, put

of trial.

The

Engel on the

objected-to

stand on

portion of

his

testimony

regarding the

Scholz

Statement,

which

purported to account to

Ahern for the

royalties from the

third

album.

legal

fees charged

In the Statement, Scholz deducted $1.7 million for

by

Engel's law

listed as equivalent to half

firm,

which the

of the fees charged in

Statement

relation to

the negotiation of the agreement with MCA and the CBS litigation.

The

immediate issue

permissible

as a

deductible from

at

trial was

"commercially

the royalties

whether

this deduction

was

reasonable

recording

expense"

under section

5.2.1 of

the FMA.

Because the record is determinative of this issue, we quote it at

length:

Q. Now, as far as legal fees as recording

costs

are

concerned,

experience over the

you've

some

years, have you not,

in reviewing the contracts

artists

had

of performing

and groups in the musical field;

is that right?
A.

Yes.

Q.

And could

jury

some

you give the Court and the

estimate

of

the

number

of

contracts that you believe is an estimate

that you reviewed over the period of time
that

you've been

doing such

matters in

the entertainment field?

A. Hundreds and hundreds and hundreds and
more.
Q. Okay.

Have

you ever

recording cost

seen legal

in any of

fees as

those hundreds

and hundreds of contracts?

MR. PASSIN:

Your Honor, I object.

He

hasn't been called as an expert witness.

THE COURT:
Do

Overruled.

you mean, are

you saying

that he

can't answer that question?

THE WITNESS:

No, your Honor, I

would

--

-26-

THE COURT:

Overruled.

If

you can't

answer it, say you can't answer it.

THE
it's

WITNESS:
a little

witness,

as

I can

answer it,

but

awkward to

call me

as a

an

expert in

my

client's

case.
THE

COURT:

Overruled.

You

were

advised that you were going to be called,

and you

said that you wished

to stay in

this case and your client was so advised.

The objection has been made.
MR. ENGEL:

At

one point we

wished to be out of the case.

should be

Overruled.

clear.

said we

I think it

At one point

we said

out.
THE COURT:

Overruled.

BY MR. PHILLIPS:
Q. Do
Engel?

you have the question in mind, Mr.

In

contracts

the hundreds and hundreds

that

you've

reviewed

of
for

performing artists such as Mr. Scholz and

other groups in the music field, have you
ever seen legal fees as a recording

cost

or expense?
A.

I have never

seen legal fees

-- You

mean designated in a contract?

Q.

Yes, as a recording cost or expense.

A. No,

have

never

seen

legal

fees

designated in a contract as anything, and

certainly not as recording costs.

(Day 7, pages 71-73).

Scholz claims the district court erred in admitting the

testimony over

was

his counsel's objection, because

using Engel

as an

expert witness

Ahern's counsel

against his

First, he points out

that Engel was not designated

under

of Civil

Federal

Carlisle Co.
____________

Rule

26.

as an expert

See Prentiss &

___ ___________

v. Koehring-Waterous Div. of Timberjack, Inc., 972

___________________________________________

F.2d 6 (1st Cir.

expert

testimony

Next,

he

Professional

Procedure

own client.

1992) (upholding trial court's refusal

from witness

maintains

that

Conduct, Engel

not

designated

under

the

should

not have

-27-

as an

applicable

to hear

expert).

Rules

of

been required

to

testify against his

See Model
___

Code of Professional

turn, Ahern

Engel's

or,

contends that the

expert opinion

under

important and disputed

point.

Responsibility DR 5-102(B).

questions asked were

Federal Rule

In

not seeking

of Evidence

701,12

in the alternative, that the district court acted within its

discretion

F.3d

client on an

at

in admitting

10-11

the testimony.

("Determinations

of

See
___

whether

Espeaignnette, 43
_____________

witness

is

sufficiently qualified to testify as an expert on a given subject

and whether such expert

testimony would be helpful to

of

to the

fact are

committed

court."); United States v.

______________

sound

discretion of

Sep lveda, 15
_________

the trier

the

F.3d 1161,

trial

1183 (1st

Cir. 1993) (stating that manifest error standard applies to trial

judge's

rulings regarding

U.S. ___, 114 S. Ct.

Scholz' complaint

expert testimony), cert. denied, ___

_____________

2714 (1994).

should be

His final contention

deemed waived because

is that

Scholz first

____________________

12
claim

We note

in passing

that Engel

position
expert, in

that

was

that we are
not called

Engel was

light of

surprised

skeptical both

as an

expert and

at being

the following discussion,

witness, right?

I'm

an

as an

held immediately

MR. ENGEL: ... The other thing is this

situation.

of Scholz'

questioned

before Engel took the stand:

delicate

of Ahern's

expert

MR. PHILLIPS:
MR. ENGEL:

So

Yes.
I'm being called as an

expert?
THE COURT:
MR ENGEL:

(Day 7, pages 53-54).

that

Which you were on notice.

I understand.

Despite Scholz' protestations in his brief

the reference to Engel as an

by Engel, an

expert must be a misstatement

error by the court reporter, or

based on something

outside the reporter's hearing, it seems apparent to us that both

parties
elicited.

foresaw
Indeed,

the

possibility

of

expert

testimony

the court's statement above suggests

based its later ruling on the same premise.

-28-

being

that it

injected

Engel's opinion

testimony

into the

case through

his

affidavits.

We need

not consider these arguments,

find that, even assuming

challenged

error.

section

the trial court erred in

of Engel's

Essentially, the

"hundreds and hundreds and

has reviewed,

contract

(Day

Engel

as anything,

7, page

73).

however, for we

testimony,

it

challenged evidence

admitting the

was not

was

harmful

that in

hundreds and more" contracts

never

and

saw

"legal

certainly not

Having examined

fees

that he

designated

as recording

the record

as a

the

in

costs."

whole to

determine if admitting this evidence affected Scholz' substantial

rights,

in accordance with our legal framework, we find that any

court error did not amount to

harmful error.

First, although

the

FMA was

certainly a

the issue

of whether Scholz

major focus of

testimony related to the single largest

royalties

on

the Scholz

Statement,

the case,

we

disagree with

was probably determinative for

several

Ames and

Stewart L.

served as

Ahern's counsel in the past

expert on

the subject of

fees,

both

attorney's

the jury, for

fees

of the

attorney's

are not

recording

Ahern testified that they

artist costs or

recording purposes.

testimony,

besides

Engel's,

who has

and who was designated an

expenses or recording costs.

expenses for

Scholz'

Levy ("Levy"),

the reasonableness

testified that

and Engel's

deduction taken from the

contention that it

reasons.

breached

contesting

this

are not

We found

point.

no

Levy

challenged the fees' inclusion on the Scholz Statement on another

-29-

front as well,

stating that Ahern was asked

that at times were working

to pay for services

against his best interests, including

time billed on motions to preclude a stipulation which would have

had Sony

or CBS dropping Ahern

from the lawsuit.

stated,

We start off

with the

that here is

Mr. Ahern who is

directing

Mr. Scholz

proposition

to

not
jump

In short, he

labels,

not instructing

to do anything.

Mr. Engel

Because Mr. Scholz

decides to do what he is doing, not

only

does Mr.

Ahern

get sued

by

CBS, not only is Mr. Ahern's income

from

CBS cut

off, now

Mr. Scholz

and his attorney, Mr. Engel, expect

Mr.

Ahern not only

but to

to accept that

defray part of the

Mr. Engel doing this.

cost of

I find

that

outrageous.

