Utility Trailer Sales of Kansas City, Inc. v. MAC Trailer Manufacturing, Inc. , 443 F. App'x 337 ( 2011 )

FILED
United States Court of Appeals
Tenth Circuit
October 5, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
UTILITY TRAILER SALES OF
KANSAS CITY, INC.,
Plaintiff-Appellant,
v. No. 10-3236
(D.C. No. 2:09-CV-02023-JPO)
MAC TRAILER MANUFACTURING, (D. Kan.)
INC.; SUMMIT TRUCK
EQUIPMENT, LLC,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before MURPHY, ANDERSON, and HARTZ, Circuit Judges.
Utility Trailer Sales of Kansas City, Inc., persuaded a jury that MAC
Trailer Manufacturing, Inc. and Summit Truck Equipment, LLC tortiously
interfered with Utility’s prospective business advantage or relationship. But the
jury rejected Utility’s claims of breach of contract and tortious interference with
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
contract, and also found that the contract between Utility and MAC was not a
franchise agreement as that term is defined in the Kansas Dealers and
Manufacturers Licensing Act (KDMLA), Kan. Stat. Ann. §§ 8-2401 to 8-2444.
After post-trial briefing, the district court concluded that, with regard to the claim
of tortious interference with prospective business advantage, MAC and Summit
were entitled to judgment as a matter of law because Utility had failed to show
that their conduct was not protected by the business competitor privilege. The
court also concluded that it lacked jurisdiction to hear Utility’s KDMLA claim
because Utility had not exhausted its administrative remedies before approaching
the court. Thus, it set aside the jury verdict in favor of Utility on the
tortious-inteference claim and dismissed the KDMLA claim.
Utility now appeals the district court’s post-trial rulings in favor of
defendants. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
Background
MAC manufactures trailers; Utility sells and services them. In November
2000, Utility and MAC entered into a Dealer Agreement. This contract stated that
Utility would “be the only dealer authorized or licensed by MAC within the
[Kansas City] area.” Aplt. App., Vol. III at 803. It also explicitly provided,
however, that neither MAC nor any other MAC dealer was prohibited from selling
trailers to customers in the Kansas City area. The Dealer Agreement was
terminable by either party with thirty days’ notice.
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In late 2007, MAC contacted Transwest Trailers LLC, a trailer dealer
located in Colorado, about becoming an authorized MAC dealer. Transwest
completed a dealer application and, in early 2008, MAC and Transwest circulated
a draft Distributor Selling Agreement. The agreement, which Transwest
executed, contemplated that Transwest’s dealership area would include the area
previously reserved to Utility. In April 2008, MAC terminated Utility’s Dealer
Agreement, effective immediately. After Utility filed a complaint under the
KDMLA with the Kansas Director of Vehicles, MAC revoked its termination of
the Dealer Agreement. MAC then declined to execute Transwest’s Distributor
Selling Agreement. Nevertheless, Transwest remained an authorized MAC
dealer.
Summit is a sister company of Transwest that has an office in Kansas City,
Missouri. It was Utility’s theory at trial that after the MAC-Transwest Distributor
Selling Agreement fell through, MAC, Transwest, and Summit agreed that
Summit would operate a de facto Kansas City MAC dealership by selling MAC
trailers that Summit would obtain through Transwest. Summit sold at least one
MAC trailer within Utility’s dealership area.
Utility filed suit against MAC and Summit in Kansas state court in
December 2008, alleging breach of contract, tortious interference with contract,
and tortious interference with a prospective business advantage or relationship.
The defendants removed the case to the federal district court. Utility continued to
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sell MAC trailers under the Dealer Agreement. By letter dated October 30, 2009,
however, MAC gave Utility thirty days’ notice of the termination of the Dealer
Agreement. In response to the October 30 letter, Utility moved to file a second
amended complaint, which would add a claim that the termination of the Dealer
Agreement was in violation of the KDMLA. The court allowed the filing of the
second amended complaint.
