Utah Foam Products Co. v. Upjohn Co.

• Decision Date: 27 June 1996
• Docket Number: Civil No. 87-C-955G.
• Citation: 930 F. Supp. 513
• Parties: UTAH FOAM PRODUCTS CO., Plaintiff, v. The UPJOHN COMPANY, Defendant.
• Court: U.S. District Court — District of Utah

930 F. Supp. 513

UTAH FOAM PRODUCTS CO., Plaintiff, v. The UPJOHN COMPANY, Defendant.

Civil No. 87-C-955G.

United States District Court, D. Utah, Central Division.

June 27, 1996.

COPYRIGHT MATERIAL OMITTED

C. Richard Henriksen and Ralph W. Curtis, Salt Lake City, UT, for Plaintiff.

Stephen B. Nebeker, Jonathan A. Dibble, Rick L. Rose, Rick B. Hoggard, Salt Lake City, UT, for Defendant.

MEMORANDUM DECISION AND ORDER

J. THOMAS GREENE, District Judge.

This matter is before the court on Upjohn's Motion for Judgment as a Matter of Law, or in the alternative New Trial or Remittitur, for both compensatory and punitive damages, after trial to a jury February 20 through March 4, 1996. Also before the court is Upjohn's Objection to an award of prejudgment interest and the postjudgment interest rate as set forth in Utah Foam's proposed form of judgment. The jury determined in a Special Verdict that Upjohn, when it was a manufacturer and seller of isocyanate during the time period in question, made both fraudulent and negligent misrepresentations to Utah Foam, a purchaser of isocyanate. On March 1, 1996, the jury rendered a verdict in favor of Utah Foam in the amount of $313,593 in compensatory damages. On March 4, 1995 the jury returned a verdict of $5.5 million in punitive damages.

Plaintiff is represented by C. Richard Henriksen and Ralph Curtis. Defendant is represented by Stephen B. Nebeker, Jonathon Dibble and Rick Hoggard. The parties have filed extensive legal memorandums, argument was presented at a hearing on April 22, 1996, and the matter was taken under advisement. Thereafter, both parties submitted additional legal analysis relative to punitive damages in view of the Supreme Court's decision in BMW of North America, Inc. v. Gore, ___ U.S. ___, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996), which was handed down after this case was argued.

STANDARDS

Motion for Judgment as a Matter of Law

The standard for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure is rigorous. Judgment as a matter of law is proper "only when the evidence so strongly supports an issue that reasonable minds could not differ." Delano v. Kitch, 663 F.2d 990, 1002 (10th Cir.1981). Courts must view the evidence in the light most favorable to the nonmoving party, without weighing the evidence, passing on the credibility of witnesses, or substituting the court's judgment for that of the jury. Rajala v. Allied Corp., 919 F.2d 610, 615 (10th Cir.1990), cert. denied, 500 U.S. 905, 111 S.Ct. 1685, 114 L.Ed.2d 80 (1991); Ryder v. City of Topeka, 814 F.2d 1412, 1418 (10th Cir.1987); Brown v. McGraw-Edison Co., 736 F.2d 609, 613 (10th Cir.1984). If conflicting material evidence exists, or if the evidence is insufficient to warrant a "one-way conclusion," judgment as a matter of law is inappropriate. Zuchel v. City and County of Denver, Colorado, 997 F.2d 730, 734 (10th Cir.1993). Accordingly, as to defendant's motion for judgment as a matter of law, this court views the evidence in this case in favor of Utah Foam and extends to it the benefit of all reasonable inferences. Finley v. U.S., 82 F.3d 966 (10th Cir.1996).

Motion for New Trial

The party seeking a new trial must demonstrate that the verdict is "not based on substantial evidence." White v. Conoco, Inc., 710 F.2d 1442 (10th Cir.1983). When the verdict is clearly and decidedly against the weight of the evidence, a new trial is proper. Getter v. Wal-Mart Stores, Inc., 66 F.3d 1119, 1125 (10th Cir.1995), cert. denied, ___ U.S. ___, 116 S.Ct. 1017, 134 L.Ed.2d 97; Holmes v. Wack, 464 F.2d 86, 88-89 (10th Cir.1972); May v. Interstate Moving & Storage, 739 F.2d 521, 525 (10th Cir.1984). This generally presents a question of fact to be determined by the trial court. Brown, 736 F.2d at 616; Richardson v. City of Albuquerque, 857 F.2d 727, 730 (10th Cir.1988); see 11 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure, § 2806.

