Hyundai Motor Finance Co. v. McKay Motors I, LLC

• Decision Date: 31 July 2009
• Docket Number: No. 08-3214.,08-3214.
• Citation: 574 F.3d 637
• Parties: HYUNDAI MOTOR FINANCE COMPANY, Appellant, v. McKAY MOTORS I, LLC; John P. McKay, Jr., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

574 F.3d 637

HYUNDAI MOTOR FINANCE COMPANY, Appellant, v. McKAY MOTORS I, LLC; John P. McKay, Jr., Appellees.

No. 08-3214.

United States Court of Appeals, Eighth Circuit.

Submitted: April 16, 2009.

Filed: July 31, 2009.

Nathan M. Norton, argued, Charles T. Coleman, on the brief, Little Rock, AR, for appellant.

Eric D. Wewers, argued, Little Rock, AR, for appellee.

Before WOLLMAN, MELLOY and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

In this diversity action for breach of contract, the district court¹ entered judgment on a jury verdict in favor of Hyundai Motor Finance Company ("Hyundai Finance") against McKay Motors I, LLC ("McKay Motors") and John P. McKay, Jr. Hyundai Finance appeals the district court's denial of its post-verdict motion for judgment as a matter of law concerning the amount of damages. For the following reasons, we affirm.

I. BACKGROUND

In January 2005, McKay Motors entered into an inventory loan and security agreement with Hyundai Finance, a so-called "captive finance company" for Hyundai Motor America ("Hyundai Motor"), the distributor of Hyundai vehicles in the United States. Hyundai Finance agreed to provide floor plan financing for McKay Motors's inventory of Hyundai vehicles. In turn, McKay Motors agreed to remit to Hyundai Finance the amount of the outstanding advance on each vehicle that it sold. Hyundai Finance took a security interest in the inventory and other collateral at McKay Motors's dealership. In the event that McKay Motors defaulted, Hyundai Finance was authorized to take possession of the collateral and dispose of it by any commercially reasonable means, including by selling certain types of vehicles to Hyundai Motor under a separate repurchase agreement.

In July 2006, during a routine audit, Hyundai Finance discovered that McKay Motors had sold vehicles "out of trust"— that is, without remitting the amount of the outstanding advances on those vehicles to Hyundai Finance in a timely manner. As of July 19, 2006, McKay Motors had an "SOT balance" of $228,000,² meaning that McKay Motors owed Hyundai Finance $228,000 for vehicles sold out of trust. On that date, Hyundai Finance sent a letter to Mr. McKay, the namesake and guarantor of McKay Motors, to inform him of the deficit and to demand immediate payment. Hyundai Finance did not exercise its right to take possession of McKay Motors's inventory, nor did it take other steps to stop McKay Motors from doing business. Mr. McKay allegedly responded to Hyundai Finance's initial demand by indicating that he would need a loan to pay off the SOT balance due to a shortage of operating capital at McKay Motors, among other things.

On September 8, 2006, Hyundai Finance sent a letter to McKay and Company, LLC ("McKay and Company"), a separate entity managed by Mr. McKay, offering a loan of $1.25 million. The proposed loan agreement was subject to numerous conditions, including McKay Motors having $400,000 in cash on hand at the time of closing to apply to its SOT balance and other outstanding debts with Hyundai Finance. On September 13, 2006, Mr. McKay accepted the terms of Hyundai Finance's proposal. Over the next two months, however, this loan agreement unraveled. By December, it was clear that the closing would not occur.

On December 20, 2006, Hyundai Finance filed this diversity action for breach of the inventory loan and security agreement. As of that date, the SOT balance had increased to $448,000. On January 9, 2007, the district court ordered McKay Motors to deliver its inventory and the other collateral at the dealership to Hyundai Finance for liquidation.

According to Hyundai Finance's calculations, McKay Motors owed $1.36 million at the time Hyundai Finance took possession of the collateral. This amount included the SOT balance ($448,000) and the principal due on forty-six vehicles remaining in McKay Motors's inventory ($911,000). Hyundai Motor repurchased seventeen of those vehicles for $344,000 and Hyundai Finance sold the remaining twenty-nine vehicles at auction for $383,000, which resulted in a total credit to McKay Motors of $727,000. After accounting for additional fees and expenses as well as the proceeds from the sale of other collateral, Hyundai Finance determined that McKay Motors still owed $609,000 in principal and fees and $210,000 in interest, for a total deficiency of $819,000.

