Children's Broadcasting Corp. v. Walt Disney Co. , 245 F.3d 1008 ( 2001 )


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  •                      United States Court of Appeals
    FOR THE EIGHTH CIRCUIT
    ___________
    No. 99-1813
    ___________
    Children's Broadcasting Corporation, *
    a Minnesota corporation,             *
    *
    Plaintiff - Appellant,        *
    * Appeal from the United States
    v.                            * District Court for the
    * District of Minnesota.
    The Walt Disney Company, a Delaware *
    corporation; ABC Radio Networks,     *
    Inc., a Delaware corporation,        *
    *
    Defendants - Appellees.       *
    ___________
    Submitted: February 16, 2000
    Filed: April 10, 2001
    ___________
    Before McMILLIAN, LAY, and JOHN R. GIBSON, Circuit Judges.
    ___________
    JOHN R. GIBSON, Circuit Judge.
    Children's Broadcasting Corporation appeals from an order of the district court
    that set aside a jury verdict for Children's on its claims for breach of contract and
    misappropriation of trade secrets against ABC Radio Networks, Inc. and The Walt
    Disney Company. The court concluded that Children's had not presented sufficient
    evidence of causation and damages. In addition to granting judgment as a matter of law
    for ABC Radio and Disney, the district court granted their alternative motion for a new
    trial. We reverse the grant of judgment as a matter of law and affirm the grant of a new
    trial limited to the issue of damages. We also affirm the district court's pre-trial grant
    of summary judgment against Children's on four claims.
    In the early 1990s, Children's created Radio AAHS, a 24-hour radio format
    aimed at children age twelve and under and their parents. Also during that time period,
    ABC Radio considered starting a children's radio network and approached Disney with
    a proposal. At that time, Disney decided not to go forward.
    By 1995, Radio AAHS was reaching around thirty percent of the United States
    through company-owned and affiliated radio stations. Early that year, Children's
    solicited ABC Radio to become its strategic partner, and executives from the two
    companies discussed options. ABC Radio's plan to invest in Children's stalled after
    Disney announced in July that it was purchasing Capital Cities/ABC, Inc., the parent
    corporation of ABC Radio. Bob Callahan, the president of ABC Radio, informed
    Christopher Dahl, the president of Children's, that ABC Radio would not be investing
    in other companies pending the outcome of the Disney purchase. After waiting a while,
    Dahl approached ABC Radio to see if the two companies could work out a deal.
    In November 1995, Children's and ABC Radio entered into a letter agreement
    under which ABC Radio agreed to provide certain services for Radio AAHS, including
    advertising sales, affiliate development, and consulting. Children's agreed to pay ABC
    Radio $25,000 per month for services plus commissions on advertising sales.
    Children's also gave ABC Radio a warrant to buy Children's stock. Although ABC
    Radio agreed that it would not represent any third-party children's radio formats
    without Children's consent, the contract specifically provided that ABC Radio could
    represent "any format developed by ABC, its parent, subsidiary or affiliated companies,
    as constituted now and in the future." Both parties agreed to keep information
    developed during the term of the agreement confidential and to use this information
    -2-
    only for the purposes of the agreement. The agreement was terminable at will upon
    ninety days written notice by either party.
    Around the same time ABC Radio entered into the agreement, it was considering
    entering the children's radio field with Disney. In January 1996, the two companies had
    not yet decided to enter the market, but they continued to make plans for a network
    called Radio Disney throughout the first half of 1996. Disney acquired Capital
    Cities/ABC, Inc. on February 6, 1996.
    On June 21, 1996, ABC Radio executives David Kantor and Scott McCarthy
    met with executives of Children's in Minneapolis. Kantor informed them that ABC
    Radio was considering developing its own children's radio network, and he invited
    Children's to become a "superaffiliate," carrying Radio Disney programming instead
    of Radio AAHS programming. Dahl rejected this offer.
    On June 27, Callahan sent a memo to Michael Eisner and Michael Ovitz
    recommending the development of a children's radio network, beginning with a four-
    month test period of Radio Disney in three markets. By letter dated July 25, ABC
    Radio notified Children's that it was terminating the contract. The ninety-day notice
    period expired on October 24, and the Radio Disney test began on November 18.
    Children's continued to broadcast Radio AAHS until January 1998.
    Children's brought this suit on September 26, 1996, alleging a variety of claims,
    among them fraud, breach of contract, misappropriation of trade secrets, breach of
    fiduciary duties, and negligent misrepresentation. Children's moved for leave to amend
    its complaint to seek punitive damages; the district court denied this motion. After
    discovery, ABC Radio and Disney moved for summary judgment, and the district court
    granted this motion on all but three claims. These claims (breach of contract for failure
    to use reasonable efforts to sell advertising and develop affiliates, breach of the
    -3-
    contractual duty of confidentiality, and misappropriation of trade secrets) were tried to
    a jury in a three-week-long trial.
