Jgr, Inc. v. Thomasville Furniture Indust.

• Decision Date: 03 June 2004
• Docket Number: No. 02-3640.,02-3640.
• Citation: 370 F.3d 519
• Parties: JGR, INC., Plaintiff-Appellee/Cross-Appellant, v. THOMASVILLE FURNITURE INDUSTRIES, INC., Defendant-Appellant/Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

370 F.3d 519

JGR, INC., Plaintiff-Appellee/Cross-Appellant, v. THOMASVILLE FURNITURE INDUSTRIES, INC., Defendant-Appellant/Cross-Appellee.

No. 02-3640.

United States Court of Appeals, Sixth Circuit.

Argued: January 29, 2004.

Decided and Filed: June 3, 2004.

COPYRIGHT MATERIAL OMITTED

Michelle J. Sheehan (argued and briefed), Roy A. Hulme (briefed), Reminger & Reminger, Cleveland, OH, for Appellant.

Marvin L. Karp (argued and briefed), Ulmer & Berne, Cleveland, OH, for Appellee.

Before: MARTIN and MOORE, Circuit Judges; WEBER, Senior District Judge.^*

BOYCE F. MARTIN, JR., Circuit Judge.

In this diversity breach of contract action, Thomasville Furniture Industries, Inc. appeals a $1,500,000 judgment in favor of JGR, Inc., and JGR cross-appeals the denial of pre-judgment interest. We note at the outset that although it is unclear whether "JGR, Inc." is the actual, formal name of the plaintiff company — as opposed to an abbreviation — we refer to it as such because the parties have done so. For the reasons discussed below, we hold that the district court abused its discretion in permitting a JGR witness to give lay opinion testimony about JGR's lost profits and loss of business value, and that the improper admission of this testimony requires vacature of the damages award and remand for a new trial solely on the issue of damages.

I. FACTUAL AND PROCEDURAL BACKGROUND

The contract at issue in this case is a written agreement called the "Thomasville Furniture Industries, Inc. `Thomasville Gallery' Program" — which we will refer to as the "Gallery Agreement" — that governs the relationship between Thomasville, a furniture manufacturer, and furniture retail establishments that Thomasville approves as "Thomasville Galleries." Pursuant to the Gallery Agreement, Thomasville Galleries were "expected to" abide by certain rules and requirements, such as maintaining a high quality store, allowing Thomasville to exercise control over personnel training, signage and other aspects of the business, and — most importantly for purposes of this appeal — displaying Thomasville products in an area that conformed to detailed specifications. In exchange, Thomasville offered its Thomasville Galleries assistance with interior design, advertising and research, as well as a non-exclusive license to use Thomasville trademarks in connection with product promotions.

If a retailer wished to be designated a Thomasville Gallery and agreed to the terms set forth in the Gallery Agreement, its representative would sign the last page of the program description and submit it to Thomasville for approval. This is what Gerald Yosowitz, JGR's main principal, did on behalf of JGR in April 1990, and Thomasville approved JGR as a Thomasville Gallery the following month. The version of the Gallery Agreement that was in effect at that time provided, among other things, as follows:

2. Expectations of Retailers. Retailers designated as Thomasville Galleries will be expected to:

(a) Set aside a physically separate and distinct area of its selling floor space with a minimum of 5,000 square feet for the sole and exclusive purpose and function of arranging, selling, and displaying Thomasville furniture products, including both Thomasville wood furniture and Thomasville upholstery.

On September 15, 1990, JGR opened a furniture store in Mentor, Ohio, called "Gerald's," with a 5,000-square foot display area devoted solely to Thomasville products, as specified in the 1990 Gallery Agreement. Gerald's was located across the street from another furniture store, called "Furniture Land," which was owned and operated by an individual named Mike Baker.¹ Despite a promising beginning, Gerald's eventually began to lose money and JGR became unable to pay Thomasville for the products that it purchased for its Gerald's store. Thomasville provided credit counseling services to JGR, but was forced to begin holding orders until JGR could pay for them.

In March 1992, Thomasville revised its Gallery Agreement. The most significant change, for purposes of this case, was the addition of an "expectation" that Thomasville Galleries would "[d]isplay Thomasville product covering at least 7,500 sq. ft. of selling floor space of which a physically separate and distinct area of no less than 5,000 sq. ft. (the `Gallery') is set aside for the sole and exclusive purpose and function of arranging, selling, and displaying Thomasville wood, upholstery, and other Thomasville home furnishings products." (Emphasis added.) A March 10, 1992, letter written by Thomasville Vice President Daniel Grow highlights this change and states that Thomasville Galleries "should establish a plan to be at this new minimum square footage level of 7,500 sq. ft. by January 1, 1993. Any new Galleries will be at the 7,500 sq. ft. level when they open."

