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HAMILTON v. ACCU-TEK

June 3, 1999

FREDDIE HAMILTON, ET AL., PLAINTIFFS,
v.
ACCU-TEK, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Weinstein, Senior District Judge.

      AMENDED MEMORANDUM, ORDER AND JUDGMENT

TABLE OF CONTENTS

I. INTRODUCTION ............................................ 808

   II. FACTS ................................................... 808
       A. Stephen Fox .......................................... 808
       B. Njuzi Ray ............................................ 809
       C. Roberto Robles ....................................... 809
       D. Leroy Sabb ........................................... 809
       E. Damon Slade .......................................... 809
       F. Kei Sunada ........................................... 809
       G. Marvin Zaretsky ...................................... 810
  III. PROCEDURAL HISTORY ...................................... 810
       A. Pre-Trial Proceedings ................................ 810
       B. Claims of Parties and Jury Instructions .............. 810
       C. Verdicts ............................................. 811
          1. Negligence ........................................ 811
          2. Proximate Cause ................................... 811
          3. Damages ........................................... 811
             a. Veronica Trott and Koichi Sunada ............... 811
             b. Stephen Fox .................................... 811
   IV. LAW AND ITS APPLICATION ................................. 812
       A. Motion to Dismiss — Collateral Estoppel .............. 812
          1. Law ............................................... 812
          2. Application ....................................... 814
       B. Motion to Amend Pleadings ............................ 815
          1. Law ............................................... 815
          2. Application ....................................... 817
       C. Motion for Judgment as a Matter of Law ............... 817
       D. Negligence ........................................... 818
          1. Duty .............................................. 818
             a. Law ............................................ 818
                 i. Liability for the Acts of Third Parties .... 819
                ii. Duties of Manufacturers .................... 822
             b. Application .................................... 824
          2. Breach ............................................ 827
             a. Law ............................................ 827
             b. Application .................................... 829
          3. Causation ......................................... 833
             a. Law ............................................ 833
                  i. Proximate Cause ........................... 833
                 ii. Intervening Cause ......................... 833
                iii. Mass. Tort Causation ....................... 834
             b. Application .................................... 835
          4. Apportionment of Liability ........................ 839
             a. Law ............................................ 839
                 i. Available Theories ......................... 839
                ii. Policy Considerations ...................... 841
             b. Application .................................... 843
          5. Damages ........................................... 846
             a. Law ............................................ 846
             b. Application .................................... 846

V. NEW TRIAL ............................................... 847

VI. CERTIFICATION ........................................... 847

VI. CONCLUSION .............................................. 848

APPENDIX A — RELEVANT PORTIONS OF JURY INSTRUCTIONS .......... 848

  APPENDIX B — VERDICT FORM FOR STEPHEN AND GAIL FOX AS COMPLETED
  BY JURY ............................................................ 850

I. INTRODUCTION

Relatives of six people killed by handguns, as well as one injured survivor and his mother, have sued twenty-five handgun manufacturers for negligence. They claim that the manufacturers' indiscriminate marketing and distribution practices generated an underground market in handguns, providing youths and violent criminals like the shooters in these cases with easy access to the instruments they have used with lethal effect.

Defendants collectively supply most of the United States market for handguns. Among them are foreign manufacturers (e.g., Para Ordnance Manufacturing, Inc.), United States subsidiaries of foreign corporations (e.g., Browning Arms Co., Beretta U.S.A. Corp. and Smith & Wesson Corp.), old-line domestic manufacturers (e.g., Colt's Manufacturing, and Sturm, Ruger & Co.), and newer gun makers specializing in the manufacture of inexpensive small and medium caliber semiautomatic pistols (e.g., Jennings Firearms, Bryco Arms, and Davis Industries). See generally Tom Diaz, Making a Killing: The Business of Guns in America 3-35 (1999); Garen J. Wintemute, M.D., The Relationship Between Firearm Design and Firearm Violence, 275 JAMA 1749 (1996).

Plaintiffs' claims raise novel issues of duty and of collective liability under governing New York state law. For this reason, it is respectfully recommended that the Court of Appeals for the Second Circuit certify these substantive law questions to the New York Court of Appeals for definitive resolution.

After a four-week trial, the jury found negligent fifteen of the defendants; nine of them were found to have proximately caused injury to one or more plaintiffs. Damages were found only in favor of plaintiff Steven Fox and his mother, Gail Fox, against American Arms, Inc. (.23% liability), Beretta U.S.A. Corp. (6.03% liability), and Taurus International Manufacturing, Inc. (6.8% liability).

Three motions are currently pending: defendants' motion to dismiss on the ground of collateral estoppel, defendants' Rule 50(b) motion for judgment as a matter of law, and plaintiffs' Rule 15(b) motion to amend the pleadings to conform to the proof. For reasons set forth below, defendants' motions must be denied, and plaintiffs' amendment granted.

