Karma Int'l, LLC v. Indianapolis Motor Speedway, LLC

Decision Date18 September 2019
Docket NumberNos. 18-2583 & 18-3487,s. 18-2583 & 18-3487
Citation938 F.3d 921
Parties KARMA INTERNATIONAL, LLC, Plaintiff-Appellant, v. INDIANAPOLIS MOTOR SPEEDWAY, LLC, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Matthew Mark Adolay, Attorney, Wooden & McLaughlin LLP, Indianapolis, IN, Brett A. Datto, Esq., Attorney, Patrick T. Krenicky, Attorney, Weir & Partners LLP, Philadelphia, PA, for Plaintiff-Appellant.

Jenny R. Buchheit, Attorney, Angela Pease Krahulik, Attorney, Ice Miller LLP, Indianapolis, IN, for Defendant-Appellee.

Before Flaum, Easterbrook, and Sykes, Circuit Judges.

Sykes, Circuit Judge.

The Indianapolis 500 race has been a fixture of American life since 1911, interrupted only by world war. So when its 100th running arrived in 2016, organizers wanted to shift the race-weekend entertainment into high gear. They engaged Karma International, LLC, an event-planning company, to host a ticketed party.

Unlike the Indianapolis 500 itself—which sold out for the first time in history—the Karma party was a disappointment. Poor ticket sales prevented Karma from covering its expenses. Karma sued the racetrack for breach of contract, accusing it of failing to adequately promote the party. The racetrack counterclaimed, alleging that Karma ignored its own advertising obligations. The district judge rejected Karma’s claim at summary judgment, ruling that the damages theory rested on speculation. A jury found Karma liable on the counterclaim, awarding $75,000 in damages. Karma appeals, seeking review of the summary-judgment ruling and the denial of its posttrial motions for judgment as a matter of law or a new trial.

We affirm. Karma’s evidence of damages is indeed speculative, so its claim fails under Indiana law. And we see no reason to second-guess the jury’s determination that Karma breached the parties’ contract by failing to fulfill its promises to advertise the event online.

I. Background

The Indianapolis Motor Speedway, LLC, sponsors the annual Indianapolis 500 race and associated race-weekend events, which include musical acts and other festivities. In 2015 Karma International became a licensee of Maxim, a men’s magazine. Karma has hosted Maxim-branded entertainment at large sporting events, including a party prior to the 2016 Super Bowl in San Francisco.

In early 2016 Karma began negotiations with the Speedway to host a Maxim-branded event at that year’s 100th-running of the race. The parties eventually agreed on terms memorialized in a March 2016 agreement. The Speedway promised to provide "marketing support via [its] social channels and ... dedicated e-mail to [its] database." In return Karma pledged to promote race-weekend activities with a "banner ad on Maxim.com (minimum 1 million impressions)." It also promised to provide "marketing support via Maxim social channels for [the Indy 500] [m]usic events (Carb Day, Legend’s Day and Indy 500 Snake Pit)."

To fulfill its advertising obligations under the contract, the Speedway sent four promotional e-mails in May 2016 promoting the Maxim party:

May 9: A dedicated e-mail to 334 sponsors and suite ticketholders
May 20: A dedicated e-mail to 13,824 fans
May 21: A cross-promotional e-mail to 89,979 fans
May 25: A dedicated e-mail to 149,430 "Wing and Wheel Newsletter" subscribers

Karma, for its part, never ran the promised banner advertisement on Maxim.com. Nor did it use Maxim’s social-media channels to promote race-weekend events.

The Maxim party took place as scheduled on May 27. Karma spent $635,855.71 on the event but generated only $215,690.39 in revenue. While 1,787 guests attended the party, Karma sold just 92 full-price tickets. Some of the remaining guests bought reduced-price tickets, but most received complimentary admission.

In August 2016 Karma sued the Speedway for breach of contract, alleging that it failed to promote the Maxim party as agreed under the terms of the contract. Karma sought $817,500 in damages, a figure apparently gleaned from conversations with Speedway officials who speculated that the party would generate $1 million in gross revenue "from ticket and table sales only."1 The Speedway filed a counterclaim alleging that Karma failed to place the promised banner advertisement on Maxim’s website or provide marketing support on Maxim’s social-media channels.

The Speedway moved for summary judgment on Karma’s claim. The judge discerned a factual dispute regarding the alleged breach of contract. While the Speedway insisted it hadn’t promised to e-mail its entire database to promote the party, the evidentiary record—construed in Karma’s favor—permitted an inference that it had. But Karma’s damages theory was entirely speculative. Karma claimed that Speedway officials gave assurances that its e-mails would generate the sale of at least 1,500 tickets. The judge held that those comments, without more, could not establish how many additional ticket sales an e-mail to its entire database would have generated. Because Karma had no nonspeculative evidence of damages, the judge entered summary judgment for the Speedway.

