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International Merger & Acquisition Consultants Inc. v. Armac Enterprises Inc.

decided: March 5, 1976.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 73-C-1986 J. SAM PERRY, Judge.

Swygert Circuit Judge, Sprecher Circuit Judge, and Warren, District Judge.*fn*

Author: Warren

WARREN, District Judge.

This appeal concerns an action whereby International Merger & Acquisition Consultants, Inc. seeks to recover a finder's fee pursuant to an alleged oral contract to locate a financing commitment for Armac Enterprises, Inc. The plaintiff-appellee is a closely-held corporation in the business of obtaining commissions for providing introductions amongst various candidates for mergers, acquisitions or financing. The defendant is a publicly-held corporation in the business of manufacturing and selling various recreational products. Jurisdiction was and is founded upon the complete diversity of the citizenship of the parties, 28 U.S.C. § 1332.

The case was brought to trial before a jury in the Northern District of Illinois during the month of October, 1974. A verdict was returned for the plaintiff in the sum of $125,000.00 and, on motion of counsel for the plaintiff, the Court granted an award of interest for willful delay in payment on the part of the defendant. In this appeal, that verdict and award of interest are challenged on several grounds; counsel for the appellant seek a reversal of the judgment that was entered together with an order for a new trial where, as a matter of law, any verdict that might be returned in favor of the plaintiff would be limited to the sum of $100,000.00 with no imposition of interest penalties.


Counsel for the appellant first claim that errors in any one or all of several rulings by the trial judge fatally prejudiced the minds of the jurors such that a new trial is warranted. For the reasons to follow, we find that no new trial is necessary.

It is clear that the trial court must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties. It is also clear that a claim of error at trial may not be predicated upon a ruling which admits or excludes evidence unless a substantial right of a party is thereby affected. See : Rule 61, Federal Rules of Civil Procedure; Rule 103(a), Federal Rules of Evidence.*fn1 These rules are binding upon us, and, as a matter of federal practice, are to guide our resolution of the various contentions presented. See generally : 11 Wright & Miller, Federal Practice and Procedure: Civil § 2881 et seq. (1973 ed.). In general, the question of whether error is "harmless" or insubstantial is to be resolved in the context of the individual case. Where it appears that error in no way influenced the jurors, or had only a slight effect on them, the verdict and judgment are to be affirmed. See: Kotteakos v. U.S., 328 U.S. 750, 90 L. Ed. 1557, 66 S. Ct. 1239 (1946); 7 Moore's Federal Practice para. 61.07[2] (1975 ed.). We find no error that can be said to be substantial within the meaning of these well-established principles.

Count III of the plaintiff's amended complaint charged that the defendant was guilty of fraud by virtue of its refusal to honor the questioned finder's fee agreement. Although several motions for dismissal of this claim were submitted prior to trial, it was not until after presentation of all the evidence that a motion for dismissal was granted as a matter of law. Counsel for the defendant assert that their case was impermissibly prejudiced by the burden of the charge of fraud during the course of the trial; we disagree.

Despite their claims of prejudice, counsel for the defendant can point to no evidence which would not have been admitted but for the charge of fraud. It is true that some reference to fraud was made by plaintiff's counsel when the case was explained to the prospective jury, but it is clear that these remarks were fleeting. It would seem that any prejudice which may have resulted therefrom was counterbalanced by the facts that subsequent to his ruling the trial judge specifically instructed the jury that there was no longer any charge of fraud at issue, that during the trial there was no evidence admitted solely on the basis of the fraud allegations, and that fraud was not discussed in closing arguments of counsel. We conclude that, in the circumstances of this case, any prejudice resulting from the belated dismissal of the fraud charge is not to be considered substantial. Compare: Walker v. Trico Manufacturing Company, Inc., 487 F.2d 595 (7th Cir.), cert. denied, 415 U.S. 978, 39 L. Ed. 2d 873, 94 S. Ct. 1564 (1974).

Counsel for the defendant argue that certain irrelevant testimony was admitted on behalf of the plaintiff to demonstrate that the financing at issue was both needed by and beneficial to the defendant. They claim that these errors constitute substantial prejudice.

Rule 401 of the Federal Rules of Evidence states that relevant evidence is evidence having any tendency to make the existence of any fact of consequence to the resolution of the action more or less probable than it would be absent such evidence. See generally, 1 Weinstein's Evidence para. 401[01] et seq. (1975 ed.). In view of this rather liberal standard, we cannot conclude that the discretion to be accorded the trial court's decision was breached in the context of this case. Certainly the existence of the finance-finding contract is made more or less likely by evidence that one of the parties thereto was in need of and benefitted by the funds eventually obtained. We find that, on balance, any error which might have been committed in this regard was harmless.

In addition to the foregoing, counsel for the defendant charge that the trial court permitted an irrelevant offer of proof to be made in the presence of the jury in violation of Rule 103(c) of the Federal Rules of Evidence. Because the evidence for each party was in sharp conflict, and because this offer of proof appears to have informed the jury that the financing in question was much more favorable than that available from defendant's traditional sources, it is alleged that this error was so prejudicial that the trial court should have granted a motion for a mistrial. Again we disagree.

Initially, it appears that reliance on Rule 103(c) is misplaced. Rule 103(c) dictates that, to the extent practicable, proceedings in jury cases are to be conducted so as to prevent suggestion to the jury of evidence which is inadmissible. The trial court found the proffered testimony to be admissible, despite a relevancy objection. In view of the standards of relevance set out in Rule 401, as discussed above, we cannot find this ruling to be a breach of discretion. Because the evidence brought out by the questioned offer of proof was not inadmissible, Rule 103(c) has no applicability. Furthermore, we find that any ...

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