763 F.2d 1148 (10th Cir. 1985), 81-2440, K-B Trucking Co. v. Riss Intern. Corp.

Docket Nº:81-2440, 81-2498.
Citation:763 F.2d 1148
Party Name:K-B TRUCKING COMPANY and Keith Collins, Plaintiffs-Appellees, Cross-Appellants, v. RISS INTERNATIONAL CORPORATION and World Leasing, Inc., Defendants-Appellants, Cross-Appellees.
Case Date:May 28, 1985
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1148

763 F.2d 1148 (10th Cir. 1985)

K-B TRUCKING COMPANY and Keith Collins,

Plaintiffs-Appellees, Cross-Appellants,

v.

RISS INTERNATIONAL CORPORATION and World Leasing, Inc.,

Defendants-Appellants, Cross-Appellees.

Nos. 81-2440, 81-2498.

United States Court of Appeals, Tenth Circuit

May 28, 1985

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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J. Nick Badgerow of McAnany, Van Cleave & Phillips, P.A., Kansas City, Kan., for defendants-appellants, cross-appellees.

Edward A. McConwell, Overland Park, Kan., for plaintiffs-appellees, cross-appellants.

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Before HOLLOWAY, Chief Judge, and BARRETT and MILLER [*], Circuit judges.

HOLLOWAY, Chief Judge.

In this diversity action, the jury awarded plaintiffs Keith Collins and K-B Trucking Co. ("K-B") actual and punitive damages on their fraudulent misrepresentation claims against defendants Riss International Corp. ("Riss") and World Leasing, Inc. ("World Leasing"). Defendants argue on appeal that (1) Collins was not a proper plaintiff; (2) certain documentary evidence was erroneously admitted; (3) there was insufficient evidence of fraud; and (4) there was insufficient proof of damages. Plaintiffs in their cross-appeal contend that the district court erred in granting defendants' motions for directed verdicts on plaintiffs' breach of warranty and conversion claims. We affirm in part and vacate in part, and remand.

I

Facts

In July 1978, Midway Trucking Co. ("Midway") was on the verge of financial collapse. Midway was owned by Billy Moberly and performed local cartage for the Kansas City Terminal of defendant Riss. Later that month, plaintiff Keith Collins and Moberly met with officials of Riss and defendant World Leasing to discuss the award of Riss's local cartage contract and the purchase of tractors from World Leasing. Certain alleged representations made by defendants' representatives to Collins at this meeting concerning the rates, gross income and profitability of the cartage operation, and the cost and quality of the tractors, form the basis of this action by Collins and K-B, the company he formed allegedly on the basis of these representations.

K-B was incorporated on August 2, 1978. Soon thereafter, K-B leased certain tractors from World Leasing with an option to purchase and contracted with Riss to provide local cartage service. On August 14, K-B entered into nine separate lease-purchase agreements with World Leasing. Defendants' Exhibits L through T, V R. 673-752. The optional purchase price of the seven 1973 tractors was $13,000 each, and the optional purchase price of the two 1972 tractors was $11,700 each. On August 14, K-B and Riss also entered into a written cartage agreement. An appendix to the agreement contained a schedule of rates by which K-B would be compensated for performing certain services. Defendants' Exhibit A, V R. 646-49. The contract provided that it would be in effect for one year and that it could be cancelled by either party upon notice.

K-B went out of business less than eight months after its incorporation. On January 16, 1979, Riss informed K-B that it was terminating the cartage contract. Also on January 16, World Leasing picked up its tractors from K-B. K-B ceased operations in March 1979.

K-B brought this action against Riss and World Leasing alleging violation of the antitrust laws, fraud, breach of contract, breach of implied warranty, and conversion. 1 I R. 1-10. World Leasing counterclaimed for breach of contract. Id. at 33 (Pretrial Order). At the beginning of trial, Keith Collins was added as a plaintiff. I R. Supp. 1. At the close of plaintiffs' evidence, the district court granted defendants' motions for directed verdicts on the antitrust, breach of warranty and conversion claims, and granted defendants' motion to strike evidence of lost profits. The court denied defendants' motions for directed verdicts on the fraud and breach of contract claims and denied defendants' motion to strike Keith Collins as a plaintiff. At the close of evidence, the court denied defendants' motions for directed verdicts on the fraud and breach of contract claims and denied plaintiffs' motion for a directed verdict on World Leasing's counterclaim.

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The jury returned a special verdict in favor of plaintiffs on the fraudulent misrepresentation claim. The jury assessed $48,724 actual damages and $10,000 punitive damages against Riss, and $23,832.84 actual damages and $20,000 punitive damages against World Leasing, for a total award of $102,556.84. ($72,556.84 in actual damages and $30,000 in punitive damages). II R. 267. The jury found in favor of Riss on the breach of contract claim and in favor of plaintiffs on World Leasing's counterclaim. Id. at 267-68. The district court denied defendants' motion for judgment n.o.v., new trial, and remittitur, and denied plaintiffs' motion to alter or amend the verdict or for a new trial on the breach of contract issue. The court entered judgment in accordance with the jury's verdict. Defendants appeal and plaintiffs cross-appeal.

