Yazdianpour v. Safeblood Techs., Inc.
| Decision Date | 27 February 2015 |
| Docket Number | Nos. 13–3586,13–3639.,13–3632,s. 13–3586 |
| Citation | 779 F.3d 530 |
| Parties | Hamid YAZDIANPOUR; Faisal Ali Mousa al Naqbi, Plaintiffs–Appellants v. SAFEBLOOD TECHNOLOGIES, INC.; Jim Limbird; Charles Worden, Jr.; Charles Worden, Sr., Defendants–Appellees. Hamid Yazdianpour; Faisal Ali Mousa al Naqbi, Plaintiffs–Appellees v. Safeblood Technologies, Inc.; Jim Limbird; Charles Worden, Jr., Defendants. Charles Worden, Sr., Defendant–Appellant. Hamid Yazdianpour; Faisal Ali Mousa al Naqbi, Plaintiffs–Appellees v. Safeblood Technologies, Inc.; Jim Limbird; Charles Worden, Jr., Defendants–Appellants Charles Worden, Sr., Defendant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
David Williams, argued, Little Rock, AR, for appellants Hamid Yazdianpour and Faisal Ali Mousa Al Naqbi, in case nos. 13–3586, 13–3632 and 13–3639.
Carl F. Cooper, III, argued, Little Rock, AR (Thomas Stone, Cal McCastlain, Thane Lawhon, on the brief), for appellees Safe Blood Technologies, Inc., Jim Limbird and Charles Worden, Jr. in case nos. 13–3586 and 13–3639.
Gail Ponder Gaines, argued, Little Rock, AR (M. Evan Stallings, Michael Hale, on the brief), for appellee Charles Worden, Sr. in case no. 13–3586.
Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.
Hamid Yazdianpour and Faisal Ali Mousa al Naqbi (Licensees), along with their limited liability company (the LLC), entered into a licensing agreement with Safeblood Technologies, Inc. (Safeblood Tech) for the exclusive rights to market patented technology overseas. Licensees later sued Safeblood Tech for breach of contract. Licensees also brought suit against Safeblood Tech and its officers Charles Worden, Jr. (Worden Jr.), and Jim Limbird (collectively, Safeblood Group) and against patent inventor Charles Worden, Sr. (Worden Sr.), for fraud, constructive fraud, and violations of the Arkansas Deceptive Trade Practices Act (ADTPA), Ark.Code Ann. §§ 4–88–101 to –115. The district court dismissed the fraud claims at summary judgment. The remaining claims proceeded to trial and a jury found for Licensees, awarding them $786,000 in contract damages and no damages for violations of the ADTPA. The district court awarded Licensees an additional $144,150.40 in prejudgment interest.
Licensees appeal, arguing that the district court erred in dismissing their fraud claims at summary judgment, that a jury instruction on the ADTPA claim was erroneous, and that the jury returned an inconsistent verdict on the ADTPA claim. Safeblood Group cross-appeals, arguing that Licensees lack standing, that the district court should have granted judgment as a matter of law on the ADTPA claim1 and the entire case, and that prejudgment interest should not have been awarded. Worden Sr. filed a conditional cross-appeal, arguing that the district court should have granted his motion for judgment as a matter of law on the ADTPA claim. We reverse the grant of summary judgment on the common-law fraud claim and the award of prejudgment interest, and we affirm in all other respects.
In December 2009, Licensees met with Limbird, Worden Jr., and Worden Sr. to discuss acquiring the exclusive rights to market certain Safeblood Tech products overseas. During the meeting, Worden Sr. told Licensees that the products used a patented formula that he had invented. Safeblood Tech and Licensees eventually entered into a licensing agreement. Although Worden Sr.'s patent was not mentioned in the original agreement, the parties contemplated that the patent rights would be assigned to Licensees, and the agreement was later amended to make that explicit.
After signing the original licensing agreement, Yazdianpour emailed Limbird, asking about Worden Sr.'s relationship with another company and seeking clarification whether Licensees would be competing against that other company. Limbird explained that Worden Sr. had assigned the rights to U.S. Patent 6,303,112 (“the patent”) to another company in the United States, but that Licensees would have the exclusive rights to market the patented technology in all other countries. Both Worden Sr. and Limbird sent emails to Yazdianpour advising him that to receive patent protection, Licensees would need to register the patent in each country in which they planned to do business. Worden Sr. also sent Yazdianpour an email with instructions for checking the status of the patent on the United States Patent and Trademark Office (USPTO) website. Safeblood Group and Worden Sr. assert that, had Licensees checked the USPTO website, it would have shown that Worden Sr. had assigned an interest in the patent to the other company in 1999 and that the other company had given Worden Sr. a security interest in the patent in 2002.