Remittitur

When confronted with the contention that compensatory or punitive damages are excessive, the trial court may order a remittitur. Klein v. Grynberg, 44 F.3d 1497, 1507 (10th Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 58, 133 L.Ed.2d 22 (1995). Whether a punitive damage award is excessive and requires remittitur implicates state law in diversity cases as well as federal constitutional law. Crookston v. Fire Insurance Exchange, 817 P.2d 789 (Utah 1991) ("Crookston I"); Crookston v. Fire Insurance Exchange, 860 P.2d 937 (Utah 1993) ("Crookston II"); BMW, ___ U.S. ___, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996).

FACTUAL BACKGROUND

Plaintiff presented evidence to the jury of damages resulting from Upjohn's allegedly fraudulent and negligent misrepresentations that Utah Foam would receive the "best" price in sales of isocyanate by Upjohn to Utah Foam. Plaintiff's experts compared transactions between Upjohn and Utah Foam with transactions between Upjohn and competitors of Utah Foam in order to establish damages which resulted from price differentials or "lost margins." To determine the comparative price, plaintiff's experts identified invoices and other documents and opined that adjustments which were granted by Upjohn to certain competitors of Utah foam for such things as freight allowances and packaging differentials resulted in price advantages to such competitors to the detriment of Utah Foam. The experts used their own judgment to determine (1) the time frame in which to compare invoices, (2) how to use the invoices, (3) how to arrive at an appropriate freight allowance, (4) how to calculate and compare packaging differentials, and (5) how to calculate and quantify other special adjustments. In doing so, Charles Peterson and Kenneth Brown, plaintiff's experts, made different judgment calls and used different approaches in calculating damages. For instance, (1) Peterson generally used a 30 day time frame while Brown made comparisons within a 60 to 90 day time frame; (2) Peterson generally made comparisons using single invoices, although on three comparisons he averaged multiple invoices and credits; Brown did not average any invoices; (3) Brown computed average freight allowances to competitors of Utah Foam in some instances and in other instances used only actual freight allowances; Peterson used the actual freight allowance given on the invoice, except for three comparisons in which he utilized a weighted average; (4) Peterson used Utah Foam's contract price list in order to establish the price differential in packaging costs between Utah foam and its competitors, except that when Utah Foam's price list was unavailable he used Upjohn's general price list; Brown used Upjohn's general price list for all transactions except that for certain transactions closer in time he used Utah Foam's contract price list. Both declined to use the Upjohn marketing price book. Brown and Peterson differed on 24 of the 49 packaging differentials. In addition, (5) both exercised judgment in opining that certain special situations were intended and actually resulted in price reductions to competitors. This includes the granting of credits by Upjohn for use of out-of-spec material, testing the product, settlement of a damage claim, and staggered price increases.

It was apparent that plaintiff's experts were unable to arrive at a precise damage figure concerning "lost margins" in pretrial proceedings or at trial. Using 53 comparisons in his report submitted before trial, Peterson calculated plaintiff's lost margin loss at $329,846. He estimated additional damages of $89,720 for 1981, 1982, and 1985, years where comparable invoices were not available. Peterson's total lost margins damage figure was $419,566. Brown prepared an early 1995 report in which he calculated plaintiff's lost margin loss at $336,525. He estimated additional damages at 176,675, for a total lost margins figure of $513,200. Brown and Peterson had different figures on at least 22 of the 53 comparisons.

After a pre-trial court ruling,¹ Peterson revised his report to include 62 comparisons which resulted in $440,017 in lost margin damages. He estimated additional lost margins for fiscal years 1979-1982 of $443,986. Also, Peterson calculated "lost sales" for fiscal years 1983-1985. Brown arrived at a new lost margins figure of $450,358 with the 62 comparisons. He estimated additional damages of $150,119, but did not calculate lost sales. Brown and Peterson differed in 33 of the 62 comparisons.

The court rejected the "estimated" and the newly proffered "lost sales" figures presented on the eve of trial, and plaintiff withdrew three comparisons. The experts then revised their calculations as to the remaining 59 comparisons: Peterson's lost margins figure increased to $447,515 (from $440,017 on 62 transactions) and Brown's figure decreased to $423,332 (from $450,358 on 62 transactions). Brown and Peterson still arrived at different figures on 20 of the 59 comparisons.

Testimony at trial concerning freight allowances was confusing and contradictory. Bruce Wilson, president of Utah Foam, testified that he understood that Upjohn would always grant four cents per pound freight allowance to customers who picked up the product at the factory outlet.² Upjohn presented evidence that it based freight allowances on the published tariffs.³ A competitor of Utah Foam testified that Upjohn would allow freight costs of at least $1.00 per mile.⁴ Based upon that evidence during trial, the court removed from consideration by the jury $133,921 in the calculations of defendant's experts.⁵

From the aforesaid various and conflicting presentations of evidence, the jury apparently chose Peterson's calculations, based at least in part on an exhibit presented after his testimony was completed which the parties stipulated he would have identified as his work product if he had been called to further testify. That exhibit purported to spread the losses he had calculated into yearly...