Kelley Metal Trading Co. v. Al-Jon/United, Inc.

• Citation: 877 F. Supp. 1478
• Decision Date: 21 February 1995
• Docket Number: No. 92-4116-RDR.,92-4116-RDR.
• Parties: KELLEY METAL TRADING COMPANY, Plaintiff, v. AL-JON/UNITED, INC., Defendant.
• Court: U.S. District Court — District of Kansas

877 F. Supp. 1478

KELLEY METAL TRADING COMPANY, Plaintiff, v. AL-JON/UNITED, INC., Defendant.

No. 92-4116-RDR.

United States District Court, D. Kansas.

February 21, 1995.

COPYRIGHT MATERIAL OMITTED

Donald Patterson, Fisher, Patterson, Sayler & Smith, Topeka, KS, Elliot M. Kaufman, Ronald H. Isroff, F. Thomas Vickers, James A. DeRoche, Ulmer & Berne, Cleveland, OH, Brenda L. Head, Davis, Unrein, Hummer, McCallister & Buck, Topeka, KS, Gregory Whitney, Pittsburgh, PA, for Kelley Metal Trading Co.

Kelley Metal Trading Co., pro se.

John H. Stauffer, Jr., Harold S. Youngentob, Goodell, Stratton, Edmonds & Palmer, Topeka, KS, Mark I. Wallach, David James Carney, Calfee, Halter & Griswold, Cleveland, OH, Curtis S. Sneden, Topeka, KS, for Al-Jon/United, Inc.

MEMORANDUM AND ORDER

ROGERS, Senior District Judge.

This matter is presently before the court upon plaintiff's motion for a new trial. Having carefully reviewed the arguments of the parties, the court is now prepared to rule.

On November 16, 1994, a jury found for the defendant on plaintiff's breach of express warranty claim, the remaining claim in this case. Prior to the verdict, the court had entered judgment for the defendant as a matter of law on plaintiff's claims of fraud and breach of implied warranty of merchantability and a portion of plaintiff's claims of breach of express warranty. The court had also concluded that plaintiff could not recover consequential damages or lost profits.

The court shall only briefly recap the facts of this case. In 1987, Blake Kelley, an individual who had been in the scrap business for over ten years, contacted the defendant and expressed an interest in purchasing a wire reclamation furnace. The defendant, who was located in Topeka, Kansas, manufactured wire reclamation furnaces. Kelley had not previously engaged in the wire reclamation business, but he wanted to expand his scrap business into this area. As part of his investigation, Kelley contacted other manufacturers of wire reclamation furnaces and individuals who were in the wire reclamation business. He observed several furnaces, including some manufactured by the defendant, in operation. In early 1990, he decided to buy a furnace from the defendant. He incorporated Kelley Metal Trading Company in June 1990 for the purpose of operating a business reclaiming wire and motors. He ultimately signed a purchase agreement to acquire a G-466 wire reclamation furnace from the defendant on June 28, 1990. As part of the contract, the defendant agreed to repurchase the furnace if the Ohio Environmental Protection Agency (EPA) did not issue a permit to operate the furnace. Prior to purchase, Kelly Pettit, the President of the defendant, had represented to Blake Kelley that the G-466 furnace would burn wire at the rate of 250 to 300 pounds per hour and that plenty of scrap wire was available to burn in the furnace. Pettit's source for this information came from other customers who had used and were presently using the G-466 furnace.

Kelley started the business of Kelley Metal Trading Company in Shaker Heights, Ohio with his brother, Clint Kelley. Clint Kelley was hired to operate the business, including the furnace. He was an attorney who had no experience in the wire reclamation business and no experience operating wire reclamation furnaces. The furnace arrived in December 1990. Kelley Metal was issued a permit to install the furnace by the Ohio EPA in February 1991. The permit to install allowed the plaintiff to operate the furnace for ninety days, at which time an emissions test would be conducted by the Ohio EPA to determine if the furnace would be allowed a permit to operate. The Kelleys operated the furnace for several weeks. They were not satisfied with the production of the furnace. They found that they were unable to make the furnace perform as it had been represented by agents of the defendant. The defendant was contacted about the productivity, and suggestions were offered for increased performance. The Kelleys saw no improvement.

