This appeal follows an Investment Company Act of 1940 (“ICA”) action seeking to impose personal liability on the independent trustees of a mutual fund for the non-renewal of an investment advisory contract. After a fourteen-day trial, the jury determined that the independent trustees acted within their discretion under the business judgment rule in replacing the investment adviser.
Plaintiffs-Appellants are: (1) shareholders and former shareholders of the Navellier Series Fund (“Fund”); (2) the original investment adviser of the Fund, Navellier Management, Inc. (“NMI”); and (3) Louis Navellier, an interested trustee of the Fund (collectively, “appellants”). Defendants-Appellees are: (1) three former independent trustees of the Fund — Donald Simon, Kenneth Sletten, and Lawrence Bianchi (collectively, “independent trustees”); (2) Roy Adams, counsel for the independent trustees; (3) Massachusetts Financial Services (“MFS”),
Appellants challenge the district court proceedings on numerous grounds, complaining about pre-trial, trial, and post-trial rulings. Sletten cross-apрeals both an imposition of sanctions against him and his counsel, and the dismissal of his counterclaim for breach of contract. We reject all of appellants’ many claims, uphold the jury verdict exonerating the independent trustees, and affirm the judgment of the district court against appellants. On Sletten’s cross-appeal, we affirm dismissal of his counterclaim but grant limited relief, holding that the district court abused its discretion in affirming the imposition of sanctions against cross-appellant Sletten and his counsel.
FACTS AND PROCEDURAL BACKGROUND
On May 15, 1993, Navellier organized the Fund as a Delaware business trust that would invest in an open-ended investment company or mutual fund. Navellier and one of his employees, Jack Drinkwa-ter,
On the day the Fund was organized, the Fund entered into an investment advisory agreement with NMI. Under this agreement, NMI provided investment advice and managed the Fund’s assets. The initial term of the investment advisory contract was two years, annually renewable if approved by a majority of the indepеndent trustees.
In January 1995, the independent trustees sought independent counsel. In October 1995, they hired Adams, an experienced mutual fund attorney, as independent counsel. Adams advised the independent trustees that, to fulfill their fiduciary obligations to the shareholders of the Fund, it was necessary to obtain certain financial information about NMI in order to conduct their annual review of the investment advisory agreement. Adams also told the independent trustees that he had concern about Kornhauser’s abilities. Adams expressed the opinion that Kornhauser should not continue as counsel for the Fund while he remained counsel for NMI, Navellier, and Navellier’s other businesses.
At a board of trustees’ meeting on April 26, 1996, Navellier presented a motion to the trustees of the Fund to merge the Fund into the Navellier Performance Funds. This merger would have been a tax-free reorganization. The assets of the Fund would have been transferred to a portfolio of the Navellier Performance Funds in exchange for the shares of the Navellier Performance Funds. The merger would have terminated the independent trustees’ positions.
The independent trustees conditioned their future consideration of the merger proposal on review of certain information concerning the finances of Navellier and his companies. After Navellier refused to provide this information, the independent trustees contacted the Securities and Exchange Commission (“SEC”) in an effort to compel Navellier to produce the information. This effort to obtain the SEC’s assistance in compelling this information did not succeed. Thereafter, the independent trustees decided to put Navellier’s proposed merger to a shareholder vote by way of a proxy prepared by NMI.
Pending resolution of the merger proposal, the independent trustees held a board of trustees meeting on March 13, 1997, and voted not to renew NMI’s investment advisory contract, which was scheduled to expire by its terms on March 15, 1997, The independent trustees also voted to hire MFS as the Fund’s investment adviser. MFS conditioned its agreement to become investment administrator on assurances that the current trustees would not continue as trustees after the vote of the Fund’s shareholders.
Navellier and Alpers filed a complaint on April 9, 1997, seeking to enjoin the independent trustees from removing them as interested trustees. Navellier also requested injunctive relief to block the investment advisory agreement with MFS so NMI could regain its former position as investment adviser.
On April 10, 1997, the independent trustees voted to remove Navellier and Alpers from their positions as interested trustees. According to appellants, the independent trustees undertook this allegedly wrongful act to entrench themselves more completely, to neutralize opposition to their upcoming proxy, and to ratify their decision to hire MFS. The independent trustees then eliminated the two positions formerly held by Navellier and Al-pers, reducing the trustees of the Fund.
