Designing Health, Inc. v. Erasmus , 226 F. App'x 976 ( 2007 )

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NOTE: This disposition is nonprecedential
United States Court of Appeals for the Federal Circuit
2006-1244
DESIGNING HEALTH, INC.,
Plaintiff-Appellant,
and
BERNARD COLLETT and ROBERT MACINTOSH COLLETT,
Plaintiffs/Third Party Defendants-Appellants,
and
COLLETT VETERINARY CLINIC, INC. and COLLETT FAMILY TRUST,
Third Party Defendants,
v.
UDO ERASMUS,
Defendant/Third Party Plaintiff-Appellee,
and
FLORA, INC., FLORA MANUFACTURING AND DISTRIBUTING, LTD.,
THOMAS GREITHER and GABRIEL LIGHTFRIEND,
Defendants-Appellees.
Allen Hyman, of North Hollywood, California, argued for plaintiff-appellant,
plaintiffs/third party Defendants-appellants.
G. Cresswell Templeton, III, Hill, Farrer & Burrill, LLP, of Los Angeles, California,
argued for third party defendants and defendants-appellees. With him on the brief were
Sheldon S. Lustigman and Andrew B. Lustigman, The Lustigman Firm, of New York,
New York.
John M. Burns, III of New York, New York, argued for defendant/third party
plaintiff-appellee.
Appealed from: United States District Court for the Central District of California
Judge George P. Schiavelli
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2006-1244
DESIGNING HEALTH, INC.,
Plaintiff-Appellant,
and
BERNARD COLLETT and ROBERT MACINTOSH COLLETT,
Plaintiffs/Third Party Defendants-
Appellants,
and
COLLETT VETERINARY CLINIC, INC. and COLLETT FAMILY TRUST,
Third Party Defendants,
v.
UDO ERASMUS,
Defendant/Third Party Plaintiff-Appellee,
and
FLORA, INC., FLORA MANUFACTURING AND DISTRIBUTING, LTD.,
THOMAS GREITHER and GABRIEL LIGHTFRIEND,
Defendants-Appellees.
__________________________
DECIDED: February 26, 2007
__________________________
Before MICHEL, Chief Judge, RADER, and SCHALL, Circuit Judges.
SCHALL, Circuit Judge.
DECISION
Designing Health, Inc.; Robert M. Collett; and Bernard Collett, (collectively “DH”)
appeal from the final judgment of the United States District Court for the Central District
of California granting judgment pursuant to the Federal Circuit’s mandate of August 10,
2005. Designing Health, Inc. v. Erasmus, No. CV 98-4755 (C.D. Cal Jan. 23, 2006)
(“Final Judgment”). DH argues on appeal that the district court erred in finding that the
Federal Circuit’s decision 1) mandated entry of judgment as a matter of law (“JMOL”) in
favor of both Flora Inc., Flora Manufacturing and Distributing, Ltd. (collectively “Flora”)
and Udo Erasmus (“Erasmus”), and 2) precluded a new trial. Additionally, DH argues
that the district court erred in declining to exercise its discretion to grant a new trial in
the event the Federal Circuit’s decision did not mandate entry of JMOL in favor of Flora
and Erasmus and did not preclude a new trial. Flora and Erasmus counter that the
district court properly concluded that the Federal Circuit mandate of August 10, 2005,
compelled entry of JMOL in favor of Flora and Erasmus and that it had no discretion to
grant a new trial. Because the district court properly executed our mandate of August
10, 2005, we affirm.
DISCUSSION
I.
