Atlas Flooring, LLC v. Porcelanite S.A. De C.V.

FILED
NOT FOR PUBLICATION APR 04 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
ATLAS FLOORING, LLC, an Arizona No. 09-17036
limited liability company, No. 10-15512
Plaintiff-counter-defendant – D.C. No. 2:07-CV-01741-SRB
Appellee,
v. MEMORANDUM *
PORCELANITE S.A. DE C.V., a foreign
corporation, DBA Grupo Porcelanite S.A.,
Defendant-counter-claimant –
Appellant.
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Argued and Submitted February 14, 2011
San Francisco, California
Before: O’SCANNLAIN and TROTT, Circuit Judges, and CAMPBELL,** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Tena Campbell, Senior United States District Judge
for the District of Utah, sitting by designation.
Following a jury verdict in this diversity action, the district court denied
Porcelanite’s renewed motions for judgment as a matter of law under Fed. R. Civ.
P. 50(b) and its motion for a new trial under Fed. R. Civ. P. 59(a). Porcelanite
appealed, and we affirm. Porcelanite also appealed the district court’s award of
attorneys’ fees and costs (see Consolidated Appeal No. 10-15512). But in its
opening brief Porcelanite did not present argument supporting that claim.
Consequently, Porcelanite waived that issue on appeal. Martinez-Serrano v. INS,
94 F.3d 1256, 1259 (9th Cir. 1996).
1. Standard of Review
We review the denial of a motion for judgment as a matter of law de novo,
and view the evidence in the light most favorable to Atlas. Lakeside-Scott v.
Multnomah Cnty., 556 F.3d 797, 802 (9th Cir. 2009) (“Judgment as a matter of law
is proper when the evidence permits only one reasonable conclusion and the
conclusion is contrary to that reached by the jury.”). We review for abuse of
discretion a district court’s denial of a motion for a new trial and must uphold a
jury verdict if it is supported by substantial evidence. Guy v. City of San Diego,
608 F.3d 582, 585 (9th Cir. 2010).
2
2. Liability
a. Breach of Contract
Porcelanite challenges the factual basis for the jury’s verdict on Atlas’s
contract claims. At trial, each party presented conflicting testimony about their
understanding of the contract and their intentions. The jury chose to believe
witnesses whose testimony favored Atlas’s contract interpretation. This Court may
not second-guess the jury’s credibility findings or weighing of the evidence. Id. A
review of the record shows that the jury verdict on Atlas’s contract claims was
supported by substantial evidence. Id.; Lakeside-Scott, 556 F.3d at 802.
b. Fraud
Porcelanite challenges the jury’s finding of intent to defraud. A review of
the record shows that sufficient evidence exists to support the jury’s finding that
Porcelanite intended to and did make fraudulent misrepresentations, so the Court
will not disturb the verdict on that basis. Guy, 608 F.3d at 585.
Porcelanite also contends that Atlas did not present any evidence that
Porcelanite’s misrepresentation caused Atlas’s lost profit damages. Porcelanite
does not provide any authority to support its proposition that a victim of fraud is
prohibited from recovering lost profits even if a jury finds that the fraud victim’s
reliance on the misrepresentation caused damage. Viewing the evidence in a light
3
most favorable to Atlas, the Court concludes that a reasonable jury could find that
Atlas relied on Porcelanite’s misrepresentations, which caused damage to Atlas.
Id.; Lakeside-Scott, 556 F.3d at 802-03. Accordingly, the jury’s fraud verdict is
valid.
c. Intentional Interference with Business Expectancies
Porcelanite argues that Atlas did not have a valid business expectancy in its
dealings with Lowe’s and that Atlas failed to prove that any interference by
Porcelanite caused Atlas’s injuries. Reviewing the evidence in a light most
favorable to Atlas, the Court holds that there was sufficient evidence to support the
jury’s verdict that Atlas had a valid business expectancy, and that Porcelanite’s
actions interfered with that expectancy. Guy, 608 F.3d at 585; Lakeside-Scott, 556
F.3d at 802-03. See also Antwerp Diamond Exch. of Am., Inc. v. Better Bus.
Bureau of Maricopa Cnty., Inc., 637 P.2d 733, 740 (Ariz. 1981).
3. Atlas’s Expert Witness on Damages
Porcelanite challenges the admissibility of the testimony of Atlas’s damages
expert, Bradley Preber, under Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311(9th Cir. 1995). Porcelanite did not challenge Mr. Preber’s testimony on the basis
of his qualifications or the relevance of his opinions but on the basis that his
conclusions were unreliable because he used an unsound methodology. Mr.
4
Preber, a CPA, used a professionally recognized method of calculating lost profits.
The district court correctly determined that Porcelanite’s complaints about Mr.
Preber’s testimony went to the weight, not the admissibility, of the expert
testimony. Stilwell v. Smith & Nephew, Inc., 482 F.3d 1187, 1192 (9th Cir. 1995).
The district court’s decision to admit the testimony of Mr. Preber was not an abuse
of discretion. Humetrix, Inc. v. Gemplus S.C.A., 268 F.3d 910, 919 (9th Cir.
2001).
Additionally, contrary to Porcelanite’s argument, the district court did not
abuse its discretion when it allowed Mr. Preber to testify about his updated damage
calculations. Mr. Preber did not issue a new report. Rather, he updated his report
(using the same methodology) based on more current information reflecting
ongoing damages. This was not error. U-Haul Int’l, Inc. v. Lumbermens Mut.
