American Trim, L.L.C. v. Oracle Corp.
| Decision Date | 01 September 2004 |
| Docket Number | No. 02-4186.,02-4186. |
| Citation | 383 F.3d 462 |
| Parties | AMERICAN TRIM, L.L.C., Plaintiff-Appellee, v. ORACLE CORPORATION, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Appeal from the United States District Court for the Northern District of Ohio, James G. Carr, J.
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Jeffrey S. Creamer, Shumaker, Loop & Kendrick, Toledo, OH, James E. Burke, III (argued and briefed), Steven C. Coffaro (briefed), Keating, Muething & Klekamp, Cincinnati, OH, for Plaintiffs-Appellees.
Walter J. Rekstis, III, James D. Thomas (argued and briefed), Harris A. Senturia (briefed), Squire, Sanders & Dempsey, Cleveland, OH, Andrew L. Frey (briefed), Mayer, Brown, Rowe & Maw, LLP, New York, NY, Robert L. Bronston (briefed), Mayer, Brown, Rowe & Maw, Washington DC, Karen P. Scarr (briefed), Dorian Daley (briefed), Oracle Corporation, Redwood City, CA, for Defendants-Appellants.
Before: SUHRHEINRICH and GIBBONS, Circuit Judges; LAWSON, District Judge.*
Plaintiff-appellee American Trim, LLC ("American Trim") brought suit against defendant-appellant Oracle Corporation ("Oracle"), alleging claims of breach of contract, breach of express and implied warranties, negligent misrepresentation, and fraudulent inducement stemming from Oracle's sale of a software package to American Trim. Following a denial of Oracle's motion for partial summary judgment, the district court divided the case into three parts: In Phase I, the jury would decide the liability issues relating to American Trim's misrepresentation and fraud claims. If American Trim prevailed in Phase I, the jury would determine damages in Phase II. In Phase III, the jury would hear American Trim's breach of contract claims. After a trial on the merits, the jury found for American Trim in both Phase I and Phase II and awarded $3,000,000 in compensatory damages and $10,000,000 in punitive damages. American Trim then moved to voluntarily dismiss its contract claims under Federal Rule of Civil Procedure 41(a)(2). The district court granted this motion after construing it as a motion for leave to amend the complaint by deleting the contract claims. Oracle filed a motion for a new trial, or, in the alternative, remittitur, and a motion for judgment as a matter of law. The district court denied these motions. Oracle appeals, arguing (1) the district court erred when it denied its motion for judgment as a matter of law on American Trim's fraud claims; (2) the district court abused its discretion by dividing the trial into three phases; (3) the compensatory damages were excessive; (4) Oracle was entitled to judgment as a matter of law on the issue of punitive damages; and (5) the ratio of punitive to compensatory damages violated due process. For the following reasons, we affirm the judgment of the district court.
American Trim was formed in 1996 as a joint venture between Alcoa, Inc., and Superior Metal Products, Inc.1 It manufactures and sells component parts to automobile and appliance manufacturers, including Ford, General Motors, Whirlpool, and General Electric. These manufacturers require their suppliers, like American Trim, to process their orders electronically using Electronic Data Interchange ("EDI"). EDI enables companies to exchange information, such as orders and shipment status, between different computer systems (e.g., between manufacturers and suppliers). Alcoa and Superior Metal Products both had separate EDI systems, but these systems could not communicate with each other, and the Superior Metal Products system was not Y2K compliant. In late 1996, American Trim began the process of acquiring an enterprise resource planning ("ERP") software system that would provide the integrated EDI technology American Trim needed. ERP software consists of numerous application programs that perform a broad variety of functions, such as financial accounting, human resources, payroll, manufacturing planning, and EDI.
Oracle is a supplier of business software. It licenses a suite of ERP software called "Oracle Applications." In the 1990s, Oracle worked with Radley Corporation, another software vendor, to offer EDI capabilities to automotive businesses. (Appellant's Br. at 5.) In 1996, Oracle initiated plans to develop software that would integrate Radley's EDI automotive software, CARaS ("Computer Aided Release Accounting System"), with Oracle ERP software in order to allow "automatic data exchange without the need for customized integration."