DH, a manufacturer of health food supplements, previously brought suit against
Flora and Erasmus in the Central District of California alleging conspiracy to commit
fraud, breach of fiduciary duty, and patent infringement. The district court dismissed the
patent infringement claims, denied Flora’s and Erasmus’ motions for judgment as a
matter of law, and entered judgment, upon a jury verdict, in favor of DH on the fraud and
2006-1244 2
breach of fiduciary duty claims. Erasmus and Flora appealed the decision of the district
court denying their motion for JMOL regarding (1) the jury verdict that they were liable
for fraud; (2) the jury’s award of damages resulting from that fraud; and (3) the jury’s
verdict that they were liable for conspiracy to commit fraud. Erasmus appealed the
decision of the district court denying his motion for JMOL regarding (1) the jury’s verdict
that he was liable for breach of fiduciary duty; and (2) the jury’s award of damages for
that breach.
On June 1, 2005, this court issued a decision on the prior appeal. Designing
Health, Inc. v. Erasmus, 132 Fed. Appx. 826 (Fed. Cir. 2005) (unpublished decision)
(“DH I”). This court affirmed the district court’s denial of JMOL with respect to the jury’s
liability verdicts against Flora and Erasmus but reversed the district court’s denial of
JMOL as to damages against both Flora and Erasmus, holding that the record evidence
was insufficient as a matter of law to support the jury’s fraud and breach of fiduciary
duty damages awards. Id. at 833-34.
On June 27, 2005, DH filed a petition for rehearing requesting “clarification by the
Court to provide limited direction to the district court, that the case is remanded for a
new trial on damages and punitive damages at the district court’s discretion in
accordance with Federal Rule of Civil Procedure Rule 50(d).” The petition for rehearing
was denied without comment on August 3, 2005.
II.
After this court’s mandate in DH I issued on August 10, 2005, the district court
granted Flora and Erasmus’ renewed motions for JMOL, stating:
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Pursuant to the Federal Circuit’s June 1, 2005 opinion and August 10,
2005 mandate ordering reversal of this court’s order denying Defendants’
motions for judgment as a matter of law (“JMOL”), the Court hereby
VACATES the prior order of this court denying said motions, and enters a
new order GRANTING said motions. Plaintiffs’ motion for a new trial is
DENIED.
Designing Health, Inc. v. Flora, Inc., No. CV-98-4758, at 1 (C.D. Cal Nov. 17, 2006).
The court also denied DH’s request for a new trial, stating:
The order of the Circuit Court is clear on its face in compelling reversal of
the denial of the JMOLs. However, Plaintiffs have argued they are entitled
to a new trial because evidence that might have supported the damages
awards was allegedly improperly excluded at trial. This is an issue that
should have been raised on appeal, either in the briefing or in the Petition
for Rehearing. It is not for this court to now, for the first time, consider
what is, in essence, an appeal from the orders of the prior Judge in this
case. . . . However, as the issues were not raised on appeal, the appellate
court did not consider a new trial or order this court to do so. Accordingly,
this court has no discretion in the matter.
Id. The court also noted that even if it had discretion to grant a new trial it would not
have exercised its discretion to grant a new trial in this case. Id. The court entered
judgment on January 23, 2006, stating: “(1) Plaintiffs [DH] shall take nothing from
Defendants Flora Inc., Flora Manufacturing and Distributing, Ltd., and Udo Erasmus on
their claim for fraud; (2) Plaintiffs [DH] shall take nothing from Udo Erasmus on their
claim for breach of fiduciary duty; and (3) costs be awarded to said Defendants under
Federal Rule of Civil Procedure 54(d).” Final Judgment, at 1.
III.
This court reviews the interpretation of its own mandate de novo. Engel Indus.,
Inc. v. Lockformer Co., 166 F.3d 1379, 1382 (Fed. Cir. 1999); see also Tronzo v.
Biomet, Inc., 236 F.3d 1342 (Fed. Cir. 2001).
DH argues on appeal that the district court erred in finding that the Federal
Circuit’s decision mandated entry of JMOL in favor of both Flora and Erasmus on
2006-1244 4
damages, and thus precluded a new trial on damages. DH urges that Weisgram v.
