Echo Acceptance Corp. v. Household Retail Services

• Citation: 267 F.3d 1068
• Decision Date: 28 September 2001
• Docket Number: Nos. 00-1167,00-1190,s. 00-1167
• Parties: (10th Cir. 2001) ECHO ACCEPTANCE CORP., a Colorado corporation and ECHOSPHERE CORPORATION, a Colorado corporation, Plaintiffs - Appellees- Cross-Appellants, vs. HOUSEHOLD RETAIL SERVICES, INC., a Delaware corporation, Defendant - Appellant - Cross-Appellee
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1068

267 F.3d 1068 (10th Cir. 2001)

ECHO ACCEPTANCE CORP., a Colorado corporation and ECHOSPHERE CORPORATION, a Colorado corporation, Plaintiffs - Appellees- Cross-Appellants, vs. HOUSEHOLD RETAIL SERVICES, INC., a Delaware corporation, Defendant - Appellant - Cross-Appellee.

Nos. 00-1167, 00-1190

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

September 28, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (D.C. No. 95-WY-605-WD)

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted] T. Wade Welch (Ross W. Wooten, with him on the briefs), T. Wade Welch & Associates, Houston, Texas, for Plaintiffs - Appellees.

Bruce A. Featherstone (John A. DeSisto, with him on the briefs), Featherstone, DeSisto, L.L.P. Denver, Colorado, for Defendant - Appellant.

Before KELLY, MCWILLIAMS, and REAVLEY^*, Circuit Judges.

PAUL KELLY, JR., Circuit Judge.

Defendant Household Retail Services, Inc. ("HRSI" or "Household"), appeals from a jury verdict in favor of Plaintiffs Echo Acceptance Corporation and Echosphere Corporation (collectively, "Echo") on Echo's breach of contract claim. The district court's jurisdiction was based on 28 U.S.C. 1332. We have jurisdiction under 28 U.S.C 1291 and we affirm.

Background

The plaintiffs in this case are Echosphere Corporation ("Echosphere"), which manufactures and sells home satellite television systems, and Echo Acceptance Corporation ("EAC"), an Echosphere subsidiary organized to facilitate the financing of such sales.¹ While some Echosphere customers no doubt make their own financial arrangements, Echosphere referred many of its customers to EAC. EAC would then enter a loan agreement with the customer, pursuant to which EAC agreed to finance the system for the customer. EAC then sold the loan agreements to an ultimate financier. Until 1989, that financier was the Central Bank of Denver, which purchased the agreements from EAC for a flat, up-front fee. J.A. 249.

On July 7, 1989, EAC entered a Merchandise Financing Agreement ("MFA") with the defendant, Household, a private label credit card company. Pursuant to the MFA, a customer interested in purchasing Echosphere equipment on credit submitted an application to Echosphere, which was transmitted to EAC and then to Household for credit approval. Upon approval, EAC purchased the customer's financing contract, then resold and assigned that agreement to Household, which thereafter assumed the credit relationship with the customer. Upon assignment, the MFA typically relieved EAC from liability for the customer's default. Household then issued a credit card to the approved customer to be used for future purchases of Echosphere equipment. The customer's contract provided for finance charges on the credit account. Household also offered credit insurance to customers, for a separate charge. Through the arrangement just described, Household provided funding for credit purchases of Echosphere equipment. The customers made monthly payments on their account balances toward principal, finance charges, and in some cases, insurance premiums. Aplt. Br. at 4.

In its initial pricing letter, HRSI confirmed the execution of the MFA and reiterated that it would "purchase from time to time revolving credit contracts at the price agreed upon from time to time and as outlined below:

1) The consumer Annual Percentage Rate will be 17.88% with a per contract discount of .85% [charged by HRSI].

2) HRSI will pay EAC 8% (eight percent) of billed finance charges monthly.

3) HRSI will pay EAC a percent of billed finance charges equivalent to 30% (thirty percent) of billed insurance charges.

4) HRSI understands that EAC does not initiate retail installment sales or revolving credit sales directly to the consumer. However, HRSI will respond to EAC as though EAC initiates all contracts per the Merchandise Financing Agreement.

J.A. 3013 (Pl. Ex. 6); see also id. at 3006-07 (Pl. Ex. 3) (Merchandise Financing Agreement). Collectively, the credit agreements originated by EAC and sold to HRSI were referred to as the "EAC Portfolio". Id. at 2333 (Tr. at 254).

Echo contends, and the district court agreed, that merchant and insurance participation payments were part of the price HRSI paid for EAC's accounts. Aplee. Br. at 40-43; J.A. 1907-08. Accordingly, the court held that payments on each individual account by HRSI to EAC were to continue for the life of that particular financing arrangement i.e., as long as HRSI continued to receive revenue from the account. J.A. 1906-07. On the other hand, HRSI maintains that the payments were designed merely as incentives to encourage sales. Aplt. Br. at 38. In HRSI's view, its payment obligation ended with its interest in encouraging future sales i.e., when it stopped purchasing new accounts from EAC. Id.