II

Real Party In Interest

Defendants argue that the district court erred in permitting Collins to be added as a plaintiff prior to trial and in denying defendants' motion to strike Collins as a plaintiff. 2 Defendants assert that Collins is not a real party in interest under Fed.R.Civ.P. 17(a). 3

Defendants apparently contend that Collins should have been dropped as a plaintiff by the district court upon their motion under Fed.R.Civ.P. 21. 4 A district court's denial of a motion to drop a party will not be overturned on appeal absent an abuse of discretion. See United States v. Wyoming National Bank, 505 F.2d 1064, 1067 (10th Cir.1974); see also Intercon Research Associates v. Dresser Industries, 696 F.2d 53, 56 (7th Cir.1982); 7 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1688, at 342 (1972) ("The grant or denial of a motion to bring in or drop a party lies in the discretion of the judge.... The trial court's exercise of discretion will not be disturbed on appeal unless an abuse [of discretion] is shown.").

We must look to Kansas law in determining whether Collins is a real party in interest under Rule 17(a). See, e.g., American National Bank & Trust Co. v. Weyerhaeuser Co., 692 F.2d 455, 459-60 (7th Cir.1982); Martin v. Morgan Drive Away, Inc., 665 F.2d 598, 604 (5th Cir.), cert. dismissed, 458 U.S. 1122, 103 S.Ct. 5, 73 L.Ed.2d 1394 (1982); American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1141 (9th Cir.1981); see also Audio-Visual Marketing Corp. v. Omni Corp., 545 F.2d 715, 718-19 (10th Cir.1976); Hoeppner Construction Co. v. United States, 287 F.2d 108, 111 (10th Cir.1961); cf. Harris v. Illinois-California Express, Inc., 687 F.2d 1361, 1373 (10th Cir.1982). "The forum state's procedural statute or rule defining the real party in interest concept is not applicable, however, because it only governs who may sue in the state courts; under Rule 17(a), the federal courts are concerned only with that portion of state law from which the specific right being sued upon stems." 6 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1544, at 647-48 (1971) (citing American Fidelity and Casualty Co. v. All American Bus Lines, 179 F.2d 7, 10 (10th Cir.1949) ). We therefore must examine whether Kansas law permitted Collins to pursue the fraudulent

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misrepresentation claim against defendants.

Under Kansas law, "[o]ne who makes a fraudulent misrepresentation or concealment is subject to liability for pecuniary loss to the persons or class of persons whom he intends or has reason to expect to act or to refrain from action in reliance upon the misrepresentation or concealment." Griffith v. Byers Construction Co., 212 Kan. 65, 510 P.2d 198, 199 (1973) (syllabus number 3 prepared by Kansas Supreme Court) 5; see also Unified School District No. 490, Butler County v. Celotex Corp., 6 Kan.App.2d 346, 629 P.2d 196, 207 (1981). Most of the alleged misrepresentations involved here occurred at a July 1978 meeting attended by Collins and Moberly and representatives of Riss and World Leasing. The alleged misrepresentations concerned discussions of the award of Riss's local cartage contract and the purchase of tractors from World Leasing. K-B was incorporated on August 2. The local cartage agreement between K-B and Riss and the lease-purchase agreements between K-B and World Leasing were executed two weeks later.

We hold that Collins is a real party in interest under Rule 17(a). He alleged that the fraudulent misrepresentations were made to him by defendants before K-B was formed and before the cartage agreement and lease-purchase agreements were signed. Collins contended that the misrepresentations induced him to form K-B and to enter into the cartage agreement and lease purchase-agreements. 6 We feel that under Kansas law, Collins was a person whom defendants "intend[ed] or ha[d] reason to expect to act or refrain from an action in reliance upon the misrepresentation or concealment." 7

III

Plaintiffs' Exhibits 9, 13 and 26

Defendants argue that the district court erred in not excluding Plaintiffs' Exhibits 9, 13 and 26 8 under Fed.R.Evid.

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403. Exhibit 9 was a maintenance record of the trucks leased by K-B, including a list of breakdowns, towing charges, and maintenance costs. III R. 449. Exhibit 13 was a weekly compilation of the amount of money paid by Riss to K-B and the amount of money withheld by Riss. Id. at 450. Exhibit 26 was a list of other cartage services that Riss used in January 1979 in addition to those performed by K-B. Id. at 568-70.

Rule 403 provides that "[a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of...

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