(Day 7, page 95).

Engel testified that the attempt to keep Ahern

in the case was not

directed solely at him,

but was part of

an

attempt to keep CBS from making deals with potential witnesses.

The fees were not

appropriateness

of their

disputed solely on the basis

deduction.

Levy testified

that the fees themselves were unreasonable.

at length

He testified that he

felt that Engel's firm

did

of the

the work without any regard to

any kind of budget, without any cap

on

their work.

around

and

Then

said, he

carte blanche. .
the case

in 1990,

we had

we are

million. . . . There

were no parameters.
what he

said

. . Suddenly when

is over

told it is $3

they turned

wanted to do.

Mr. Engel did

No one was

checking what he did to say

too expensive, don't do it.

-30-

it was

(Day 7, pages 104-05).

were higher

In turn,

than originally

personally pursued

repeated attempts

Engel testified that the

estimated because

the litigation

to settle.

the head

to the "bitter

Ultimately,

fees

of CBS

end," despite

he maintained, Scholz

prevailed and won moneys for the entire band -- and Ahern.

In

fact,

the

attorney's

fees

were

challenged deduction on the Scholz Statement.

not

the

only

There was lengthy

testimony questioning and defending many of the other deductions,

most notably the producer's fee and the more than 11,000 hours of

studio time Scholz charged for.

Therefore, even if the jury felt

the deduction of the attorney's fees -- or of some of them -- was

appropriate, they

could still have reasonably

materially breached the FMA.

both

sides, as to whether

found that Scholz

Between the additional evidence, on

the legal fees

could be commercially

reasonable recording expenses, whether the amount of fees charged

were reasonable,

and whether

other deductions on

the Statement

were reasonable,

we find

that Engel's challenged

testimony was

not central to the case.

Second, the

prejudicial

effect.

evidence admitted

did not have

an unduly

When called to the stand by his co-counsel,

Engel was able to clarify that,

while he felt he was asked about

"recording

actually

costs,"

the

FMA

addresses

expenses":

Q.

Does the

the

further

-- The first question, does

modification

use the

term

"recording costs"?
A.

My

recollection

Modification

Agreement

-31-

is,

the

uses

[F]irst
the

term

"recording

"recording

expenses."

I was asked about

recording costs.
***
Q.

Do

recording contracts use

"recording

expenses"

or

the term
"recording

costs"?
A.
I've

I,

in all

seen,

remember

the

in

the recording
many of

them,

term "recording

ever used, it's always

contracts
I

don't

expenses"

"recording costs"

that I've seen in the clause.

(Day

13, pages 110-112).

He followed

up on this in his closing

argument, stating

that "[q]uestions

costs, but recording

costs is not

(Day 15,

We find

page 18).

were asked

about recording

the word used [in

that this additional

the FMA]."

testimony by

Engel counters the potential prejudicial effect of his challenged

statement.

of

the

Scholz argues on appeal

testimony was

compounded

that the prejudicial effect

by the

statement

counsel in his closing argument that

there is no

testimony before

you,

ladies

gentlemen, that

legal

and

costs in litigation that Mr. Scholz

was in
fact,

is a
to

the

recording

cost.

contrary, the

testimony here has been

In
only

that legal

costs -- legal fees and legal costs

are not recording costs.
You

may

recall

Mr.

Engel

uncomfortably on the witness stand,

after

qualified

him

expertise in matters of
acknowledging

that

this

on

his

this sort,
was

the

of Ahern's

case.

(Day 15, page 45).

at trial

as witness

Engel

However, between the totality of the evidence

and the additional statements Engel

himself made, both

and as counsel, we do not feel that this reference to

in the hour spent

in closing argument

by Ahern's counsel

-32-

could

be found

to sway the

jury's decision,

prompting harmful

error.

See Espeaignnette, 43 F.3d at 9.

___ _____________

B.
B.

The Omitted Testimony

The Omitted Testimony
_____________________

Scholz contends that the district court made a separate

harmful error in upholding the

counsel

objections made by Ahern's

trial

when Engel's co-counsel called Engel to the stand on the

thirteenth day of trial and tried to have him address his earlier

testimony.

After stating

expenses," not

that the FMA used the

"recording costs," and reading

term "recording

out the pertinent

section of the FMA, Engel's testimony continued as follows:

Q. Have
[the]

you
words

seen

contracts using

"recording

costs"

only
where

artists were paid for legal fees?

A. Yes.
Q. As

an

expert, how

do

you interpret

recording

expenses as

it's used

Further Modification Agreement?

in the

MR. PHILLIPS:
THE COURT:

Objection.

Sustained.

THE WITNESS:

Your Honor, I was

asked

-THE COURT:
Q. Does

Sustained.

the

language

in

the

Further

Modification Agreement -THE

COURT:

He

did you ever see

was

no.

asked you a question,

it before?

Now you're

allow any

Your answer

saying --

I won't

questions as to where

you saw

it.
THE WITNESS:
I remember the
answered

He asked me, your Honor,

exact question, because I

it,

he

asked

interpreting recording costs.

me

about

Now, if he

can ask me to interpret -MR PHILLIPS:

THE

COURT:

Objection, your Honor.

Sustained,

sustained.

Sustained.
THE WITNESS:

Well --

BY MR. PASSIN:
Q. Does the
Further

-- Does the language

Modification

-33-

Agreement

of the
affect

other

deductions

you mentioned

in [the

Scholz Statements]?
MR. PHILLIPS:

Objection.

He's simply

interpreting the agreement.

THE COURT:

I'm going to sustain it.

THE WITNESS: Your Honor, could we have

a side bar, because I think -THE COURT:

No. No.

Let's get going.

(Day 13, pages 112-14).

On

appeal, Scholz

argues that

the

court "apparently

believed

that it

would be

too prejudicial

to Ahern

to permit

Engel to explain his apparently adverse expert testimony but that

it was not too prejudicial to

Scholz to permit Engel to

testify

adversely to Scholz in the first place, a horrendous conclusion."

(Appellant's Brief, page 34).

testified, he

and

in

was asked

We disagree.

about "contracts of

groups in the musical field."

the disputed

designated

in

testimony that

recording costs."

called to the

The first time Engel

performing artists

(Day 7, page 71).

he had

"never seen

contract as anything,
____________

and

agreed that he

legal fees

certainly not

(Day 7, page 73 (emphasis added)).

stand, Engel

He stated

had seen
___

When next

"contracts

using only [the] words 'recording costs' where artists were

for legal

fees."

(Day 13,

page 112).

The

as

paid

court's decision to

sustain

the objection

made

by Ahern's

counsel in

the ensuing

dialogue was not a refusal to allow Engel to explain his evidence

on

the basis of

its prejudicial effect

evidently a reaction to

against Ahern:

it was

the apparent inconsistency between these

statements.

-34-

Essentially,

on appeal

co-counsel was not allowed to

of his

direct testimony for

Scholz maintains

"cross-examine" him on the subject

Ahern, thereby precluding

presenting clarifying

evidence or diminishing the

attorney

against

testifying

compounded the

Scholz

contends.

ruling,

of

his

the difference

This

expert

because

him from

"sting" of an

client.

Engel's

that

got to hear

of contracts, such as

managers, or

own

admitting

He complains

the jury never

other types

and

error

that Engel's

error

testimony,

of the

court's

Engel's testimony regarding

agreements between performers

between "recording

costs" and

"recording expenses."