Utility’s claims went to trial before a jury. The jury found in favor of
Utility on its claim of tortious interference with a prospective business advantage
and awarded damages of $87,500 against MAC and $37,500 against Summit. As
described above, the jury found in favor of MAC on Utility’s contract claim and
in favor of Summit on Utility’s claim of tortious interference with contract, and
also found that the Dealer Agreement was not a franchise agreement as defined by
the KDMLA.
MAC and Summit filed a renewed motion for judgment as a matter of law
on the claim for tortious interference with a prospective business advantage, and
Utility filed a motion for judgment as a matter or law or for a new trial on its
KDMLA claim. The district court granted MAC and Summit’s motion. It
concluded that Utility had failed to present sufficient evidence that defendants’
actions were not protected under the business competitor privilege; specifically,
that Utility failed to show that MAC and Summit employed “wrongful means”
when competing with Utility, as required to overcome the privilege. The court
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then denied Utility’s motion because Utility had failed to file a complaint with the
Kansas Director of Vehicles after it received MAC’s second termination letter.
Therefore, the court concluded, Utility had failed to exhaust the administrative
remedies provided by the KDMLA and the court was without jurisdiction to hear
the KDMLA claim.
Analysis
“Because this is a diversity case, we apply the substantive law of the forum
state.” DP-Tek, Inc. v. AT & T Global Info. Solutions Co., 100 F.3d 828, 831
(10th Cir. 1996). “In the absence of authoritative precedent from the Kansas
Supreme Court, however, our job is to predict how that court would rule.” Id.
(quotation omitted).
I. Tortious Interference Claim
The district court held that Utility had not presented sufficient evidence
that defendants employed “wrongful means” when competing with Utility, and
thus Utility failed to overcome the business competitor privilege. Accordingly,
the court granted judgment as a matter of law to MAC and Summit on Utility’s
claim for tortious interference with a prospective business advantage. Utility
argues the district court erred because (1) the defendants did not timely assert the
business competitor privilege; (2) the business competitor privilege is not
applicable in the circumstances of this case; and (3) Utility presented sufficient
evidence that MAC and Summit used “wrongful means” in competing with it.
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We review de novo the grant of a motion for judgment as a matter of law.
Dillon v. Mountain Coal Co., L.L.C., 569 F.3d 1215, 1219 (10th Cir. 2009).
“Judgment as a matter of law is appropriate when a ‘party has been fully heard on
an issue during a jury trial and the court finds that a reasonable jury would not
have a legally sufficient evidentiary basis to find for the party on that issue.’” Id.
(quoting Fed. R. Civ. P. 50(a)(1)). “A party is entitled to judgment as a matter of
law only if the evidence points but one way and is susceptible to no reasonable
inferences which may support the opposing party’s position.” EEOC v. PVNF,
L.L.C., 487 F.3d 790, 797 (10th Cir. 2007) (quotation omitted).
A. Timely Assertion
Utility first argues that the district court erred in concluding that MAC and
Summit timely asserted the business competitor privilege. The district court held
that the privilege was encompassed in defendants’ assertion in the pretrial order
that their conduct was “legally justified.” Aplt. App., Vol. I at 86-87. With
regard to this aspect of the tortious-interference arguments, our review is for
abuse of discretion. See Tyler v. City of Manhattan, 118 F.3d 1400, 1403
(10th Cir. 1997) (“Because the district court is in the best position to interpret its
pretrial order, our standard of review on appeal is abuse of discretion.”).
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Even assuming that MAC and Summit were required to assert the
privilege, 1 the district court did not abuse its discretion in concluding that the
privilege came under the term “legally justified.” As the court noted, the Kansas
Supreme Court has stated, “in the area of interference with prospective
contractual relations the terminology of privilege, proper vs. improper, and
justification are used interchangeably with no overwhelming preference for any
term.” Turner v. Halliburton Co., 722 P.2d 1106, 1116 (Kan. 1986). Therefore,
the court was not arbitrary, capricious, whimsical or manifestly unreasonable in
interpreting “legally justified” to encompass the business competitor privilege.
See Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir. 2009) (“A district court
abuses its discretion if its decision is arbitrary, capricious, whimsical, or
manifestly unreasonable.” (quotation omitted)).
B. Applicability of Business Competitor Privilege
Next, Utility asserts that the business competitor privilege is inapplicable to
this case as a matter of law. It contends that: (1) no Kansas appellate court has
adopted the privilege; and (2) the privilege is not applicable to these
circumstances, “in which the parties have contractually obligated themselves and
agreed that no other dealer will have a location within the exclusive territory set
by the contract.” Aplt. Opening Br. at 31.
1
It is the plaintiff’s burden to show the defendant’s conduct was not
privileged, not the defendant’s burden to show its conduct was privileged. See
DP-Tek, 100 F.3d at 836.
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We quickly dispose of the first argument. In DP-Tek, 100 F.3d at 832-33,
this court predicted that the Kansas Supreme Court would adopt the business
competitor privilege. No Kansas appellate decision has contradicted or
undermined DP-Tek, and in the absence of intervening precedent, we are bound
by this court’s prior interpretation. See Stauth v. Nat’l Union Fire Ins. Co. of
Pittsburgh, 236 F.3d 1260, 1267 (10th Cir. 2001) (“[A]ny panel of this Court
[must] follow an earlier panel’s interpretation of state law, absent a supervening
declaration to the contrary by that state’s courts or an intervening change in the
state law.”).
With regard to its second argument, Utility argues that “when the parties
have contracted to limit or restrict trade, or know of such restrictions, they have
no basis to later claim privilege for a blatant and willful violation of the exclusive
dealership area provision of the contract through sham arrangements,
misrepresentations, and other intentional conduct.” Aplt. Opening Br. at 31. It is
true that the question of whether interference is improper “depends on a judgment
and choice of values in each situation.” Restatement (Second) of Torts § 767
cmt. b; see also Turner, 722 P.2d at 1116 (“The issue raised on a plea of
justification has been said to depend on the circumstances of the particular
case . . . .” (quotation omitted)). In this case, however, it is not clear that all
competitive conduct would violate the Dealer Agreement. That agreement
provided that “[n]othing contained in this Agreement shall be deemed by the
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parties to in any way restrict MAC, or any other MAC Dealer, from selling MAC
products at any time or in any place to any person.” Aplt. App., Vol. III at 804.
Because this provision leaves room for at least some competition, it therefore also
leaves room for asserting the business competitor privilege. See Occusafe, Inc. v.
EG&G Rocky Flats, Inc., 54 F.3d 618, 623 (10th Cir. 1995) (stating, in predicting
Colorado law, that “[t]he competitor’s privilege set out in section 768(1) applies
when the parties compete in any way”).
C. Sufficiency of the Evidence
Finally, Utility argues that it presented sufficient evidence for a jury to
conclude that MAC and Summit used “wrongful means” in competing with
Utility. The district court disagreed, concluding that this court has required a
showing of “independently actionable conduct” to establish “wrongful means”
and that none of Utility’s evidence constituted “independently actionable
conduct.” Aplt. App., Vol. I at 391-94.
The “wrongful means” requirement arises from the Restatement (Second) of
Torts § 768(1), which establishes the elements of the business competitor
privilege for interference with prospective contractual advantage. In DP-Tek, this
court held that with regard to a claim of interference with a prospective relation,
the Kansas Supreme Court would likely conclude that “wrongful means requires
independently actionable conduct.” 100 F.3d at 833. “‘[W]rongful means’ refers
to conduct such as physical violence, fraud, civil suits, and criminal
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prosecutions.” Id. (quotation omitted); see also Restatement (Second) of Torts
§ 768 cmt. e (“The predatory means discussed in [Restatement] § 767, Comment
c, physical violence, fraud, civil suits and criminal prosecutions, are all wrongful
in the situation covered by this Section.”). DP-Tek also held that it is the
plaintiff’s burden to show that the defendant’s conduct was not privileged.