    The jury found that ABC Radio breached the contract with respect to advertising
    sales and confidentiality and awarded $20 million to Children's for this breach. The
    jury rejected Children's claim that ABC Radio breached the affiliate development
    provision of the contract. The jury also found that two of the seven items submitted by
    Children's as trade secrets were valid trade secrets: a list of Children's advertisers sold
    and proposed and their rates and Children's techniques and processes for Radio AAHS
    programming. The jury found that ABC Radio and Disney had misappropriated only
    the advertiser list, awarding Children's $10 million from ABC Radio and $10 million
    from Disney on this claim. The jury determined that ABC Radio's breach of contract
    was not a material breach.1
    ABC Radio and Disney moved for judgment as a matter of law or, in the
    alternative, a new trial. The district court found that the evidence supported the jury's
    finding that ABC Radio breached the contract and that ABC Radio and Disney
    misappropriated the advertiser list, but concluded that Children's had not presented
    sufficient evidence of causation or damages.
    In reaching its conclusion about causation, the district court discussed primarily
    the testimony of Stephen Willis, one of Children's experts. It concluded that Willis's
    testimony was nothing more than speculation; that it lacked any credible analysis to
    support his causation theory; and that no facts supported his conclusions. The court
    found that Children's offered no evidence that any particular breach or misappropriation
    1
    The verdict form included the question of whether ABC Radio's breach was
    material because Children's owed $91,000 under the contract. If the jury found the
    breach to be material, Children's performance (and thus the payment) would be
    excused.
    -4-
    was the direct cause of a specific amount of damages. In addition, according to the
    district court, Willis failed to address other factors that may have limited the success
    of Radio AAHS.
    The district court further found that Children's failed to present reliable evidence
    of damages. It concluded that Willis's testimony that Children's was damaged in the
    amount of $177 million was based on unreliable financial projections that were created
    with an assumption that Children's would have a long-term relationship with ABC
    Radio and that did not take into account the fact that Radio AAHS had to compete with
    Radio Disney. Thus, the court found that Willis's damages projections went so far
    beyond realistic optimism as to be "fairy-tale-like." The jury had no other evidence on
    which to base a damage award, according to the district court, and it was forced to
    resort to speculation and conjecture. The court therefore granted judgment as a matter
    of law to ABC Radio and Disney.
    The district court also granted a conditional new trial on the issues of causation
    and damages. The district court stated that the reasoning supporting its grant of
    judgment as a matter of law applied to the motion for new trial, that the findings on
    causation and damages were unsupported by the evidence, and that the verdict
    conflicted with the weight of the evidence. It also stated that it had erred by allowing
    Willis's testimony to stand and that this testimony had tainted the trial, thus requiring
    a new trial.
    I.
    We review a grant of judgment as a matter of law de novo, viewing the evidence
    in the light most favorable to the nonmoving party while giving that party the benefit
    of all reasonable inferences. Van Steenburgh v. Rival Co., 
    171 F.3d 1155
    , 1158 (8th
    Cir. 1999). Judgment as a matter of law is warranted only when all the evidence points
    in one direction and no reasonable interpretations support the jury's verdict. Mears v.
    -5-
    Nationwide Mut. Ins. Co., 
    91 F.3d 1118
    , 1122 (8th Cir. 1996); see also Fed. R. Civ.
    P. 50(a)(1).
    The district court upheld the jury's findings of breach and misappropriation, and
    ABC Radio and Disney do not appeal these determinations. We agree that Children's
    presented evidence from which a reasonable jury could conclude that ABC Radio
    breached its contractual duties with respect to advertising sales and confidentiality and
    that ABC Radio and Disney misappropriated a list of Children's advertisers. We
    conclude the district court erred, however, by determining that ABC Radio and Disney
    were entitled to judgment as a matter of law on the issues of causation and damages.2
    A.
    Children's presented evidence that ABC Radio's breach of the contract caused
    damage. Dahl testified that Children's was relying on ABC Radio to sell advertising.
    Willis testified that ABC Radio's failure to exercise reasonable efforts in advertising
    sales led to a decline in Children's revenues. Lynne Gross, an expert who testified on
    Children's behalf, concluded that if ABC Radio failed to perform under the contract,
    as it related to both affiliate development and advertising sales, Children's would be
    damaged.
    Gross testified regarding her understanding of the "first mover" advantage: when
    a business is the first of its kind and it gets to a certain level, competitors will have a
    difficult time unseating it. Her opinion was that Children's had the potential to obtain
    such an advantage. A memo written by ABC Radio's Bart Catalane to Callahan and
    Kantor supports this idea: "This market will only support one major player--it's not big
    2
    The verdict form, the district court's order, and the parties' briefs segregate