Default judgments were awarded by the court in favor of two of the plaintiffs, Veronica Trott and Maria Santana, for 100% of their damages against Cobray Firearms, Inc., which failed to appear or answer. See Hamilton v. Accu-Tek, 1999 WL 169523, at *1 (E.D.N.Y. Feb. 17, 1999). The court found that the gun was manufactured by Cobray and that the plaintiffs did suffer damages. These independent findings by the court do not control evaluation of the evidence by the jury in the instant case. See Joseph v. New York City Bd. of Educ., 171 F.3d 87, 93 (2d Cir. 1999) ("The fact that there may have been evidence to support an inference contrary to that drawn by the trier of fact does not mean that the findings were clearly erroneous.").

II. FACTS

A. Stephen Fox

Stephen Fox was shot in Queens, New York on November 14, 1994. He was sixteen years old at the time, as was his friend, the shooter, Alfred Adkins, Jr. Mr. Fox survived, but a bullet remains lodged in his brain, causing severe permanent disability. There was evidence that the handgun Mr. Adkins used had been bought by him a short time before the shooting from a seller — unlikely to have been licensed — who declared it came from "the south" when he dispensed it from the trunk of a car.

Charged initially with attempted murder, Mr. Adkins later pled guilty to reckless endangerment in Queens County Family Court. A .25 caliber spent cartridge case was recovered from the crime scene. The gun used to shoot Mr. Fox was never found. Mr. Adkins testified at his deposition that he did not recall how he came to possess it.

Suit was initially brought by Gail Fox, Mr. Fox's mother and guardian. When Mr. Fox attained his majority, he was substituted as plaintiff. Ms. Fox remained in the case, suing on her own behalf for loss of her son's services and for her own nursing care of him.

B. Njuzi Ray

Njuzi Ray was shot and killed in Brooklyn, New York on July 27, 1993. He was seventeen years old. The shooting appears to have resulted from a dispute about girlfriends. It occurred as Mr. Ray and his friends walked toward Reginald Cooper's home in an attempt to settle the disagreement. Mr. Cooper was charged with murder, but was subsequently acquitted. The handgun used in the shooting was never recovered. 9 millimeter casings and one 9 millimeter caliber bullet were retrieved from the crime scene. An additional 9 millimeter caliber bullet was removed from Mr. Ray's body during the autopsy.

Mr. Ray's mother, Freddie Hamilton, sued for her son's estate.

C. Roberto Robles

Roberto Robles was shot and killed in Bronx, New York on March 23, 1994. He was sixteen years old. Four people were arrested and convicted of murder for their participation in the shooting. It seems to have resulted from a fight after a baseball game two days earlier. Recovered from the crime scene was a 9 millimeter pistol manufactured by Cobray Firearms, Inc.

Mr. Robles' mother, Maria Santana, sued for her son's estate.

D. Leroy Sabb

Leroy Sabb was shot and killed in Bronx, New York on October 13, 1993, after having been chased by five unknown assailants. He was seventeen years old.

The handgun used in the killing was not found, but 9 millimeter expended bullets and shell casings were recovered from the scene.

Mr. Sabb's mother, Veronica Trott, sued for her son's estate.

E. Damon Slade

Damon Slade was eighteen years old at the time he was shot and killed on December 10, 1993. The shooter, Harry Eberhart, confronted Mr. Slade and three others in the elevator of an apartment building in Yonkers, New York. After preventing the elevator doors from closing he opened fire, killing Mr. Slade and one of his companions and wounding others. Mr. Eberhart was tried and convicted of the murder of Mr. Slade. The handgun Mr. Eberhart used in the killing was not found, but 9 millimeter spent casings and bullets were recovered from the scene. Mr. Eberhart testified at his deposition that he had used a 9 millimeter Hi-Point pistol to shoot Mr. Slade. He also testified that he fled after the shooting and hid the gun in some bushes.

Mr. Slade's mother, Andrea Slade-Lewis, sued for her son's estate.

F. Kei Sunada

Kei Sunada was twenty-two years old when he was shot and killed on August 7, 1994 during the course of a robbery in either the elevator or the stairwell of the apartment building where he lived in Queens, New York. The gun was not found. A spent .380 caliber bullet and cartridge casing where recovered. Armond McCloud, Jr. was convicted of murder. His accomplice, Reggie Cameron was convicted of robbery.

Mr. Sunada's father, Koichi Sunada sued for his son's estate.