100 F.3d at 836. Thus, the district court did not err in concluding that, to succeed
with its claim for tortious inference with prospective business advantage, Utility
must show independently actionable conduct to establish that defendants used
wrongful means in competing with it.
Utility summarizes the evidence in its favor and argues that defendants’
“patently transparent attempt to make an end [run] around the exclusive
dealership rights of [Utility]” establishes independently actionable conduct.
Aplt. Opening Br. at 37. According to the jury, defendants’ actions did not
constitute breach of contract or tortious inference with contract. Thus, for Utility
to prevail, there must be some other actionable conduct. But with the exception
of its fraud argument discussed below, 2 Utility fails to explain how defendants’
2
Utility’s opening brief states that “it was [Utility’s] position below that the
Defendants’ acts and omissions were in violation of the [KDMLA].” Aplt.
Opening Br. at 38. Perhaps this reference was intended to suggest that a violation
of the KDMLA constitutes independently actionable conduct. For two reasons,
however, we decline to consider this position. First, this one-sentence assertion
does not constitute adequate appellate briefing. See MacArthur v. San Juan
County, 495 F.3d 1157, 1160-61 (10th Cir. 2007) (“[M]ere conclusory allegations
with no citations to the record or any legal authority for support does not
(continued...)
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actions in evading the exclusive-dealership provisions are otherwise actionable.
It is insufficient to simply describe the circumstances and then conclude that
defendants’ actions were wrongful and independently actionable.
Utility does suggest that defendants’ conduct was independently actionable
as fraud. It does not appear, however, that Utility made this argument before the
district court. Utility’s response to defendants’ renewed motion for judgment as a
matter of law discussed Utility’s “end run” theory of wrongful means, but it did
not explain how the evidence established fraud. Utility asserts in a footnote in its
opening brief that its “factual presentation of the case” established that “[f]raud
was at the heart of the actions of Summit and MAC,” Aplt. Opening Br. at 40 n.2,
but it fails to identify (either in its opening brief or reply brief) where in the
district court it argued what it does here – that the evidence of fraud satisfied the
requirement of independently actionable conduct. And in its order, the district
court noted that Utility “fail[ed] to address the ‘independently actionable conduct’
standard required to establish wrongful means. Utility Trailer does not explain
2
(...continued)
constitute adequate briefing.” (quotation omitted)). Second, even though in the
district court Utility argued that there was a violation of the KDMLA, it does not
appear that Utility tried to make any connection between the KDMLA and
independently actionable conduct. Arguments made for first time on appeal
generally are waived. See Tele-Commc’ns, Inc. v. C.I.R., 104 F.3d 1229, 1233
(10th Cir. 1997) (“[W]e should not be considered a ‘second shot’ forum, a forum
where secondary, back-up theories may be mounted for the first time.”).
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how or why any of the above-listed conduct of defendants could form the basis of
independent liability.” Aplt. App., Vol. I at 393.
Our general rule is to decline to hear arguments raised for the first time on
appeal. See, e.g., Turner v. Pub. Serv. Co., 563 F.3d 1136, 1143 (10th Cir. 2009)
(“Turner may not lose in the district court on one theory of the case, and then
prevail on appeal on a different theory, even if the new theory falls under the
same general category as an argument presented as trial.” (quotation omitted)).
Because Utility offers, and we see, no reason to depart from the general rule in
this instance, we decline to consider whether the evidence sufficiently establishes
fraud.