    causation from damages on both the contract claim and the trade secret claim. Our
    analysis mirrors this segregation.
    -6-
    enough to support two--even Disney. The people who get there first and in the biggest
    way will win. Radio Aahs has a huge head start." Gross also testified that ABC Radio
    and Disney were able to accelerate their entry into the market by using information,
    particularly information about advertising and marketing, they obtained from Children's.
    ABC Radio documents show that its executives believed that it could use the
    deal with Children's to "take control of how we enter or CBC exits the market." An
    ABC Radio management review of Radio AAHS/Children's prepared by McCarthy
    discussed the following defensive strategy: "Keep someone else from buying or
    aligning with CBC. Could be largely accomplished with existing CBC/ABC
    agreement."
    Children's also presented evidence that the misappropriation of its list of
    advertisers and rates caused damage. Gross testified that information about advertising
    rates actually charged to a customer was valuable because a competitor could then
    undersell by a small amount and get the advertiser. The ABC Radio management
    review prepared by McCarthy discussed Radio AAHS's advertisers: "Several accounts
    have been developed into significant dollars. However, competing venture could target
    same accounts with same pitch." Finally, a planning document for Radio Disney
    asserted that "Radio Disney network spots will be priced aggressively versus AAHS
    (Radio Disney's spot rates are not projected to reach Radio AAHS'[s] current spot rates
    until 1999)."
    Viewing this evidence in the light most favorable to Children's, we conclude that
    it supports the jury's finding that the breach of contract and the misappropriation of the
    advertiser list caused harm to Children's. ABC Radio and Disney were not entitled to
    judgment as a matter of law on causation.
    -7-
    B.
    Children's presented evidence that supports the jury's award of damages. Under
    Minnesota law, damages for breach of contract must be proved to a reasonable
    certainty, and a party cannot recover speculative, remote, or conjectural damages.
    Leoni v. Bemis Co., 
    255 N.W.2d 824
    , 826 (Minn. 1977); see also Cardinal Consulting
    Co. v. Circo Resorts, Inc., 
    297 N.W.2d 260
    , 266-67 (Minn. 1980). "Once the fact of
    loss has been shown, the difficulty of proving its amount will not preclude recovery so
    long as there is proof of a reasonable basis upon which to approximate the amount."
    Leoni, 255 N.W.2d at 826. Damages for misappropriation of a trade secret "can
    include both the actual loss caused by misappropriation and the unjust enrichment
    caused by misappropriation that is not taken into account in computing actual loss."
    Minn. Stat. § 325C.03(a) (1998).
    The district court found that the only damages evidence offered by Children's
    was Willis's testimony. To the contrary, the jury had a variety of evidence to consider.
    Willis himself testified that if there were reasons for the decline in Children's value
    other than the unlawful conduct of Disney and ABC Radio, adjustments would have
    to be made to his $177 million calculation. Dahl testified that the market value of
    Children's at one time was close to $100 million and that ABC Radio valued Children's
    in the $20 million range. McCarthy stated in the ABC Radio management review that
    it would cost between $60 million and $90 million to acquire Children's. There were
    dozens of exhibits in the record before the jury that included Children's revenues and
    losses (both actual and projected), valuations of Children's assets, and actual and
    potential advertising sales. The jury's award does not have to match any particular
    figure in the evidence as long as the award "is within the mathematical limitations
    established by the various witnesses and is otherwise reasonably supported by the
    evidence as a whole." Carroll v. Pratt, 
    76 N.W.2d 693
    , 697 (Minn. 1956).
    -8-
    The Minnesota Court of Appeals upheld a jury award of $7,000 where the only
    damages evidence presented placed the amount at $10,500. Fudally v. Ching Johnson
    Builders, Inc., 
    360 N.W.2d 436
     (Minn. Ct. App. 1985). The defendant argued that the
    verdict was not supported by the evidence because nothing specific supported the jury's
    calculation. 
    Id. at 438-39
    . The court held that the award "was within the parameters
    established by the evidence" and that the specificity urged by the defendant was
    unnecessary to sustain the award. 
    Id. at 439
    .
    The jury was entitled to sort through the evidence presented at trial and to arrive
    at what it considered to be the damages caused by the conduct it found to be wrongful.
    In short, there was evidence from which the jury could approximate the amount of
    damages sustained by Children's. ABC Radio and Disney were not entitled to
    judgment as a matter of law on damages.
    II.
    We review a conditional grant of a new trial for abuse of discretion. Dominium
    Mgmt. Servs., Inc. v. Nationwide Hous. Group, 
    195 F.3d 358
    , 366 (8th Cir. 1999). A
    motion for a new trial may be
    bottomed on the claim that the verdict is against the weight of the
    evidence, that the damages are excessive, or that, for other reasons, the
    trial was not fair to the party moving; and may raise questions of law
    arising out of alleged substantial errors in admission or rejection of
    evidence or instructions to the jury.
    Montgomery Ward & Co. v. Duncan, 
    311 U.S. 243