G. Marvin Zaretsky

Marvin Zaretsky was shot and killed on June 25, 1994 during a robbery in the parking lot of a convenience store in Queens, New York. He was 49 years old. His three assailants were arrested and indicted on charges of second degree murder, robbery, and criminal possession of a weapon; two of the three pled guilty, and a third, previously convicted of manslaughter, is awaiting trial. Two .380 caliber casings and two .380 caliber bullets were recovered from the scene, but the gun used to shoot Mr. Zaretsky was never found.

Mr. Zaretsky's wife, Diane Zaretsky, sued for her husband's estate.

III. PROCEDURAL HISTORY

A. Pre-Trial Proceedings

In actions filed in January 1995, two plaintiffs sued numerous handgun manufacturers asserting claims of negligent marketing, design defect, ultrahazardous activity and fraud. A number of defendants jointly moved for summary judgment in April 1995. The court dismissed plaintiffs' product liability and fraud claims but allowed them to proceed on a negligent marketing theory. See Hamilton v. Accu-Tek, 935 F. Supp. 1307, 1315 (E.D.N.Y. 1996).

Additional plaintiffs intervened in April 1996 after the court granted leave to amend the Complaint to add plaintiffs. In May 1996, defendants again moved for summary judgment on plaintiffs' remaining negligence claim. The motion was denied on the ground that while substantial discovery had taken place on the issue of collective liability, discovery on defendants' underlying negligence claim was not yet complete. See id. at 1329-30. A petition for a writ of mandamus was denied by the Second Circuit. See Hamilton v. Accu-Tek (2d Cir. August 5, 1996) (order denying mandamus).

In June 1996, actions were commenced against a number of handgun distributors. All but two of the distributor defendants moved to dismiss for lack of personal jurisdiction. See Fed.R.Civ.P. 12(b)(2). The motion was denied as to fifteen distributors. See Hamilton v. Accu-Tek, 32 F. Supp.2d 47 (E.D.N.Y. 1998).

A motion to dismiss or transfer one case on the ground of lack of diversity was denied. See Hamilton v. Accu-Tek, 13 F. Supp.2d 366 (E.D.N.Y. 1998).

At the close of discovery, defendants renewed their motion for summary judgment. It was denied. See Hamilton v. Accu-Tek, 1998 WL 903473 (E.D.N.Y. Dec.18, 1998).

Two plaintiffs' cases, Johnstone v. Accu-Tek and Costa v. Accu-Tek, were transferred to federal courts in California and Virginia, respectively, based on conflict of laws and other considerations. See Hamilton v. Accu-Tek, 1999 WL 167672 (E.D.N.Y. Jan.22, 1999).

The case proceeded to trial in January 1999. At the suggestion of the court during the trial, plaintiffs voluntarily dismissed all claims against the distributors.

Related gun cases, other than those tried, are still pending in this court. They were stayed until completion of trial and appeal in the instant cases.

B. Claims of Parties and Jury Instructions

Plaintiffs claim that defendants marketed and distributed handguns negligently, proximately causing each of the seven shootings at issue.

Defendants deny having marketed or distributed handguns negligently and deny responsibility for any of the plaintiffs' injuries. They contend that the sole proximate cause of the murders and shootings in these cases was criminal conduct on the part of the shooters and others.

The relevant portions of the charge on the law and of one of the jury verdict forms utilized are attached as Appendices A and B, respectively.

C. Verdicts

1. Negligence

In each of the seven cases, fifteen defendants were found to have marketed or distributed handguns negligently: (1) American Arms, Inc., (2) Arcadia Machine & Tool, Inc., (3) Beretta U.S.A. Corp., (4) Bryco Arms, (5) Calico Light Weapons Systems, Inc., (6) Colt's Manufacturing, Inc., (7) Freedom Arms Co., (8) Glock, Inc., (9) International Armament Corp., d/b/a/ Interarms Industries, Inc., (10) Jennings Firearms, Inc., (11) K.B.I., Inc., (12) Phoenix Arms, Inc., (13) Sigarms, Inc., (14) Sundance Industries, Inc., and (15) Taurus International Manufacturing, Inc.

2. Proximate Cause

No defendant was found liable for the injuries of plaintiffs Andrea Slade-Lewis, Maria Santana, Freddie Hamilton or Diane Zaretsky.