On February 15, 2010, Worden Sr. learned from his attorney that it was too late to register the patent in any other country and that the patent would be legally protected only in the United States. Worden Sr. relayed this information to Limbird, who then informed Worden Jr. Nevertheless, on February 18, 2010, Worden Sr. executed an agreement giving Safeblood Tech the exclusive rights to the patent outside the United States. On March 2, 2010, Safeblood Tech assigned these patent rights to Licensees, amending the original agreement to provide Licensees and the LLC with the exclusive rights to the patent outside the United States.
Licensees proceeded with plans to distribute and sell the products in the Middle East until May 2010, when they discovered that they would not be able to register the patent in any country. Thereafter, Licensees brought suit, alleging the claims set forth above. The district court granted summary judgment to Safeblood Group and Worden Sr. on the fraud claims, holding that Licensees could not establish justifiable reliance because public records available on the USPTO website showed that Safeblood Tech did not own the exclusive rights to the patented technology. The remaining claims proceeded to trial, where a jury found that Safeblood Tech had breached its contract with Licensees and that Safeblood Group and Worden Sr. had violated the ADTPA. Although Licensees requested $825,169.70 in damages, the jury, as set forth above, awarded $786,000 for the breach-of-contract claim and no damages for the ADTPA claim, followed by the district court's award of $144,150.40 in prejudgment interest.
A magistrate judge received the jury's verdict in place of the district judge who had presided over the case. After reading the verdict into the record, the magistrate judge dismissed the jury and stated that the district court would enter judgment based on the jury verdict. Court was then adjourned. More than a month later, Licensees filed a brief objecting to the ADTPA verdict as inconsistent. Licensees raised the inconsistent-verdict issue again in their motion to amend the judgment, which the district court denied. Safeblood Group and Worden Sr. did not file a postverdict motion for judgment as a matter of law or for a new trial.
As an initial matter, we hold that Licensees have standing to bring suit. Licensees were parties to the contract that Safeblood Tech breached and were the parties allegedly harmed by the violation of the ADTPA and the defendants' fraud. Despite Safeblood Group's argument to the contrary, Licensees' decision not to include the LLC as a plaintiff did not deprive them of Article III standing. See ABF Freight Sys., Inc. v. Int'l Bhd. of Teamsters, 645 F.3d 954, 959–61 (8th Cir.2011) ().
Licensees argue that the district court erred in granting the defendants' motions for summary judgment on the common-law fraud claim (having abandoned their constructive fraud claim). We review de novo a district court's grant of summary judgment and its interpretation of state law, viewing the facts in the light most favorable to the nonmovant. Davidson & Schaaff, Inc. v. Liberty Nat'l Fire Ins. Co., 69 F.3d 868, 870 (8th Cir.1995).
Under Arkansas law, the elements of fraud are:
(1) a false representation of a material fact; (2) knowledge that the representation is false or that there is insufficient evidence upon which to make the representation; (3) intent to induce action or inaction in reliance upon the representation; (4) justifiable reliance on the representation; and (5) damage suffered as a result of the reliance.
Tyson Foods, Inc. v. Davis, 347 Ark. 566, 66 S.W.3d 568, 577 (2002). Because the very representations relied on can be what cause forbearance from further inquiry into a statement's falsity, justifiable reliance ordinarily “does not require the party to test the truth of such representations where they are within the knowledge of the party making them or where they are made to induce the other party to refrain from seeking further information.” Lancaster v. Schilling Motors, Inc., 299 Ark. 365, 772 S.W.2d 349, 351 (1989) (quoting Clay v. Brand, 236 Ark. 236, 365 S.W.2d 256, 260 (1963) ). A party to a business transaction is justified in relying on a misrepresentation of fact without investigation “not only where an investigation would involve an expenditure of effort and money out of proportion to the magnitude of the transaction but also where it could be made without any considerable trouble or expense.” Fausett & Co. v. Bullard, 217 Ark. 176, 229 S.W.2d 490, 491–92 (1950) (quoting Restatement of Torts § 540 (1938) ). A party must investigate an affirmative misrepresentation—as opposed to an undisclosed fact—only when “the facts should be apparent to one of his knowledge and intelligence from a cursory glance, or he has discovered something which should serve as a warning that he is being deceived.”Lancaster, 772 S.W.2d at 351 (quoting Prosser & Keeton on the Law of Torts § 108 (5th ed.1984)); see, e.g., Burgess v. French, 100 Ark.App. 51, 263 S.W.3d 578, 581–82 (2007) (...
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