Marley Co., 528 U.S. 440 (2000), implies a notice requirement whereby a court of
appeals must be explicit when it directs a district court to enter judgment for the jury
verdict loser in order to put the jury verdict winner on notice that it must seek a new trial
before the court of appeals. According to DH, absent this explicit notice, a court of
appeals’ silence in the mandate should not be construed by the district court as
requiring entry of judgment for the jury verdict loser. Rather, the jury verdict winner
should be free to seek, and the district court should have the discretion to grant, a new
trial on remand. DH further argues that the district court’s denial of a new trial on
damages was inconsistent with DH’s Seventh Amendment right to a jury trial. DH
further outlines several alleged evidentiary failings by the district court which DH asserts
support allowing a new trial on damages.
Flora and Erasmus counter that the rule of mandate divests the district court of
jurisdiction to do anything more than whatever actions are necessary to carry out the
mandate. According to Flora and Erasmus, the district court properly denied DH a new
trial because the mandate in this case did not remand any issues to the district court,
and the only action left within the district court’s jurisdiction was to reverse its prior
denial of Flora’s and Erasmus’ JMOL motions. Flora and Erasmus assert that the
Seventh Amendment is not violated when a trial judge determines that evidence
supporting an element of a cause of action is legally insufficient for the jury to render a
verdict on the claim. Flora and Erasmus further counter that DH’s failure to timely
object during trial to the court’s process for deciding admissibility of exhibits and
2006-1244 5
resolution of the evidentiary issues and such failure to raise those issues in DH I
precludes DH from now raising them.
We have jurisdiction over this appeal under 28 U.S.C. § 1295(a)(1).
IV.
Neely v. Martin K. Eby Construction, definitively ruled that a court of appeals,
after reversing the denial of a party’s motion for JMOL (then styled “judgment n.o.v.”),
may itself order dismissal or direct entry of judgment for that party. 386 U.S. 317(1967). In doing so, the Court determined that a grant of JMOL at the appellate level is
consistent with both the Seventh Amendment’s right to a jury trial and the statutory
grant of appellate jurisdiction. Id. at 322 (“As far as the Seventh Amendment’s right to
jury trial is concerned, . . . there is no constitutional bar to an appellate court granting
judgment n. o. v. Likewise, the statutory grant of appellate jurisdiction to the courts of
appeals is certainly broad enough to include the power to direct entry of judgment n. o.
v. on appeal.”) (internal citation omitted). The Court in Neely went on to discuss, inter
alia, the proper procedural practice under Federal Rule of Civil Procedure 50(d)1 in
cases where the appellate court sets aside a trial court’s denial of a Rule 50(b)2 motion
1
Fed. R. Civ. P. 50(d) states:
Same: Denial of Motion for Judgment as a Matter of Law. If the motion for
judgment as a matter of law is denied, the party who prevailed on that
motion may, as appellee, assert grounds entitling the party to a new trial in
the event the appellate court concludes that the trial court erred in denying
the motion for judgment. If the appellate court reverses the judgment,
nothing in this rule precludes it from determining that the appellee is
entitled to a new trial, or from directing the trial court to determine whether
a new trial shall be granted.
2
Fed. R. Civ. P. 50(b) states:
2006-1244 6
for JMOL, explaining that “Rule 50(d) expressly preserves to the party who prevailed in
the district court the right to urge that the court of appeals grant a new trial should the
jury’s verdict be set aside on appeal.” Id. at 323. In cases where an appellate court
sets aside a jury verdict based on insufficient evidence, the Court explicitly noted that:
[T]here remain important considerations which may entitle [plaintiff-
appellee] to a new trial. The erroneous exclusion of evidence which would
have strengthened his case is an important possibility. Another is that the
trial court itself caused the insufficiency in plaintiff-appellee’s case by
erroneously placing too high a burden of proof on him at trial. But issues
like these are issues of law with which the courts of appeals regularly and
characteristically must deal. . . . [I]f the plaintiff’s verdict is set aside by the
trial court on defendant’s motion for judgment n.o.v., plaintiff may bring
these very grounds directly to the court of appeals without moving for a
new trial in the district court. Final action on these issues normally rests
with the court of appeals.