    , 251 (1940). The district court
    must articulate its reasons for granting a new trial to permit meaningful review of its
    decision. Dominium, 
    195 F.3d at 366
    ; see also Fed. R. Civ. P. 50(c)(1). "When
    evidence is erroneously admitted or excluded or where the trial court has erred in the
    instructions to the jury, the trial court is considered in a better position to correct a
    -9-
    manifest injustice in ruling on the motion for new trial." Fireman's Fund Ins. Co. v.
    Aalco Wrecking Co., 
    466 F.2d 179
    , 186 (8th Cir. 1972).
    Here, the district court gave two reasons for granting a new trial. First, it
    concluded that "the jury's findings on causation and damages were unsupported by the
    evidence presented at trial and the verdict conflicts with the weight of the evidence on
    these issues." Second, it determined that it should have excluded or struck Willis's
    testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 
    509 U.S. 579
     (1993),
    and that this testimony "tainted" the trial by exposing the jury to an "exaggerated sum"
    of damages.3
    Had the district court actually excluded Willis's testimony, we would have
    reviewed its decision for abuse of discretion. See General Elec. Co. v. Joiner, 
    522 U.S. 136
    , 138-39 (1997). "When evaluating the admissibility of expert testimony under
    Federal Rule of Evidence 702, the district court must look to both the relevancy and the
    reliability of the testimony." Blue Dane Simmental Corp. v. American Simmental
    Ass'n, 
    178 F.3d 1035
    , 1040 (8th Cir. 1999). Here, the district court found that Willis's
    testimony was unreliable, stating that it was "speculative and based solely on
    conjecture."
    Willis applied an uncontroversial accounting method called discounted cash flow
    to determine what the value of Children's would have been in the absence of the alleged
    wrongful conduct. He acknowledged, however, that he did not take into account the
    announcement of Radio Disney as a competitor when drawing his conclusions. The
    3
    Before trial, ABC Radio and Disney moved to exclude Willis's testimony under
    Daubert, on the ground that it was unreliable speculation. The district court denied this
    motion and overruled the majority of the various objections to Willis's testimony that
    ABC Radio and Disney made at trial. Only when the district court considered the
    motion for a new trial did it conclude that it should not have allowed Willis's testimony.
    -10-
    agreement between Children's and ABC Radio did not include a non-compete clause,
    and the establishment of Radio Disney cannot be considered wrongful conduct. The
    existence of Radio Disney was relevant to Children's value, but Willis did not consider
    it. Cf. Blue Dane, 
    178 F.3d at 1040-41
     (where economist used typical method of
    analysis, but did not consider all independent variables that could affect his conclusion,
    district court did not abuse discretion by excluding testimony).
    Willis's testimony at trial was that any breach of contract, any use of confidential
    information, or any misappropriation of any trade secret caused the exact same amount
    of damage to Children's:
    But as a result of my studies, it was my judgment that the damage
    determination that I made and testified to earlier would be the same
    regardless of whether some or all of this information was found to have
    been used and, similarly, with respect to the efforts or lack of efforts
    regarding the affiliates, the development or lack of development of
    affiliates or revenues.
    ....
    [I]f any one of the items we've talked about--the failure to use reasonable
    efforts regarding affiliates or the failure to achieve advertising sales or the
    use of any piece or all of the confidential information, including the trade
    secrets--were or were not a finding of liability, all you need is any one of
    them and the damage calculation would be what my determination was.
    The assertion that any or all of the alleged wrongful acts would have caused the same
    outcome is dubious. Children's argues that, under Daubert, a court can review only the
    methodology of the expert, not his or her conclusions. "But nothing in . . . Daubert .
    . . requires a district court to admit opinion evidence that is connected to existing data
    only by the ipse dixit of the expert. A court may conclude that there is simply too great
    an analytical gap between the data and the opinion proffered." Joiner, 
    522 U.S. at 146
    .
    Furthermore, Willis based his testimony on a report prepared with the assumption that
    ABC Radio and Disney had engaged in a variety of wrongful conduct contained in the
    -11-
    original complaint. Only three counts from the original complaint survived summary
    judgment, but Willis's damages theory remained the same.
    Willis failed to consider the effect of competition on Children's, his theory of
    causation was questionable, and his testimony was based on a report prepared before
    Children's claims were narrowed for trial. The district court did not abuse its discretion
    by concluding that it should have excluded Willis's testimony.
    The court found that a new trial was necessary because Willis's testimony tainted
    the trial. When assessing the impact of improperly admitted evidence, the district court
    is in the best position to measure the effect on the jury. See Neely v. Martin K. Eby
    Constr. Co., 
    386 U.S. 317
    , 325 (1967) (trial judge has "first-hand knowledge of
    witnesses, testimony, and issues" and a "'feel' for the overall case"); Fireman's Fund,
    