On May 23, 1997, after the reorganization of the board of trustees, a shareholder vote was held to determine whether MFS should continue as investment adviser to the Fund. The proposal to retain MFS failed, receiving less than the required two-thirds vote of shareholders. Navellier refused to return to the Fund unless the independent trustees released him from liability and agreed to resign as trustees. The independent trustees signed a release, returned management of the Fund to NMI, and resigned.
On February 24, 1998, appellants filed a first amended class action complaint. The amended complaint alleged the following claims: (1) breach of fiduciary duty under the ICA and Delaware law against the independent trustees, MFS, and Scott; (2) breach of fiduciary duty and negligence under California law against Adams; and (3) waste and intentional interference with
Jury trial commenced on June 21, 1999. After a fourteen-day trial, the jury returned a unanimous verdict for the independent trustees on all claims. The district court entered judgment on August 24, 1999. On September 8, 1999, appellants filed motions for judgment’ as a matter of law and for a new trial. The district court dеnied both motions. This appeal and cross-appeal followed.
DISCUSSION
I. Pre-Trial Rulings
A. Dismissal of claims against Adams
Appellants contend that the district court erroneously dismissed the claims against Adams for breach pf fiduciary duty and negligence pursuant to Federal Rule of Civil Procedure 12(b)(6). We disagree.
We review de novo a district court’s dismissal of a complaint for failure to state a claim upon'which relief can be granted. Wyler Summit P’ship v. Turner Broad. Sys., Inc.,
Applying California law, which the parties agree is controlling here, the California Supreme Court has explained that the determination of whether the duty undertaken by an attorney extends to a third person not in privity involves the balancing of various factors. These factors include: (1) “the extent to which the transaction was intended to affect the plaintiff,” (2) “the foreseeability of harm to him,” (3) “the degree of certainty that the plaintiff suffered injury,” (4) “the closeness of the connection between the defendant’s conduct and the injury suffered,” (5) “the moral blame attached to the defendant’s conduct,” and (6) “the policy of preventing future harm.” Goodman v. Kennedy,
Applying these factors here, the district court correctly held that Adams, by advising the independent trustees, did not assume a duty of care to the Fund’s shareholders. The district court reasoned that the shareholders were not the intended beneficiaries of Adams’ counsel to the independent trustees; the harm alleged by the appellants (i.e., capital gains taxes) was not a foreseeable result of Adams’ conduct; ■ the connection between Adams’ advice to the independent trustees and the alleged injury was remote and tenuous; no moral blame could be attached to Adams’ conduct in advising the independent trustees of their obligations under the law; and strong public policy reasons militated against finding any duty owed by Adams to the shareholders.
We see no sound basis for disagreement with this analysis. Adams was represent
B. Dismissal of ICA claims against MFS and Scott
Appellants contend that the district court'erroneously dismissed their claims against MFS and Scott for breach of fiduciary duty under the ICA pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court addressed three theories in dismissing appellants’ claims against MFS and Scott for breach of fiduciary duty under the ICA. We address each theory in turn.
1. Fiduciary Duty
The ICA expressly provides that decisions regarding the renewal of investment advisory contracts are within the sole discretion of a fund’s independent trustees.
[I]t shall be unlawful for any registered investment company having a board of directors to ... renew ... any contract or agreement ... whereby a person undertakes regularly to serve or act as investment adviser ... for such company, unless the terms of such contract or agreement and any renewal thereof have been approved by the vote of a majority of directors, who are not parties to such contract or agreement or interested persons of any such party ....
15 U.S.C. § 80a-15(c) (emphasis added).
MFS is not alleged to have been, and never was, a trustee of the Fund. In fact, MFS did not become the Fund’s investment adviser until March 15, 1997, two days after the independent trustees decided not to renew NMI’s contract. Further, according to the Declaration of Trust, a trustee must be a natural person. Similarly, the independent trustees did not appoint Scott as a trustee of the Fund until April 13, 1997, nearly one month after the independent trustees voted not to renew NMI’s contract. Additionally, because Scott was an officer and director of MFS, he served as an interested trustee of the Fund. By the plain terms of the ICA, interested persons are prohibited from participating in the vote to retain or replace an investment adviser. See 15 U.S.C. § 80a-15(c).