Hank Atwell, American Trim's manager of information systems ("I/S"), put together a list of twenty-five leading software vendors who were candidates to provide a new integrated system, and then narrowed that list down to six vendors, including Oracle. Craig Rogers, American Trim's EDI expert, testified that EDI was a "critical determinant" in including or eliminating participants in the selection process. According to Rogers, one of Oracle's competitors was eliminated from the process when it informed American Trim that it did not have the integrated EDI functionality American Trim was seeking.
In December 1996, an employee in American Trim's I/S department contacted Mike Vandivier, a sales representative for Oracle, and requested information about Oracle's manufacturing software and applications. She told Vandivier that American Trim wanted an integrated system with EDI capabilities. Vandivier did not know at that time whether Oracle could satisfy American Trim's needs, so he spoke with other people within the company, including Peter Ciccarelli, Oracle's sales manager for the mid-Atlantic region. Ciccarelli suggested to Vandivier that a product named Oracle Automotive might work for American Trim. He told Vandivier to try to get American Trim's representatives to come to a demonstration of the product in Detroit.
In March 1997, Oracle sent American Trim a "Statement of Direction," which described Oracle Automotive as "an integrated supply chain management solution for ... suppliers of the automotive industry." The Statement of Direction consistently describes Oracle Automotive in the present tense:
Oracle Automotive supports the key EDI transactions used within the automotive supply chain. Oracle EDI Gateway, Radley CARaS, and other transaction software, provide the necessary components to enable EDI transmission of automotive documents between trading partners.
However, the Statement of Direction also notes that:
The features listed in this statement of direction are planned for Beta release early in calendar Q1 1997 and are based on Oracle Applications Release 10.7 with Smartclient. Production release will be achieved as soon as successful Beta testing is completed.
In the software industry, "Beta release" refers to a stage of software development in which the software is released to a limited number of customers for testing and further development before being released to the general public. According to Oracle, Oracle Automotive entered Beta testing in June 1997. Vandivier testified that he was aware in spring 1997 that Oracle Automotive was limited in availability, but that Ciccarelli told him to proceed with his negotiations with American Trim because the product would be available by the time American Trim was ready to implement it.
When Atwell saw the reference to Beta testing in the Statement of Direction, he asked Oracle if he could see the software in use at a customer's site. Vandivier suggested instead that he attend a demonstration at Oracle's automotive center in Detroit because it would be too intrusive to go to a customer and he "didn't think [a customer] would give them a good show." Atwell testified that he made clear to Vandivier that American Trim would not be interested in purchasing Oracle's software unless Oracle Automotive was included.
In March 1997, Atwell prepared a Request for Authorization ("RFA") for his plan to convert the company to new software. The RFA recommended the Oracle Applications system as the "best fit" for American Trim:
American Trim sent its I/S group to Troy, Michigan on April 24, 1997, to see a live demonstration of Oracle Automotive. The purpose of attending the presentation was to see the EDI functionality operating before American Trim actually ordered it. Vandivier opened the presentation by telling the American Trim representatives that what they were going to see was "live" and "in production." During the presentation, Radley representatives demonstrated Radley CARaS and an Oracle representative demonstrated certain modules of Oracle Applications. Jim Butts of Oracle and John Walczy of Radley gave a slide presentation to illustrate the Oracle-Radley partnership. The slides, like the Statement of Direction, described Oracle Automotive in the present tense, as an existing integrated EDI product. The slides included (1) a statement that the Oracle Automotive Solution "fulfills" industry supply chain EDI requirements; (2) a depiction of the integrated flow of EDI transactions between Oracle Applications and the Radley CARaS software; and (3) statements that "Oracle Automotive is ... [p]owerful capabilities [sic] through two programs" and that "Oracle supports, warrants & enhances the complete solution over time." (emphasis in original).
After the slide show, Butts conducted a demonstration showing the integrated flow of EDI transactions directly from the Radley CARaS component into the Oracle ERP applications. Butts indicated to the American Trim I/S representatives that what they were seeing was actually happening and never advised that it was a simulation. Vandivier testified that, as a result...
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