Mercedes-Benz United States, LLC v. Carduco, Inc., NUMBER 13-13-00296-CV
| Decision Date | 31 March 2016 |
| Docket Number | NUMBER 13-13-00296-CV |
| Parties | MERCEDES-BENZ USA, LLC, Jack L. Holt, Craig W. Dearing, and Frank J. Oswald Jr., Appellants, v. CARDUCO, INC. D/B/A Cardenas Metroplex, Appellee. |
| Court | Texas Court of Appeals |
Thomas R. Phillips, Merritt N. Spencer, E. Michael Rodriguez, Eduardo Roberto Rodriguez, Alex Huddleston, Joseph R. Knight, Matthew J. Kemner, for Appellants.
Wallace B. Jefferson, Alexandra Wilson Albright, Peter D. Marketos, Leslie Chaggaris, Don Cruse, Susan Vance, for Appellee.
Before Chief Justice Valdez and Justices Rodriguez and Longoria
This appeal arises from a judgment entered in favor of appellee Carduco, Inc. d/b/a Cardenas Metroplex (Carduco) and against appellants Mercedes-Benz USA, LLC; Jack L. Holt, a Mercedes Regional Franchise Manager; Craig W. Dearing, a Mercedes After-Sales Operations Manager; and Frank J. Oswald Jr., a Mercedes After-Sales Operations Manager, (collectively "MBUSA") in a suit for fraud in the inducement and negligent misrepresentation. By nine issues, MBUSA contend: (1–2) the reliance element of Carduco's claims was not established as a matter of law because (a) the alleged misrepresentations, whether oral representations or non-disclosures, conflicted with the terms of the parties' contract, and (b) Carduco contractually promised that it was not relying on any representations; (3) appellants did not owe a duty to disclose to Cardenas; (4) charge errors occurred; (5) the trial court abused its discretion by admitting evidence that MBUSA is indemnifying the individual defendants; (6) the trial court abused its discretion by refusing to require Carduco's counsel to fully open his jury argument; (7) cumulative error probably caused the rendition of an improper verdict; (8) no evidence, or at least factually insufficient evidence, supports the award of punitive damages; and (9) the punitive damages awards are excessive and unconstitutional.1 We affirm as modified.
The facts giving rise to this case involves the following car dealerships and distributor: (1) Carduco, owned by Renato C. Cardenas, Sr. (Renato); (2) Autoplex Harlingen a/k/a Cardenas Autoplex, Inc. Harlingen (Autoplex), owned by Renato's son, Renato G. Cardenas (Rene), and later purchased by Carduco; (3) Heller-Bird Motors, owned by Ron Heller and Bill Bird; and (4) MBUSA, the North American distributor for Mercedes products, which is a wholly owned subsidiary of Daimler AG.
It is undisputed that from 1993 through 2009, Rene owned and operated a Mercedes-Benz dealership in Harlingen as part of Autoplex. It is also undisputed that in 2007 MBUSA encouraged Autoplex to relocate to McAllen, Texas, a location shown by MBUSA's studies to be the optimal location for customer convenience and for maximizing sales in the Rio Grande Valley. According to Renato, he personally knew that "the Mercedes people were there with Rene making plans to move it" because he was to do the construction on his son's new location in McAllen and had met with Rene and "Mercedes people" regarding the move. However, in the spring of 2008, MBUSA sent Rene a termination notice because, as Holt explained, Autoplex "was not meeting any [MBUSA's] performance standards." Autoplex had also failed to file a required IRS form on the sale of a single car in 2005 and received a corporate felony conviction.
The termination proceedings were mooted in April 2008 when Carduco entered into an asset-purchase agreement with Rene for Autoplex. The purchase was conditioned on, among other things, Carduco receiving MBUSA's approval to become a franchised dealer. On May 8, 2008, Carduco applied to Mercedes-Benz for the Mercedes-Benz Harlingen franchise. According to Renato, he believed that MBUSA's approval of moving his franchise from Harlingen to McAllen was "a foregone conclusion." He based this understanding on the history MBUSA had with Rene, on Renato's own discussions and meetings with Dearing, and Oswald as the parties reviewed the selection of a location for Renato's new franchise in McAllen, and on MBUSA's alleged non-disclosure of certain information—that MBUSA was working to put another dealer in the McAllen area and had sent a final letter of intent to Heller-Bird Motors for the McAllen-area dealership.
