Rajala v. Allied Corp.
Decision Date | 02 November 1990 |
Docket Number | Nos. 88-1727,88-1762,s. 88-1727 |
Parties | Eric C. RAJALA, Trustee in Bankruptcy for General Poly Corporation, Plaintiff/Appellee and Cross-Appellant, v. ALLIED CORPORATION, Defendant/Appellant, and Cross-Appellee. |
Court | U.S. Court of Appeals — Tenth Circuit |
Charles W. German (Matthew J. Verschelden, Stinson, Mag & Fizzell, Kansas City, Mo., Roger D. Stanton, Stinson, Mag & Fizzell, Overland Park, Kan., and Brent L. Brown, Stinson, Mag & Fizzell, Dallas, Tex., with him on the briefs), for plaintiff/appellee and cross-appellant.
Before HOLLOWAY, SEYMOUR and EBEL, Circuit Judges.
Because of the complex factual history of this action, the evidence relevant to each issue is set forth in the subsection addressing that particular issue. The following is simply a brief summary of the events which preceded this litigation.
Plaintiff-appellee General Poly Corporation ("General Poly") was a manufacturer of plastic films used to manufacture products such as merchandise bags and rubbish can liners. Defendant-appellant Allied Corporation ("Allied") is a chemical company which produces, among other things, the resins used by manufacturers of plastic films such as General Poly.
Prior to the formation of General Poly, representatives of the yet unincorporated company met with Allied executives to discuss the development of certain high molecular weight ("HMW") resin products. HMW resins are desirable because their greater strength allows for production of a thin film comparable in strength to thicker films produced from other resins. At that time, there was no domestic producer of HMW resins.
The two companies entered into several agreements concerning the HMW resin. Allied proceeded with its development efforts, but its resin development did not meet General Poly's expectations. General Poly purchased substandard ("off-grade") HMW resin from Allied in order to fill some of its needs, although the majority of its resin was obtained from other sources.
General Poly ultimately was unable to operate as a profitable company. General Poly filed for protection in bankruptcy and the trustee in bankruptcy brought a variety of tort and contract claims against Allied in this action. The district court dismissed most of the claims by directed verdict and summary judgment. However, General Poly prevailed on its claim for breach of fiduciary duty, obtaining a jury verdict in its favor for just over $70 million dollars in compensatory and punitive damages. Allied appeals that jury verdict and the denial of its motion for j.n.o.v. General Poly cross-appeals the unfavorable directed verdicts on its other claims.
The only claim brought by General Poly which survived Allied's motions for summary judgment and directed verdict was the claim for breach of fiduciary duty. The jury returned a verdict in favor of General Poly, ruling that Allied owed General Poly fiduciary duties and that Allied had breached those duties. Allied moved for judgment notwithstanding the verdict, arguing that the jury instructions misinterpreted Kansas' law of fiduciary duties and that General Poly had presented insufficient evidence to demonstrate either that Allied owed General Poly fiduciary duties or that Allied breached any such duties.
On appeal, Allied challenges the district court's denial of its motion for judgment notwithstanding the verdict on each of the grounds asserted below. In subpart one of this section, we set forth our understanding of the law of fiduciary relationships in Kansas. In subpart two, we review the evidence presented below and hold that Allied's motion for judgment notwithstanding the verdict was improperly denied because there was insufficient evidence of a fiduciary relationship.
In Denison State Bank v. Madeira, 230 Kan. 684, 691, 640 P.2d 1235, 1241 (1982) It may be said that generally there are two types of fiduciary relationships: (1) those specifically created by contract such as principal and agent, attorney and client, and trustee cestui que trust, for example, and those created by formal legal proceedings such as guardian and/or conservator and ward, and executor and administrator of an estate, among others, and (2) those implied in law due to the factual situation surrounding the involved transactions and the relationship of the parties to each other and to the questioned transactions.
the Supreme Court of Kansas summarized the law of fiduciary relationships as follows:
Here, as in Denison, it is the second type of fiduciary relationship with which we are concerned.
Determination of whether this second type of fiduciary relationship " " Id. (quoting Curtis v. Freden, 224 Kan. 646, 651, 585 P.2d 993, 998 (1978)). Although such fiduciary relationships cannot be defined with precision, the Supreme Court of Kansas has prescribed "certain broad principles which should be considered in making the determination of whether a fiduciary relationship exists in any particular factual situation:
A fiduciary relationship imparts a position of peculiar confidence placed by one individual in another. A fiduciary is a person with a duty to act primarily for the benefit of another. A fiduciary is in a position to have and exercise, and does have and exercise influence over another. A fiduciary relationship implies a condition of superiority of one of the parties over the other. Generally, in a fiduciary relationship, the property, interest or authority of the other is placed in the charge of the fiduciary.
Id. (emphasis in original).
The court in Denison made clear that each of the general considerations listed above need not be present in every case in which a fiduciary relationship is alleged. However, the court emphasized that an overriding consideration in the law of fiduciary relationships was that "one may not abandon all caution and responsibility for his own protection and unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the one sought to be held liable as a fiduciary." Denison, 230 Kan. at 696, 640 P.2d at 1243-44 (emphasis added). The court went on to state that "[t]his is particularly true when one ... is fully competent and able to protect his own interests." Id.
Id. 191 Kan. at 170, 380 P.2d at 426 (citations omitted) (emphasis added). Although a fiduciary relationship may arise out of an agreement to act together for the mutual benefit of the parties, such a relationship cannot be established by accident or inadvertence.
Wolf v. Brungardt, 215 Kan. 272, 285, 524 P.2d 726, 736 (1974) (emphasis added).
This court has also recognized that conscious assumption of the alleged fiduciary duty is a mandatory element under Kansas law. See Hotmar v. Lowell H. Listrom & Co., Inc., 808 F.2d 1384, 1387 n. 3 (10th Cir.1987); cf. 36A C.J.S. Fiduciary, 385 (1955) ("As a general rule, a fiduciary relationship is established only when it is shown that the confidence reposed by one person was actually accepted by the other, and merely reposing confidence in another may not, of itself, create the relationship") (footnotes omitted).
Although the courts of Kansas have suggested that a somewhat more protective approach may be used when one party is under a disability or disadvantage, Cornett v. Roth, 233 Kan. 936, 941, 666 P.2d 1182, 1186 (1983), Wedman v. Home Nat. Bank of Arkansas City, No. 88-1439-K (D.Kan., Jan. 25, 1990) (WESTLAW, 1990 WL 7501), this more protective approach will ordinarily not be utilized as between two or more business people or business entities who each possess the capacity to protect themselves. See Ritchie Enterprises v. Honeywell Bull, Inc., 730 F.Supp. 1041, 1054 (D.Kan.1990) ( ). The Supreme Court of Kansas has cautioned against an approach which would unfairly "convert ordinary day-to-day business transactions into fiduciary relationships where none were intended or anticipated." Denison, 230 Kan. at 696, 640 P.2d at 1243.
Allied made a motion for directed verdict at the end of plaintiff's case and again following presentation of...
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