Trying cases

Trial lawyers believe they pay a trial judge a high compliment when they say "she'll let you try your case."

The praise implies a few things — that the judge doesn't make you do everything exactly the way she did when she practiced law, doesn't interrupt you on cross right as you go in for the kill, and doesn't rescue your opponent when he makes a fatal mistake.

The fact that trial lawyers see she'll-let-you-try-your-case as laudable in a member of the judicial priesthood tells you something — that not all members have the trait. Maybe less than half do. Possibly a lot less.

Still, the great mass of them won't actually hijack your case. What do you do if one does?

The question arose this week in a case about insurance — travel insurance.

The dispute

Trip Mate, which served as an agent for issuers of travel insurance policies, including Stonebridge Casualty, made an agreement with Stonebridge Casualty to collect premiums on policies that Trip Mate placed with travel organizers and pay the premiums to Stonebridge Casualty.

The agreement allowed Trip Mate to deduct "refund of premiums" from its collections but made Trip Mate responsible for "commissions".

Trip Mate and Stonebridge Casualty got into a fight over whether profit-sharing deals that Trip Mate had made with a pair of travel organizers had made Stonebridge Casualty directly responsible for sharing profits with them and whether the deals involved "refund of premiums", which Trip Mate could deduct, or "commissions", which Trip Mate had to eat.

An ensuing trial (to the bench instead of a jury) saw the lawyers for Trip Mate and Stonebridge Casualty slugging it out over Stonebridge Casualty's direct liability to the travel organizers and the refund-of-premiums v. commissions question.

The hijack

The judge had his own, different idea about the case. He saw the dispute as turning on whether the parties had tacitly amended their contract by behaving over a period of years as if it allowed Trip Mate to charge Stonebridge Casualty for the profit-sharing. After the first day of the two-day trial, he said:

Obviously, one of the issues here is, irrespective of what the [agreement] says, was there a course of dealing which effectively modified the terms of the [agreement]. I don't know whether you want to deal with that in your presentations tomorrow or whether you want to deal with it posttrial by way of additional briefing, but I'll tell you that that is an issue that I see, and I would like some help in trying to make my way through it. Okay. . . . Those are legal issues that I think need to be addressed at some stage.

Trip Mate, Inc. v. Stonebridge Casualty Ins. Co., No. 13-2032, slip op. at 6 (8th Cir. Oct. 6, 2014) (emphasis Blawgletter's).

Judge-ment

How did the lawyers react? Basically by ignoring His Honor's remarks. Neither side briefed the modification-by-conduct issue or even mentioned it in post-trial submissions.

The result? The court rejected both sides' theories.

"The district court instead held in favor of Trip Mate based on a theory . . . that Stonebridge's 'knowing acquiescence' in Trip Mate's use of Premium Trust Account funds to pay profit sharing indicated that 'Stonebridge effectively agreed profit sharing was a debt it would pay out of its share of the premiums.'" Id. at 7. Stonebridge Casualty thus had to pay Trip Mate $424,827.30 to cover what Trip Mate owed to the profit-sharing travel organizers.

Reversal

The Eighth Circuit held that the district court erred by effectively amending the pleadings without telling the parties. It noted that Rule 15(b)(2) allows a court to amend pleadings simply "by entering findings regarding the implied amendment" but that it doesn't permit secret amendments. The panel required "actual notice of the implied amendment . . . and an adequate opportunity to cure any surprise." Id. at 9.

The panel concluded:

Through the lens of hindsight we can see that the district court probably attempted to amend the pleadings during the first day of trial. The parties, however, reasonably and quite clearly misunderstood the district court's vague comments about their course of dealings, and the court took no steps to clarify this obvious misunderstanding during the trial or in its instructions to the parties regarding their post-trial briefs. The parties thus did not have actual notice of the implied amendment issue or an adequate opportunity to cure the surprise of this issue being added to the case. . . . The parties therefore did not consent to trying the implied amendment issue, and the district court abused its discretion by adding it to the pleadings.

Id. at 11.

Lesson

Most of the time, you will know when the judge has hijacked your case. You will get more clues than the judge in Trip Mate v. Stonebridge Casualty gave. But then you must raise heck about it. If you don't, you will have consented to the judge's effective amendment of the pleadings.

But you may not have to alert the trial judge to your complaint if he rules before you know that he's made a sub silentio amendment. The Eighth Circuit reversed despite the fact that Stonebridge Casualty apparently did not fuss about what the district judge did until it filed its opening brief on appeal.

Why did it wait? Likely because it thought the trial judge would have given it a chance to cure any prejudice from the late development. And it still would have lost.

That scenario seems likely to Blawgletter. We wonder why the Eighth Circuit didn't think the same thing.