Nebraska Plastics, Inc. v. Holland Colors Americas, Inc.

• Decision Date: 13 May 2005
• Docket Number: No. 04-2180.,No. 04-2035.,04-2035.,04-2180.
• Citation: 408 F.3d 410
• Parties: NEBRASKA PLASTICS, INC., Appellant/Cross-Appellee, v. HOLLAND COLORS AMERICAS, INC., Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

408 F.3d 410

NEBRASKA PLASTICS, INC., Appellant/Cross-Appellee, v. HOLLAND COLORS AMERICAS, INC., Appellee/Cross-Appellant.

No. 04-2035.

No. 04-2180.

United States Court of Appeals, Eighth Circuit.

Submitted: February 14, 2005.

Filed: May 13, 2005.

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Michael F. Coyle, Argued, Omaha, NE (Danene J. Tushar and Jeremy B. Morris, on the brief), for appellant/cross-appellee.

William R. Johnson, Omaha, NE (Raymond E. Waldenfor, on the brief), for appellee/cross-appellant.

Before MORRIS SHEPPARD ARNOLD, BOWMAN, and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

A jury awarded Nebraska Plastics over $1,800,000 on its claims against Holland Colors Americas ("HCA") for breach of implied warranties, negligent design, manufacture and supply, negligent misrepresentation and fraudulent concealment. The jury also returned a verdict for HCA on its counterclaim for approximately $50,000 in overdue payments. The district court¹ granted HCA's post-verdict motions for judgment as a matter of law on the issue of future damages and for a pro tanto settlement credit based on Nebraska Plastics' settlement with another defendant, reducing Nebraska Plastics' award to under $300,000. Nebraska Plastics appeals the district court's grant of the motions and the entry of judgment for HCA on its counterclaim, while HCA cross-appeals the submission of the negligent design, manufacture and supply claim to the jury. For the reasons discussed below, we affirm the rulings of the district court.

I. BACKGROUND

Nebraska Plastics is a producer of polyvinyl chloride (PVC) products, including PVC fencing. In 1993, Nebraska Plastics decided to develop colored PVC fencing. With no experience or expertise in producing outdoor colored PVC products, Nebraska Plastics recognized that it needed assistance. Therefore, Nebraska Plastics hired pigment supplier HCA to help develop the colored fencing, based on HCA's representation that it had the technical knowledge and resources to help Nebraska Plastics develop a quality product. Nebraska Plastics gave HCA its proprietary PVC formula to allow HCA to develop an appropriate pigmentation technology. HCA sales agent Dick Bushart instructed Nebraska Plastics on the equipment and procedures needed to add HCA's pigment during the fencing manufacturing process. Nebraska Plastics began producing colored fencing in 1996.

In 1997, Nebraska Plastics' customers and dealers began to complain that the colored fencing was weathering abnormally. Nebraska Plastics was obligated by its product warranty, and by a desire to maintain its good name in the market, to replace fencing that weathered abnormally. Nebraska Plastics alerted HCA immediately about the abnormal weathering, and HCA assembled a technical team to address the problem.

By April 1998, HCA had determined the source of the problem. Nebraska Plastics' PVC formula for fencing included calcium carbonate, supplied by OMYA, Inc. ("OMYA"). Calcium carbonate is a common ingredient in white PVC products. However, it was known in the industry that calcium carbonate is an unsuitable ingredient for outdoor colored PVC products. PVC reacts with sunlight to form water-soluble material. The calcium carbonate in the PVC attracts moisture to the water-soluble material, causing it to wash away in rain. After the water-soluble material washes away, only a white surface remains, resulting in a faded or chalky appearance for the colored PVC.

HCA chose not to inform Nebraska Plastics that calcium carbonate was causing the abnormal weathering. Bushart knew that if Nebraska Plastics altered its PVC formula to remove calcium carbonate, it would also remove another ingredient that Bushart sold, and Bushart did not want to lose his sales commissions on that ingredient. Instead, at the urging of Bushart, HCA's technical team told Nebraska Plastics that expensive changes in Nebraska Plastics' equipment and manufacturing process would solve the problem. HCA was fully aware that, even if Nebraska Plastics implemented the changes, the abnormal weathering would continue as long as calcium carbonate was included in Nebraska Plastics' PVC formula.

