## Facts

- Racine Hotel Partners, a Johnson-affiliated limited partnership, hired Olympia Hotels Corporation to develop, build, and operate a hotel in Racine, Wisconsin.
- The contract required Olympia to use “best efforts” to make the hotel successful.
- The hotel performed poorly financially after opening.
- Olympia sued Racine for breach of contract and asserted a Wisconsin civil conspiracy claim against Racine and related entities.
- Racine counterclaimed for breach of contract (alleged failure to use “best efforts”) and for fraudulent inducement; Racine also asserted federal RICO counterclaims.
- Over Racine’s objection, a magistrate judge conducted jury voir dire in the civil jury trial.
- The district court severed the fraudulent-inducement and RICO counterclaims for separate proceedings and tried Olympia’s contract claim, Olympia’s conspiracy claim, and Racine’s “best efforts” breach counterclaim.
- The district court directed a verdict against Racine on its “best efforts” counterclaim for insufficient proof of damages, directed a verdict against Olympia on the conspiracy claim, and the jury awarded Olympia about $1.2 million on Olympia’s contract claim.

## Issues

1. Whether a magistrate judge may conduct civil jury voir dire over a party’s objection under the Federal Magistrates Act.
2. Whether the district court properly directed a verdict against Racine on its “best efforts” breach counterclaim based on inadequate damages proof.
3. Whether the district court properly directed a verdict against Olympia on its Wisconsin civil conspiracy claim.
4. Whether federal subject-matter jurisdiction and the district court’s severance/trial management decisions were proper.

## Decision

- The Seventh Circuit held it was error to allow a magistrate judge to conduct civil voir dire without the parties’ consent; the error required a new trial.
- The court held the directed verdict against Racine on its contract counterclaim was improper because the evidence allowed a reasonable estimate of damages even without a precise damages figure.
- The court affirmed the directed verdict against Olympia on the civil conspiracy claim for lack of sufficient evidence.
- The court vacated the judgment and remanded for a new trial consistent with its rulings; it treated federal jurisdiction as adequately supported by Racine’s federal counterclaims and found no reversible error in severance.

## Legal Principles

- Under the Federal Magistrates Act as applied, a magistrate judge may not conduct civil jury voir dire over a party’s objection; lack of consent is a fundamental defect requiring a new trial without harmless-error analysis.
- Contract damages need not be proven with mathematical precision; if evidence provides a reasonable basis to estimate damages, the issue should go to the jury.
- “Best efforts” clauses are enforceable; whether a party used “best efforts” is generally a fact question evaluated in context against reasonable commercial standards.
- A civil conspiracy claim requires evidence of an agreement to accomplish an unlawful objective (or a lawful objective by unlawful means); poor business outcomes and internal coordination, without more, are insufficient.

## Conclusion

The Seventh Circuit ordered a new trial because jury selection was conducted by a magistrate judge over objection and because Racine’s “best efforts” counterclaim should have been submitted to the jury despite imprecise damages proof, while affirming dismissal of Olympia’s conspiracy theory for insufficient evidence.


Olympia Hotels Corp. v. Johnson Wax Dev. Corp., 908 F.2d 1363 (7th Cir. 1990)