    466 F.2d at 186
    . Cf. United States v. Wilkins, 
    139 F.3d 603
    , 604-05 (8th Cir. 1998)
    (in criminal case, district court in best position to judge whether evidence regarding
    dismissed charges tainted jury's consideration of another count). Even though the jury
    did not award $177 million, the damages amount to which Willis testified, the jury's
    award of $20 million to Children's for breach of a contract that was terminable at will
    with ninety days notice suggests to us that Willis's testimony gave the jury an
    unrealistic idea of the appropriate measure of damages.4 The district court's discussion
    of Willis's testimony supports its grant of a new trial on the issue of damages, and we
    affirm on that issue.
    4
    When a breaching party has the power to terminate a contract upon notice, the
    general rule is that the calculation of damages is limited to the notice period. See
    Western Oil & Fuel Co. v. Kemp, 
    245 F.2d 633
    , 638-42 (8th Cir. 1957); Pappas v.
    Stark, 
    142 N.W. 1046
    , 1048 (Minn. 1913); 3 E. Allan Farnsworth, Farnsworth on
    Contracts 150 (2d ed. 1998).
    -12-
    The district court did not suggest, however, that Willis's testimony tainted the
    causation findings. Although the court concluded that "the jury's findings on causation
    . . . were unsupported by the evidence presented at trial" when articulating its first
    reason for granting a new trial, our discussion in Section I of this opinion demonstrates
    that evidence other than Willis's testimony supported a finding that the breach of
    contract and the trade secret misappropriation caused some damage to Children's. On
    numerous occasions, we have made clear that the district court has a duty to articulate
    its reasons for overturning the jury's verdict when it grants a conditional motion for a
    new trial on the ground that the verdict is against the weight of the evidence. E.g.,
    Dominium, 
    195 F.3d at 366
    ; White v. Pence, 
    961 F.2d 776
    , 781 (8th Cir. 1992). The
    district court's summary conclusion that the verdict on causation conflicted with the
    weight of the evidence is insufficient to support the grant of a new trial on this issue.
    See Stafford v. Neurological Med., Inc., 
    811 F.2d 470
    , 474 (8th Cir. 1987).
    III.
    Children's asks us to reconsider several claims on which the district court granted
    summary judgment before trial. We review a grant of summary judgment de novo,
    viewing the evidence in the light most favorable to the non-moving party and upholding
    summary judgment where there are no genuine issues of material fact and the moving
    party is entitled to judgment as a matter of law. Wayne v. Genesis Med. Ctr., 
    140 F.3d 1145
    , 1147 (8th Cir. 1998) (per curiam); Fed. R. Civ. P. 56(c).
    A.
    Children's argues that the district court erred by granting summary judgment on
    its negligent misrepresentation claim. A required element of this claim "is that the
    alleged misrepresenter owes a duty of care to the person to whom they are providing
    information." Smith v. Woodwind Homes, Inc., 
    605 N.W.2d 418
    , 424 (Minn. Ct. App.
    2000). Under Minnesota law, no duty of care exists between sophisticated equals
    -13-
    negotiating a business transaction unless the parties have a special relationship. 
    Id. at 424-25
    ; see also Safeco Ins. Co. of Am. v. Dain Bosworth Inc., 
    531 N.W.2d 867
    , 871-
    72 (Minn. Ct. App. 1995). Because there is no evidence that ABC Radio and
    Children's had a special relationship, ABC Radio owed no duty of care to Children's.
    The claim for negligent misrepresentation necessarily fails.
    B.
    Children's argues that the district court erred by granting summary judgment on
    its fraud claim. Under Minnesota law, the elements of fraud are the making of
    a false representation of a past or existing material fact, susceptible of
    knowledge, knowing it to be false or without knowing whether it was true
    or false, with the intention of inducing the person to whom it was made
    to act in reliance upon it or under such circumstances that such person
    was justified in so acting and was thereby deceived or induced to so act
    to his damage.
    Berryman v. Riegert, 
    175 N.W.2d 438
    , 442 (Minn. 1970).
    Children's alleges that ABC Radio represented that it would enter the children's
    radio market only with Children's and that Disney had no intention of entering the
    market. The evidence cited by Children's to support its claim that someone at ABC
    Radio made these representations is scant. At his deposition, Dahl testified that Kantor
    said that ABC and Disney would not enter the children's radio market without
    Children's. At trial, however, Dahl testified that Kantor never said that ABC and
    Disney would not independently pursue children's radio. Dahl also testified that
