Glass Design Imports, Inc. v. Imports Specialties
| Decision Date | 12 April 1989 |
| Docket Number | Nos. 87-2703,88-1078,s. 87-2703 |
| Citation | 867 F.2d 1139 |
| Parties | GLASS DESIGN IMPORTS, INC., Appellee, v. IMPORT SPECIALTIES, Gene Lepere, Robert G. Hall and Educators Publishing Service, Inc., Appellants. GLASS DESIGN IMPORTS, INC., Appellant, v. IMPORT SPECIALTIES, Gene Lepere, Robert G. Hall and Educators Publishing Service, Inc., Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Charles Thomas, Kansas City, Mo., for appellants Import Specialties, et al.
Marie L. Gockel, Kansas City, Mo., for appellee Glass Design Imports, Inc.
Before HEANEY, * and BOWMAN, Circuit Judges, and ROSS, Senior Circuit Judge.
Gene Lepere, Robert Hall, Educators Publishing Service, Inc. (EPS) and their business, Import Specialties, appeal from the district court's order entering judgment upon a jury verdict awarding both actual and punitive damages in favor of Glass Design Imports, Inc. on Glass Design's claims of fraud and tortious interference with business expectancy. In this diversity case, the defendants filed timely appeal of the denial of their motions for judgment notwithstanding the verdicts. Glass Design has filed a cross-appeal.
Rastal GmbH & Co. KG is a West German corporation in the business of manufacturing and selling glassware. Plaintiff/appellee/cross-appellant Glass Design is a Missouri corporation which alleged that Rastal and its American agent, Import Specialties, made fraudulent representations and breached an agreement that Glass Design would be the exclusive distributor of Rastal products in the United States. Other named defendants, Lepere, Hall, and EPS have a financial stake in Import Specialties. At trial, Rastal was also a named defendant. The jury entered a verdict of $250,000 against Rastal on a breach of contract claim. It also entered a verdict of $250,000 for Glass Design against all defendants on the fraud count and $30,000 punitive damages against each defendant. The district court reversed the $30,000 punitive damage award against Import Specialties as it was unincorporated and thus not susceptible to punitive damages. On the tortious interference claim, $1,000 in actual damages and $10,000 in punitive damages were also awarded against Lepere.
After post-trial motions, Glass Design was to receive $245,000 on either the contract or fraud claim but not both. The punitive damage awards and awards against Lepere were not altered. The rendered opinion is reported at Glass Design Imports, Inc. v. Rastal GmbH & Co. KG, 672 F.Supp. 419 (W.D.Mo.1987). Rastal has settled with Glass Design. The remaining defendants prosecute this appeal.
Lepere had been marketing Rastal products since 1979. In 1980 Robert Sullivan first met Lepere at a St. Louis beer wholesaler's convention where Lepere was displaying Rastal products. In January 1981 Sullivan called Lepere and said he would be interested in handling Rastal products. Lepere sent Sullivan a letter dated January 7, 1981, thanking him for his interest, along with two accompanying Rastal catalogs containing pricing and duty information.
In February 1981 business negotiations commenced in Kansas City between the three principals of Glass Design (Robert Sullivan, Thomas Sullivan and William Harsh), and Lepere of Import Specialties. In April the parties again met in Toronto along with Lambert Diks of Rastal and orally agreed that Glass Design would be the sole importer of Rastal products with the exception of pre-existing Rastal customers and breweries (marketed by Lepere). Glass Design understood that the products were made by Rastal in Germany and that it was to exclusively control United States retail distribution.
It appears that numerous representations were made by Diks in this regard. Evidence of representations made by Lepere, however, was less clear. Harsh testified that "the basic agreement that we reached in Toronto was that we would be the exclusive distributor in the United States of America." When asked about discussions of the products' country of origin, Thomas Sullivan responded "Bill Harsh asked on a lot of different items as he was looking at [Diks and Lepere] and every answer was [that the products were] made in West Germany."
The representation about origin of the products continued in a "write-up" sent by Lepere to Glass Design in June 1981. The write-up contained promotional literature for possible use in Glass Design's catalog. It described Rastal as having its own artisans for making and manufacturing mouth-blown molten glass creations.