II. KDMLA Claim
The district court denied Utility’s motion for judgment as a matter of law or
a new trial on its KDMLA claim and dismissed that claim because Utility had not
exhausted its administrative remedies. Utility presents three challenges to this
conclusion: (1) the KDMLA itself does not require an aggrieved party to engage
in the KDMLA’s complaint process, and the Kansas courts have not interpreted it
in that manner; (2) the administrative tribunal (the Kansas Director of Vehicles)
has explicit authority only to grant injunctive relief, and statutory damages do not
lie in its exclusive jurisdiction; and (3) the pendency of the federal action and the
interests of judicial economy and efficiency justified Utility in not filing an
administrative complaint in this instance.
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Our review is de novo for all aspects of the motion. Denials of judgment as
a matter of law are reviewed de novo. See Aquilino v. Univ. of Kan., 268 F.3d
930, 933 (10th Cir. 2001). And although denials of new-trial motions generally
are reviewed for abuse of discretion, where the decision turns on an issue of law
(as in this case), our review is de novo. See Weese v. Schukman, 98 F.3d 542, 549
(10th Cir. 1996); see also Cent. Kan. Credit Union v. Mut. Guar. Corp., 102 F.3d
1097, 1104 (10th Cir. 1996) (applying de novo review to interpretation of state
statutes).
Kan. Stat. Ann. § 8-2414 addresses the cancellation of franchise
agreements between dealers and manufacturers or distributors. In subsection (b),
it provides that:
A vehicle dealer . . . may file a complaint with the director [of
vehicles] against a first or second stage manufacturer or distributor
challenging the reasons and causes given for the proposed
cancellation . . . . Upon a complaint being filed, the director shall
promptly set the matter for public hearing . . . for the purpose of
determining whether there has been a violation of [Kan. Stat. Ann. §]
8-2410 . . . or whether good cause exists for cancellation, termination
or nonrenewal of the franchise agreement in accordance with the
dealers and manufacturers licensing act.
Kan. Stat. Ann. § 8-2414(b). The next subsection continues:
The franchise agreement shall remain in full force and effect pending
the determination by the director of the issues involved as provided
by this act. If the director determines that the first or second stage
manufacturer or distributor is acting in violation of this act or that
good cause does not exist for the proposed action, the director shall
order for the franchise agreement to be kept in full force and effect.
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Id. § 8-2414(c). Subsection (d) places the burden of proof “on the first or second
stage manufacturer or distributor to show by a preponderance of the evidence that
it did not act arbitrarily or unreasonably and that good cause did exist for the
proposed cancellation, termination or nonrenewal of the franchise agreement.”
Id. § 8-2414(d). This subsection further empowers the Director of Vehicles to
order that the franchise agreement may be cancelled, terminated or
not renewed if the director finds, after a hearing, that the licensed
vehicle dealer is acting in violation of this act or that the judgment of
the first or second stage manufacturer or distributor is with good
cause and the vehicle dealer’s default is material.
Id. § 8-2414(d). After defining “good cause” in subsection (e), § 8-2414
provides for certain payments the manufacturer “shall pay” “[i]n event of
cancellation, termination or nonrenewal of a franchise agreement.” Id.
§ 8-2414(f).
“The exhaustion doctrine dictates that an administrative remedy be sought
and completed before the courts will act.” Jarvis v. Kan. Comm’n on Civil
Rights, 528 P.2d 1232, 1235 (Kan. 1974). Accordingly, the Kansas Supreme
Court “has consistently held that where an administrative remedy is provided by
statute, such remedy ordinarily must be exhausted before a litigant may resort to
the courts.” NEA-Coffeyville v. Unified Sch. Dist. No. 445, 996 P.2d 821, 825
(Kan. 2000). “Because agency decisions are frequently of a discretionary nature
or frequently require specific expertise, the agency should be given the first
chance to exercise that discretion or to apply that specific expertise.” Id.
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“However, if no administrative remedy is available or if it is inadequate to
address the problem at issue, exhaustion is not required.” Id. A failure to
exhaust an adequate and available administrative remedy precludes a judicial
action. See Sandlin v. Roche Labs., Inc., 991 P.2d 883, 889 (Kan. 1999); Mattox
v. Dep’t of Transp., 747 P.2d 174, 176 (Kan. App. 1987).