    Callahan said that ABC Radio wanted to try children's radio with Children's, "And if
    it doesn't work with you, we're going to probably--not probably. I think he said we're
    going to abandon our efforts." Dahl's deposition testimony calls this trial testimony into
    question. At his deposition, he stated that he could not remember anyone other than
    -14-
    Kantor assuring that ABC Radio and Disney would not enter the children's radio
    market. Dahl's inconsistent testimony does not create a genuine issue of material fact.
    This leaves only the testimony of Lance Riley, the in-house attorney for
    Children's. At his deposition, he testified that a person from ABC Radio whom he
    believed to be Kantor said that there would be no point in entering into the agreement
    with Children's if ABC Radio intended to compete with Children's. Riley clarified that
    no one at ABC Radio said that it would not compete after the term of the agreement.
    We cannot conclude that this evidence sufficed to create a genuine issue on the first
    element of a fraud claim: the making of a false representation.
    Furthermore, even if the evidence supported Children's contentions that ABC
    Radio represented that neither it nor Disney would enter the children's radio market,
    Children's would not have been justified in relying on these representations. Fraud
    must be proved with reference to the specific intelligence and experience of the party
    alleging it. Murphy v. Country House, Inc., 
    240 N.W.2d 507
    , 512 (Minn. 1976). A
    memo written by Jim Gilbertson of Children's indicates that Children's was well aware
    that ABC Radio and Disney might enter the children's radio market. Also, there is no
    indication that Children's actually relied on any such representations. At trial, Dahl was
    asked why he considered it unlikely that Disney and ABC Radio would enter the
    market without Children's, and he responded, "Well, number one, we had the contract
    with ABC. And I regarded that as an extremely important document that would prevent
    them from doing that." He did not say that someone represented that ABC Radio and
    Disney would not enter the market. The agreement on which Dahl purported to rely
    does not contain a non-compete clause. In fact, its language seems to contemplate that
    ABC Radio or Disney, its future parent, might develop a children's radio format:
    "Nothing herein shall be deemed to prevent ABC from representing or selling national
    advertising time in connection with any format developed by ABC, its parent,
    subsidiary or affiliated companies, as constituted now and in the future." (emphasis
    -15-
    added.) Cf. Henvit v. Keller, 
    15 N.W.2d 780
    , 782 (Minn. 1944) (element of reliance
    lacking where written stipulations of lease contradicted alleged representations).
    Children's further claims that ABC Radio's representations that it would keep
    information confidential and use reasonable efforts to perform were fraudulent.
    "[U]nder Minnesota law, a representation or expectation of future events is not
    sufficient to support an action for fraud simply because the represented act or event did
    or did not take place." Exeter Bancorporation, Inc. v. Kemper Sec. Group, Inc., 
    58 F.3d 1306
    , 1313 (8th Cir. 1995). A misrepresentation of a present intention to do
    something in the future could constitute fraud if there is affirmative evidence that the
    promisor had no intention of keeping the promise at the time it was made. 
    Id. at 1312
    .
    Because Children's offers no evidence that ABC Radio did not intend to perform when
    it entered into the agreement, its allegations do not support a claim for fraud
    independent of the breach of contract claim.
    Children's also alleges that ABC Radio failed to disclose several facts: its
    discussions with Disney about creating a children's radio network, its intention to use
    the contract as paid education, and its "self-serving" interpretation of the confidentiality
    clause. "The general rule is that one party to a transaction has no duty to disclose
    material facts to the other." L & H Airco, Inc. v. Rapistan Corp., 
    446 N.W.2d 372
    , 380
    (Minn. 1989) (internal quotation omitted). A duty may exist when a fiduciary
    relationship exists between the parties, when disclosure is necessary to clarify
    information previously disclosed, or when one party has special knowledge of material
    facts to which the other does not have access. 
    Id.
     The third situation is the only one
    that may apply here, and the Minnesota Supreme Court has "rarely addressed that
    particular theory of fraud." 
    Id.
    Children's claim that ABC Radio should have disclosed its interpretation of the
    confidentiality provision makes little sense. We see no support in Minnesota law for
    imposing a duty on sophisticated parties negotiating a contract at arms' length to