On September 23, 2008, MBUSA's president and chief executive officer Ernst Lieb and General Manager Tracey Matura executed a binding letter of intent with Heller-Bird Motors to open a Mercedes-Benz dealership in San Juan, Texas. Lieb and Matura then approved Carduco's application to become a franchised Mercedes-Benz dealer in December 2008. On June 2, 2009, Carduco completed its purchase of Autoplex's assets. And on June 24, 2009, after Carduco received its state motor vehicle dealer license, Carduco and MBUSA executed the Mercedes-Benz Passenger Car Dealer Agreement that incorporated a number of other agreements (the Dealer Agreement).
In August 2009 Holt met with Carduco and other Texas Mercedes-Benz dealers to report that MBUSA was appointing Heller-Bird to a new dealership near McAllen. Within days of that meeting, Carduco formally requested a relocation of its Mercedes-Benz dealership to the McAllen area. In October, MBUSA rejected the request. In December 2010, Heller-Bird opened Mercedes-Benz of San Juan, and in March 2011, MBUSA informed Carduco that it was "implementing a realignment of certain zip codes," including the realignment of certain demographic areas of the Harlingen dealership's Area of Influence ("AOI") to Heller-Bird.
Carduco sued MBUSA, Holt, Oswald, and Dearing for fraud in the inducement and Oswald and Dearing for negligent misrepresentation.2 Carduco alleged that MBUSA induced it to acquire Autoplex and a Mercedes-Benz franchise in Harlingen with the expectation of relocating and operating a Mercedes-Benz dealership in the McAllen area. Carduco claimed, among other things, that "Oswald and Dearing represented to Autoplex and Carduco that MBUSA had no plans to put another dealership in the McAllen, Texas sales area and that Carduco should submit plans to MBUSA to construct and operate an Autohaus facility in McAllen, Texas." After the trial court heard evidence that MBUSA had failed to preserve emails from potential witnesses after becoming aware of possible litigation in this case and had not instructed witnesses to preserve those emails after learning of Carduco's suit, the trial court granted Carduco's request for a spoliation instruction in the jury charge.
The jury found Mercedes-Benz, Holt, Oswald, and Dearing liable for fraud in the inducement and found Dearing and Oswald liable for negligent misrepresentation. It awarded Carduco $15,307,722 in benefit-of-the-bargain damages and $6,085,195 in out-of-pocket damages. In addition, the jury found by clear and convincing evidence that the harm to Carduco resulted from fraud or malice. It then found beyond a reasonable doubt that each defendant engaged in conduct defined as the felony of securing execution of a document by deception. The jury assessed punitive damages of $100 million against MBUSA, $10 million against Holt, $2.5 million against Dearing, and $2.5 million against Oswald. The trial court rendered judgment on the verdict. This appeal ensued.
By its first issue, relying on Playboy Enterprises, Inc. v. Editorial Caballero, S.A. de C.V., 202 S.W.3d 250, 258 (Tex.App.—Corpus Christi 2006, pet. denied), MBUSA challenges, as a matter of law, the reliance element of Carduco's fraudulent inducement and negligent misrepresentation claims, including any claim based on a non-disclosure theory. MBUSA direct this Court to the following terms of the Dealer Agreement that it assert directly conflict with Carduco's claims of misrepresentation and non-disclosure.
MBUSA has attempted to limit our analysis of the jury's finding of justifiable reliance on two alleged misrepresentations or non-disclosures.3 Specifically, MBUSA argues that the jury found that it had either misrepresented only the following: (1) that Carduco had a right to relocate; and/or (2) that Carduco had the right of exclusivity in its AOI.4 Therefore, according to MBUSA because the terms of the Dealer Agreement directly contradict these findings, as a matter of law, the evidence is insufficient to support the jury's finding of justifiable reliance. For the reasons explained further below, we conclude that the jury's finding of fraud was not limited to only these two grounds.
In its jury charge, the trial court defined the term misrepresentation and stated that a non-disclosure could also form the basis of a fraud claim if all of the elements of fraud were proven. However, the jury was not instructed that it was limited to finding fraud only if it determined that MBUSA either (1) told Carduco that it could move to McAllen or (2) failed to tell Carduco that it would not be the exclusive dealership in its AOI. Instead, the jury was free to come to its own conclusion...
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Mercedes-Benz United States, LLC v. Carduco, Inc.
...of appeals suggested a remittitur of the punitive damages award to $ 600,000, but otherwise affirmed the trial court's judgment. 562 S.W.3d 451, 475, 495-96, 500 (Tex. App.—Corpus Christi-Edinburg 2016) (mem. op.). One member of the three-judge panel dissented, arguing that Carduco should t......