With regard to the remaining three plaintiffs, the jury found proximate causation and apportioned damages as follows:

Veronica Trott

American Arms, Inc. (.23%)

Arcadia Machine & Tool, Inc. (.85%)

Beretta U.S.A. Corp. (6.03%)

Bryco Arms (5.29%)

Colt's Manufacturing Co., Inc. (4.14%)

Glock, Inc. (4.29%)

Phoenix Arms, Inc. (1.3%)

Sigarms, Inc. (0%)

Taurus International Manufacturing, Inc. (6.8%)

Koichi Sunada

American Arms, Inc. (.23%)

Arcadia Machine & Tool, Inc. (.85%)

Colt's Manufacturing, Inc. (4.14%)

Taurus International Manufacturing, Inc. (6.8%)

Stephen and Gail Fox

American Arms, Inc. (.23%)

Beretta U.S.A. Corp. (6.03%)

Taurus international Manufacturing, Inc. (6.8%)

3. Damages

a. Veronica Trott and Koichi Sunada

In the Trott and Sunada cases, the jury found negligence and proximate cause, but no damages. A finding of no damages was not inconsistent with the evidence.

In the case of Mr. Trott, whose estate sought damages only for conscious pain and suffering, the jury could have found instantaneous death with no pain or suffering. In that of Mr. Sunada, it could have found immediate loss of consciousness with no pain or suffering. Such findings could have supported the jury's conclusion that no damages should have been awarded in either case for injury suffered during the lifetime of the deceased.

The evidence could also have been evaluated by the jury to support a conclusion that Mr. Sunada would not have added to the value of his estate. A funeral bill for Mr. Sunada was in evidence, but the jury could have concluded that payment of the bill by the estate had not been established by a preponderance of the evidence.

b. Stephen Fox

With respect to Stephen Fox and Gail Fox, the jury calculated total damages of $3,950,000 and $50,000 respectively, to be assessed against the three defendants found liable in the percentages indicated above — .23, 6.03, and 6.8.

Since a verdict of negligence requires proof of damages, only the Fox defendants have legal reason to contest the verdict. The complaint is dismissed against all other defendants. There is no basis for their Rule 50(b) motions.

IV. LAW AND ITS APPLICATION

A federal court sitting in diversity applies the substantive law of the forum state, including that state's choice-of-law rules, and federal procedural law. Erie R.R. v. Tompkins, 304 U.S. 64, 80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Hamilton v. Accu-Tek, 1999 WL 167672, at *3 (E.D.N.Y. Jan.22, 1999). The decisional law of the forum's highest courts and that state's constitution and legislative enactments are to be afforded the greatest weight in determining the applicable state rule.

On state law issues of first impression, the district court must predict how the highest state court would rule were it presented with the same question. In making such a prediction, the precedents of intermediate state and federal courts are entitled to deference. See, e.g., Competex, S.A. v. Labow, 783 F.2d 333, 341 n. 16 (2d Cir. 1986); In re Eastern and Southern Districts Asbestos Litig., 772 F. Supp. 1380, 1388 (E.D.N Y 1991), aff'd in part, rev'd in part on other grounds sub nom. In re Brooklyn Navy Yard Asbestos Litig., 971 F.2d 831 (2d Cir. 1992); Jed I. Bergman, Note, Putting Precedent in its Place: Stare Decisis and Federal Predictions of State Law, 96 Colum. L.Rev. 969 (1996); Nikoforos Matthews, Note, Circuit Court Erie Errors and the District Court's Dilemma: From Rotolith and the Mirror Image Rule to Octagon Gas and Asset Securitization, 27 Cardozo L.Rev. 739 (1996).

A. Motion to Dismiss — Collateral Estoppel

In October 1996, Lorcin Engineering, Inc., then a defendant in the instant cases, filed for bankruptcy in California. Plaintiffs intervened in the bankruptcy proceeding as creditors. A hearing on Lorcin's objections to plaintiffs' claims was held in October 1997. The bankruptcy judge concluded that plaintiffs had failed to establish the existence of a legal duty and disallowed their claims. This decision was approved by the district judge. See In re Lorcin Engineering Co., No. RS96-27640-RA (Bankr.C.D.Cal. Feb. 17, 1998) (ordering disallowing claim of Hamilton, et al.). Plaintiffs did not appeal from this determination.

Almost one year later, in January 1999, defendants moved to dismiss on the ground that the California bankruptcy judge's decision and the district judge's affirmance collaterally estopped plaintiffs from litigating their negligence claims in this court. Defendants' motion is without merit.

1. Law

While the parties cite to New York issue preclusion law, because bankruptcy courts are federal courts of specific jurisdiction, federal law applies. "When a prior action is decided under federal question jurisdiction, it is clear that federal law is used to determine its res judicata effect." Carlin v. Gold Hawk Joint Venture, 778 F. Supp. 686, 690 (S.D.N.Y. 1991); see also Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 41-42 & n. 3 (2d Cir. 1986), cert. denied, 480 U.S. 948, 107 S.Ct. 1608, 94 L.Ed.2d 794 (1987) (applying federal preclusion law where the previous action was in federal court under federal question jurisdiction, and extending it to prior diversity jurisdiction judgments in dicta); id. ("It would seem that federal courts must possess an equivalent power and that federal law should determine the preclusive effect of a federal judgment, without regard to the basis of jurisdiction.").