Nor did they hear his explanation that his

answer

if

might

differ

asked

about

"commercially reasonable

recording expenses," not

"recording costs," he

this

some skepticism,

final protest with

notes.

however, in

We

view

light of

Engel's

testimony on the stand that he had never seen legal fees

designated

"as

anything,"

which

would,

presumably,

include

commercially reasonable recording expenses.

Assuming, arguendo,
________

above testimony and

the

line

of

that

Engel would

that the district

questioning,

court erred in

any resulting

error

First, for the same reasons outlined above, the

related to a

Ames

and

central issue, was

Levy

stated

that

not central

they

saw

no

"recording costs" and "recording expenses."

debated

the total amount

of fees charged as

aspects

of

Statement.

the

Scholz

have

As

was

made

the

excluding

harmless.

testimony, while

in and of

itself.

difference

between

Additional testimony

well as many other

for

the

potential

-35-

prejudicial effect, the testimony Engel was able to give,

above, made it clear

"recording

costs,"

that his earlier statement was

not

"recording

expenses," an

quoted

directed to

argument

he

reiterated in his closing, mitigating the potential effect of the

apparent inconsistency.

Additionally,

the stand

in response

Engel stated,

actual charging

of recording costs or

during his first

to

day on

questioning about

expenses by a

the

group or a

performing artist, that although he reviews accountings after the

fact, he has never

reviewed an accounting like that

the Scholz Statement.

case.

don't remember

this category.

81).

He

any accounting that

testimony does

it does

contract, implying

of the record as a

was

not go

emphasize that

that his

is not

either central

could have swayed the

prior

a standard

about other

Weighing the above in the light

whole, see Doty, 908 F.2d at

___ ____

the court's

into

(Day 7, page

directly to his

the FMA

special

really falls

and others' statements

contracts may not be pertinent.

say that

is a

This is not a standard contract."

While this

statements,

testified that "[t]his

provided in

evidentiary ruling excluded

or prejudicial

in its

factfinders' decision.

1057, we cannot

evidence that

effect such

Thus, even

that it

if the

court erred, it did not rise to the level

of harmful error.

See
___

Lubanski, 929 F.2d at 46.

________

C.
C.

The Overall Impact of Engel's Testimony

The Overall Impact of Engel's Testimony
_______________________________________

Of course, it is not just the impact of the information

elicited

from

error standard.

Engel that

we must

evaluate under

We must also address the

-36-

the harmless

potential prejudicial

effect on the

stand,

jury of

dispute with

seeing Engel, Scholz'

the

court and

testimony, and finally make a

against his client's

opposing

counsel, take

the

counsel over

his

statement, apparently unwillingly,

interest -- a

statement against which,

he

argues, he had to take an apparently inconsistent position in his

closing argument.

some

with

There is no

doubt in our mind

prejudicial effect on the jury.

"'fair

assurance

that this had

Nonetheless, we cannot say

that

the

judgment

was

[]

substantially swayed by the error.'"

Espeaignnette, 43 F.3d at 9
_____________

(quoting Lubanski, 929 F.2d at 46).

________

The jury sat through fifteen

days

of

testimony

trial,

on

all

received

points,13

substantial

and

heard

and

an

often

hour

cumulative

of

closing

argument from each party's

that

the

verdict

counsel.

could

have

We find it

been

the

highly unlikely

result

of

Engel's

questioning and the attendant

commentary.

Cf. United States

___ _____________

Rosales,
_______

(1st

1994)

19

F.3d

763,

768

prosecutor's inappropriate argument

Cir.

in closing

(holding

did not

v.

that

warrant

new trial under harmless error standard).

____________________

13

Indeed, the

evidence was

so redundant

that the

prompted to exclaim that

in all
a

my years, I have never seen

case in

have come

which the
up so

accumulation
case

of

is really

same matters

many times.

The

evidence in

this

burdensome. .

. .

I'm telling you, I've told you many

times, I don't know how much longer
I can take cumulative evidence.

court was

(Day 13, pages 89-90).

-37-

There are significant reasons

not

be

able to

testify at

trial,

why trial counsel should

no matter

for

counsel testifies.

The

principal

considerations

to

testifying on behalf of

ethical
a

lawyer
his client

which party

regarding contested issues are that

the

client's

case

presented through

will

"be

the testimony of

an obviously interested witness who

is subject to

impeachment on

account; and that the

in

effect,

position

put
of

in

that

advocate is,
the

arguing

unseemly
his

own

credibility."

Siguel v. Allstate Life Ins. Co., 141 F.R.D. 393,

______
_______________________

1992)

(quoting

Responsibility,

advocate and

ABA

Comm.

on

Ethics

Formal Op. 339 (1975)).

witness can

prejudice the

and

396 (D. Mass.

Professional

"Combining the roles of

opposing party

involve a conflict of interest between lawyer and client."

Rules of Professional Conduct Rule 3.7 cmt. 1.

and can

Model

When the attorney

is called to the stand by his client's opponent, the concerns are

just as substantial, if not more.

See Siguel, 141

___ ______

F.R.D. at 396

("Although there are degrees of adverse testimony, there are few,

if

any,

situations

that

justify

employment in

this circumstance.").

Professional

Conduct 3.7 states that

advocate

at a trial where he or she

witness, except, among other

acceptance

Accordingly,

or

continued

Model Rule of

a lawyer shall

not act as

is likely to be a necessary

things, where the testimony relates

to an uncontested issue or disqualification of the attorney would

work

substantial hardship on the client.

the danger that

Finally, there is also

the performance of the dual roles of counsel and

-38-

witness will create

attorney is

the

trier

closing

confusion on the jury's part

speaking as a

according

witness, "raising the

testimonial

credit

argument," United States v.

_____________

(7th Cir. 1982) --

to

as to when the

possibility of

the

prosecutor's

Johnston, 690 F.2d 638, 643

________

or, conversely, weighing the testimony

as if

it were argument.

All these concerns

heightened

when counsel

clearly come

into play

at a

level when trial counsel acts as an expert.

is asked to

play that role

for the length

more

However,

of one

question in a fifteen-day trial, even acknowledging the impact of

the attendant discussion with the

court, attempts to examine him

on the testimony and

we

cannot

references to it in the

hold that

affecting

a party's

cumulative and

it rises

to

substantial

not a central

that resulted from the

closing arguments,

the level

of

right where

part of the

harmful error

the testimony

case.

Any

is

prejudice

objected-to portions of Engel's testimony

did not rise to the level of harmful error.

D.
D.

Denial of Pre-Trial Motion for Continuance

Denial of Pre-Trial Motion for Continuance
__________________________________________

Prior

to trial,

Ahern

filed two

motions seeking

to

disqualify Engel as Scholz' counsel on the grounds that Engel was

percipient witness

Scholz

When

opposed, and

the

appeared on

parties

who

ought to

the district

presented

testify on

court refused,

their lists

both parties' lists.

Scholz' behalf.

of

both motions.

witnesses,

Engel

Approximately six weeks before

trial

was

scheduled to

disqualify.

This

begin, Ahern

time Scholz

agreed

filed

a third

to withdraw

motion to

his counsel

-39-

provided that he was given time to find new lead counsel.

memorandum in support of

his motion, Scholz stated that

[felt] he must retain new trial counsel in

the risk of a

In his

he "now

this matter, to avoid

disqualification of his counsel just

prior to the

trial, and for other reasons."

His

Motion

however,

to Continue

denied both

(Scholz' Memorandum in Support of

Trial, page

3).