Id. at 327-28. Accordingly, the Court in Neely determined that Rule 50(d) provides
adequate opportunity for a plaintiff-appellee to present, either in his brief or in a petition
(Cont’d. . . .)
Renewing the Motion After Trial; Alternative Motion for a New Trial. If the
court does not grant a motion for judgment as a matter of law made under
subdivision (a), the court is considered to have submitted the action to the
jury subject to the court’s later deciding the legal questions raised by the
motion. The movant may renew its request for judgment as a matter of
law by filing a motion no later than 10 days after the entry of judgment
or—if the motion addresses a jury issue not decided by a verdict—no later
than 10 days after the jury was discharged. The movant may alternatively
request a new trial or join a motion for a new trial under Rule 59.
In ruling on a renewed motion, the court may:
(1) if a verdict was returned:
(A) allow the judgment to stand,
(B) order a new trial, or
(C) direct entry of judgment as a matter of law; or
(2) if no verdict was returned:
(A) order a new trial, or
(B) direct entry of judgment as a matter of law.
2006-1244 7
for rehearing, his grounds for a new trial in the event his verdict is set aside by the court
of appeals. Id. at 329.
Given that it was permissible for this court in DH I to direct entry of judgment
below in favor of Flora and Erasmus, we must determine if that is in fact what our
mandate did. “[A] lower court is bound to respect the mandate of an appellate tribunal
and cannot reconsider questions which the mandate has laid at rest.” FCC v. Pottsville
Broad. Co., 309 U.S. 134, 140-41 (1940) (citing In re Sanford Fork & Tool Co., 160 U.S.
247, 255-56 (1895)). An issue within the scope of the initial judgment of a district court
is necessarily incorporated within the scope of a court of appeals’ mandate, and
remanding the case to the district court without instructions to revisit the issue
forecloses further review on remand. See Tronzo, 236 F.3d at 1348; see also Engel
Indus., 166 F.3d at 1382 (“[T]he Engel III court did not order a remand on any of the
issues presented on appeal. Therefore the scope of the Engel III mandate, and thus the
scope of the matters removed from the district court’s jurisdiction, is coterminous with
the scope of the issues deemed presented on appeal.”). However, “[w]hile a mandate is
controlling as to matters within its compass, on the remand a lower court is free as to
other issues.” Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 168 (1939) (citing In re
Sanford, 160 U.S. 247). Therefore, the question is what issues were within the scope of
the initial district court judgment and subsequent appeal in DH I, and consequently were
finally decided by the mandate, and what other issues, if any, did the appellate court’s
mandate leave for the district court to decide.
This court’s mandate in DH I left the district court with no additional issues to
dispose of, and the only thing left for the district court to do was to grant JMOL in favor
2006-1244 8
of Flora and Erasmus with respect to damages. Notably, the previous opinion by this
court did not order remand of any issues on appeal; it only “affirmed-in-part and
reversed-in-part” the decision of the district court. DH I, 132 Fed. Appx. at 834. In the
previous appeal, Flora and Erasmus appealed the decision of the district court denying
their motion for JMOL regarding, inter alia, the jury’s award of damages resulting from
fraud. Id. at 827. This court reversed the district court’s denial of JMOL as to the fraud
damages, finding the record evidence was insufficient as a matter of law. Id. at 834.
Additionally, Erasmus appealed, inter alia, the district court’s denial of his motion for
JMOL regarding the jury’s award of damages for breach of fiduciary duty. Id. at 827.
This court reversed the district court’s denial of JMOL as to the breach of fiduciary duty
damages, noting that the admission of certain exhibits at trial supporting fraud damages
was improper, and that, even if the exhibits had been properly admitted, the evidence
presented by DH was insufficient as a matter of law to support the breach of fiduciary
duty damages award. Id. at 833. Under these circumstances, the only thing left for the
district court to do was to do the opposite of its previous action denying Flora and
Erasmus JMOL with respect to damages—that is, to grant the Flora and Erasmus
motions for JMOL on damages.