Collateral estoppel's main purposes are to avoid unnecessary relitigation and inconsistencies among court rulings:

  It protects litigants from the burden of relitigating
  an issue which the other party has already litigated
  and lost. It promotes judicial economy by preventing

  needless litigation. Finally, it fosters reliance on
  judicial action by minimizing the possibility of
  inconsistent decisions.

Southern Pac. Communications Co. v. American Tel. & Tel. Co., 740 F.2d 1011, 1019 (D.C.Cir. 1984) (internal quotation marks and citations omitted).

Collateral estoppel does apply to decisions rendered by the bankruptcy courts. See United States v. Alfano, 34 F. Supp.2d 827, 832 (E.D.N.Y. 1999). The doctrine, however, "has been narrowly tailored to ensure that it applies only where circumstances indicate the issue estopped from further consideration was thoroughly explored in the prior proceeding, and that the resulting judgment thus has some indicia of correctness." Johnson v. Watkins, 101 F.3d 792, 795 (2d Cir. 1996).

Four requirements for establishing collateral estoppel limit the doctrine to cases where applying it is not unfair:

  (1) the issues at both proceedings must be identical;
  (2) the relevant issues were actually litigated and
  decided in the prior proceeding; (3) there must have
  been full and fair opportunity for litigation of the
  issues in the prior proceeding; and (4) the issues
  were necessary to support a valid and final judgment
  on the merits.

Alfano, 34 F. Supp.2d at 834 (citing Central Hudson Gas & Elec. v. Empresa Naviera, 56 F.3d 359, 368 (2d Cir. 1995)). The party invoking collateral estoppel has the burden with regard to each of these elements. See id. (citing Dowling v. United States, 493 U.S. 342, 350, 110 S.Ct. 668, 107 L.Ed.2d 708 (1990)). A significant change in "controlling facts or legal principles since the prior judgment [or] other special circumstances [may] warrant an exception to the normal rules of preclusion." Id. (citing Montana v. United States, 440 U.S. 147, 155, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979)). Application of collateral estoppel is ultimately a decision entrusted to the "trial courts' sense of justice and equity." Blonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 334, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971).

Even where an issue has been actually litigated and finally decided and was necessary to the judgement rendered in a prior proceeding, a party will be barred from relitigating it only if the initial opportunity to litigate was "full and fair." See Metromedia Co. v. Fugazy, 983 F.2d 350, 365 (2d Cir. 1992); see also Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 646 (2d Cir. 1998). Of primary importance in determining whether a prior proceeding afforded a "full and fair opportunity to litigate" is whether the party against whom preclusion is sought had an incentive to try the case vigorously in that forum. See 18 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure § 4465, at 598 (1981). ("One of the great fears that has always been urged against nonmutual preclusion has been that a party will be bound in unforeseen ways by half-hearted litigation of an apparently trivial claim.").

As the Restatement recognizes, a minor skirmish does not have to be fought to the death while the main dispute awaits decision:

  There are many reasons why a party may choose not to
  raise an issue or contest an assertion in a
  particular action. The action may involve so small an
  amount that litigation of the issue may cost more
  than the value of the lawsuit. Or the forum may be an
  inconvenient one in which to produce the necessary
  evidence.

Restatement (Second) of Judgments § 27 cmt. e (1982). See also, e.g., Remington Rand Corp. v. Amsterdam-Rotterdam Bank, 68 F.3d 1478, 1486 (2d Cir. 1995) (lack of incentive to litigate is of particular concern "where the party against whom estoppel is sought had little warning during the first suit that the issues being decided might become binding against it in later litigation"); The Evergreens v. Nunan, 141 F.2d 927, 929 (2d Cir.), cert. denied, 323 U.S. 720, 65 S.Ct. 49, 89 L.Ed. 579 (1944) (Hand, J.) ("Defeat in one suit might entail results beyond all calculation by either party; a trivial controversy might bring utter disaster in its train. There is no reason for subjecting the loser to such extravagant hazards.").

2. Application

Neither the public interest in judicial economy nor litigants' interest in avoiding the expense and burden of relitigating decided issues is implicated here. This is not a case in which an issue was litigated and finally determined in one forum and attempts are now made to relitigate it in another, unnecessarily burdening the courts and causing a "misallocation of resources." Blonder-Tongue Lab., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 329, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). By the time of the hearing before the bankruptcy judge, the plaintiffs' claims had already been pending in the Eastern District of New York for almost three years. Discovery, though not yet complete, had been substantial. Pre-trial motions had been briefed, argued and decided. In addition, defendants waited almost a year after entry of the bankruptcy order disallowing plaintiffs' claims against Lorcin before asserting collateral estoppel in a motion filed two days before the start of trial. During this time they continued to engage in discovery and to file and argue motions, further obviating the need for what is essentially an equitable remedy designed to reduce burden and expense.