The district court properly concluded that neither MFS nor Scott were trustees to the Fund — and therefore did not owe a fiduciary duty to the shareholders — when the independent trustees decided to change investment advisers.
2. De Facto Investment Adviser
Appellants argue that MFS and Scott owed a fiduciary duty because they “were, in substance, acting as Trustee and Investment Adviser prior to March 15, 1997, irrespective of a formal agreement.” The contention that MFS and Scott were “de facto” investment advisers has no basis in law and is contrary to the plain language of the ICA.
Appellants rely on Lutz v. Boas,
Here, appellants failed to allege that MFS or Scott entered into any agreements — even informal ones — or that they received compensation for any purported advisory services. Lutz does not support appellants’ theory that MFS and Scott were de facto trustees or investment advisers undеr the ICA.
Appellants also contend that they are helped by the terms “Advisory Board” and “Director” under the ICA, arguing that MFS became an “Advisory Board” and Scott a “Director” because they urged the independent trustees to replace NMI. This argument fails under the plain language of the ICA.
The ICA defines “Advisory Board” as an “elected or appointed ” board with “advisory functions as to investments.” 15 U.S.C. § 80a-2(a)(l) (emphasis added). “Director” is defined as “any director of a corporation or any person performing similar functions with respect to any organization.” 15 U.S.C. § 80a-2(a)(12). Appellants have not alleged that MFS was elected or appointed in any capacity prior to the independent trustees’ non-renewal of NMI’s contract. Nor have appellants alleged that Scott was performing the functions of a director before the non-renewal of NMI’s contract.
The district court properly concluded that MFS and Scott were not “de facto” investment advisers owing a fiduciary duty to the shareholders of the Fund.
3. Control
The district court also properly concluded that MFS and Scott cannot be held liable for breach of fiduciary duty under the ICA on the theory that they “controlled” the independent trustees.
The ICA defines “control” as “the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.” 15 U.S.C. § 80a-2(a)(9). MFS and Scott could not have been “control persons” under the ICA, however, because the independent trustees do not fall within the definition of “controlled persons” under the ICA. “A natural person shall be presumed not to be a controlled person within the meaning of this subchapter.” 15 U.S.C. § 80a-2(a)(9). This presumption can only be overcome by “a determination to the contrary made by the Commission.” Id. No such determination has been made by the SEC here. MFS and Scott cannot be held liable for breach of fiduciary duty under a theory of control.
We hold that the district court properly dismissed appellants’ claims against MFS and Scott for breach of fiduciary duty under the ICA.
C. Dismissal of Delaware claims against MFS and Scott
Appellants also contend that the district court erroneously dismissed its claims against MFS and Scott for breach of fiduciary duty under Delaware common law. The district court addressed two theories in dismissing appellants’ claims against MFS and Scott for breach of fiduciary duty under Delaware law.
1. Fiduciary Duty
As discussed above, neither MFS nor Scott owed a fiduciary duty to the Fund when the independent trustees decided not to renew NMI’s contract to provide investment advisory services. Appellants cite no authority for the proposition
The district court properly determined that because neither MFS nor Scott owed a fiduciary duty to the shareholders of the Fund when the independent trustees decided not to renew NMI’s contract, neither can be liable for breach of fiduciary duty under Delaware law.
2. Control
The district court also correctly held that neither MFS nor Scott “controlled” the independent trustees under Delaware law. See Harriman v. E.I. DuPont De Nemours & Co.,
Here, appellants failed to offer — and do not offer on appeal — any facts to establish that MFS and Scott affirmatively dictated the destiny of the Fund or dominated through actual exercise of direction over the independent trustees.
We hold that the district court properly dismissed appellants’ claims against MFS and Scott for breach of fiduciary duty under Delaware common law.
D. Dismissal of waste and interference with prospective economic advantage claims against MFS and Scott
Appellants contend that the district court erroneously dismissed Navellier’s claims against MFS and Scott for waste and for intentional interference with prospective economic advantage pursuant to Federal Rule of Civil Procedure 12(b)(6). Appellants’ arguments are without merit.