Ahern's Renewed

The

district court,

Motion to

Disqualify and

Scholz' Motion to Continue Trial.

As discussed

appeal that the

above, Scholz

maintains in his

brief on

trial court erred by allowing Ahern to use Engel

as his own expert against Scholz.

One of the four contentions he

uses to support this position is that

the

trial

Scholz

court
in

predicament

his
when

grant the last

disqualify
failure
under

to
these
in

Scholz,

is,

placed

precarious
refused

to

motion by Ahern

to

Engel

resulted

error.

itself

it

grant the

itself,

The

continuance

circumstances,
severe

which

prejudice

to

reversible

(Appellant's Brief,

Scholz cites

motions

page

34).

In

support of

several cases weighing district

for continuances.

his

statement,

court decisions on

See Lowe v. City of East Chicago, 897

___ ____
____________________

F.2d 272, 274-75 (7th Cir. 1990) (concluding that it was an abuse

of discretion to deny motion

for continuance where plaintiff was

faced with choice between voluntary dismissal and going to

although

Flynt,
_____

court

trial

his attorney was not ready for trial); United States v.

_____________

756 F.2d 1352, 1358-59 (9th

abused its

discretion in

Cir.) (finding that district

denying motion

-40-

for continuance

where doing so effectively foreclosed defendant from presenting a

defense), amended, 764

_______

prolong our discussion.

court

abused

continuance.

its

F.2d 675

(9th Cir. 1985).

Simply put, we do

discretion

in

We need

not

not feel the district

denying

the

motion

for

Even if it did, the error was harmless.

Finally, we note that while we ultimately hold that the

court

did

not commit

harmful error

in making

ruling, we find

it very disturbing that trial

in

In

this case.

making his

appeal, Scholz

its evidentiary

counsel testified

directs us

to a

series of cases, several of which are referenced above, which lay

out the real and serious

to testify at trial.

1172,

1172

available

See,
___

n.5 (7th

from

circumstances'

participates

concerns implicated by allowing counsel

Cir.

other

or

e.g., United States v. Dack, 747 F.2d

____ _____________
____

1984)

sources

'compelling

in the case should

We ask whether

Scholz and

opposing Ahern's first

("Where

and

evidence

absent

reasons,'

his counsel read

easily

'extraordinary

an

not be called

is

attorney

who

as a witness.").

these cases

two motions to disqualify.

before

The concerns

the cases voice are implicated whether counsel testifies for

or her own client or for the opposing party.

if Engel

doubt

testified solely as

to ministerial

the wisdom of allowing him on

his firm's

What is

his

more, even

matters, we

still

the stand, as the matter of

legal fees -- not only whether, as a whole, they were

commercially reasonable recording expenses but

were reasonable

heard

at all -- was

deposition testimony

also whether they

a matter of testimony.

from

Ahern's expert

The jury

Levy that

the

-41-

legal fees

from the

"excessive and

Engel

CBS

litigation were,

among other

totally inappropriate" (Day 7,

was called to

the stand by Scholz

things,

page 86); whether

or Ahern, indeed, even

had he

never testified,

his integrity

and judgment could

have

been questioned by the factfinders.

COUNTERCLAIM FOR FRAUD AND DECEIT AND AFFIRMATIVE DEFENSES

COUNTERCLAIM FOR FRAUD AND DECEIT AND AFFIRMATIVE DEFENSES

The

Further Modification Agreement provided that Ahern

was entitled to

a share of the royalties of

before

24,

October

1984.

provision, Ahern would

third

Scholz

album,

waived

as it

the

Had

not be

the

any album completed

parties

entitled to any

was completed

deadline,

after

conveying

adhered to

this

moneys from

the

that date.

his

Instead,

waiver

through

communications between the parties' attorneys in May of 1984.

this

action, Scholz drew

on his waiver

third

counterclaim and

argue

for rescission of the

several of

of the

deadline in his

his affirmative

waiver agreement on

In

defenses to

the grounds of

fraud and deceit and, alternatively, its invalidation.

On appeal

before

us,

he appeals

the

district

court's directed

verdict

against him on these claims.

Our standard of review is a familiar one.

judgment

as a

matter of

law "should

A motion for

be granted only

when the

evidence, and the inferences to be drawn therefrom, viewed in the

light most favorable to the nonmovant . . . could lead reasonable

persons

(quoting

to but

one conclusion."

MacQuarrie,
__________

877 F.2d

Dopico-Fern ndez v. Grand Union Supermarket,

________________
________________________

11, 12 (1st Cir.), cert. denied, 488 U.S. 864 (1988)).

____________

-42-

at 128

841 F.2d

We review

the district court's directed

Bank,
____

45 F.3d at 552.

decisional

standards

verdict de novo.
_______

Accordingly,

that

1992)

Fleet Nat'l
___________

"'we use the same stringent

control

Gallagher v. Wilton Enter., Inc.,

_________
____________________

See
___

the

district

962 F.2d 120,

(quoting Hendricks & Assocs., Inc.

__________________________

court.'"

125 (1st

Cir.

v. Daewoo Corp., 923

_____________

F.2d 209, 215 (1st Cir. 1991)).

A.
A.

Rescission
Rescission
__________

In

his

Third

Affirmative

Defense

and

Third

Counterclaim, Scholz

sought recision of the

waiver agreement on

the grounds that Ahern fraudulently induced him to enter into the

agreement by not disclosing that he had neither accounted for nor

paid, since at least 1981, the royalties he owed Scholz under the

FMA.

Under New York law, applied here pursuant to the FMA choice

of law provision, a party seeking to prove

common law fraud must

show that:

(1)

the

[cross-]defendant made

material false
the [cross-]
defraud

representation, (2)
defendant intended to

the

[cross-]

plaintiff

thereby, (3) the [cross-] plaintiff

reasonably

relied

upon

the

representation, and (4) the [cross]plaintiff

suffered

damage

as

result of such reliance.

Banque Arabe et Internationale D'Investissement v. Maryland Nat'l

_______________________________________________
______________

Bank,
____

57 F.3d

146, 153

(2d Cir.

1995) (analyzing

elements in

context of claim for rescission based on fraud); see also Keywell

________ _______

Corp. v. Weinstein,
_____
_________

33 F.3d 159, 163 (2d Cir.

1994).

The first

element may be met by demonstrating not only a misrepresentation,

but

also a concealment or nondisclosure of a material fact.

-43-

See
___

Allen v.
_____

1991);

1994).

Westpoint-Pepperell, Inc.,
_________________________

Bickhardt v.
_________

Ratner,
______

In addition,

945

871 F.

Supp.

the party claiming

must demonstrate that the

F.2d 40,

44 (2d

613, 618

Cir.

(S.D.N.Y.

fraudulent concealment

opposing party had a duty

to disclose

the material information in question and demonstrate each element

of the claim by clear and convincing evidence.

See Banque Arabe

___ ____________

et Internationale,
_________________

our analysis

weighing

what duty

elements listed

57 F.3d

Ahern

at 153.

We begin

owed Scholz,

above, ultimately

and

then turn

concluding that

to

by

the

the district

court erred in directing a verdict.

In

the instant

case,

Scholz a duty to disclose because

Scholz argues

that Ahern

he was a fiduciary.

owed

See Brass
___ _____

v. American Film Techs., 987 F.2d 142, 150 (2d Cir. 1993).
____________________

contests that at the time

the waiver was given in May

Ahern

1984, the

Management Agreement had terminated and so there was no fiduciary

duty

and, thus,

fiduciary

no duty to

relationship

relations and

1976)); see Apple Records, Inc.