The California bankruptcy hearing was a sideline proceeding against one defendant in a court located across the country. Their small stake in that proceeding and the inconvenience of the California forum gave plaintiffs little incentive to litigate the duty issue. Plaintiffs did not choose the location of the west coast forum, but were compelled to intervene there if they were to have any hope of recovering against Lorcin. "It may be proper to deny preclusion if the first action occurred in an inconvenient forum that made it impossible to engage in full discovery or to call witnesses." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331 n. 15, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979).

While plaintiffs may have suspected that disallowance of their claim by the bankruptcy judge would bar them from pursuing Lorcin in another court, see In re Lorcin Engineering Co., No. RS96-27640-RA, Transcript of Proceedings Before the Honorable Robert W. Alberts, United States Bankruptcy Judge, October 28, 1997 ("Bankr.Tr."), at 71, they could not have anticipated the possibility that it might bind them in the ongoing complex New York litigation against Lorcin's many non-bankrupt co-defendants. That plaintiffs did not contemplate any potential preclusive effect of the bankruptcy proceeding on their New York suit is evidenced by lead counsel's decision not to attend the California hearing and not to appeal the bankruptcy decision. Even if plaintiffs had realized the desirability of litigating fully the duty issue before the California bankruptcy court, it is doubtful whether their limited resources — already fully committed to the New York lawsuit — would have warranted such full-scale bicoastal litigation.

The limited nature of the bankruptcy hearing and lack of preparation by plaintiffs' local counsel further militate against preclusion. See 18 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, supra, § 4465, at 600-02. ("Preclusion may also be denied by showing that . . . counsel was incompetent . . . or that the issues were not in fact extensively litigated."). The bulk of the bankruptcy hearing was devoted to a discussion of the bankruptcy court's power to dispose of plaintiffs' tort claims. The bankruptcy judge repeatedly expressed doubt on this score. See, e.g., Bankr.Tr. at 8-9 ("Congress perceives personal injury tort and wrongful death cases as being clearly something that has to be decided at the Article III court rather than the Article I court level. And far be it from me to argue with it as an Article I judge."); id. at 11 ("I'm not inclined to spend a lot more time second-guessing the district court in New York. . . . I mean that litigation is pending, it hasn't been thrown out. And I don't think you should assume that this Bankruptcy Court is going to, in effect, throw it out while that court hasn't."); id. at 17 ("I don't think I have jurisdiction to do this"); id. at 19 ("I don't want to spend a lot of time where I'm firmly — or fairly firmly convinced that this Court doesn't have the jurisdiction to say on the merits, in effect, liquidating that claim you can't — I mean you get zero because you can't state a claim for relief because there's no duty, for example."). See generally In re Dow Corning Corp., 215 B.R. 346, 349-51 (Bankr.E.D.Mich. 1997) (collecting cases representing opposing views of bankruptcy courts' jurisdiction to disallow personal injury claims as a matter of law).

Once the bankruptcy judge did address the merits of the duty issue, plaintiffs' local counsel referred a number of times to her inability to litigate the matter fully due to her incomplete knowledge of New York law. See, e.g., Bankr.Tr. at 57 ("As a preliminary matter, Your Honor, let me simply say that if you are asking me to argue New York law, I do not feel that I am prepared or competent to do that today. . . ."); id. at 52 ("I'm sorry that I'm not as well versed as [lead counsel] would be in citing cases to you.").

The bankruptcy judge did ultimately decide to disallow the plaintiffs' claims against Lorcin in their entirety. See id. at 65. He denominated the disallowance a "non-core proceeding," requiring entry of a final order and judgment by the district court. The conclusory three-page Findings of Fact and Conclusions of Law reflects the incomplete nature of the litigation and militates against giving the decision any preclusive effect.

Finally, the unique circumstances presented by the instant litigation warrants denial of defendants' motion. In a case involving complex and novel questions of national import, in which the tort law of another state is decisive, discovery is not yet complete and the theory of the case is still evolving, a bankruptcy court's summary findings cannot be permitted to preclude the plaintiff from a recovery on the merits after a full trial. Defendants' motion to dismiss on the ground of collateral estoppel must be denied.

B. Motion to Amend Pleadings

Plaintiffs moved pursuant to Rule 15(b) to amend their Second Amended Complaint to conform to the proof at trial concerning defendants' liability under a national market share theory. Defendants oppose the motion on three grounds: first, that the market share issue was tried without their express or implied consent, second, that the amendment would prejudice them, and third, that permitting the amendment would be "futile" since market share liability is inapplicable to the instant cases. The issues of consent and prejudice are addressed in this part. Defendants' "futility" argument goes to the merits of the applicability of market share liability; it is better addressed in the context of defendants' motion for judgment as a matter of law. See Part IV, infra.

