Anderson v. Beatrice

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862 F.2d 910; 1988

COUNSEL: Charles R. Nesson with whom Jan Richard Schlichtmann and Schlichtmann, Conway, Crowley & Hugo were on briefs for Appellants.

Jerome P. Facher with whom Neil Jacobs, Donald R. Frederico and Hale and Dorr were on briefs for Appellees.

SELYA, Circuit Judge.

Although we disagree with appellants' characterization of the matter before us as a watershed in the law of toxic torts, we find these consolidated appeals to raise perplexing questions -- some of novel impression -- concerning the scope and operation of certain of the Civil Rules. An exposition of the questions squarely presented, and of our answers to them, follows.

We eschew an exigetic presentation of the litigation's history, secure in the knowledge that the reader with a thirst for further detail may appropriately consult two published table-setter opinions: Anderson v. Cryovac, Inc., 96 F.R.D. 431 (D. Mass. 1983) (Anderson I) and Anderson v. W.R. Grace & Co., 628 F. Supp. 1219 (D. Mass. 1986) (Anderson II). Rather, we address the facts only insofar as they pertain directly to the issues which confront us.

In 1964, the Commonwealth of Massachusetts and the city of Woburn approved plans to site two municipal water wells, designated "G" and "H," in the Aberjona River Valley. The wells were installed. In 1979, public health officials discovered that the wells were contaminated by toxic solvents. These solvents included trichloroethylene, tetrachloroethylene, transdichloroethylene, and trichloroethane. For ease in reference, we shall call them, collectively, the "complaint chemicals." After much investigation, officials of the federal Environmental Protection Agency (EPA) zeroed in on several potential sources of contamination: a manufacturing plant owned by W.R. Grace & Company (Grace), situated northeast of the wells; premises controlled by Unifirst Company, located north of the wells; and a 15-acre parcel of vacant wetland lying west and southwest of the wells. This parcel is a cynosure of the case.

The 15 acres were bordered by the Aberjona River on the east, a railroad embankment on the west, and a facility operated by a trucking company on the north. South of the parcel were a trio of businesses: Aberjona Auto Parts, Murphy Waste Oil, and Whitney Barrel Co. To the southwest, across a set of railroad tracks, lay a tannery which had been operated by the John J. Riley Company (Rileyco). In 1951, Rileyco -- then owned and operated by the Riley family -- purchased the 15 acres from the city and installed a production well on the site. In December 1978, the tannery became a division of defendant-appellee Beatrice Foods Company (Beatrice). Under the terms of the acquisition agreement, Beatrice obtained the business and real estate and assumed Rileyco's environmental liabilities. John J. Riley, Jr. (Riley) stayed on as the division's chief operating officer. In January of 1983, Beatrice resold the main tannery property. Riley resumed his proprietary operation of the tanning business under the Rileyco name. Simultaneously, the 15-acre wetland was transferred to an entity bearing the elegant name "Wildwood Conservation Corporation" (Wildwood). Like the "new" Rileyco, Wildwood was controlled by Riley.

Plaintiffs (appellants before us) all lived near wells G and H during and prior to 1979. In 1982, they sued Grace, Beatrice, and others in a Massachusetts state court, alleging that complaint chemicals in the water supply had caused them to contract a variety of ailments, leukemia included. Their action was based upon common law tort theories of negligence, nuisance, and strict liability. Because diversity jurisdiction existed, Grace and Beatrice were able to remove the case to federal district court. After several years, trial approached. The district court -- confronted with a behemoth of a case -- opted to try the matter in three stages. In the first phase, the jury would determine whether defendants were responsible for polluting the wells. The second and third phases, if needed, would be devoted to causation and damages, respectively. A 78-day first-phase trial ensued. Fifty-three days along, at the end of plaintiffs' case in chief, defendants moved for directed verdicts. In a written memorandum and order, the district judge ruled, inter alia:

(1) As to any negligence claim against Beatrice, the jury could only consider conduct occurring after August 27, 1968 (the date when Rileyco, Beatrice's predecessor in interest, first had arguable notice that wastes on the 15 acres could affect the municipal water supply).

When the evidence was closed, the court and the parties spent the best part of three days conferring over proposed jury instructions and related matters. The jury ultimately received the case on eight special interrogatories, four of which concerned Beatrice's liability. The first read as follows:

1. Have the plaintiffs established by a preponderance of the evidence that any of the following chemicals were disposed of at the Beatrice site after August 27, 1968 and substantially contributed to the contamination of Wells G and H by these chemicals prior to May 22, 1979?
(a) Trichloroethylene Yes / No
(b) Tetrachloroethylene Yes / No
(c) 1,2 Transdichloroethylene Yes / No
(d) 1,1,1 Trichloroethane Yes / No

The jury answered in the negative as to each chemical and, in accordance with the court's instructions, went no further as to Beatrice.