___ ____________________

relationship can

where confidence

is based upon

York courts typically

focus on

fiduciary

exist whenever one

Allen, 945 F.2d

_____

904-05 (N.Y.

v. Capitol Records,
_________________

(N.Y. App. Div.

be

York law, a

technical

v. George, 383 N.Y.S.2d 900,

______

529 N.Y.S.2d 279, 283

fiduciary

'both

in, and relies upon, another.'"

at 45 (quoting Penato
______

Inc.,
____

includes

"Under New

those informal relations which

[person] trusts

App. Div.

disclose.

found between

1988) (noting that

close friends

prior business dealings).

whether one

person has

or

"New

reposed

trust

or confidence

in another

who

thereby gains

a resulting

-44-

superiority

or influence over the first."

Lehman Bros. Kuhn Loeb Inc.,

____________________________

767 F. Supp.

Litton Inds., Inc. v.

__________________

1220, 1231 (S.D.N.Y.

1991), rev'd on other grounds, 967 F.2d 742 (2d Cir. 1992).
______________________

Scholz points us to the decision in Apple Records, Inc.

___________________

v. Capitol Records, Inc., where the court

_____________________

the New

York corporation of

found that plaintiffs,

the Beatles, stated a

fiduciary relationship existed.

The

business

Capitol

dealings

Records

date back

and

between

the

to 1962, when

Beatles
the still

unacclaimed Beatles entrusted their

musical

talents

Capitol

records.

that

this

to

defendant

It is

alleged

relationship proved

so

profitable to defendant that at one

point the Beatles constituted 25 to
30

percent of its

after

the

business.

Beatles attained

Even
their

remarkable degree of popularity and

success,

they

rely

Capitol

on

manufacture
their
that

still continued

and

recordings.
from

relationship
relationship

such
was
of

Records for

the

distributing

of

It
a

to

can be said

long

enduring

borne a

special

trust

and

claim that a

confidence,

one

independent

of

duties,

one which

and

which
the

existed

contractual
plaintiffs

argue was betrayed by fraud . . . .

529 N.Y.S.2d at 283.

Like the parties in Apple Records,

_____________

at the

time of the waiver in 1984 Ahern and Scholz had a long history of

business

dealings,

marked

modification agreements.

between

the

parties

previously, was

series

Also as in that

here

However, unlike that case,

by

was

of

agreements

case, the relationship

profitable

one

Ahern no longer, as of

Scholz' manager.

-45-

Indeed,

and

for

Ahern.

several years

Scholz testified that

in 1978, when he first started the process that culminated in the

FMA,

he was no longer on speaking terms with Ahern.

not doubt

-- and

Ahern admitted

at trial --

While we do

that Ahern

had a

fiduciary duty to Scholz until 1981, the question remains whether

there

was such a

between the

special relationship

parties at the

relationship, at least

share

of

remained.

however, a

the

Since a

time of the waiver

as regards

royalties

of trust

from

that a fiduciary

Ahern's duty

the

reasonable juror

first

could

and confidence

to pay

Scholz'

second

albums,

find that

it did,

and

directed verdict is inappropriate on

the question of

whether

Ahern

owed Scholz

continue our analysis and

fiduciary

duty.

Therefore,

turn to the evidence presented

we

on the

elements listed above.

First, as for the

material false misrepresentation

nondisclosure, it is undisputed

that Ahern did not disclose

or

his

failure to pay, a fact which a reasonable juror could easily find

material.

On the

other hand,

("Sherry"),

who provided business

both

Ahern and

Barbara Sherry

management services for Ahern

and BOSTON while Ames served as their business manager and served

as

Ahern's business

trial,

manager from

testified that they were

after the waiver

concealment.

1982 up

not aware money

was made, and Scholz

Second,

deceive into Sherry's

through the

Scholz would

time of

was owed until

points to no evidence

have us

of

read an

intent to

testimony agreeing with Engel's

statement

that

today,

charged with

looking at

administrating

royalty statement

from

the company

the publishing,

"it's

immediately

-46-

plain to anyone who knows this business, that [the administration

company] was not paying"

6, pages 61-62).

Sherry knew

the proper percentage to Scholz.

(Day

Scholz cannot rely on this as an admission that

Scholz was

not receiving

all his moneys,

however,

since

her actual

testimony was

failure at the time.

that she

did not

know of

the

Instead, he seeks to build on her admission

that one could have known from the face of the royalty statements

that there was an error,

as well as the

evidence that letters of direction

fact that there was

no

were prepared for the foreign

sub-publishers, to support his contention that Ahern "had to have

known" he was

evidence

not making all his

indicating that he could

just that he did not.

payments.

Ahern presented

not have known

no

of the error,

In essence, therefore, determining whether

Ahern intended to deceive Scholz becomes an issue of credibility,

one which of necessity is a question for the jury.

As

nondisclosure,

for whether

Scholz

reasonably

relied on

Ahern's

his case is damaged by the fact that the evidence

is undisputed

Scholz'

that Ahern

did not

attorney contacted

actually solicit

his counsel and

offered it

Scholz explained his motivation at trial:

A.

Well, I figured if

I, if I finished

the record six months later and

I missed

that date that Paul Ahern was entitled to

his

12

know,

percent
I missed

months

of the
that date

royalties,

you

and then

six

later delivered the record, I was

sure he would

be upset

and

12 percent

want his

about that

and,

anyway,

and I

didn't want to fight with him.

Q.

And

was it

your intention

at that

time -A.

I had enough trouble at that point.

-47-

the waiver.

to him.

Q.

And did

you

ask

for anything

in

return for that waiver?

A.

No.

(Day 10, pages 38-39).

at

his testimony

trial that he "obviously" would not have agreed to the waiver

had he known of

as evidence

the

However, Scholz points to

Ahern's failure to pay him

of his reliance.

inferences,

circumstances

that

fraudulent agreement,

nondisclosure of his

Giving Scholz the

reasonable

Ahern

publishing royalties

juror

sought

once it had

to

could

induce

benefit of all

find

under

Scholz

been offered to

these

into

him, through

failure to pay.

The presence of the fourth

element, damages, Scholz contends, is

witnessed by the fact that

he now owes

Ahern money:

would not have been

Given

all of

the

had he not

waived the deadline, Ahern

entitled to royalties from the

above,

we

find

that

third album.

Scholz

has

mustered

sufficient evidence for the issue to go to the jury.

B.
B.

Invalidation of the Waiver

Invalidation of the Waiver
__________________________

In his Fourth

argues that the waiver

knowingly give his

prevail, all

the waiver if

consent.

He maintains here that

that he would not

he had known of Ahern's failure

district court

disagree.

Affirmative Defenses,

should be invalidated because he

he must prove is

pay him royalties.

the

and Fifth

Scholz

did not

in order to

have agreed to

to account to and

Since he testified to that effect, he argues,

erred in

First, we note that

granting a

directed verdict.

We

none of the cases Scholz looks to

for support discuss invalidation

Federal

Rule of

as an affirmative defense under

Civil Procedure

8(c).

Although the

case law

-48-

indicates

that

there

is

precedent

for

such

an

defense, see, e.g., Unites States v. Krieger, 773 F.