1. Waste
The parties agree that Delaware law is controlling on this issue. Delaware courts have explained that the legal test for waste is “severe.” Glazer v. Zapata Corp.,
We hold that the district court properly dismissed the waste claims asserted against MFS and Scott. Under Delaware law, there is no basis for a waste claim against these parties who were not directors. Moreover, appellants’ first amended complaint itself established that a shareholder proxy vote was legally required pursuant to Rule 15a-4 of the ICA, which also shows there could have been no waste.
2. Interference with prospective economic advantage
California recognizes a “competition privilege,” which protects one from liability for inducing a third person
The privilege applies where (a) the relation [between the competitor and third person] concerns a matter involved in the competition between the actor and the competitor, and (b) the actor does not employ improper means, and (c) the actor does not intend thereby to create or continue an illegal restraint of competition, and (d) the actor’s purpose is at least in part to advance his interest in his competition with the other.
Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Vill. Square Venture Partners,
We hold that the district court properly dismissed the claims against MFS and Scott for intentional interference with a prospective economic аdvantage.
E. Dismissal of counterclaims without prejudice
Appellants allege — in one paragraph without citation to the record or authority — that the district court abused its discretion in dismissing appellees’ indemnity counterclaims without prejudice. Appellants contend that “[t]he jury should have been informed that those claims had not merely vanished but that Defendants might refile and seek $3.5 million in attorneys fees.... ”
Appellants’ argument is frivolous. The decision to grant a voluntary dismissal under Federal Rule of Civil Procedure 41(a)(2) is addressed.to the sound discretion of the district court. Sams v. Beech Aircraft Corp.,
Appellants’ bare allegation of error does not demonstrate that the district court abused its discretion in dismissing appellees’ indemnity counterclaims without prejudice. See Hamilton v. Firestone Tire & Rubber Co.,
F. Summary judgment on intentional interference with prospective economic advantage claim
Appellants allege that the district court erroneously granted summary judgment on NMI’s claim against the independent trustees for intentional interference with prospective economic advantage. The district court correctly held that there were no triable issues of fact as to two essential elements of this claim.
We review de novo the district court’s order granting summary judgment. Covey v. Hollydale Mobilehome Estates,
First, appellants failed to prеsent evidence demonstrating a reasonable probability that NMI would continue as the investment adviser to the Fund. Appellants point to no evidence in the record which, when viewed in a light most favorable to their position, demonstrates that NMI had a reasonable expectation of continuing as the Fund’s investment adviser. Rather, appellants simply assert that “a Board that was acting with proper motives” would have renewed NMI’s contract. This is not, however, evidence of a “reasonable” expectation of a continuing business relationship. The district court properly concluded that NMI did not have a reasonable expectation of continuing as the Fund’s investment adviser.
Appellants also failed to point to evidence demonstrating damages. As the district court noted, “the claim must still fail because the damages flowing from defendants’ interference with this prospective business relationship are too speculative. ‘It is black-letter law that damages which are speculative, remote, imaginary, co'ntingent or merely possible cannot serve as a legal basis for recovery.’ ” (Quoting Mozzetti v. City of Brisbane,
Because appellants failed to present evidence demonstrating that NMI had a reasonable expectation of continuing as the Fund’s investment adviser and did not establish actual damages, we hold that the district court properly granted summary judgment on NMI’s claim for intentional interference with prospective economic advantage.
G. Summary judgment on Sletten’s counterclaims
On cross-appeal, Sletten contends that the district court erroneously granted summary judgment on the breach of contract counterclaims that he asserted against Navellier and NMI. We disagree.
Before returning the Fund to Navellier, Sletten and the independent trustees executed the following release:
In consideration of the covenants, promises and agreements contained herein, Donald Simon, Kenneth Sletten and Lawrence Bianchi (collectively “Trustees”) ... release and fully discharge Louis Navellier, Navellier Management, Inc., and their predecessors, successors and related entities ... from all rights, claims and causes of action of any kind or any nature whatsoever, known or unknown, in law or at equity, which the Trustees have or may have against them except for any claim for contribution or indemnity in the event that any third party asserts claims and recovers against the Trustees.