On April 26, 1991, the first emissions test or stack test of the furnace was conducted by the Ohio EPA. Hobart Taylor, an employee of the defendant, was sent to Ohio to assist the Kelleys with the stack test. The furnace failed the Ohio EPA's emission standards in that the emission of chlorine and particulates exceeded the EPA standards. The defendant offered several suggestions so that the furnace could pass EPA standards. The defendant installed a damper on the furnace to control the particulate emission problem. The defendant's agents thought the problem with the chlorine emissions involved the failure of the Kelleys to properly exclude chlorinated wire from burning in the furnace. Clint Kelley was not satisfied with the methods provided by the defendant to separate PVC wire from non-PVC, and he developed his own sorting protocol. The EPA subsequently approved his separating procedures. A second round of tests was conducted on June 16, 1991. The defendant sent three employees, including President Pettit, to Ohio to assist with the second test. The furnace once again failed to meet the emissions standards. The defendant offered two alternatives to the plaintiff. First, they offered to repurchase the furnace as previously agreed. Second, they offered to provide a chlorine scrubber to the plaintiff at a discounted price. Plaintiff was unwilling to do either. This lawsuit was filed in 1992.

In the instant motion, plaintiff raises a number of arguments in support of its motion for new trial. First, plaintiff argues that the court erred in granting judgment as a matter of law to the defendant on its claims of fraud and breach of implied warranty of merchantability. Second, plaintiff contends that the jury's verdict on the breach of express warranty claim was against the weight of the evidence. Third, plaintiff asserts that the court abused its discretion by deferring a ruling on defendant's motion for judgment as a matter of law until the close of the evidence. Fourth, plaintiff argues that the court erred as a matter of law in failing to rule that the defendant's warranty limitations were void. Fifth, plaintiff contends that the court erred in not allowing the jury to consider plaintiff's request for lost profits and in requiring that the plaintiff's damages be mitigated after the second stack test. Finally, plaintiff argues that the court erred in not allowing testimony on "cheating" by the defendant during the stack tests as it related to issues of the availability and sortability of chlorinated wire and the productivity of the furnace.

A motion for new trial is committed to the sound discretion of the trial court. Ryder v. City of Topeka, 814 F.2d 1412, 1424 (10th Cir.1987). A new trial may be granted if the verdict is against the weight of the evidence or if prejudicial error has occurred. Anderson v. Phillips Petroleum Co., 861 F.2d 631, 637 (10th Cir.1988).

The court shall first consider the plaintiff's arguments that the court erred in granting judgment as a matter of law to the defendant on its claims of fraud and breach of implied warranty of merchantability. Plaintiff contends that it presented sufficient evidence on these matters to allow them to be considered by the jury.

An order granting a motion for judgment as a matter of law under Fed. R.Civ.P. 50 is proper when the court, reviewing the evidence and inferences most favorably to the non-moving party, finds that there is insufficient evidence upon which the jury could properly find for the non-moving party. Rajala v. Allied Corp., 919 F.2d 610, 615 (10th Cir.1990), cert. denied, 500 U.S. 905, 111 S.Ct. 1685, 114 L.Ed.2d 80 (1991). In ruling on such a motion, the court must apply the substantive evidentiary burden of proof which applies to the non-moving party's claims at trial. Id.

To recover on a claim of fraudulent misrepresentation under Kansas law, a plaintiff must show by clear and convincing evidence that a defendant made a representation or statement of material fact which was untrue and known to be untrue or recklessly made with disregard of its truth or falsity, on which plaintiff reasonably relied to his detriment. Tetuan v. A.H. Robins Co., 241 Kan. 441, 738 P.2d 1210, 1230 (1987).

Two of the fraud claims alleged by the plaintiff in this case remained at the time of trial. Plaintiff contended that the defendant made the following fraudulent misrepresentations: (1) the wire reclamation furnace would process 250 to 300 pounds per hour of combustible insulation while complying with EPA pollution requirements; and (2) PVC wire, which could not be burned in the furnace, constituted only a small percentage of the scrap wire available and could be easily separated from the non-PVC prior to burning. The court found that plaintiff had failed to produce sufficient evidence that the defendant knew that the representations were untrue or that they were made with disregard of their truth or falsity. The evidence, when viewed in the light most favorable to the plaintiff, demonstrated that such statements were made and they may have been inaccurate. Nevertheless, the evidence that they were made with an intent to deceive or recklessly made with disregard for their truthfulness was lacking. Such evidence is necessary to avoid judgment as a matter of law. See Whitten v. Farmland Industries, Inc., 759 F.Supp. 1522, 1542 (D.Kan.1991); Green Construction Co. v. Kansas Power & Light Co., 717 F.Supp. 738, 744 (D.Kan.1989). As to the claim concerning the productivity of the furnace, plaintiff offered little on the defendant's knowledge that the furnace could not process 250 to 300 pounds per hour of combustible insulation and comply with EPA standards. Plaintiff attempted to suggest that the defendant had an inadequate basis for making such a representation. However, the only evidence offered by the plaintiff on this issue came from Chris Hartman and Don Campbell....