    -16-
    disclose their particular interpretations of its provisions. With regard to the remaining
    two alleged nondisclosures, ABC Radio had no "special knowledge" that it should have
    imparted to Children's. Children's was aware that ABC Radio and Disney might form
    a competing network, and it was also aware that ABC Radio would learn about
    children's radio through the agreement.
    The district court did not err in granting summary judgment against Children's
    on its fraud claim.
    C.
    Children's alleges that ABC Radio acted as its agent, that it had fiduciary duties
    to Children's, and that it breached these duties. Although the existence of an agency
    relationship is generally a question of fact, summary judgment may be appropriate if
    the evidence is conclusive. Smith, 
    605 N.W.2d at 423
    . "[B]efore a court will impose
    a legal obligation on a person to act like an agent, the plaintiff must first introduce
    factual evidence that he sought this arrangement and that the alleged agent consented
    to it." PMH Props. v. Nichols, 
    263 N.W.2d 799
    , 803 (Minn. 1978). See also Nerlund
    v. Schiavone, 
    84 N.W.2d 61
    , 65 (Minn. 1957) ("No one can become the agent of
    another without the consent, either express or implied, of the principal."). Neither
    Children's nor ABC Radio consented to a principal-agent relationship. In fact, they
    expressly disclaimed any such relationship in their contract:
    Nothing contained in this Agreement shall create or be deemed to create
    any association, partnership, joint venture or the relationship of principal
    and agent or employer and employee between the parties hereto, it being
    understood that ABC and CBC shall perform all of their obligations
    hereunder as fully independent parties.
    This disclaimer binds Children's and precludes its claim for breach of fiduciary duties.
    Cf. Board of Trade v. Hammond Elevator Co., 
    198 U.S. 424
    , 437 (1905) (implying that
    -17-
    express disclaimer of principal-agent relationship would be decisive between the parties
    involved in the disclaimer); Norsul Oil & Mining Co. v. Texaco, Inc., 
    703 F. Supp. 1520
    , 1545-46 (S.D. Fla. 1988); Wardley Corp. v. Welsh, 
    962 P.2d 86
    , 89 (Utah Ct.
    App. 1998). Summary judgment on this claim was appropriate.
    D.
    Children's argues that the district court erred by granting summary judgment on
    its claim that ABC Radio breached the contract's research provision. This provision
    provides: "Upon request, ABC shall assist CBC in working with Arbitron, Radar and
    other research companies to refine and further develop measurement methodologies for
    CBC's audience." William McClenaghan, the person at ABC Radio who was
    responsible for responding to Children's research requests, stated in his affidavit: "CBC
    never made any requests to me to assist CBC in working with Arbitron, Radar or other
    research companies to refine and further develop measurement methodologies for
    CBC's audience."
    Children's directs us to McClenaghan's deposition testimony, where he stated,
    "AAHS wanted to go out and do more audience surveys, and I said that is not the way
    to go." Children's also cites Gilbertson's deposition testimony, where he was asked,
    "[D]o you know if anybody at CBC ever made a request to ABC to work with any of
    the research companies to refine and further develop measurement methodologies for
    CBC's audience?" Gilbertson responded, "Again, I just don't recall if we asked in that
    context. It's possible. . . . I don't recall. I know I asked Mr. McClenaghan basically
    for his aid in research." Gilbertson was then asked, "Did you ask him to assist you to
    refine or develop measurement methodologies for CBC's audience?" His response was,
    "I don't recall whether we did or not. I just don't recall if we asked that specific
    question." This testimony does not raise a genuine issue regarding whether Children's
    asked ABC Radio to assist it in the specific way contemplated by the contractual
    -18-
    provision. Without such a request, there could be no breach. The district court did not
    err by granting summary judgment against Children's on this claim.
    IV.
    Finally, Children's argues that the district court erred by barring it from seeking
    punitive damages on its commercial tort claims. In light of our disposition of these
    claims in Section III, we need not address this argument. We reverse the district court's
    grant of judgment as a matter of law and remand the case for a new trial limited to
    damages.5
    A true copy.
    Attest:
    CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
    5
    Our opinion should not be read to imply that the conduct that the jury found
    wrongful caused any particular type of damage to Children's or that Children's is
    entitled to any particular amount of damages.
    -19-
    