1. Unconscionability
Under California law,
Here, the record indicates that there are no genuine issues of material fact indicating that the challenged release was either procedurally or substantively unconscionable. As the district court noted, Sletten freely chose to waive his legal rights in order to preserve the stability of the Fund, he was well-represented by counsel, and he had adequate time to pursue other alternatives. And, as the district court properly found, the release “is also not unconscionable because it was ‘one-sided,’ nor does it shock the conscience.”
2. Duress
A release may be invalidated on the ground of economic duress when a party is subject to a wrongful act such as a threat and must succumb to the wrongdoers or face financial ruin. Sheehan v. Atlanta Int’l Ins. Co.,
There are no genuine issues of material fact indicating that the challenged release was procured though economic duress. Sletten had more than one alternative to signing the release and accepting NMI’^s return as investment adviser. Slet-ten might have hired a company named Neuberger and Berman as investment adviser, liquidated the Fund, appointed a receiver, or found another investment adviser. While Sletten may have found these choices unattractive, the district court properly found that “there was no economic duress, as none of these choices would have caused Sletten ... to face economic ruin.”
H. Class certification
Appellants contend that the district court abused its discretion by denying class certification pursuant to Federal Rule of Civil Procedure 23(b)(3). We review the denial of class certification for abuse of discretion, Zinser v. Accufix Research Inst., Inc.,
The district court gave five grounds for denying class certification pursuant to Rule 23(b)(3), each of which sustains the denial. The district court held that: (1) individual questions predominate over common questions; (2) intraclass conflicts preclude certification; (3) Kornhauser, as class counsel, “cannot adequately represent the class;” (4) Navellier was neither a typical nor adequate class representative and was subject to unique defenses; and (5) the remaining class members were not appropriate class representatives.
Appellants’ challenge to the district court’s denial of class certification is supported by virtually no citations to authority and no citations to the record. For example, as to three of the district court’s independent grounds justifying denial of certification, appellants simply argue: “[T]here are no intra or interclass conflicts, there are no unique defenses as to Mr. Navellier which would preclude him or any of the other Plaintiffs from acting as class representatives.” These bald assertions do not establish that the district court abused its discretion in denying class certification.
The district court correctly applied Rule 23 and each ground advanced is independently sufficient to support the denial of certification. See, e.g., Valentino v. Carter-Wallace,
We hold that the district court did not abuse its discretion in denying class certification.
II. Trial Management
A. Time limitations
Appellants contend that the district court’s imposition of a time limit within which to present their case “was prejudicial and deprived them of due process.” This argument is without merit.
We review such challenges to trial court management for abuse of discretion. Amarel v. Connell,
The time limits imposed here were reasonably based on the parties’ estimates and were adjusted as appropriate during trial. Amarel,
B. Evidentiary rulings
Appellants challenge evidentiary rulings made by the district court throughout the trial. We reviеw the district court’s evidentiary rulings for abuse of discretion and “will not reverse in such a case, unless the ruling is manifestly erroneous.” Gen. Elec. Co. v. Joiner,
None of these challenges has merit and none requires our detailed discussion. As to each of the challenged rulings, appellants do not demonstrate that the district court’s action was “manifestly erroneous.” Id We hold that the district court did not abuse its discretion in making the challenged evidentiary rulings.
C. Comment on accusations of perjury
Appellants argue that the district court improperly influenced the jury by accusing Navellier of perjury. This argument is without merit.
During cross-examination, Navellier claimed that the independent trustees had perjured themselves at trial by testifying to the substance of a conference call between Navellier and the independent trustees. In response to this accusation, the court admonished Navellier: “All right. This is enough. That’s a very, very serious charge that he’s made under oath, and it could be perjurious. This could be a criminal proceeding.” Appellants’ counsel objected, and the court then immediately instructed the jury to disregard his prior comment:
All right. I think his objection is good, ladies and gentlemen of the jury, аnd the jury will disregard that statement of the court.
And I will, again, admonish you that nothing that the court says or does during the course of this trial should be taken in any way as indicating how your verdict should come out.
You, and you alone, are the sole judges of the facts in this case, and it’s your judgment that counts on the facts, it’s not the court’s.
Trial courts have broad discretion to comment upon the evidence, including the credibility of a witness. See Quercia v.
