Unpublished Disposition, 931 F.2d 59 (9th Cir. 1989)

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US Court of Appeals for the Ninth Circuit - 931 F.2d 59 (9th Cir. 1989)

BUCKEYE ASSOCIATES, LTD., Plaintiff-Appellant-Cross-Appellee,v.FILA SPORT, S.P.A. and Fila Sports, Inc.,Defendant-Appellee-Cross-Appellant.

Nos. 89-16315, 89-16316.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 14, 1991.Decided April 23, 1991.

Before: FLETCHER, WILLIAM A. NORRIS and TROTT, Circuit Judges.


MEMORANDUM* 

Buckeye Associates, Ltd. ("Buckeye") agreed to purchase sportswear from Fila Sport S.p.A. ("Fila-Italy") and Fila Sports, Inc. ("Fila-USA"). When the deal went sour, Buckeye sued Fila-Italy and Fila-USA (collectively, "Fila") for breach of contract and interference with advantageous economic relations. The district court (1) refused to allow Buckeye to proceed with a breach of contract theory not stated in the complaint, and (2) excluded the testimony of six witnesses because Buckeye failed to depose the witnesses prior to trial, and because their testimony was largely hearsay and irrelevant. After trial, the district court granted Fila's motion for a directed verdict, and Buckeye now appeals. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

* Exclusion of Buckeye's Breach of Contract Claim

On July 6, 1984, Fila-Italy contracted to sell Buckeye a quantity of closeout or slow-moving Fila merchandise for the sum of $2,750,000 (the "Agreement"). Fila-USA acknowledged and agreed to Article 7 of the Agreement, which provides, in relevant part:

[Fila-Italy], during the term of this Agreement, will not sell or offer for sale any defective sportswear, where the United States would become the ultimate destination for such sportswear.

[Fila-Italy] and [Fila-USA] represent that this Agreement does not violate any existing agreements that would affect [Buckeye's] importation and sale of the Goods in United States.

When Buckeye was unable to resell the Fila merchandise, it brought suit against Fila-Italy and Fila-USA. After various motions to dismiss were resolved, Buckeye was left with claims against Fila-USA for breach of contract and interference with Buckeye's prospective advantageous economic relations.

Buckeye's complaint alleged that Fila breached the first sentence of Article 7. Paragraph 29 of the complaint reads:

As a result of offering to sell the same lot of merchandise covered by the agreement directly to United States purchasers, Fila Italy and Fila U.S.A. breached Article 7 of the July 6, 1984, agreement, causing Plaintiff harm.

Fila-USA moved to dismiss the breach of contract claim, arguing that Buckeye's complaint failed to state a claim against Fila-USA. The district court held:1 

The motion to dismiss the claim is DENIED. While Fila/USA is not an express party to the contract, Fila/USA is a signatory to the contract. Fila/USA was contractually bound to the following term:

The Seller and Fila Sports Inc. represent that this Agreement does not violate any existing agreements that would affect the Purchasers importation and sale of the Goods in the United States.

Consistent with the liberal pleading rules of Fed. R. Civ. P. 8, Paragraph 29 of the first amended complaint adequately pleads a breach of this term. ("As a result of offering to sell the same lot of merchandise covered by the agreement directly to United States purchasers, Fila Italy and Fila U.S.A. breached Article 7 of the July 6, 1984, agreement, causing the plaintiff harm.")

During the discovery process, Buckeye learned that at the time Fila executed its contract with Buckeye, Fila was a party to several other agreements with its United States customers. Apparently these agreements contained provisions effectively prohibiting the customers, mostly retail chains, from purchasing Fila merchandise from distributors other than Fila itself. This practice, according to Buckeye, violates the second sentence of Article 7:

If it had been permitted to advance the claim at trial, Buckeye's contention would have been that Fila-USA breached the second sentence of Article 7 of the Agreement by enforcing its existing agreements with Fila-USA's customers, which agreements restricted the customers' ability to buy and sell Fila merchandise.

Buckeye first raised this argument in a Pre-Trial Statement filed November 4, 1988.2  At the pretrial conference on April 24, 1989, the district court refused to allow Buckeye to proceed with the second breach of contract theory because it was not set forth in the complaint. At trial, therefore, the court evaluated the evidence supporting only Buckeye's first theory--that Fila-USA breached Article 7 by selling or offering to sell to other purchasers the merchandise obligated to Buckeye--and directed a verdict for Fila.

On appeal, Buckeye contends the district court erred in excluding its second breach of contract theory because the court ruled in the April 8 Order that Buckeye's complaint adequately pled a breach of the second sentence of Article 7. We disagree.