During the pendency of the original appeal, certain previously undisclosed evidence surfaced. Plaintiffs learned serendipitously that Riley had commissioned Yankee Environmental Engineering and Research Services, Inc. (Yankee) to make a hydrogeologic investigation of the tannery property in 1983. Yankee was to determine (1) the direction of groundwater flow at the tannery; (2) whether groundwater contamination was present there; and (3) whether the tannery contributed to contamination found at Rileyco's two production wells. The resulting report (Report), based on field research conducted during mid-1983, was never produced in pretrial discovery.

Spurred by their newfound knowledge, plaintiffs moved to set aside the judgment. The district court heard argument on three separate days and denied the motion. Anderson v. Beatrice Foods Co., No. 82-1672-S, slip op. (D. Mass. Jan. 22, 1988) (Anderson V). The court made four salient findings: (1) the Report was relevant and within the ambit of plaintiffs' pretrial discovery request; (2) defense counsel had defaulted in their obligation to furnish the Report during discovery; (3) the nondisclosure resulted from "a lapse of judgment" rather than fraud or deliberate misrepresentation, id. at 20; and (4) plaintiffs had not been prevented from fully and fairly presenting their case.

A. Rule 60(b)(3).

We start with basics. Plaintiffs' motion to upset the judgment was brought under Fed.R.Civ.P. 60(b) and was therefore addressed to the district court's sound discretion. When Rule 60(b) is in play, we ordinarily defer to the trial judge's more intimate knowledge of the case. For us to act, there must be an abuse of discretion. Under this standard, we reverse only if it plainly appears that the court below committed a meaningful error in judgment.

In relevant part, Rule 60 states:

On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: . . . (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party. . . .

Failure to disclose or produce materials requested in discovery can constitute "misconduct" within the purview of this subsection. "Misconduct" does not demand proof of nefarious intent or purpose as a prerequisite to redress. For the term to have meaning in the Rule 60(b)(3) context, it must differ from both "fraud" and "misrepresentation." Definition of this difference requires us to take an expansive view of "misconduct."

Verdicts ought not lightly to be disturbed, so it makes very good sense to require complainants to demonstrate convincingly that they have been victimized by an adversary's misconduct. And as with other defects in the course of litigation, the error, to warrant relief, must have been harmful -- it must have "affect the substantial rights" of the movant. Fed.R.Civ.P. 61. 11 Moreover, since parties ought not to benefit from their own mis-, mal-, or nonfeasance, uncertainties attending the application of hindsight in this area should redound to the movant's benefit.

Our chief refinement of the conventional "full and fair preparation and presentation" standard is to delineate more exactly how the value of the suppressed evidence should be weighed. By definition, lack of access to any discoverable material forecloses "full" preparation for trial since the material in question will be missing. Yet concealed evidence may turn out to be cumulative, insignificant, or of marginal relevance. If that be the case, retrial would needlessly squander judicial resources. The solution, we believe, is that before retrial is mandated under Rule 60 (b) (3) in consequence of discovery misconduct, the challenged behavior must substantially have interfered with the aggrieved party's ability fully and fairly to prepare for and proceed at trial.

Under a substantial interference rule as we envision it, a party still need not prove that the concealed material would likely have turned the tide at trial. Substantial impairment may exist, for example, if a party shows that the concealment precluded inquiry into a plausible theory of liability, denied it access to evidence that could well have been probative on an important issue, or closed off a potentially fruitful avenue of direct or cross examination.

Substantial interference may also be established by presumption or inference. That possibility, however, brings to the fore the utility of some further embellishments.

Although we agree that the existence of misconduct in the Rule 60(b)(3) sense does not depend upon a demonstration of nefarious intent or purpose, the actor's intent is not immaterial. Nondisclosure comes in different shapes and sizes: it may be accidental or inadvertent, or considerably more blameworthy (though still short of fraud or outright misrepresentation). In the case of intentional misconduct, as where concealment was knowing and purposeful, it seems fair to presume that the suppressed evidence would have damaged the nondisclosing party

It seems equally logical that where discovery material is deliberately suppressed, its absence can be presumed to have inhibited the unearthing of further admissible evidence adverse to the withholder, that is, to have substantially interfered with the aggrieved party's trial preparation.