Procedural History

As the district court aptly noted: "The word 'simple' should not be used in any sentence involving this case. [T]here's nothing simple about this. It's convoluted and . . . it's a beast with a strange heartbeat." J.A. 2449 (Tr. at 633). We will attempt to simplify the procedural history nonetheless, reciting only those motions, orders, and proceedings relevant to our analysis. Of the four causes of action alleged in Echo's First Amended Complaint,² only a portion of the first claim for breach of contract is at issue in this appeal. Specifically, we are concerned with Echo's contention that HRSI was contractually obligated to make merchant participation and insurance percentage payments for the life of each individual loan in the EAC portfolio, and that HRSI's failure to make any such payments after the termination of the MFA constituted a breach. Id. at 66-69.

In December 1995, Echo moved for partial summary judgment on that portion of its breach claim, id. at 136-70 [hereinafter "Echo's Breach Motion"]; in February 1996, HRSI filed a cross-motion for summary judgment on the same issue. Id. at 472-510 [hereinafter "HRSI's Cross-Motion"]. Simultaneous with its Cross-Motion, HRSI also filed a separate motion for summary judgment, arguing that all four claims were barred by Colo. Rev. Stat. 38-10-124, the statute of frauds for credit agreements. Id. at 443-61 [hereinafter "HRSI's Statute of Frauds Motion"].³ Three years later, the district court entered an order on the foregoing and other motions, denying HRSI's Statute of Frauds Motion, granting Echo's Breach Motion, and denying HRSI's Cross-Motion. Id. at 1899-1919. In pertinent part, the court held that 38-10-124 was inapplicable to Echo's claims as a matter of law. Id. at 1903-04. The court also found that the MFA unambiguously provided for payments to continue post-termination, and that HRSI's failure to make such payments was a breach of contract. Id. at 1906-08. Finally, the court noted that the determination of the applicable rates for post-termination payments was "a question of fact, appropriately decided by a jury . . . ." Id. at 1913.

Prior to trial, Echo filed a preemptive Motion in Limine, requesting the exclusion of evidence relating to certain defense theories that the court had already rejected as a matter of law. Id. at 2147-54. The court granted the motion in part, confirming that it would not admit evidence or allow arguments concerning: (1) HRSI's statute of frauds defense, or (2) HRSI's claim that post-termination payments were intended as incentives, rather than part of the purchase price. Id. at 2230-31 (Order on Mot. in Limine); cf. id. at 1903-04, 1907-08 (Order on Mots. for Summ. J.). The remainder of Echo's motion was taken under advisement. Id. at 2231-32 (Order on Mot. in Limine).

In a conference with counsel at the close of Echo's case, the court clarified that "the only fact issue here is what's the percentage that applies." Id. at 2446 (Tr. at 623). In HRSI's view, this announcement constituted a "restructuring" of the trial, which prejudiced its case in a variety of ways. Aplt. Br. at 18-19, 44-50. Accordingly, HRSI moved the court: (1) for a "curative instruction," advising the jury to disregard evidence relating to the monetary amount of damages, J.A. at 2459, 2488 (Tr. at 672-75, 788-89) (oral motion); (2) to strike specified testimony and exhibits relating to the amount of damages, id. at 2461-62, 2488 (Tr. at 683-86, 788) (oral motion); see also id. at 2431-41 (brief); and (3) to declare a mistrial. Id. at 2487-88 (Tr. at 786-89); see also id. at 2755-2814 (brief). HRSI also moved that the court enter judgment in its favor as a matter of law, arguing that Echo had failed to establish any agreement between the parties as to post-termination rates. Id. at 2485-86 (Tr. at 779-81) (oral motion); see also id. at 2731-54 (brief). Subject to the foregoing motions, HRSI rested its case. Id. at 2489 (Tr. at 792). All four motions were denied. Id. at 2882-89 (denying motions for mistrial and for judgment as a matter of law); id. at 2462, 2527 (Tr. at 684-86, 798-99) (denying motions to strike and for curative instruction). But cf. id. at 2626 (Inst. 15: "You need not be concerned with the actual monetary amount owed by HRSI to EAC . . . .").

In response to a special interrogatory, the jury found that Echo "had proven, by a preponderance of the evidence, that the applicable merchant participation rate was 10% and the applicable insurance participation rate was 30%, as agreed upon by the parties and evidenced by a letter from Defendant[.]" Id. at 2523 (emphasis added). The court then applied the jury's percentage to the stipulated value of the portfolio, granted Echo's motion for prejudgment interest, and entered judgment for Echo in the amount of $4,840,609 $3,965,534 in past damages, $730,824 in prejudgment interest, and $144,251 in future damages. Id. at 2991-92. The court awarded prejudgment interest at the statutory rate of eight percent, but reduced the interest award by one-third "in the interest of fairness," due...