* The district court's interpretation of Buckeye's complaint is a question of law we review de novo. Cooke, Perkiss & Liehe v. Northern Cal. Collection Serv., 911 F.2d 242, 244 (9th Cir. 1990).

We agree that Paragraph 29 of the complaint alleged only a breach of Article 7's first sentence. If, during discovery, Buckeye uncovered facts sufficient to plead a breach of Article 7's second sentence, it had ample time to seek leave to amend the complaint and state the new theory. Its failure to do so resulted in substantial prejudice to Fila-USA, and its attempt to introduce the new theory was, in essence, an attempt to amend the complaint at the pretrial conference. Wood v. Santa Barbara Chamber of Commerce, 705 F.2d 1515, 1520 (9th Cir. 1983), cert. denied, 465 U.S. 1081 (1984) (refusing to allow plaintiffs to offer new theory more than two years after complaint was filed because of prejudice to defendants); Roberts v. Arizona Bd. of Regents, 661 F.2d 796, 798 (9th Cir. 1981) (denying leave to amend complaint where new issue was "raised at the eleventh hour, after discovery was virtually complete"); Waters v. Weyerhaeuser Mortgage Co., 582 F.2d 503, 506-07 (9th Cir. 1978) (refusing to permit plaintiffs to amend complaint because of prejudice to defendants where amendment was sought twenty-nine months after original complaint was filed and sixteen months after discovery was completed).

Further, Buckeye's alleged reliance on the April 8 Order does not excuse its failure to seek leave to amend the complaint in a timely fashion. After the pretrial conference, Buckeye filed a "Brief on Issues Raised at Pre-Trial Conference," in which Buckeye presented legal arguments for allowing the second theory to go forward. Nevertheless, the court refused to permit Buckeye to proceed with the new theory at trial. Because Buckeye had a full and fair opportunity to present its arguments to the court, we conclude that Buckeye's alleged reliance on the April 8 Order did not place it at an unfair disadvantage.

II

Exclusion of Buckeye's Witnesses

The district court excluded the testimony of six of Buckeye's witnesses because the court disapproved of Buckeye's discovery tactics, and because the testimony would consist solely of inadmissible hearsay. On appeal, Buckeye argues that the court was wrong on both counts. We affirm the district court on the first ground and thus do not reach the second.

Buckeye claims it was "not responsible for Fila-USA's failure to depose the excluded witnesses," and offers explanations for each instance of misconduct cited by the district court. Because there is a reasonable excuse for each instance, Buckeye argues, the district court erred in excluding the testimony. We review the trial court's decision to exclude testimony for abuse of discretion. United States v. Slaughter, 891 F.2d 691, 697 (9th Cir. 1989).

Buckeye's arguments lack merit and are clearly refuted by the record. We conclude that the district court did not abuse its discretion in excluding the testimony.

III

Rule 11 Sanctions

In its cross-appeal, Fila asserts that the district court erred in not imposing Rule 11 sanctions against Buckeye because "it is clear from the discovery and the trial testimony that Buckeye conducted no pre-complaint investigation to ascertain whether there were any facts to support its claims against Fila," and because Buckeye's action was brought for an improper, "coercive" purpose.

We review the district court's decision not to impose sanctions under Rule 11 for an abuse of discretion. Cooter & Gell v. Hartmarx Corp., --- U.S. ----, 110 S. Ct. 2447, 2461 (1990). "A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Id.; see also Townsend v. Holman Consulting Corp., 914 F.2d 1136, 1143-44 (9th Cir. 1990); Westlake North Property Owners Ass'n v. City of Thousand Oaks, 915 F.2d 1301, 1305 (9th Cir. 1990).

As the district court noted, the conduct of Buckeye's counsel throughout this litigation has consisted of "sloppy lawyering, at the least." Fila contends the district court erred in not imposing sanctions because Buckeye brought this litigation "based on opinions or conclusions which are not supported by a pre-filing investigation which shows that its allegations are well grounded in fact." Although this is a close issue, we conclude the district court did not abuse its discretion in denying Fila's motion for attorney's fees and costs.

AFFIRMED.

 *

This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3

 1

This order was entered on April 8, 1987. We will refer to it as the "April 8 Order."

 2

In the Pre-Trial Statement, Buckeye alleged that "Fila USA breached Article 7 of the Agreement by enforcing existing agreements with Fila-USA's customers that restricted the customers' ability to buy and sell Fila merchandise." This allegation was articulated again in a Status Conference Statement filed February 10, 1989 and in a Pre-Trial Statement filed March 24, 1989