The counterclaim proceeded to trial, and Speedway employees testified that no banner advertisement appeared on Maxim.com and that Karma failed to provide the promised marketing support on Maxim’s social-media channels. Karma’s CEO Dylan Marer admitted that he didn’t know whether these marketing efforts had occurred. Jonathan Faber, a damages expert, estimated that the Speedway’s lost-value damages for the nonexistent Maxim.com ad were approximately $15,000–$75,000. And he pegged the lost-value damages for the nonexistent social-media promotion at $90,000–$105,000.

The jury found Karma liable and awarded $75,000 in damages. Karma moved for judgment as a matter of law, and alternatively for a new trial, under Rule 50 of the Federal Rules of Civil Procedure. The judge denied both motions and entered judgment on the jury’s verdict.

II. Discussion

Karma challenges the judge’s summary-judgment ruling and the denial of its posttrial motions. "We review a summary judgment de novo, asking whether the movant has shown that there is no genuine dispute as to any material fact." Kopplin v. Wis. Cent. Ltd. , 914 F.3d 1099, 1102 (7th Cir. 2019) (quotation marks omitted). Summary judgment is appropriate if Karma "failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"We review the denial of a Rule 50 motion for judgment as a matter of law de novo" and "consider whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the verdict when viewed in the light most favorable to the party against whom the motion is directed." Martin v. Milwaukee County , 904 F.3d 544, 550 (7th Cir. 2018) (quotation marks omitted). "Judgment as a matter of law is proper ‘if a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.’ " Lawson v. Sun Microsystems, Inc. , 791 F.3d 754, 761 (7th Cir. 2015) (quoting FED. R. CIV. P. 50(a)(1) ). Finally, we review the denial of a motion for a new trial for abuse of discretion. Clarett v. Roberts , 657 F.3d 664, 674 (7th Cir. 2011). "A verdict will be set aside as contrary to the manifest weight of the evidence only if ‘no rational jury’ could have rendered the verdict." Moore ex rel. Estate of Grady v. Tuleja , 546 F.3d 423, 427 (7th Cir. 2008).

Indiana law governs the dueling contract claims in this diversity suit. In Indiana "the essential elements of a contractual action" are "(1) a valid and binding contract; (2) performance by the complaining party; (3) non-performance or defective performance by the defendant; and (4) damages arising from defendant’s breach." U.S. Research Consultants, Inc. v. County of Lake , 89 N.E.3d 1076, 1086 (Ind. Ct. App. 2017) (quotation marks omitted). No one disputes that the parties had a valid contract.

The judge concluded at summary judgment that Karma offered only speculative evidence of its damages, an essential element of the claim. Under Indiana law "a factfinder may not award damages on the mere basis of conjecture or speculation." Noble Roman’s, Inc. v. Ward , 760 N.E.2d 1132, 1140 (Ind. Ct. App. 2002). "Although mathematical certainty is not required, the amount awarded must be supported by evidence in the record." Country Contractors, Inc. v. A Westside Storage of Indianapolis, Inc. , 4 N.E.3d 677, 694 (Ind. Ct. App. 2014). Moreover, any "damages claimed for a breach of contract must be the natural, foreseeable, and proximate consequence of the breach." Masonic Temple Ass'n of Crawfordsville v. Ind. Farmers Mut. Ins. Co. , 837 N.E.2d 1032, 1037 (Ind. Ct. App. 2005).

Karma’s damages theory rested on its contention that Speedway officials guaranteed sales of at least 1,500 tickets, a promise somehow premised on their characterization of the Speedway’s e-mail database. Because the Speedway didn’t e-mail its entire database, the theory goes, the Maxim party attracted far fewer than 1,500 paying customers.

To begin, the evidence of a 1,500-ticket guarantee is quite sparse. It consists of Karma CEO Marer’s deposition testimony that Speedway employees Kyle and Jarrod Krisiloff "asked me how many [tickets] I would need to—to sell to make this worthwhile, and I said a minimum of 1,500, and they said, ‘No problem. We sell all of our events out. We’ll sell it out, no problem, with our database.’ "

This testimony perhaps sheds light on the parties’ expectations, and if Karma had proof of damages, it might be relevant to the question of foreseeability. But it is not evidence of harm caused by the alleged breach—namely, the Speedway’s decision to promote the event through certain subsets of its e-mail database rather than the whole thing. Karma offered no expert testimony or other evidence of harm proximately...

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