Utility first argues that § 8-2414(b) is not mandatory. But it is immaterial
that subsection (b) says a party “may” file an administrative complaint. See
Sandlin, 991 P.2d at 886, 889 (dismissing for failure to exhaust, even though the
statutes governing the complaint procedure said that a person “may file a
complaint” and “may petition for reconsideration”); Blomgren v. Kan. Dep’t of
Revenue, 191 P.3d 320, 324 (Kan. App. 2008) (rejecting the argument that an
administrative appeal is discretionary, even though the statute provided that a
licensee “may appeal”). Further, while Utility asserts “[n]o Kansas appellate
court has applied the exhaustion of administrative remedies rule to claims for
damages for violations of the KDMLA,” Aplt. Opening Br. at 45, we have not
located any Kansas decision holding that the exhaustion doctrine does not apply
to § 8-2414(b). It appears that the question simply has not yet arisen before the
Kansas appellate courts. In the absence of contrary authority, we predict that the
Kansas Supreme Court would hew to its general rule favoring exhaustion of
administrative remedies.
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As Utility also points out, the statute is silent as to who has authority to
award statutory damages. As described above, however, the provisions outlining
the administrative complaint procedure and the provision for statutory damages
are all found in § 8-2414. The fact that the statutory damages directive is in the
same section as the director-hearing procedure strongly suggests that the director
may award statutory damages. Also, the section of the KDMLA expressly
addressing the “jurisdiction of courts” in the first instance (as distinguished from
courts undertaking judicial review pursuant to the Kansas Judicial Review Act)
explicitly provides only for injunctive relief. Kan. Stat. Ann. § 8-2413(a).
Combined with the placement of the statutory damages provision in § 8-2414, this
indicates that the Kansas Supreme Court would be likely to hold that the director
may be not only an appropriate authority to award statutory damages in the first
instance, but also perhaps the only authority.
Moreover, even if the director does not have the authority to award
statutory damages, that does not mean that the Kansas Supreme Court would
excuse Utility from employing the statutory complaint procedure. The lack of
statutory damages would not necessarily make the procedure inadequate. The
Kansas Supreme Court has indicated that “plaintiffs should be permitted to seek
court relief without first presenting the case to the administrative agency” only
“[w]here there are no issues raised which lend themselves to administrative
determination and the only issues present either require judicial determination or
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are subject to judicial de novo review.” Zarda v. State, 826 P.2d 1365, 1369
(Kan. 1992) (emphasis added). It also has recognized that:
Since agency decisions are frequently of a discretionary nature, or
frequently require expertise, the agency should be given the first
chance to exercise that discretion or to apply that expertise. . . .
Frequent and deliberate flouting of administrative processes could
weaken the effectiveness of an agency by encouraging people to
ignore its procedures.
Jarvis, 528 P.2d at 1234. This case contains issues that would benefit from the
application of the agency’s expertise, including the question, briefed by the
parties both before the district court and this court, of whether the Dealer
Agreement even qualifies as a “franchise agreement” under the KDMLA.
Finally, Utility argues that it should not be required to exhaust
administrative remedies because, in light of the already pending judicial action,
“it made sense for reasons of judicial economy to allow [Utility] to amend its
pleadings to include a claim for statutory damages under the KDMLA.” Aplt.
Opening Br. at 46. Utility cites no legal authority in support of this theory,
however, and we have found no Kansas case applying a “judicial economy”
exception to the exhaustion doctrine. Cf. Sandlin, 991 P.2d at 889 (noting the
court “must protect the requirement of exhaustion” and dismissing where the
plaintiff cut short the administrative process to continue with court proceedings).
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Conclusion
The judgment of the district court is AFFIRMED.
Entered for the Court
Stephen H. Anderson
Circuit Judge
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