Forklifts of St. Louis, Inc. v. Komatsu Forklift, USA, Inc., 98-1293

• Decision Date: 08 July 1999
• Docket Number: No. 98-1293,98-1293
• Citation: Forklifts of St. Louis, Inc. v. Komatsu Forklift, USA, Inc., 178 F.3d 1030 (8th Cir. 1999)
• Parties: , FORKLIFTS OF ST. LOUIS, INC., Plaintiff-Appellee, v. KOMATSU FORKLIFT, USA, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

178 F.3d 1030 FORKLIFTS OF ST. LOUIS, INC., Plaintiff-Appellee, v. KOMATSU FORKLIFT, USA, INC., Defendant-Appellant.

No. 98-1293.

United States Court of Appeals, Eighth Circuit.

Submitted Dec. 16, 1998.

Filed June 2, 1999.

Rehearing and Rehearing En Banc Denied

July 8, 1999.

Michael Joseph Morris, St. Louis, Missouri, argued (David Wells and Jeffrey R. Fink, on the brief), for Defendant-Appellant.

John W. Moticka, St. Louis, Missouri, argued (S. Jay Dobbs, on the brief), for Plaintiff-Appellee.

Before: BEAM, FLOYD R. GIBSON, and LOKEN, Circuit Judges.

LOKEN, Circuit Judge.

This diversity case arose when a distributor relationship went sour. The protagonists are Komatsu Forklift, U.S.A., Inc. ("Komatsu"), a Georgia manufacturer of Komatsu brand forklifts and parts, and Forklifts of St. Louis, Inc. ("FSI"), an established distributor of forklifts in the St. Louis area that agreed to add the Komatsu line. The destructive catalyst was Komatsu's broken promise to eliminate its existing St. Louis distributor, John J. Connell Co. ("Connell"). This deprived FSI of profits it expected to reap from becoming the only Komatsu distributor located in the St. Louis area, so FSI terminated the relationship and commenced this action for breach of promise. The significant legal issue on appeal is whether Missouri law provides a claim for negligent misrepresentation in these circumstances.

I.

In late 1993, FSI was a successful distributor of Clark brand forklifts, enjoying a twenty percent retail market share in its St. Louis trade area. Clark agreed that FSI could represent other forklift manufacturers because Clark was having problems supplying its dealers with enough product. At the same time, Komatsu wanted a new dealer in the St. Louis area because its existing dealer, Connell, was performing poorly, having less than three percent of the St. Louis retail market. FSI and Komatsu discussed FSI becoming a Komatsu dealer. To spark FSI's interest, Komatsu represented it was in the process of terminating Connell as a Komatsu dealer.

On June 10, 1994, the parties signed a written Dealer Sales and Service Agreement (the "Agreement") granting FSI the non-exclusive right to distribute Komatsu forklifts. The Agreement gave FSI, but not Komatsu, the right to terminate at any time on thirty days notice. FSI purchased a substantial inventory of Komatsu equipment and began construction of a new facility, called Forklift City, for the promotion and sale of Komatsu forklifts. When Komatsu did not promptly terminate Connell, FSI demanded a written promise that it would become the sole Komatsu distributor in the St. Louis area. On July 26, 1994, Komatsu sent FSI a fax stating, "Komatsu is committed to [FSI] as the sole dealer in St. Louis." But in the following months, Komatsu did not terminate Connell. Indeed, an invigorated Connell became a serious thorn in FSI's side, aggressively undercutting FSI's prices for Komatsu products, satisfying a growing portion of the local demand for Komatsu forklifts that FSI had planned to capture, and targeting FSI's Clark forklift customers for conversion to Komatsu.

On May 2, 1996, FSI terminated the Agreement and commenced this action, alleging that Komatsu had fraudulently and negligently misrepresented that it was terminating Connell. Komatsu contended it honestly represented being in the process of terminating Connell, a process that failed when Connell resisted and Komatsu had no sufficient contractual cause to terminate unilaterally. After a lengthy trial, the jury rejected FSI's claims of intentional fraud and promissory estoppel but awarded $417,000 in damages on its claim of negligent misrepresentation. The district court ¹ denied Komatsu's extensive post-trial motions. Komatsu now appeals, seeking judgment as a matter of law or a new trial. We affirm.

II.

Komatsu argues that FSI's claim of negligent misrepresentation is inconsistent with, and therefore barred by, the written Agreement between the parties. The Agreement contained a broad integration clause:

This Agreement reflects all the agreements ... by and between the parties. Neither party shall be liable for any representation made unless it is expressly set forth in this Agreement....

The Agreement assigned FSI an area of primary responsibility and stated that FSI's rights as a dealer were "nonexclusive." Komatsu contends that its pre-contractual promise to terminate Connell and make FSI the sole Komatsu dealer in St. Louis was inconsistent with these terms of the Agreement, and FSI may not obtain relief barred by the law of contracts through a claim in tort for negligent misrepresentation.

This is a difficult issue, and it appears to be unresolved under Missouri law. FSI appropriately cites Cabinet Distributors, Inc. v.. Redmond, 965 S.W.2d 309, 314 (Mo.App.1998), which broadly stated that the rule that a written contract does not bar claims of fraudulent inducement applies equally to claims that a contract was induced by one party's negligent misrepresentation. But the discussion in Cabinet Distributors was an alternative ground, the opinion did not deal satisfactorily with the complexities of the issue, and the court entirely ignored contrary authority from other jurisdictions across the country. Compare AKA Distributing Co. v. Whirlpool Corp., 137 F.3d 1083, 1086-87 (8th Cir.1998) (applying Minnesota law); Rio Grande Jewelers Supply, Inc. v. Data General Corp., 101 N.M. 798, 689 P.2d 1269 (1984); Keller v. A.O. Smith Harvestore Prods., Inc., 819 P.2d 69, 74-77 (Colo.1991) (Rovira, C.J., dissenting), and the authorities cited in those cases, with Cabinet Distributors and the authorities on which it relied. Thus, we are not at all confident that if presented with the question the Supreme Court of Missouri would adopt the broad ruling in Cabinet Distributors.

However, even if FSI's claim of pre-contractual negligent misrepresentation is barred as inconsistent with the written Agreement, FSI also presented evidence that Komatsu's negligent misrepresentations continued after the contract was formed. In July 1994, Komatsu promised FSI it would be the sole Komatsu dealer located in the St. Louis area, and Komatsu thereafter reassured FSI that the termination of Connell was still in progress. In reliance on those representations, FSI (i) did not exercise its right to terminate the Agreement at any time, and (ii) invested heavily in its plan to market Komatsu forklifts from a new Forklift City facility. It is well-settled that post-contract-formation misrepresentations of this kind will support an action for fraud or for negligent misrepresentation. See Jim Lynch Cadillac, Inc. v. Nissan Motor Acceptance Corp., 896 S.W.2d 704, 707 (Mo.App.1995); Eaton Corp. v. Easton Assoc., Inc., 728 F.2d 285, 291-94 (6th Cir.1984). This distinction suggests we should examine the jury's verdict more closely.

In its negligent misrepresentation instruction, the district court charged that the jury must find FSI relied on Komatsu's misrepresentations "in deciding to become or remain a dealer of Komatsu products." In other words, the instruction encompassed misrepresentations made both before and after contract formation. The jury then returned a general verdict for FSI on this claim. In most cases, if an appellate court finds error in one theory of liability upon which a general verdict may have rested, the verdict cannot be upheld. See Sunkist v. Winckler & Smith Co., 370 U.S. 19, 29-30, 82 S.Ct. 1130,...