The presumption, if it arises, should be a rebuttable one. It may be refuted by clear and convincing evidence demonstrating that the withheld material was in fact inconsequential. We are keenly aware of the stringency of this standard, yet we believe it to be an appropriate antidote for deliberate misconduct. A party who is guilty of, say, intentionally shredding documents in order to stymie the opposition, should not easily be able to excuse the misconduct by claiming that the vanished documents were of minimal import. Without the imposition of a heavy burden such as the "clear and convincing" standard, spoliators would almost certainly benefit from having destroyed the documents, since the opposing party could probably muster little evidence concerning the value of papers it never saw. As between guilty and innocent parties, the difficulties created by the absence of evidence should fall squarely upon the former.

Where the documents have been intentionally withheld but not destroyed, the threshold becomes easier to climb. In such situations, the documents themselves may constitute clear and convincing proof that no prejudice inured. Of course, the actual documents are not the only proof of harmlessness which could be clear and convincing. Even when documents have been destroyed, it is possible to present evidence of their general nature and contents, and to decide whether they would likely have been irrelevant or cumulative.

Conversely, where the nondisclosure was accidental -- as opposed to knowing or purposeful -- there seems less reason for an adverse presumption.

While parties who are substantially prejudiced by their opponents' misconduct may make a case for a new trial even absent malicious intent, the burden of showing substantial interference in that circumstance should rightfully rest with the movant. Yet the movant, we suggest, need only carry that devoir of persuasion by a preponderance of the evidence, since the considerations which lead us to impose a heightened burden of proof on one who deliberately destroys or withholds discovery materials are lacking when the default is unintentional and the burden of proof is, therefore, to be hefted by the withholdee.

To summarize, in motions for a new trial under the misconduct prong of Rule 60(b)(3), the movant must show the opponent's misconduct by clear and convincing evidence. Next, the moving party must show that the misconduct substantially interfered with its ability fully and fairly to prepare for, and proceed at, trial. This burden may be shouldered either by establishing the material's likely worth as trial evidence or by elucidating its value as a tool for obtaining meaningful discovery. The burden can also be met by presumption or inference, if the movant can successfully demonstrate that the misconduct was knowing or deliberate. Once a presumption of substantial interference arises, it can alone carry the day, unless defeated by a clear and convincing demonstration that the consequences of the misconduct were nugacious. Alternatively, if unaided by a presumption -- that is, if the movant is unable to prove that the misconduct was knowing or deliberate -- it may still prevail as long as it proves by a preponderance of the evidence that the nondisclosure worked some substantial interference with the full and fair preparation or presentation of the case.

In our view, this methodology strikes an acceptable balance between the need to preserve the finality of judgments and the need to enforce discovery rules against those who would seek unfair advantage by withholding information. It does not handcuff the nisi prius court; rather than requiring mechanistic decisionmaking, the protocol which we have delineated envisions that the trial judge will make a series of record-rooted judgment calls in exercising his informed discretion under Rule 60(b)(3) -- judgment calls of the sort district courts are uniquely equipped to essay. And because weighing the relevant factors remains primarily a task for the district court, we will ordinarily defer to its assessment of the situation, absent error of law or manifest abuse of discretion.

B. The State of the Record.

Although our approach to Rule 60(b)(3) differs somewhat from that employed by the district court, remand is not automatic. See, e.g., United States v. Mora, 821 F.2d at 869-70 (though district court used wrong standard, factual findings were sufficiently explicit to allow court of appeals to discern result). It is important, therefore, to peruse the lower court's findings carefully before charting our future course.

1. Misconduct. Though the circumstances giving rise to belated discovery of the Report need not be discussed, the circumstances surrounding its nondisclosure are of great concern. The district court required plaintiffs to establish Beatrice's misconduct by clear and convincing evidence. Anderson V, slip op. at 10. It correctly imputed counsel's knowledge and behavior to the client, found that Beatrice had suppressed the Report, and characterized this suppression as "a lapse in judgment." Id. at 20. It made no explicit finding as to whether the default was tantamount to Rule 60(b)(3) misconduct. This last omission, however, appears to be of little moment; the record contains clear and convincing evidence -- overwhelming evidence, to call a spade a spade -- that appellee engaged in what must be called misconduct under the applicable legal standard.

2. Nature of the Misconduct. We next examine whether appellee's misconduct was knowing, deliberate, or intentional to such a degree as to trigger a presumption of substantial interference. The district court made the following finding on this point:

I do not draw the inference from these defaults, however, that the defendant deliberately and fraudulently suppressed these reports. These reports are not significantly detrimental to the defendants, and in fact contain many conclusions that are favorable to them. Given the vast amount of information made available to plaintiffs in the course of the trial, it seems inconceivable that experienced and competent counsel would have swallowed the camel and strained at the gnat . . . In any case, I do not find that fraud or deliberate misrepresentation has been established by clear and convincing evidence.

To determine the utility of this finding, we must review what transpired at the Rule 60(b) hearing.