Yosowitz, on behalf of JGR, signed and returned the revised Gallery Agreement to Thomasville with handwritten notes on the back. These notes state, in relevant part:

... I sign this agreement under the condition that all other Thomasville dealers in my marketing area are held to the same conditions.... If I correctly understand the letter from Dan Grow (dated 3/10/92) which spells out Thomasville's new guidelines (including square footage requirements) all Thomasville dealers existing or new will be held to the same requirements. If this is in fact the case my concearns [sic] have been addressed....

In a letter dated August 4, William Carrico, also a Thomasville Vice President, acknowledged Yosowitz's notes and stated that Thomasville would "review the matter by July 1, 1993," after letting "matters settle out."

In the meantime, in the fall of 1992 Thomasville negotiated with Furniture Land, JGR's competitor, a different marketing agreement, called the "Thomasville Home Furnishings Store Agreement." Pursuant to this agreement, the name of the Furniture Land chain would be changed to "Baker's" and the chain would carry the Thomasville line in seven stores, including the one across the street from Gerald's, as well as in a brand new 10,000 square foot store devoted solely to Thomasville products. In November 1992, pursuant to the Home Furnishings Agreement, Furniture Land changed the name of all its stores in the Cleveland area to "Baker's" and kicked off a "grand re-opening" of the store across the street from Gerald's. Baker's advertised this grand opening with a circular featuring its new "Thomasville Gallery" line of furniture. JGR alleges that Baker's displayed only a few isolated pieces of Thomasville furniture at its grand opening. According to JGR, Baker's employees urged its customers to view the entire line of Thomasville furniture at Gerald's, but to purchase the items at Baker's. Baker's customers allegedly were handed cards that stated: "Go to Gerald's. Bring back a price and we'll beat it by five percent."

The day after the Baker's grand opening, in light of JGR's mounting financial problems and debts, Thomasville placed JGR's credit on hold and refused to process or ship any orders from Gerald's until JGR sent full payment for those orders. Ultimately, no longer able to continue doing business, Gerald's closed its doors on October 2, 1993.

Although each party in this case has asserted various claims against the other,² the sole claim with which we are concerned in this appeal is JGR's claim that Thomasville breached the 1992 Gallery Agreement. The essence of that claim is that Thomasville breached the Agreement by permitting Baker's to sell Thomasville furniture without requiring Baker's to "[d]isplay Thomasville product covering at least 7,500 sq. ft. of selling floor space of which a physically separate and distinct area of no less than 5,000 sq. ft. (the `Gallery') is set aside for the sole and exclusive purpose and function of arranging, selling, and displaying Thomasville wood, upholstery, and other Thomasville home furnishings products." This claim was the subject of a jury trial featuring the testimony of several witnesses. JGR presented the only damages witness, a certified public accountant and lawyer named James Gornik. Gornik testified as to the amount of lost profits and loss of business value that JGR suffered as a result of Thomasville's alleged breach of the 1992 Gallery Agreement. Thomasville filed a motion in limine to exclude Gornik's testimony on the ground that it was properly the subject of expert testimony, not lay opinion testimony, but that he was not qualified to give expert testimony. The district court denied Thomasville's motion, and Gornik proceeded to testify about projections that he had prepared showing what JGR's net income would have been in each year from 1991 through 2005 and what the net worth and value of the business would have been at the end of each of those years.

The jury determined that Thomasville had, in fact, breached the 1992 Gallery Agreement and that JGR was entitled to a damages award of $0 for lost profits and $1,500,000 for loss of business value. Thomasville subsequently filed a Rule 50 motion for judgment as a matter of law, arguing that the jury verdict had no basis for an award of loss of business value. The district court denied the motion. JGR filed a motion for pre-judgment interest pursuant to Ohio Revised Code section 1343.03(A). While the district court initially granted the motion and awarded pre-judgment interest at the rate of 3.73%, Thomasville filed a motion for reconsideration of that award, which the district court granted. On reconsideration, the district court changed its original ruling and declined to award any pre-judgment interest. Judgment was entered for JGR in the amount of $1,500,000. Thomasville appealed the district court's $1,500,000 judgment in favor of JGR, and JGR cross-appealed the denial of its motion for pre-judgment interest.

II. ANALYSIS

A. Testimony of James Gornik

The primary issue in this case concerns the admissibility of testimony by JGR...