In August merchandise arrived in Glass Design's warehouse with some cartons marked "made in Czechoslovakia." The "made in West Germany" stickers had fallen off the boxes. Further, invoices from Rastal depicted the products as having been made in West Germany. A promotional film stated that the Rastal factory produces glass both by hand and by machine.
At trade shows, Glass Design soon became aware that it was not the sole Rastal distributor in the United States. It discovered that other buyers had also received the merchandise. Its inquiry culminated in a meeting in Germany where it found that Rastal was not capable of blowing glass, nor had it had the facilities for many years. The two alternate fraud theories of place of manufacture and exclusivity were submitted to the jury.
The tortious interference claim against Lepere arose from the factual setting in which Walter Cribbins Company sought to purchase 200 beer steins from Glass Design. Glass Design had none in stock so called upon Lepere who informed that Import Specialties also had none. Later Lepere himself made the sale to the company without a commission to Glass Design although Glass Design had arranged the sale.
The fraud theories were submitted to the jury in the disjunctive. By special interrogatories, the jury determined that the parties entered into their agreement in April 1981 in Toronto. As to damages, Glass Design's witness, George Arneson, testified to the following elements:
(1) Salaries and Benefits Foregone $163,000.00
(2) Loan Losses 74,000.00
(3) Capital Investment 3,000.00
(4) Legal Expenses 5,000.00
(5) Lost Profits on Direct Sales 81,000.00
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TOTAL $326,000.00
Defendants objected to the expert opinion evidence on tangible losses based upon the facts the expert witness was asked to assume.
Upon the jury's award of $250,000, a $5,000 remittitur was ordered to make the amount $245,000 ($326,000 less $81,000 lost profits). For reversal the defendants argue the wrongful denial of their motions for judgment notwithstanding the verdicts as follows:
(1) The district court erred in failing to enter a judgment notwithstanding the fraud verdict in favor of the defendants.
(2) The district court erred in failing to remit $163,000 from the fraud verdict and in failing to limit Glass Design to $81,000 "benefit of the bargain" actual damages on the fraud verdict.
(3) The district court erred in failing to enter a judgment notwithstanding the verdict in favor of defendants Hall and EPS on the punitive damage awards for fraud.
(4) The district court erred in failing to grant a judgment notwithstanding the verdict in favor of Lepere on the tortious interference verdict.
On cross-appeal, Glass Design asserts the district court erred in failing to submit tendered instruction Nos. 1-9 regarding a breach of contract claim against defendants Import Specialties, Lepere, Hall, and EPS. We affirm in part and reverse in part.
The misrepresentations as to origin of the products and exclusivity of the distributorship were both numerous and ongoing. In its reply brief, the defendants note that the important date of April 1981 must be the focal point as that was when the Toronto meeting occurred and the arrangement was established. They attempt to place the blame on Diks who indicated that Germany was the country of origin.
Secondly, the defendants contend that the only possible construction of fraud by Lepere could be fraud by concealment or silence. They insist that Lepere made no affirmative representations at the Toronto meeting and the issue of fraud by concealment was not pleaded or submitted to the jury.
Glass Design points to the fact that Lepere had worked for Rastal since 1979 and must have known the origin of the goods. Lepere maintained regular phone contact with Diks and knew the difference between a column one country and a column two country (countries with different tariffs or duties owed on samples brought into the United States based in part on the samples' country of origin). Lepere's deposition testimony revealed that he "perhaps" knew that some Rastal products were not manufactured in West Germany in October or November 1980. Lepere had the responsibility as the representative for Rastal for the whole of the United States since 1979.
Glass Design further notes Lepere's representation that all other distributors would be "cut off" after it complained that others were marketing Rastal goods. Lepere correctly responds that any representations made after April 1981 could not have been relied upon by Glass Design in entering into the agreement.
We believe it was reasonable for the jury to infer and find that either one or both of Glass Design's two theories of fraud existed from the manifestations of the various defendants including Lepere. Falsity, knowledge of falsity, materiality, reliance, causation and damages were all present. "[F]raud may be inferred from facts and circumstances and need not be shown by direct evidence." Rogers v. Hickerson, 716 S.W.2d 439, 446 (Mo.Ct.App.1986). Proof of each element may rest upon circumstantial evidence. Martin v. Brune, 631 S.W.2d 77, 80 (Mo.Ct.App.1982). We are mindful that fraud is...
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