Document Info

Docket Number: 99-1813

Citation Numbers: 245 F.3d 1008, 2001 WL 345207

Judges: McMillian, Lay, Gibson

Filed Date: 4/10/2001

Precedential Status: Precedential

Modified Date: 11/4/2024

Authorities (19)

Norsul Oil & Min. Co., Ltd. v. Texaco, Inc. , 703 F. Supp. 1520 ( 1988 )

Montgomery Ward & Co. v. Duncan , 61 S. Ct. 189 ( 1940 )

exeter-bancorporation-inc-a-minnesota-corporation-v-kemper-securities , 58 F.3d 1306 ( 1995 )

Board of Trade v. Hammond Elevator Co. , 25 S. Ct. 740 ( 1905 )

Neely v. Martin K. Eby Construction Co., Inc. , 87 S. Ct. 1072 ( 1967 )

Daubert v. Merrell Dow Pharmaceuticals, Inc. , 113 S. Ct. 2786 ( 1993 )

Fireman's Fund Insurance Company, a Corporation v. Aalco ... , 466 F.2d 179 ( 1972 )

Safeco Insurance Co. of America v. Dain Bosworth Inc. , 1995 Minn. App. LEXIS 640 ( 1995 )

Melvin White v. B. Jeffery Pence Natalee Schay, United ... , 961 F.2d 776 ( 1992 )

Smith v. Woodwind Homes, Inc. , 2000 Minn. App. LEXIS 143 ( 2000 )

Robert Stafford v. Neurological Medicine, Inc. And Raymond ... , 811 F.2d 470 ( 1987 )

blue-dane-simmental-corporation-roland-nuss-ron-vlasin-dennis-behrhorst-v , 178 F.3d 1035 ( 1999 )

western-oil-fuel-company-a-delaware-corporation-v-orval-l-kemp-webb , 245 F.2d 633 ( 1957 )

General Electric Co. v. Joiner , 118 S. Ct. 512 ( 1997 )

David Mears v. Nationwide Mutual Insurance Company , 91 F.3d 1118 ( 1996 )

Wardley Corp. v. Welsh , 346 Utah Adv. Rep. 44 ( 1998 )

United States v. Jimmy Wilkins and Fred Baine , 139 F.3d 603 ( 1998 )

dominium-management-services-inc-v-nationwide-housing-group-nationwide , 195 F.3d 358 ( 1999 )

Fudally v. Ching Johnson Builders, Inc. , 1985 Minn. App. LEXIS 3728 ( 1985 )

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