We hold that the court here did not abuse its discretion by commenting on Navellier’s testimony. The court did not distort the evidence and the court’s comment was not so one-sided as to amount to an abuse of discretion. See Quercia,
D. Imposition of sanctions against Slet-ten
On cross-appeal, Sletten argues that the district court abused its discretion in affirming the special master’s imposition of sanctions against Sletten and his counsel for “abusive and oppressive” discovery requests. Sletten contends that the sanctions violated his right to due process because he and his counsel were not given notice or opportunity to be heard before the special master imposed sanctions. We agree.
We review the imposition of sanctions for abuse of discretion. Primus Auto. Fin. Servs. v. Botarse,
Here, Sletten and his counsel first received notice of the sanctions when they received a copy of the special master’s order imposing sanctions. This order was summarily approved by the district court. The special master abused its discretion by failing to give Sletten and his counsel notice of his intent to impose sanctions before imposing sanctions. Miranda,
III. Jury Instructions
Appellants contend that two of the instruсtions given to the jury were errone
A. ICA instruction
Appellants argue that the district court “committed prejudicial error” by refusing to instruct the jury that, absent an emergency or unforeseen event, section 15 of the ICA requires prior shareholder approval before an investment adviser may be replaced.
Section 15(a) of the ICA makes it unlawful to serve as an investment adviser except under a contract approved by the shareholders. See 15 U.S.C. § 80a-15(a). Recognizing that an unavoidable lapse of time may occur between the end of one contract and the date on which a new contract is approved by a majority of shareholders, the SEC promulgated Rule 15a-4, which provides in pertinent part:
Notwithstanding section 15(a) of the Act, a person may act as investment adviser for [a fund] pursuant to a written contract which has not been approved by a majority of the outstanding voting securities of such company during the one hundred and twenty day period after the termination of an investment advisory contract by an event (other than an assignment by an investment adviser in connection with which such investment adviser, or a controlling person thereof, directly or indirectly receives money or other benefit) described in paragraphs (3) or (4) of section 15(a) of the Act or by the failure to renew such contract....
17 C.F.R. § 270.15a-4.
The availability of [Rule 15a-4] is not conditioned on a finding that either of the first two events — the non-renewal or termination of an advisory contract by the fund — was unforeseeable. Rather, under the rule’s plain language, the only conditions are that: the interim contract may not lаst more than 120 days; it must be approved by the directors, including a majority of the independent directors; and the compensation under the contract may not exceed what would have been paid under the most recent contract that was approved by the shareholders.
See § 17 C.F.R. 270.15a-4(a) and (b).
Appellants argue that appellees’ “reliance on Rule 15a-4 as legal grounds for their actions is legally wrong.... Rule 15a-4 is an SEC rule and is not necessari
Section 6(c) of the ICA grants the SEC broad authority to exempt certain actions from the requirements of the ICA. Section 6(c) of the ICA provides:
The Commission, by rules and regulations upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person ... or transaction, or any class or classes of persons ... or transactions, from any provisions ... of this subchapter or of any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the. purposes fairly intended by the policy and provisions of this title.
15 U.S.C. § 80a-6(c). The authorization to exempt any person or transaction from the provisions of the ICA when “necessary or appropriate in the public interest and consistent with the protection of investors” reflects the Congressional intent to entrust certain policy decisions to the SEC.
In determining the appropriate scope of the exemption embodied by Rule 15a-4, the SEC was required to balance two important investor protections in Section 15(a). On the one hand, the shareholder approval requirement ensures that fund investors have the authority to decide whether a particular investment adviser is retained by the fund. On the other hand, granting the trustees the authority to terminate or not renew an existing contract gives them critical оversight. Deciding how to reconcile these provisions when their policies conflict is precisely the sort of judgment entrusted to the SEC by Congress.
Appellants do not demonstrate that the SEC’s promulgation of Rule 15a-4 is inconsistent “with the protection of investors or the purposes fairly intended by the policy and provisions” of the ICA. See 15 U.S.C. § 80a-6(c). While Rule 15a-4 permits a brief postponement of the shareholders’ right to vote on an advisory contract, it includes additional investor safeguards, such as the requirement that a majority of the independent trustees approve the interim contract and compensation limitations for the interim period.