___ ____ ______________
_______

583

(S.D.N.Y. 1991)

(denying summary

judgment on,

affirmative

Supp. 580,

inter alia,
_____ ____

claim for invalidity of guarantees despite failure to claim it as

an affirmative defense), we have found, and

no

comprehensive discussion

Moore

et al.,

1995)

(listing

of its

nature.

Moore's Federal Practice

_________________________

most

common

the parties present,

See 2A
___

James Wm.

8.27[4] n.6

affirmative

defenses,

(2d ed.

excluding

invalidity).

We find no

cases he cites.

that all he

Allen, which
_____

does

Rather,

it notes that

coupled

he looks

Scholz' position in

to for the

the

proposition

has to prove is that he would not have agreed to the

waiver,

finds

other support for

not address

either mutual

invalidity

of a

a court may rescind

_______

mistake or

with some fraud . . . of

one party's

waiver

or release.

a release "'where it

unilateral mistake

the other party.'"

Allen, 945

_____

F.2d

at 44 (quoting National Union Fire Ins. Co. v. Walton Ins.

_____________________________
___________

Ltd.,
____

696 F.

Supp. 897, 902

(S.D.N.Y. 1988)).

Scholz did not

plead

mutual mistake, and his rescission claim based on fraud is

addressed above.

Scholz

states that he does not have to show Ahern owed

him a fiduciary duty in order to

Indeed,

superior

the

court

in Allen
_____

state a claim for invalidation.

notes

knowledge not available to

that

where

one party

the other party,

has

a duty to

disclose may arise, apparently exclusive of a fiduciary duty, id.

___

at 45,

but Scholz does not

point to any evidence

-49-

that he could

not have

discovered that

reliance

on Gishen v. Dura Corp., 362

______
__________

(Mass.

1972), apparently

cannot waive information

whose

Ahern had not

existence

ignorance

is

for

been paying

him.

His

Mass. 177, 285 N.E.2d 117

the proposition

that "[a]

party

with respect to an error in calculation

unknown

is caused by the

to

him,

very lack of

particularly

where

his

disclosure in question

and where the parties are not fully at arm's length," id. at 122,
___

is misplaced.

First and most importantly, under

the choice-of-

law provision of the FMA, the parties here are applying New York,

not Massachusetts,

law.

a jury

Second, the Gishen

______

request

for

instruction

on

because

the party had not previously

waiver, which

is dicta --

and seems to

was

denied

presented the argument; it

does not involve an affirmative defense.

language

opinion addressed a

Id. at 121.
___

The quoted

undercut Scholz' proposition

that a fiduciary relationship is not necessary.

Scholz' citation to Werking v. Amity Estates, Inc., 137

_______
___________________

N.E.2d 321 (N.Y. 1956), also proves unfruitful.

defines a waiver

right

as "'the intentional relinquishment

with both knowledge of

relinquish

it.'"

There, the court

Id. at
___

its existence and

327 (quoting Whitney

of a known

an intention to

on Contracts 273

(4th

ed. 1946)).

The

court found

the waiver in

question, of

jurisdictional defects in a tax sale of plaintiff's farm, invalid

because

with

Here,

plaintiff "had no knowledge

having

knowingly

however,

Scholz

and

of the right

he is charged

intentionally relinquished."

knew

exactly

-50-

what

right

he

Id.
___

was

relinquishing:

the right

not to pay

Ahern 12

percent of

the

royalties from the third album.

MASSACHUSETTS LAW CLAIMS

MASSACHUSETTS LAW CLAIMS

We

next turn

to

General

Law

Massachusetts

Ahern's claim

Chapter

against Scholz

93A,

sections

("Chapter 93A").

The

to pay royalties

as provided

in the FMA

it held

that the Scholz

More specifically,

the

royalties

on the

district court found that Scholz'

third

deceptive business practice,

blatant attempt

due and owing

page 3).

The

album

(District Court

court awarded

11

failure

93A.

Statement regarding

constituted an

and that it

and

violated Chapter

unfair

and

was a "deliberate

and

to deprive Plaintiff Ahern

to him."

under

of moneys rightfully

Memorandum and

Ahern $547,000

as well as

Order,

costs,

interest, and reasonable attorney's fees.

Scholz now contends that his actions do not rise to the

level of unfair or

of Chapter

93A.

deceptive trade practices within

Section 11

the meaning

of Chapter 93A provides

a cause of

action to

[a]ny

person

conduct
and

of

who

engages in

any trade

who suffers any

the

or commerce
loss of money

or property, real or personal, as a

result of the

use or employment of

another person who

trade

or

commerce

engages in
of .

any
.

an

unfair or deceptive act or practice

. . . .

Mass. Gen.

L. ch. 93A,

11.14

We begin with

our standard of

____________________

14

Section

2, which is also referred to

establishes that
deceptive

acts or

in the current action,

"[u]nfair methods of competition

practices

in the

conduct

and unfair or

of any

trade

or

-51-

review;

once it is established, we address Scholz' attack on the

sufficiency of the district

that

his acts did

require of Chapter

Corp. v.
_____

court's findings, and his contention

not rise to

the level

93A violations.

Garrity Oil Co., 884

_______________

Because we ultimately

find that

of "rascality" courts

See Quaker State Oil Ref.

___ _______________________

F.2d 1510, 1513 (1st

the district court

Cir. 1989).

erred as

matter of law

in finding

that Scholz violated

Chapter 93A,

we

need not address the defenses Scholz raises to the application of

that Chapter.

A.
A.

Standard of Review
Standard of Review
__________________

We review the district court's findings of law de novo,

_______

and only set aside

its findings of fact if

"clearly erroneous."

See Industrial Gen. Corp. v. Sequoia Pacific Sys. Corp., 44 F.3d

__________________________
__________________________

40, 43 (1st Cir. 1995); see, e.g., Pepsi-Cola Metro. Bottling Co.
___ ____ ______________________________

v. Checkers, Inc.,
______________

754 F.2d 10, 17 (1st Cir.

of fact is '"clearly

1985).

erroneous" when although there

"A finding

is evidence

to support it, the reviewing court on the entire evidence is left

with the definite

and firm

conviction that a

mistake has

been

committed.'"

Industrial Gen., 44 F.3d at 43 (quoting Anderson v.

_______________
________

City of Bessemer City,

________________________

omitted)).

factual

the

470 U.S.

564,

573

(1985)

(citation

"Although whether a particular set of acts, in their

setting, is unfair or

boundaries

of

what

[Chapter] 93A violation

may

is a

deceptive is a

qualify

question of fact,

for consideration

question of law."

Schwanbeck
__________

____________________

commerce" are unlawful.

Mass. Gen. L. ch. 93A,

-52-

as

2.

v.

Federal-Mogul Corp.,
___________________

578 N.E.2d 789, 803 (Mass.

1991), rev'd on
________

other grounds, 592 N.E.2d 1289 (Mass. 1992).

_____________

B.
B.

The District Court's Findings

The District Court's Findings
_____________________________

The district court determined that Scholz

had violated

sections 2 and 11 through his failure to pay Ahern royalties from

the

third

album,

Memorandum and

Ahern

all

and

Order.

made

the

following

findings

in

its

First, it found that Scholz agreed to pay

royalties after deduction of only a producer's royalty and

commercially reasonable

recording

expenses.