1. Law

Rule 15(b) of the Federal Rules of Civil Procedure provides for amendment of pleadings to reflect the proof at trial. It states in pertinent part:

  When issues not raised by the pleadings are tried by
  express or implied consent of the parties, they shall
  be treated in all respects as if they had been raised
  in the pleadings. Such amendment of the pleadings . .
  . may be made upon motion of any party at any time,
  even after judgment. . . .

Amendment of the pleadings pursuant to Rule 15(b) is a part of the general federal policy of limiting the restrictive effect of historical pleading rules. See generally 6A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice & Procedure § 1491 (1990).

Determination of a Rule 15(b) motion is entrusted to the sound discretion of the trial court, informed by the general principle that amendments should be "freely given when justice so requires." Fed.R.Civ.P. 15(a). See Hillburn v. Maher, 795 F.2d 252, 264 (2d Cir. 1986). The crux of the inquiry is whether the nonmoving party had an opportunity fully to contest the issue included in the amendment. See New York State Elec. & Gas Corp. v. Secretary of Labor, 88 F.3d 98, 104 (2d Cir. 1996) ("In assessing whether pleadings should conform to the proof, the pivotal question is whether prejudice would result."); see also Cunningham v. Quaker Oats Co., 107 F.R.D. 66, 71 (D.C.N.Y. 1985) ("restrictions upon amendments exist chiefly to prevent confusion, delay, and the chance that a party will find itself on the short end of a judgment without having been given a fair opportunity to defeat the claims asserted against it.").

Decision of a motion to amend on a trial record is a two-step process. See, e.g., during the trial that an unpled issue was being tried. See United States v. Certain Real Property and Premises Known as 890 Noyac Road, 945 F.2d 1252, 1257-59 (2d Cir. 1991); Hillburn, 795 F.2d at 264; Al-Jundi v. Oswald, 1995 WL 353159, at *1 (W.D.N.Y. June 6, 1995).

The first step is to inquire whether the non-moving party expressly or impliedly consented to trial of the unpled issue. If the answer is yes, the proponent of the motion is entitled to mandatory amendment of the pleadings. See Hillburn, 795 F.2d at 264. Implied consent exists where the parties recognized during the trial that an unpled issue was being tried. See, e.g., Certain Real Property, 945 F.2d at 1257; Kirkland v. District of Columbia, 70 F.3d 629, 633-34 (D.C.Cir. 1995) (finding consent where "parties understood that [the issue] was being contested"); see also 6A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, supra, § 1493, at 19.

The second step is to ask whether amendment would prejudice the non-movant. See, e.g., Certain Real Property, 945 F.2d at 1259. The court has discretion to grant a Rule 15(b) motion even in the absence of express or implied consent "so long as [the nonmoving party] would not thereby be prejudiced, and [the motion] `should be granted in the absence of such prejudice if the interests of justice so require.'" Sudul v. Computer Outsourcing Svcs., 917 F. Supp. 1033, 1041 (S.D.N.Y. 1996) (quoting Hillburn, 795 F.2d at 264). Prejudice exists if the opponent could have tried the case substantially more effectively — as by presenting further evidence, calling additional witnesses or taking depositions — had it known of the amendment earlier. In Royal American Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1017-18 (2d Cir. 1989), for example, the court found that granting plaintiff's 15(b) motion would be prejudicial since plaintiff's "inexcusable tardiness" had prevented defendants from retaining an expert in defense of the amended claim, preparing and presenting other relevant evidence, and addressing the issue in opening statements and through earlier and crucial witnesses. See also Grand Light & Supply Co. v. Honeywell, Inc., 771 F.2d 672, 680 (2d Cir. 1985) (finding prejudice where evidence from which plaintiff inferred trial of and consent to the amended issue was relevant to a pled issue and defendant would likely have introduced further evidence had the unpled issue been tried).

Prejudice is not presumed to result merely from a party's use of a new legal theory. See, e.g., New York State Electric & Gas Corp. v. Secretary of Labor, 88 F.3d 98, 104 (2d Cir. 1996) (amendment to change theory of safety infraction to an "analogous" and fully litigated one was non-prejudicial); 6A Wright, Miller & Kane, supra § 1493 at 47-48 ("the theory of liability upon which the case nominally was to be tried may be changed [under 15(b)]"); cf. DCPB, Inc. v. City of Lebanon, 957 F.2d 913, 917(1st Cir. 1992) (plaintiff's proposed amendment of complaint to add a tort claim to its contract cause of action in order to justify "enhanced damages" awarded by the jury but impermissible under the applicable state contract law was prejudicial because it "attempt[ed] to superimpose a new (untried) theory on evidence introduced for other purposes").