Plaintiffs' presentation occupied the time allotted on the first day. Attorneys for Beatrice and Riley began the second day by offering counterarguments. Plaintiffs then mounted a rebuttal. At the same session, they submitted a written motion asking the district court to make certain inquiries of counsel for Beatrice and Riley, respectively, and reaffirmed the entreaty in their verbal presentation. These requests implicated matters of undeniable relevance, such as counsel's knowledge of the Report and the possibility that further undisclosed information lurked in the shadows. The district court did not rule on the motion. At the third and final session (a week later), plaintiffs brought the matter up again. The court stated that it would hear no further argument and effectively foreclosed the inquiry.

The colloquy between the judge and Mr. Nesson, one of plaintiffs' attorneys, went as follows:

MR. NESSON: We have a matter pending before your Honor, which is a motion to inquire, and we stated specific questions which we asked.
THE COURT: I'm not doing that.
MR. NESSON: If you are denying this motion, then before this hearing closes, we ask the right to call [Riley's attorney] to the witness stand and examine her on the issues of fact that relate to this motion.
THE COURT: No. I said to you last week, you had two shots to do whatever you needed to do on this motion. If you wanted to call witnesses, you should have told me then.
MR. NESSON: We did, your Honor.
THE COURT: Then you should have called your witnesses.
MR. NESSON: No. We told you that we thought that calling lawyers to the stand was a bad business. We would rather have you make the inquiry. We were hoping and I was hoping that you would make the inquiry.
MR. NESSON: You have not made the inquiry, and at that point I am saying if you've denied this motion, we want to preserve our rights with respect to that. We now ask you before this hearing closes that we call [Riley's attorney] to the witness stand.
THE COURT: I am not doing anything more on this hearing.

Transcript of Hearings 11/10/87, at 3:48-49. We add that, notwithstanding the court's somewhat oblique statement in reference to what was "said . . . last week," the record of the earlier proceedings contains no disposition of the inquiry motion. Instead, the colloquy appears to have meandered onto other topics, without any indication as to whether the court would or would not question counsel as requested.

We sympathize with the district court's frustration, and share its skepticism concerning fractious lawyers who insist upon raising new arguments late in the day. Yet in the circumstances of this case, we think the judge erred in rejecting plaintiffs' motion to inquire -- an error that was compounded when he proceeded to make findings of fact on the very matters which inquiry could reasonably have been expected to illuminate.

To begin with, plaintiffs exercised due dispatch regarding the matter. Despite the "two shots" reference by the court, the transcript contains nothing which shows that plaintiffs were put on notice to call opposing counsel at the outset or forgo their testimony. When it first became evident that neither defense counsel's presentation nor the court's queries would directly address the rationale for withholding the Report, plaintiffs' lawyers moved with some celerity. Sensitive to the unseemliness of grilling fellow attorneys, and believing (not unreasonably) that inquiry by the court would be the most decorous way to proceed, they chose to file a written motion to direct the court's attention to the critical issues of what Beatrice knew and when its knowledge was acquired. The procedure which they outlined was a plausible one. The court did not respond, either affirmatively or negatively, notwithstanding an oral reminder. Having filed a timely motion on a relevant subject, plaintiffs were entitled to a ruling. Not having received one, they were justified in continuing to press the request at the third hearing. When the court then stated for the first time that it would not interrogate the lawyers, plaintiffs promptly sought to call them as witnesses. No greater diligence could reasonably be expected.

Nor was this some fribbling matter of marginal relevance. Where there has been an unrevealed failure to make discovery, the offender's knowledge and intent is of decretory significance in a proceeding under Rule 60(b)(3). Questioning might well have produced evidence that Beatrice knowingly and deliberately concealed the Report; if so, a presumption of substantial interference would arise, sufficient to yoke Beatrice with the burden of showing its defalcation to have been harmless. In a case such as this -- where the motion to interrogate was seasonably filed; where the questions were of so salient a nature and might well have yielded results highly pertinent to a reasoned decision on the pending motion; and where the attorneys whose testimony was desired were present and available to respond -- we think the district court abused its discretion by refusing to launch the inquiry. We must, therefore, return the case to the court below so that the error may be corrected

3. Value of the Evidence. Because remand is necessary, we need not dwell on the Report's value or the degree to which its absence disrupted Plaintiffs' ability to prepare and present their case. For one thing, such matters are tied closely to the question of intent and the existence of a rebuttable presumption of substantial interference

We retain jurisdiction and remand to the district court with directions that it conduct the further inquiry envisioned in this opinion and thereafter make findings of fact and recommendations to this court based on the results of the inquiry.

All parties shall bear their own costs.