Falls Steel Tube & Manufacturing Company v. Trumark, Inc.

Citations: 73 F.3d 361; 1995 U.S. App. LEXIS 40756; 1995 WL 750541Docket: 94-3981

Court: Court of Appeals for the Sixth Circuit; December 17, 1995; Federal Appellate Court

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The case involves Falls Steel Tube Manufacturing Company suing Trumark, Inc. for breach of a joint venture agreement, resulting in a jury verdict of $574,560 in favor of Falls Steel. Trumark appealed, claiming insufficient evidence of lost profits and challenging the district court's partial summary judgment favoring Falls Steel regarding the agreement's terms, as well as various trial rulings. The joint venture was established to exclusively supply Chrysler Motors Corporation, with Trumark as the prime contractor purchasing tubing from Falls Steel. After Chrysler ceased direct purchases from Falls Steel, Trumark terminated the contract in December 1992, citing quality issues, leading to Falls Steel's operational shutdown in early 1993. On appeal, the court affirmed the jury’s verdict, determining that Falls Steel had adequately demonstrated its lost profits, and upheld the district court's decisions regarding motions for judgment as a matter of law and directed verdict. The ruling indicates that federal courts follow the law of the forum state—in this case, Ohio—when evaluating such motions.

A motion for a directed verdict can be granted if the trial court finds that reasonable minds could only conclude one way on a determinative issue, which is adverse to the party opposing the motion. The court must evaluate the evidence in the light most favorable to that party without weighing the evidence or assessing witness credibility. In Ohio, a plaintiff may recover lost profits in a breach of contract case if: 1) the profits were contemplated by the parties when the contract was formed; 2) the loss is a probable result of the breach; and 3) the profits can be shown with reasonable certainty, avoiding speculation. Evidence of lost profits must be substantiated by calculations based on available facts.

In the case at hand, Falls Steel used the expert testimony of CPA James Wilcosky to claim lost profits of $1,493,000 due to Trumark's contract termination. Wilcosky analyzed financial statements and interviews, projecting sales based on a strong quarter's performance while estimating expenses from past averages. Despite Trumark's challenges to the validity of this evidence, the court found it was not so speculative that it warranted exclusion from jury consideration. Although the jury awarded a lower amount than Wilcosky's estimate, this did not imply that the evidence was legally inadequate. Trumark contended that Ohio law requires business records to establish lost profits; however, while such records would enhance the expert's opinion, they are not mandatory. Falls Steel presented exhibits based on its business records, which Trumark did not dispute.

The jury's verdict regarding lost profits is affirmed based on sufficient evidence. The case addresses a breach of an exclusivity clause in a contract between Falls Steel and Trumark concerning the sale of tubular products to Chrysler. The district court found that this exclusivity clause did not apply to existing contracts between Chrysler and Falls Steel, a decision reviewed de novo. Under Ohio law, the intentions expressed in an integrated, unambiguous contract are upheld, and extrinsic evidence is permitted only if the contract language is ambiguous. Testimony from Ray Hicks of Falls Steel indicated he believed the contract allowed exceptions for existing contracts. Additionally, Trumark's former vice president did not object to these existing contracts when informed in 1992, suggesting possible implied waiver of the exclusivity term. The court noted that a reasonable juror could find that Falls Steel did not breach the contract by honoring its commitments to Chrysler.

Trumark contested the district court's decision to not include its preprinted purchase order forms in the contract, asserting that the contract's language implied incorporation of these terms. However, the court upheld that the December 10 letter agreement constituted a complete contract. The lack of evidence for negotiations regarding the purchase order terms prior to the December 10 agreement reinforced this conclusion. The court emphasized that if Trumark intended to rely on the purchase order terms, it should have explicitly stated so in the December 10 agreement.

During closing arguments, Falls Steel's counsel incorrectly characterized Trumark's gross sales as profits, suggesting that a favorable verdict for Falls Steel was justified because Trumark could afford it. The counsel stated that while Trumark's profits increased significantly, the jury's verdict could serve as a message against benefiting at the expense of companies like Falls Steel. The trial court's discretion in determining the prejudicial impact of attorney comments is acknowledged, with new trials granted only if there is a reasonable probability that improper conduct affected the jury's verdict. The misstatement made by counsel, deemed isolated and without prejudice, does not warrant a new trial. Additionally, Trumark's argument for a new trial based on the verdict being against the clear weight of the evidence was dismissed, as Falls Steel provided sufficient evidence to support the jury's decision. The judgment in favor of Falls Steel is affirmed by the district court.