None of DH’s arguments to the contrary are convincing. As noted, DH urges that
Weisgram contains an implicit “notice due process requirement” that requires a court of
appeals to explicitly direct the district court to enter judgment against the jury verdict
winner if such is the intended outcome. The Court in Weisgram determined that the
authority of courts of appeals to direct the entry of judgment as a matter of law extends
beyond the situation addressed in Neely to include cases in which, on the appellate
2006-1244 9
court’s excision of erroneously admitted testimony, insufficient evidence remains to
support the jury’s verdict. Weisgram, 528 U.S. at 444. We see nothing in Weisgram
that implies a “notice due process requirement.” Furthermore, the text of Federal Rule
of Civil Procedure 50(d) alone is adequate to put any plaintiff-appellee on notice of the
proper procedure to follow when a district court’s denial of JMOL is overturned on
appeal.
DH also relies on Exxon Chemical Patents, Inc. v. Lubrizol Corp., 137 F.3d 1475(Fed. Cir. 1998), to argue that silence in an appellate court’s mandate with respect to
granting a new trial should be interpreted as vesting discretion in the district court to do
so. In Exxon, the district court had interpreted a mandate in a prior appeal to this court
as prohibiting the district court from granting a new trial. Id. at 1477. This court held,
however, because the prior opinion was confined to the issue of literal infringement, the
mandate did not deprive the district court of the power to grant Exxon’s motion for a new
trial on infringement under the doctrine of equivalents. Id. Exxon does not help DH
because our prior opinion considered and disposed of all issues DH now asserts as
grounds for a new trial. DH outlines several alleged evidentiary failings by the district
court that it asserts support allowing a new trial on damages because the excluded
evidence would provide the necessary support for a damages verdict that this court
found lacking in DH I. The issue of the sufficiency of the evidence to support a
damages verdict was undeniably before this court on appeal in DH I:
2006-1244 10
On appeal . . . defendants argue that the award of damages in favor of the
plaintiffs constituted error for several reasons. . . . [D]efendants contend
that DH failed to offer any evidence of out-of-pocket losses. . . . [T]hey
argue that DH did not have sufficient relevant operating history to
establish lost profits for its health supplements product for humans, and
that it failed to offer evidence sufficient to show: (1) what profits, if any, it
would have made in the retail health food store market had it not entered
into the distribution agreements with the Flora Companies, and (2) that
such profits would have been more than the profits that DH made from the
Flora Companies’ marketing and sales.
DH I, 132 Fed. Appx. At 830. The district court’s evidentiary rulings came under
scrutiny in DH I, and DH had a full and fair opportunity to raise any evidentiary issues
relevant to the damages determination during its first appeal. See, e.g., id. at 832 (“DH
contends that the exhibits in the 1500 Series were properly admitted into evidence as
summaries under Rule 1006 because they are based on evidence that was otherwise
admissible at trial and that was reasonably available to Erasmus.”). To the extent DH
did not raise particular arguments in support of the jury verdict on damages, or in the
alternative in support of a new trial on damages, during the first appeal in DH I, either in
its briefing on appeal or petition for rehearing, those issues are waived. See Tronzo,
236 F.3d at 1349 (concluding that appellee’s belated attack on the punitive damages
award was foreclosed by the appellate court’s mandate in the first appeal because
appellee could have raised a challenge to the punitive damages award in the first
appeal but did not).
CONCLUSION
The district court properly interpreted this court’s mandate in DH I as compelling
grant of JMOL in favor of Flora and Erasmus and as foreclosing a new trial on any
issues within the scope of the mandate in DH I. Because the district court did not err in
2006-1244 11
reversing its previous denial of JMOL and denying DH’s request for a new trial, we
affirm.
AFFIRMED
2006-1244 12