At trial, Hyundai Finance sought to recover damages in the amount of $819,000. Although the jury found in favor of Hyundai Finance on its breach of contract claim and rejected the defendants' counterclaims, the jury found that the amount of damages suffered by Hyundai Finance was $276,000. Hyundai Finance then moved for judgment as a matter of law concerning the amount of damages, arguing that the "uncontroverted evidence at trial established Hyundai's damages to be [$819,000], not the [$276,000] that the jury awarded." The district court disagreed on the merits.

The only issue presented in this appeal is whether the district court's denial of Hyundai Finance's post-verdict motion for judgment as a matter of law was erroneous.

II. DISCUSSION

Rule 50(a)(2) of the Federal Rules of Civil Procedure provides that "[a] motion for judgment as a matter of law may be made at any time before the case is submitted to the jury" and "must specify the judgment sought and the law and facts that entitle the movant to the judgment." If the district court does not grant a motion for judgment as a matter of law made before the case is submitted to the jury, Rule 50(b) provides that "[n]o later than 10 days after the entry of judgment ... the movant may file a renewed motion for judgment as a matter of law and may include an alternative or joint request for a new trial under Rule 59."³

Ordinarily, we review de novo a district court's denial of a post-verdict motion for judgment as a matter of law, viewing the evidence in the light most favorable to the verdict. Structural Polymer Group, Ltd. v. Zoltek Corp., 543 F.3d 987, 991 (8th Cir.2008). But if a party fails to articulate with specificity the grounds for its pre-verdict motion for judgment as a matter of law, then judgment as a matter of law "may neither be granted by the district court nor upheld on appeal unless such a result is `required to prevent manifest injustice.'" Conseco Fin. Servicing Corp. v. N. Am. Mortgage Co., 381 F.3d 811, 821 (8th Cir.2004) (quoting Walsh v. Nat'l Computer Sys., Inc., 332 F.3d 1150, 1158 (8th Cir.2003)); see also Alternate Fuels, Inc. v. Cabanas, 538 F.3d 969, 973 (8th Cir.2008) ("[I]f the movant's legal theories are not articulated before the verdict, review is limited to whether the judgment sought is required to prevent manifest injustice." (internal quotation marks omitted)). Moreover, we have consistently held that the grounds for a renewed motion for judgment as a matter of law under Rule 50(b) are limited to those asserted in support of the pre-verdict motion for judgment as a matter of law under Rule 50(a). See, e.g., Conseco, 381 F.3d at 821; Walsh, 332 F.3d at 1158. Thus, if a party fails to seek judgment as a matter of law concerning the amount of damages before the case is submitted to the jury, it may not raise the issue for the first time in a post-verdict motion for judgment as a matter of law. See Day v. Toman, 266 F.3d 831, 837 (8th Cir.2001).

In this case, Hyundai Finance moved for judgment as a matter of law concerning the amount of damages after the jury returned a verdict awarding about one-third of the damages that Hyundai Finance sought. Hyundai Finance's post-verdict motion for judgment as a matter of law was not styled as the renewal of a pre-verdict motion that had been denied or deferred. On appeal, Hyundai Finance has not cited to or otherwise identified a pre-verdict motion for judgment as a matter of law concerning the amount of damages.

Having examined the trial record independently, we located three instances in which Hyundai Finance moved for judgment as a matter of law before the verdict. Hyundai Finance first moved for judgment as a matter of law at the close of the defendants' case-in-chief. Hyundai Finance's original motion failed to comply with Rule 50(a)(2) because counsel for Hyundai Finance did not specify the judgment sought and did not set out any law or facts that entitled Hyundai Finance to the judgment. As a result of these deficiencies, it is not possible to determine whether the motion even related to Hyundai Finance's claim for breach of contract— and in particular, the amount of damages resulting from the alleged breach—rather than or in addition to the defendants' counterclaims. The district court denied the motion without further comment.⁴

Hyundai Finance renewed its original motion at the close of all the evidence. The renewed motion also failed to comply with Rule 50(a)(2) because counsel for Hyundai Finance did not specify the judgment sought and did not set out any law or facts that entitled Hyundai Finance to the judgment. This time, counsel referred to punitive damages, which were part of the defendants' counterclaims but were not relevant to Hyundai Finance's claim for actual damages stemming from the defendants' alleged breach of contract. The district court apparently deferred deciding whether punitive damages could be awarded to the defendants and denied Hyundai Finance's renewed motion in all other respects.⁵ After the jury retired to deliberate the district court said that it would treat all motions for judgment as a matter of law "as being remade here and now" but summarily denied the renewed motions without eliciting additional argument from the parties.

At oral argument before this court, counsel for Hyundai Finance conceded, albeit with some equivocation, that the original and renewed pre-verdict motions for judgment as a matter of law did not deal with the amount of damages "distinctly" or "as a separate issue." Nevertheless, counsel argued that because Hyundai...