Also, the SEC’s reasonable interpretation of a statute that it administers, including its promulgation of rules and regulations interpreting or implementing the statute, is entitled to deference. Chevron USA, Inc. v. NRDC,
Because appellants’ proposed jury instruction is contrary to the plain language of Rule 15a-4, we hold that the district court properly refused to give the proposed instruction.
B. Business judgment rule instruction
Appellants advance two arguments in support of their contention that the district court erroneously instructed the jury on the business judgment rule.
As to the independent trustees’ duty of care, the court instructed:
[A] trustee, to fulfill the requisite duty of care under the business judgment rule must,
One: Not have an undisclosed personal financial interest in the transaction that is the subject of the trustee’s business judgment.
Two: Be informed about the subject of the business judgment to the extent that the trustee reasonably believes to be appropriate under the circumstances, and such belief must be rational.
And Three: Rationally believe that the trustee’s business judgment is in the best interest of the corporation.
The Plaintiff, who is challenging the conduct of the trustees of a mutual fund, must prove that the trustees did not exercise the proper business judgment. And, consequently, you must find that defendants fulfilled their duty of care unless plaintiff proves
(a) that the defendants have an undisclosed personal financial interest in the transaction that is the subject of their business judgment, or
(b) that defendants were not informed about the subject of the business judgment to the extent that they reasonably believed to be appropriate under the circumstances, or
(c) that they did not rationally believe that such business judgment was in the best interest of the corporation, or
(d) that no business judgment was, in fact, exercised.
(Emphasis added to challenged portion of instruction).
The duty of care instruction given here properly stated controlling Delaware law. In Brehm v. Eisner,
Compare the Amеrican Law Institute test, which requires that a director*947 must be “informed ... to the extent the director reasonably believes to be appropriate under the circumstances.” Because this test also is based on the objective test of reasonableness, it could be argued that it is essentially synonymous with the Delaware test.... In the end, the debate may be mostly semantic.
Id. at 259 n. 47 (internal citations omitted) (emphasis added). Thus, Delaware courts have rejected appellants’ contention that the duty of care instruction given here erroneously created a subjective — rather than objective — test. Even if there are “semantic” differences between Delaware law and the instruction given here, the district court did not err in giving an instruction that “is essentially synonymous with the Delaware test.” Id.
Appellants next contend that the district court erroneously instructed that they were required to prove that bad faith “was the sole or primary motivating factor” for the independent trustees’ decision.
The district court’s instruction here complied with Delaware law. In, In re Anderson, Clayton Shareholders Litigation,
We hold that the business judgment rule instructions given by the district court here properly stated controlling Delaware law.
C. Federal Rule of Civil Procedure 37(b)(2) sanction
Appellants contend that the district court erred when, as a sanction for discovery abuse, it instructed the jury that Navellier had breached his duty to procure liability insurance for the Fund. We review the imposition of discovery sanctions for abuse of discretion. The Stars’ Desert Inn Hotel & Country Club, Inc. v. Hwang,
“Rule 37(b)(2) contains two standards — one general and one specific— that limit a district court’s discretion. First, any sanction must be ‘just’; second, the sanction must be specifically related to the particular ‘claim’ which was at issue in the order to provide discovery.” Ins. Corp. оf Ireland, Ltd., v. Compagnie des Bauxites de Guinee,
Here, the district court found that Kornhauser, as counsel for Navellier and NMI, willfully refused to answer questions at his deposition concerning the circumstances under which insurance was procured for the Fund — even after the special master ordered Kornhauser to answer the questions. This conduct warranted sane
IV. Post-Trial Rulings
A. Motions for judgment as a matter of law and new trial
Appellants argue that the district court erroneously denied their motions for judgment as a matter of law and for new trial. This court reviews de novo the denial of a motion for judgment as a matter of law. United States ex rel. Hopper v. Anton,
Appellants erroneously contend that the district court denied their motions on the grounds that they were “untimely.” But that is not what the court did. The district court denied appellants’ self-styled “renewed” motions for judgment as a matter of law and new trial because appellants in fact had failed to make such motions at the close of evidence. There was nothing that could be renewed following the entry of judgment.
