Williams v. Dresser Industries, Inc.
| Decision Date | 28 August 1997 |
| Docket Number | No. 94-9105,94-9105 |
| Parties | 11 Fla. L. Weekly Fed. C 437 John R. WILLIAMS and John B. Williams, Plaintiffs-Appellees, Cross-Appellants, v. DRESSER INDUSTRIES, INC., Defendant-Appellant, Cross-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Harold T. Daniel, Jr., Laurie Webb Daniel, Holland & Knight, Atlanta, GA, Patrick G. Hatcher, Irvine, CA, for Defendant-Appellant, Cross-Appellee.
Harry L. Griffin, Jr., Jennifer L. Wheatley Fletcher, Robert Thomas Tifverman, Griffin, Cochrane & Marshall, Atlanta, GA, for Plaintiffs-Appellees, Cross-Appellants.
Appeal from the United States District Court for the Northern District of Georgia.
Before COX, Circuit Judge, and KRAVITCH and CLARK, Senior Circuit Judges.
In this diversity action, the appellees, John R. Williams ("John Williams") and his son John B. Williams ("Jay Williams"), negotiated and bought a distributorship of heavy construction equipment that carried the appellant Dresser Industries, Inc.'s ("Dresser") products as their main line. Less than a week after the Williams purchased the distributorship, Dresser announced its intent to enter into a joint venture with another heavy construction equipment manufacturer, Komatsu, Ltd. ("Komatsu"). The appellees alleged that the joint venture was harmful to their business because customers feared that the Dresser product would become obsolete, that Dresser fraudulently concealed information about the pending joint venture in order to induce their purchase of the distributorship, and that they would not have bought the distributorship had they known about the pending joint venture. The appellees claimed that the joint venture led to a significant loss of business that ultimately forced them to sell their business at a loss. The jury returned a verdict for the appellees and awarded them over ten million dollars in damages. The appellant contends that the district court erred in denying the motion for judgment notwithstanding the verdict because the appellees did not prove the elements of fraud required under Georgia law. We agree with the appellant and reverse the judgment.
Dresser was primarily an oil service company that acquired International Harvester's construction equipment business in 1982, but was a lesser player in the heavy construction equipment industry which was dominated by other companies such as Caterpillar and Komatsu. The leading companies in the industry had the money to invest in research and development of new equipment, and the smaller companies struggled to keep up with the pace of innovations. Dresser was one of the companies having difficulty staying competitive in the industry. Joint ventures were increasingly common in the industry as the strategy for survival, and Dresser began talking with potential joint venture partners in 1986. In late summer of 1987, Dresser's senior management began preliminary discussions with Komatsu about the possibility of a joint venture. The two companies signed a confidentiality agreement restricting information of the discussions about the potential joint venture to their senior executives.
The Williams were Georgia residents who were sophisticated business executives, having owned and managed numerous businesses for years. John Williams expanded his father's lumber company from one store to ten stores, added a sawmill, and expanded into the concrete business in 1965. John Williams took his concrete business from one plant and eight trucks to 31 plants and 600 trucks. John Williams asked his son, Jay Williams, to run a block plant, and when the Williams sold their business they owned six block plants. The Williams sold their building materials company in 1986 for $90,000,000, and sought a new business.
They learned that a heavy equipment distributorship, the Tri-State Tractor Company ("Tri-State") was for sale, and on January 5, 1988, the Williams signed a letter of intent to purchase Tri-State. Because Dresser's permission was necessary for the sale of the distributorship, the Williams contacted Dresser to obtain its consent, and to place an initial order of inventory. Dresser denied the inventory order, and the Williams traveled to Chicago to meet with Dresser representatives.