2. Application

Market share liability was introduced early in the case. See, e.g., Hamilton v. ACCU-TEK, 935 F. Supp. 1307, 1331 (E.D.N Y 1996) (noting likelihood of adoption of market share liability and discussing New York's approach to the theory). Its applicability was contested in pre-trial motions and was thoroughly litigated during the trial. See, e.g., Transcript of Oral Argument of Summary Judgement Motion, Dec. 17, 1998, at 15 (defendants note that "[p]laintiff attempts to come under the DES case, the Hymowitz case"); id. at 32 (defendants note that this is a case "where the plaintiff wants to apply collective liability; in this case market share liability"); id. at 38 (defendants' argue that plaintiffs' market share theory should not be applied in this case because the theory has never been applied "to any other product other than DES"); id. at 51 (defendants argue that court should consider exculpation should it decide that "some form of market share liability" applies); id. at 80-82 (extended discussion by plaintiffs of market share and Hymowitz); Tr. (trial) at 2045 (objecting to imposition of any form of market share liability and arguing that market share makes "no sense" in this "conduct-based" case).

Consent does not entail the non moving party's permission — implied or express — to trial of the unpled issue. It depends, as noted, on the opponent's awareness that the issue was being litigated. On the record, defendants' position that their numerous objections to the trial of market share issues precludes a finding of consent is untenable. The case was tried on a variation of negligence theory foreseen throughout the litigation.

There was no prejudice. As the court of appeals for the Second Circuit has held:

  a party cannot normally show that it suffered
  prejudice simply because of a change in its
  opponent's legal theory. Instead, a party's failure
  to plead an issue it later presented must have
  disadvantaged its opponent in presenting its case.

New York State Elec. & Gas Corp. v. Secretary of Labor, 88 F.3d 98, 104 (2d Cir. 1996). Here, no disadvantage has been demonstrated. Defendants have pointed to no uncalled witnesses, unpresented evidence or compromised opening or closing arguments. See, e.g., Royal American Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1017-18 (2d Cir. 1989). Not only did defendants avail themselves of every possible opportunity to litigate the market share issue, they retained an expert, Dr. Benston, who prepared and proffered evidence as to market share statistics in both his deposition and at trial. See Rule 26 Report of Def's Expert Benston (Oct. 15, 1998) at 18-19, Table 5, Table 6; Tr. (trial) 3069-72.

This Rule 15(b) motion falls squarely within the rule that "if it is clear that the parties understand exactly what the issues are when the proceedings are had, they cannot thereafter claim surprise or lack of due process because of alleged deficiencies in the language of particular pleadings." Kuhn v. Civil Aeronautics Bd., 183 F.2d 839, 841 (D.C.Cir. 1950). Plaintiffs' motion to amend the pleadings is granted.

C. Motion for Judgment as a Matter of Law

At the close of plaintiffs' case, defendants moved, pursuant to Rule 50(a), for judgment as a matter of law. Decision was reserved, and the motion was renewed post-verdict pursuant to Rule 50(b). Defendants argue that (1) they owed the plaintiffs no legal duty; (2) the evidence is insufficient to support the jury's findings of negligence and proximate cause; (3) market share liability does not apply; and (4) plaintiffs' proof with respect to market share was inadequate to support the jury charge and verdict.

After a verdict, the district court may, as appropriate, either allow the judgment to stand, order a new trial, or direct entry of judgment as a matter of law. Fed. R.Civ.P. 50(b).

In determining whether to grant a Rule 50(b) motion, the evidence must be viewed in the light most favorable to the non-movant. See LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 429 (2d Cir. 1995), cert. denied sub nom. Village of Airmont v. LeBlanc-Sternberg, 518 U.S. 1017, 116 S.Ct. 2546, 135 L.Ed.2d 1067 (1996). The party defending the verdict must be given "the benefit of all reasonable inferences that the jury might have drawn in his favor from the evidence." Id.; see also 9A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2528, at 288 (1995) (party against whom a motion is made is entitled to "every legitimate inference that can be drawn from the evidence").

Judgment as a matter of law is inappropriate unless there is "either an utter lack of evidence supporting the verdict, so that the jury's findings could only have resulted from pure guesswork, or the evidence [is] `so overwhelming that reasonable and fair-minded persons could only have reached the opposite result.'" Doctor's Assocs., Inc. v. Weible, 92 F.3d 108, 111-12 (2d Cir. 1996) (quoting Baskin v. Hawley, 807 F.2d 1120, 1129 (2d Cir. 1986)), ...


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