Cas. Co., 576 F.3d 1040, 1043 (9th Cir. 2009).
4. Damages
In awarding damages, a jury has broad discretion in weighing the evidence,
and the Court is not to substitute its judgment for that of the jury. Del Monte
Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422, 1435 (9th Cir. 1996).
“We must uphold the jury’s finding unless the amount is grossly excessive or
5
monstrous, clearly not supported by the evidence, or based only on speculation or
guesswork.” Id.a. Compensatory Damages
Porcelanite challenges the jury’s compensatory damages award, arguing that
the award was based upon speculation, improperly provided double recovery, and
was impermissible under the economic loss doctrine.
i. Speculation
Contrary to Porcelanite’s contention, the jury did not speculate when it
calculated the damages award. Under Arizona law, Atlas, the prevailing party,
showed the amount of its damages with reasonable certainty. Gilmore v. Cohen,
386 P.2d 81, 82 (Ariz. 1963). Atlas’s damages expert witness testified that the
conservative high end of Atlas’s total damages (for the liability theories combined)
was $30.7 million. The jury awarded $32.3 million. In addition to the expert
testimony (including his damage summary tables), the record contained other
evidence providing a reasonable basis for the slightly higher amount awarded by
the jury. The expert presented projections about future sales between the date of
his damage estimate and the time of trial, and Atlas introduced evidence that
Porcelanite continued making sales to Lowe’s after the damages period calculated
by the expert witness. This is not a situation where the award is “clearly not
6
supported by the evidence.” Los Angeles Mem’l Coliseum Comm’n v. NFL, 791
F.2d 1356, 1360 (9th Cir. 1986). Accordingly, the Court upholds the
compensatory damages award.
ii. Double Recovery
The Court finds that the jury did not award duplicate damages to Atlas. The
nature of the jury’s verdict does not suggest double recovery. The expert witness
testified about lost profits without relegating the damages to a particular theory of
liability. The jury allocated the total amount of damages to the different theories.
Atlas is not required to demonstrate how the jury reached the damages amount. It
is enough that a rationale for the jury’s division of the damages total can be derived
from the record. Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369
U.S. 355, 365 (1962); Morissette v. United States, 342 U.S. 246, 276 (1952).
Furthermore, Porcelanite, in failing to poll the jury or attempt to resolve
ambiguities in the verdict before the jury was excused, cannot now use any
uncertainty or confusion to set aside the verdict.
iii. Economic Loss Doctrine
The economic loss doctrine does not bar Atlas’s recovery of compensatory
tort damages. Arizona courts have applied the economic loss doctrine only to non-
intentional torts in the products liability and construction defects context. Flagstaff
7
Affordable Housing Limited Partnership v. Design Alliance, Inc., 223 P.3d 664(Ariz. 2010) (en banc). There is no logical connection between those contexts and
the exclusive distribution contract at issue here. Adopting Porcelanite’s position
would result in an impermissible expansion of Arizona law.
Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931, 939 (9th Cir. 2001).
b. Punitive Damages
Porcelanite contends that the $25 million punitive damages award was
unconstitutional because it was grossly excessive. Southern Union Co. v. Irvin,
563 F.3d 788, 791 (9th Cir. 2009). When considering the constitutionality of a
punitive damage award, the Court considers the degree of reprehensibility of the
sanctioned party’s actions, the disparity between the actual and punitive damage
awards, and the difference between the punitive damage award and comparable
civil penalties.1 State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418
(2003).
Porcelanite consciously disregarded Atlas’s interests and rights. Although
no physical harm occurred, Porcelanite’s selfish conduct was motivated by greed
and resulted in profits for Porcelanite at Atlas’s expense. Porcelanite consciously
1
This third factor is not applicable here because the parties did not present
comparable civil penalties. Porcelanite’s cite to criminal penalties is not relevant.
8
and repeatedly concealed its actions and made millions of dollars from its sales to
Lowe’s.2 The “infliction of economic injury, especially when done intentionally
through affirmative acts of misconduct . . . can warrant a substantial penalty.”
BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 576 (1996).
The disparity between the actual and punitive damage amounts is not
significant. The jury’s punitive damages award was approximately 1.5 times
Atlas’s tort damages. This is below the ratios this Court has approved as
constitutional. See, e.g., Southern Union, 563 F.3d at 792; Planned Parenthood of
the Columbia/Willamette, Inc. v. Am. Coalition of Life Activists, 422 F.3d 949,
962 (9th Cir. 2005); Zhang v. Am. Gen. Seafoods, Inc., 339 F.3d 1020, 1044 (9th
Cir. 2003).
For the foregoing reasons, this Court concludes that the punitive damages
award was not grossly excessive and did not violate Porcelanite’s due process
rights.
2
Porcelanite argues that it acted on the honest belief that Lowe’s would no
longer stock Atlas’s products. Porcelanite further argues that the district court
erred in excluding from evidence an e-mail from Lowe’s to that effect. Assuming,
without deciding, that the e-mail should have been admitted as evidence, the
content and weight of that lone e-mail is not enough to tip the already heavily-
weighted scale in Porcelanite’s favor.
9
In sum, there is no basis to disturb the jury’s determination of Atlas’s
compensatory or punitive damages.
AFFIRMED.
10