In Watchous Enterprises v. Mournes, No. 22-3071 (10th Cir. Nov. 30, 2023), the Tenth Circuit holds that the district court did not abuse its discretion by using Fed. R. Civ. P. 56(g) to deem facts submitted on summary judgment as established for purposes of trial, although the panel suggests that it might have ruled otherwise had the appellants made a more detailed argument below and on appeal.
“Watchous filed suit in the United States District Court for the District of Kansas, bringing claims under the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and common-law claims under Kansas law . . . .” Both parties moved for summary judgment. “Watchous’s motion for partial summary judgment appended a statement of 369 facts it contended were uncontroverted. [Defendants] responded to each fact, denying some outright and disclaiming knowledge of, contesting in part, or acceding to others.”
“The district court granted partial summary judgment in favor of Watchous on its fraud claims (leaving damages for the jury to decide), essentially on the ground that Appellants misrepresented and failed to disclose ‘the historic and contemporary facts about Waterfall’s dubious finances, loan defaults, and consistent lack of success in funding similar projects.’”
For trial, “Watchous . . . moved under Fed. R. Civ. P. 56(g) for an order stating that a number of facts uncontested in the summary-judgment proceedings should be treated as established for purposes of the trial on the remaining claims. The court granted the motion, stating that it would issue an instruction to the jury telling it to deem certain facts established. The instruction listed 295 facts.” A jury thereafter found defendants liable for “civil conspiracy to defraud Watchous and . . . RICO, 18 U.S.C. § 1962(c) and (d),” and awarded compensatory and punitive damages.
On appeal, defendants argued (among other things) that the district court “abused its discretion by improperly using Fed. R. Civ. P. 56(g) to deem facts established for purposes of trial.” Rule 56(g) provides that “[i]f the court does not grant all the relief requested by the [Rule 56 summary judgment] motion, it may enter an order stating any material fact — including an item of damages or other relief — that is not genuinely in dispute and treating the fact as established in the case.”
The Tenth Circuit affirms. It first rejects the defendants’ general argument that facts offered only for purposes of summary judgment are presumptively not conceded for trial. “To be sure, the nonmovant is entitled to admit a fact solely for the purpose of resolving the summary-judgment motion. It may think there is no point in wasting time and energy on a factual issue because it can prevail even if that particular fact is not disputed.”
“But that does not mean a party can sit close-lipped when the court is considering the use of Rule 56(g) and assume that it is protected by an irrebuttable presumption that the use of admissions is always limited to the summary-judgment proceeding. The party opposing an order establishing facts under Rule 56(g) must either present evidence controverting the proposed facts or persuade the district court that it would be unfair or otherwise inappropriate to establish particular facts through that process.”
Unfortunately for defendants, the panel finds that they did not (in substantial part) present a sufficient opposition to the admissions of fact. “Appellants’ briefs on appeal briefly allude to these concerns about overusing Rule 56(g), but the briefs speak only in generalities. They do not explain how these general concerns apply in this case.” The panel analyzes the few specific challenges to admissions of fact made by the defendant and finds no abuse of discretion.
Still, in a footnote, the panel expresses their disquiet with the district court’s procedure.
“Although to resolve this appeal we need address only Appellants’ specific arguments, and although district courts have considerable discretion in their use of Rule 56(g), we should add that we do have reservations about what the district court did here. In large part we can see that what the court did was both fair and efficient in presenting documentary evidence of transactions without the need for a parade of witnesses. But some of the findings arguably go beyond objective characterizations of documents and include inferences that should be made by a jury, even though they were quite reasonable. This opinion should not be read as an endorsement of rulings by the district court that have not been adequately challenged on appeal.
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