Federal Rule of Civil Procedure 50(b) provides, in pertinent part:
If, for any reason, the court does not grant a motion for judgment as a matter of law made at the close of all the evidence, the court is considered to have submitted the action to the jury subject to the court’s later deciding the legal questions raised by the motion. The movant may renew its request for judgment as a matter of law by filing a motion no later than 10 days after entry of judgment — and may alternatively request a new trial or join a motion for a new trial under Rule 59.
(Emphasis added.). We have held that “failure to comply with Rule 50(b) precludes a challenge to the sufficiency of the evidence on appeal and that the requirement that thе motion be made at the close of all the evidence is to be strictly observed.” Patel v. Penman,
The district court properly denied the motions for judgment as a matter of law and new trial. See id. at 879.
B. Motion to amend the complaint
Appellants argue that the district court “committed reversible error” in denying their motion to amend the complaint to conform to the evidence.
We need not consider this argument because appellants have waived their challenge to this issue on appeal.
CONCLUSION
We will not disturb the jury’s verdict and we affirm the judgment of the district court challenged by appellants. We further hold for Kenneth Sletten on the cross appeal that the district court erred in affirming the special master’s imposition of sanctions against Sletten and his counsel. We vacate the imposition of sanctions and remand with instructions to afford Sletten and his counsel an opportunity to present a defense and explain why they should not be sanctioned. Appellees are entitled to their costs on appeal.
AFFIRMED in part, VACATED in part, and REMANDED.
Notes
. In July 1995, Drinkwater resigned as an interested trustee and was replaced by Alan Alpers, another employee of Navellier’s.
. The ICA provides that boards of directors of investment companies must be composed of “interested” and “non-interested” or "independent” persons. An "interested” person is generally defined as any person having a direct or indirect financial interest in an investment company. 15 U.S.C. §§ 80a-2(a)(19), 80a-2(a)(3). No registered investment company shall have a board of directors more than sixty percent of the members of which are persons who are interested persons of such registered company. 15 U.S.C. § 80a-10(a).
.We note that Samuel Kornhauser, counsel for Navellier, NMI, and former counsel for the Fund, represented appellants at trial and on this appeal.
. Because of our dispositiоn of this issue, we do not decide the alternate argument advanced by MFS and Scott — namely, whether the ICA provides a private right of action.
. Because we hold that the district court properly dismissed appellants' state law claims, we do not determine whether the ICA preempts these claims.
. Moreover, so long as the independent trustees were exercising a reasonable business judgment, which was decided by the juiy, the independent trustees would be entitled to decline to extend the relationship with NMI. For this reason as well, the claim of interference fails.
. The release was executed in California and includes waiver language referring to California Civil Code section 1542. As a result, we look to California law to determine its validity. See Kaufman & Broad-South Bay v. Unisys Corp.,
. At the pretrial conference, the court acknowledged that appellants originally claimed to need twenty-five days. However, this estimate was made before the court ruled on the cross-motions for summary judgment. The grant of partial summary judgment eliminated NMI's interference claim as well as Slet-ten’s contract-based counterclaims. The dismissal of these claims streamlined the issues and eliminated the need for expert testimony.
. As a preliminary matter, appellees argue that appellants are precluded from raising this issue on appeal. Specifically, appellees contend that ''[ajppellants did not object when the Court declined to give the proposed instruction and did not object when the Court finished instructing the jury and gave the par-lies another opportunity to object.” We assume, without deciding, that appellants properly preserved this issue for appeal.
. This regulation has since been amended, but we quote the version that governs this case.
. Further, contrary to appellants’ claim, the independent trustees do not have unbridled discretion for 120 days. In deciding whether to enter into an interim contract, just as in deciding whether to renew or terminate an existing contract, the independent trustees must satisfy their duties as fiduciaries of the fund. These duties are enforceable under the ICA, and include the obligation to inform themselves of material facts and exercise their judgment for the benefit of the fund. See 15 U.S.C. § 80a-15(c).
. The business judgment rule is a presumption that in making а business decision the directors of a corporation "acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.” Smith v. Van Gorkom,
. Further, appellants failed to include the district court's denial of this motion in their excerpts of record or supplemental excerpts of record. See Fed. R.App. P. 10(b)(2) ("If the appellant intends to urge on appeal that a finding or conclusion is unsupported by the evidence or is contrary to the evidence, the appellant must include in the record a transcript of all evidence relevant to that finding or conclusion.”).