Second,

the

court held that

the Scholz Statement

deceptive business

the

time

practice.

constituted an unfair

More specifically, it

deductions taken for legal fees,

and

found that

payment to Jeff Dorenfeld,

spent in the studio, and the resulting recording costs were

all not commercially reasonable

recording expenses.

court

recording

stated,

$500,000

commercially reasonable.

in

It

expenses

next found that

a deliberate and blatant attempt to

the

Plaintiff

Ahern

monies rightfully due and

him as royalties
the

third

of

owing to

from the sales of

Boston

album.

Such

egregious conduct . . . is patently

an

unfair and

The

deceptive practice.

submission

Statement]

as

Scholz

Ahern

display

to
of

of
an

[the

Scholz

accounting
is

arrogant

by

shocking

disdain

would

be

Scholz' Statement

was

deprive

Rather, the

for

Ahern's contractual

rights and was

rendered in obvious bad faith.

(District Court Memorandum and Order, page 3).

-53-

Scholz

challenges the

Federal Rule of Civil Procedure

the facts

sufficiency of

these findings.

52(a) mandates that courts "find

specially and state separately

[their] conclusions of

law

thereon" when

Monta ez
________

(noting

regarding

v.

trying

Bagg, 510
____

that judge

did

Chapter 93A

Scholz notes that

facts without

N.E.2d 298,

not

make

300

jury.

findings

Mass. R.

did not state

See,
___

(Mass. App.

detailed

claims under

the court

Civ. P.

that the

e.g.,
____

Ct. 1987)

of

fact

52(a)).

deductions

were actually deceptive, and reminds us that the Scholz Statement

set forth in some detail what each of the deductions were.

the court did

not make more

specific findings

deceptive practices, he maintains,

93A finding against

(holding

him.15

that district

Since

as to unfair

or

we should reverse the Chapter

See Schwanbeck, 578

___ __________

court finding

of Chapter

N.E.2d at

803

93A violation

lacked foundation in the court's subsidiary findings).

However, we

judge

need

only make

conclusions on the

remind Scholz

brief,

that under Rule

definite

contested matters."

52(a) "the

pertinent findings

Makuc
_____

and

v. American Honda
______________

Motor Co., 835 F.2d 389, 394 (1st Cir. 1987).

_________

Here, the district

court

that four

found that

Scholz

breached the

FMA,

of

his

deductions were commercially unreasonable, while a figure of $0.5

million would be reasonable; and that the Scholz Statement was "a

____________________

15
that

We

note that, contrary to Scholz' position,

the district court did

fact, we would likely remand

not lay out

were we to find

sufficient findings of

so that the lower court could

make

subsidiary findings of fact and enter a new judgment on the basis

of its findings.

See, e.g., Sidney Binder, Inc. v. Jewelers Mut.

___ ____ ___________________
_____________

Ins. Co., 552 N.E.2d 568, 572 (Mass. App. Ct. 1990).
________

-54-

deliberate and

him.

It is

Ahern rises

lower

a basis

remand.

blatant attempt to deprive" Ahern

a question of

to the level of

law whether this

of moneys owed

attempt to deprive

a violation of Chapter

93A, as the

court held, and we believe the decision includes enough of

for the Chapter

93A finding

The district court has

conclusions.

to save the

decision from

provided us with more than mere

See Sidney Binder, Inc., 552 N.E.2d at 572 (holding

___ ___________________

that

explanatory

recited the

findings

were necessary

evidence without making findings

where

court

merely

and concluded that

"neither party ha[d] sustained its burden of proof" that

93A had been

violated).

We note,

Chapter

however, that our task

have been much simpler in this and other issues had the

would

district

court seen fit to explicate more of its decision-making on paper.

There is a gap between

unreasonable

finding that deductions are

commercially

and finding that the Scholz Statement as a whole is

an attempt to deprive

and "deceptive":

Ahern deserving of the

modifiers "unfair"

while we are willing to follow

across the distance between

the lower court

them, a bridge would have

been more

than welcome.

C.
C.

Scholz' Challenge to the Chapter 93A Findings

Scholz' Challenge to the Chapter 93A Findings
_____________________________________________

Having

set

forth

findings of the district

challenge to the

our

standard

of

review

court, we turn to the heart

Chapter 93A award.

As

and

the

of Scholz'

noted above, whether an

act was unfair and/or deceptive is

a question of fact.

our

not hesitate to find that the

review of the evidence, we do

district

Based on

court's findings of fact are not clearly erroneous, and

-55-

we will

not disturb

Geltman,
_______

them.16

533 N.E.2d 647, 653

See
___

United Truck Leasing Co.

_________________________

(Mass. App. Ct.

N.E.2d 20 (Mass. 1990).

Thus, we assess

under

the

Chapter

93A

in

light

of

v.

1989), aff'd, 551

_____

the lower court's award

its

finding

that

four

deductions -- which totalled $4.2 million -- were not reasonable,

but $0.5

costs,

million

would

commercially

reasonable

recording

and that the Scholz Statement was a deliberate attempt to

deprive Ahern of his

album.

be

We ask now

percentage of the royalties from

whether these facts rise

the third

to the level

of a

violation of Chapter 93A, section 11.

There

is

no

clear

definition

constitutes an "unfair or deceptive" act.

11.

of

what

conduct

Mass. Gen. L. ch. 93A,

The Massachusetts courts "have noted, however, that '[t]he

statute

"does

not contemplate

ethical

or moral behavior.

marketplace."'"

an

overly

precise standard

of

It is the standard of the commercial

Shepard's Pharmacy, Inc. v.

_________________________

Stop & Shop Cos.,

_________________

640 N.E.2d 1112, 1115 (Mass. App. Ct. 1994) (quoting USM Corp. v.
_________

Arthur D. Little Sys., Inc., 546

______________________________

1989)),

case law

N.E.2d

888 (Mass.

review granted, 644 N.E.2d 226 (1994).

______________

on Chapter 93A, "a common

App. Ct.

In the extensive

refrain has developed.

'The

objectionable conduct must attain a level of rascality that would

raise an eyebrow of someone inured to the rough and tumble of the

world of commerce.'"

Quaker State, 884 F.2d

_____________

at 1513

(quoting

____________________

16

Scholz argues at length in

support a finding

that his acts

his breach that the facts do

were unfair or

deceptive.

not

We

decline,

however, to enter into the record yet again to point to

testimony and evidence refuting his contentions.

-56-

Levings v. Forbes & Wallace Inc., 396 N.E.2d 149, 153 (Mass. App.
_______
_____________________

Ct. 1979)).

In short,

chapter

that

the defendant's

"within
some
other

93A claimant

at

established

unfairness,"

actions fell

least the

common-law,

or

must show

penumbra of

statutory,

or

concept

of

were

"immoral,

unethical,

oppressive

or

unscrupulous,"

and

resulted

in

injury

. . .

to

"substantial

competitors or other businessmen."

Id. (quoting PMP Assocs., Inc. v. Globe Newspaper Co., 321 N.E.2d
___
_________________
___________________

915, 917 (Mass. 1975)).

is

unfair,

we

In evaluating whether an act or practice

assess

"the

including what both parties

equities

between

the

knew or should have known.

parties,"

Swanson
_______

v. Bankers Life Co., 450 N.E.2d 577, 580 (Mass. 1983).

________________

It is

lead to a

well established that

violation of Chapter

93A.

breach of a

See, e.g.,
___ ____

contract can

Anthony's Pier
______________

Four, Inc. v. HBC Assocs., 583 N.E.2d 806, 821 (Mass. 1991).
__________
___________

simple fact that a

party knowingly breached a contract

raise

to the

the

breach

level

of

Chapter 93A

The

does not

violation,

however.