In Chicago, the Williams met with the marketing and sales vice president of the construction equipment division, Wesley Lee, and with other Dresser employees; none of the Dresser employees with whom they met knew about the possible joint venture. The negotiations lasted approximately four hours, and Lee repeatedly left the room apparently in order to consult with someone with higher authority. During the meeting, the Williams asked Lee about Dresser's future, and Lee responded that Dresser would be "second to none," that they were planning to hire additional engineers and would make Dresser "one of the leading machinery people in the business." 1 The Williams assumed that they would meet with Gary Eggerichs, the head of Dresser's construction equipment division, although they had not asked for a meeting with him, but Eggerichs was not part of that meeting. Eggerichs, who knew of the joint venture, met and spoke with the Williams briefly in the hallway after the meeting concluded. The Williams left Chicago having successfully negotiated an initial inventory order of ten million dollars.
On January 28, 1988, the Williams closed the purchase of Tri-State and executed their franchise agreement with Dresser. That same day, senior executives of Dresser and Komatsu signed a letter of understanding regarding the joint venture. Three days later, January 31, 1988, Dresser and Komatsu announced the pending joint venture during a trade show in New Orleans. Jay Williams attended the trade show and learned of the joint venture along with all the other Dresser distributors at that time.
The Williams did not attempt to rescind their purchase of Tri-State, and several weeks later confirmed their initial inventory order in writing without mentioning any concerns about the pending joint venture. Jay Williams did not communicate his concerns regarding the joint venture to Dresser until September 19, 1988. In a letter, Jay Williams stated that it appeared that both Komatsu and Dresser dealers would soon be selling "functionally identical equipment" and that Tri-State "may greatly be damaged if not substantially destroyed" because of the competition from the Georgia Komatsu dealer, a larger company. 2 Williams also stated that they "might well have elected not to purchase Tri-State Tractor Company at all had we been timely advised to the plans for the joint venture," and that they "believe[d] that Dresser had a duty to disclose its imminent plans for the joint venture to us before we agreed to acquire Tri-State." 3 In November of 1989, after incurring losses for 1988 and 1989, the Williams sold Tri-State to the Georgia Komatsu dealer. At the time of trial, Dresser products continued to be sold through the company formed by the joint venture between Dresser and Komatsu.
The Williams brought their complaint alleging that Dresser had fraudulently induced their participation as a distributor by concealing the information about the pending joint venture, and that had they known about the joint venture, they would not have bought Tri-State. Dresser filed a motion to dismiss, claiming that they had no duty to disclose their plans because they had no fiduciary or confidential relationship with the Williams, and that an allegation of misrepresentation and concealment of a future event did not state a claim.
The district court denied the motion to dismiss, noting that Georgia law imposed a duty to disclose material facts in light of either a confidential relationship or the particular circumstances of the case. 4 The district court found that the Williams had alleged sufficient facts giving rise to a duty to disclose because of the particular circumstances. 5 The district court also found that the Williams alleged that Dresser fraudulently concealed and misrepresented the existing fact of its present intention to enter the joint venture. 6 The case proceeded to a jury trial, and at the end of the plaintiff's case, Dresser moved for a directed verdict. Dresser argued that the Williams failed to exercise due diligence in investigating Dresser before they bought Tri-State, and that Wes Lee's comments to the Williams were mere puffing or statements as to future events. The district court denied the motion, and the jury returned a verdict for the Williams of $6,557,683 in compensatory damages and $4,000,000 in punitive damages. The district court denied Dresser's subsequent motion for judgment notwithstanding the verdict, and this appeal followed.
This court reviews a district court's denial of a motion for judgment as a matter of law de novo. 7 We consider "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." 8 In our review, we consider all the evidence and inferences in a light most favorable to the nonmoving party. 9 If the facts and inferences overwhelmingly favor one party, such that reasonable people could only arrive at one verdict, then the motion should have been granted. 10 However, if substantial evidence exists in opposition to the motion such that reasonable people, exercising impartial judgment, might reach differing conclusions, then the motion should have been denied and the case submitted to the jury. 11 There must be more than a mere scintilla of evidence to survive a motion for judgment as a matter of law; "there must be a substantial conflict in evidence to support a jury question." 12
Under Georgia law, a plaintiff suing for recovery for fraudulent misrepresentations must prove five essential elements: (1) the defendant made representations; (2) knowing they were false; (3)...
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