Cf.
___

(stating that

Pepsi-Cola Metro. Bottling Co.,

_______________________________

"mere breaches of

violate [C]hapter 93A.").

Massachusetts Supreme

disregard

of known

754 F.2d

contract, without more,

at 18

do not

In the breach of contract context, the

Judicial Court has "said

contractual

that conduct 'in

arrangements' and

intended

to

secure benefits for the breaching party constitutes an unfair act

or practice

for [Chapter] 93A

583 N.E.2d at 821;

purposes."

see Wang Labs., Inc. v.

___ ________________

Inc., 501 N.E.2d 1163, 1165 (Mass. 1986).

____

-57-

Anthony's Pier Four,

____________________

Business Incentives,
____________________

Relying on the Appeals

Court of

N.E.2d

test.

Massachusetts' decision

666 (Mass.

App. Ct.

There, the court

in Atkinson v.
________

1992), Scholz

Rosenthal, 598
_________

seeks to

examined a series of breach of

cases and concluded that

[t]here

is

in

constant

pattern of

breach

of contract

obtain

advantage

committing
to

the

breach

those

the use
as a
for

the breach
party;

of

contract

In

rancid
the

of a

lever to
the

party

i.e.,

the

has

an

that gives it

flavor of

absence of

in relation

other

extortionate quality
the

cases

unfairness.

conduct having

that quality, a failure

to perform

limit this

contract

obligations under
even

though

a written lease,

deliberate

and

for

reasons of

self-interest, does not

present an

occasion for invocation

of [Chapter] 93A remedies.

Id. at 670-71
___

(citation omitted).

find no Massachusetts case

We have

not addressed,

and

law addressing, whether this language

from Atkinson extends beyond its immediate context to limit award

________

of Chapter 93A damages in breach of

an "extortionate quality."

Inc.,
____

29 F.3d

accepting,

28,

33 (1st

arguendo, that
________

contract cases to cases with

See NASCO, Inc. v. Public Storage,

___ ____________
________________

Cir.

"in a

1994) (quoting

breach of

liability does not attach under [Chapter]

a defendant

knowingly

breached a

contact

Atkinson
________

and

contract situation,

93A, section 11 unless

in order

to

secure

additional benefits to itself to the detriment of a plaintiff.").

We need not do so today,

however.

First, if we accept

the test for Chapter 93A violation Scholz claims Atkinson frames,
________

the

district court's award here will not stand because there has

-58-

not been an extortionate element to the breach:

hold

on to Ahern's

money, but he

was not using

Scholz tried

to

the breach "to

force

[Ahern] to

required to do."17

do what

a "wedge" to force

e.g.,
____

be legally

plaintiff to supply

approval as a

F.2d at

award where defendant withheld payment

Anthony's Pier Four, 583

_____________________

withholding

would not

Pepsi-Cola Metro. Bottling Co., 754

______________________________

18 (affirming Chapter 93A

as

otherwise [he]

N.E.2d

more products); see,

___

at

pretext to force

822 (holding

that

party into changing

price of underlying contract violated Chapter 93A).

Second, if we were to find that Atkinson does not limit

________

Chapter 93A liability to cases

with an extortionate element, but

rather address Scholz' acts under the test as stated in Anthony's

_________

Pier Four, we still

_________

find that Chapter 93A has not been violated.

That test asks whether

there has been conduct "'in

disregard of

known contractual

arrangements' and intended to

for the breaching

party."

821;

Anthony's Pier Four,

___________________

secure benefits

583 N.E.2d

at

see Wang Labs., 501 N.E.2d at 1165 (finding liability under

___ __________

Chapter

93A

where

interference

with

contract "constituted

____________________

17
also

Ahern tries to argue that not only the Scholz Statement, but
Scholz' defense of this

case, in which

defenses and counterclaims, fulfill

he raised numerous

the requirement of finding a

"wedge" used by Scholz to force Ahern to abandon his share of the

royalties from the
findings

do

not

third album.
discuss

However, the district

Scholz'

conduct

in

lawsuit, either by reference

or as a basis for

We

afield

refuse

to

move as

far

from

court's

defending

this

its conclusions.

the district

court's

findings in order to find extortionate conduct as Ahern requests.

His

reliance

on

the

court's

discussion

of

the

defendant's

litigation practices in Quaker State is misplaced, because there

_____________
the defendant's
the complaint,

prosecution of
and was

884 F.2d at 1513-14.

the counterclaims was

addressed by the

raised in

district court

below.

-59-

willful act calculated to obtain the benefits of [the] contract .

without

cost

arrangements").

and

Here,

in

the

disregard

court found

of

known

contractual

that Scholz

knowingly

breached the contract in order to gain a benefit -- Ahern's share

of the royalties.

But

of

The question,

a contract.

that would be true of any

then, is

knowing breach

whether the

level of

"rascality" is

Chapter

sufficient to rise to the level of a violation of

93A.

We

find it is

not.

that the court deemed commercially

half of the

First,

while the deductions

unreasonable ate up more than

royalties reported, we note that Scholz did not seek

to conceal the nature of the deductions:

he laid them out on the

Scholz Statement in varying levels of detail.

Next, while Scholz

has an extensive degree of control over the moneys from the third

album, there has been no allegation that he did not report all of

the royalties from

presented

that

MCA on

the

the Scholz Statement.

number of

hours

spent

on

Evidence

was

the album

was

reconstructed after the fact, but the district court did not find

that the figures given

deductible.

were inaccurate, just that they

were not

Scholz' breach amounted to more than a dispute over

the commercial reasonableness of

certain deductions, as he would

have us believe.

of rascality

Nonetheless, his acts did not rise to the level

required for Chapter 93A

liability.18

Ultimately,

____________________

18

Both parties devote sections of their briefs to six "factors"

related
disputes.
because
not

to Scholz'

"rascality" which

Scholz raises,

and Ahern

We note that, for the most part, they prove irrelevant

we focus here on

the nature of the

Scholz' actions in

breaching the FMA,

relationship between the

last twenty years.

-60-

parties for the

therefore,

we conclude that the district court erred as a matter

of law in finding

Scholz violated Chapter 93A, and

reverse that

holding.

PREJUDGMENT INTEREST AND ATTORNEY'S FEES

PREJUDGMENT INTEREST AND ATTORNEY'S FEES

As

93A,

we need

award

Ahern's

we have found

not address

of attorney's

contention.

added . . .

not violate Chapter

the parties' arguments

fees under that

cross-appeal of

prejudgment

that Scholz did

statute.

the district

interest, since

that is

See Mass. Gen. L. ch.

___

do we weigh

court's refusal

based on

231

to the amount of damages,

Nor

regarding the

to award

his Chapter

93A

6C ("interest shall be

at the contract rate,

established, or at the rate of twelve percent per annum from

if

the

date of the breach or demand.").

of contract claim, as that

Aubin v. Fudala, 782

_____
______

"[w]hen

the

was brought under New York law.

F.2d 287, 289 (1st Cir.

a Plaintiff secures a

law

of

that

It does not apply to his breach

state

1986) (noting that

jury verdict based

governs

the

award

See
___

on state law,

of

prejudgment

interest.").

No costs on appeal to either party.

CONCLUSION
CONCLUSION

For

court's

other

the reasons

decision regarding

stated

above, we

Chapter 93A

reverse the
_______

violations, affirm
______

lower

its

holdings except on rescission, and remand for trial on the

______

issue of rescission.

-61-