Naturally, even after making the changes recommended by HCA, Nebraska Plastics continued to receive warranty claims from fading and "chalking" of the colored fencing. Nebraska Plastics sought information from other consultants and learned that calcium carbonate was causing the problem. In August 2000, Nebraska Plastics reduced the calcium carbonate in its formula from eight parts per hundred to three; five months later, they completely eliminated calcium carbonate from the formula. Nebraska Plastics has yet to receive a complaint of abnormal weathering related to fencing manufactured after the reformulation. Nebraska Plastics sold a total of 9,893,437 pounds of defective fencing between 1996 and 2001.

When Nebraska Plastics questioned HCA about the new information Nebraska Plastics had received regarding calcium carbonate, HCA initially was evasive. In February 2001, visiting HCA technical personnel finally "hinted" to Nebraska Plastics that calcium carbonate was indeed the source of the problem. Those HCA personnel were rebuked by Bushart.

Nebraska Plastics brought suit against HCA and OMYA, the calcium carbonate supplier, in October 2001 for breach of express and implied warranties, negligent design, manufacture and supply, negligent misrepresentation and fraudulent concealment. HCA brought a counterclaim against Nebraska Plastics to recover payment for deliveries of pigment between March and June of 2001. The district court granted summary judgment to OMYA on the implied warranty of merchantability and negligent design, manufacture and supply claims. The remaining claims proceeded to jury trial.

In the early stages of trial, OMYA settled the remaining claims against it. The jury returned a verdict for Nebraska Plastics on all of its claims against HCA, except for breach of express warranty, and awarded damages totaling $1,811,590. Of that amount, $1,042,492 was awarded for colored fence warranty claims expected to be incurred in the future. The jury also returned a verdict for HCA on its counterclaim.

Following the jury verdict, the district court granted HCA's motion for judgment as a matter of law ("JAML") on the issue of future damages. In addition, the district court granted HCA's motion for a pro tanto settlement credit, reducing the damages against HCA by the amount Nebraska Plastics received in the OMYA settlement. As a result, the judgment against HCA was reduced to $269,098. Finally, the district court entered judgment on HCA's counterclaim against Nebraska Plastics for $50,722.

Nebraska Plastics appeals the exclusion of the testimony of its expert on future damages, the grant of JAML to HCA on future damages, the grant of a pro tanto settlement credit to HCA and the entry of judgment for HCA on its counterclaim. HCA cross-appeals the submission of the negligent design, manufacture and supply claim to the jury.

II. DISCUSSION

A. Excluded Expert Testimony

Nebraska Plastics expert William Cheese offered future damages testimony in which he attempted to estimate the cost to Nebraska Plastics of customer warranty claims expected to be received in the future for defective colored fencing. After a pre-trial hearing, the district court excluded Cheese's opinions because they did not fit the facts of the case. "Decisions concerning the admission of expert testimony lie within the broad discretion of the trial court, and these decisions will not be disturbed on appeal absent an abuse of that discretion." Anderson v. Raymond Corp., 340 F.3d 520, 523 (8th Cir.2003) (quoting Peitzmeier v. Hennessy Indus., Inc., 97 F.3d 293, 296 (8th Cir.1996)). We evaluate the district court's understanding of the evidence at the time the district court made the ruling. See Old Chief v. United States, 519 U.S. 172, 182 n.6, 117 S.Ct. 644, 136 L.Ed.2d 574 (1997) ("It is important that a reviewing court evaluate the trial court's decision from its perspective when it had to rule and not indulge in review by hindsight.").

Cheese calculated future damages by assuming that every pound of colored fence produced between 1996 and 2001 would be subject to a warranty claim.² The district court did not abuse its discretion in concluding that Cheese's assumption was invalid in view of the facts of the case. Specifically, the district court noted that, while Nebraska Plastics' evidence did show that all colored fencing with calcium carbonate would eventually fade, it did not demonstrate that every pound of fencing would fade to the point of being subject to a valid warranty claim. In fact, at the time of the district court's order excluding Cheese's testimony in November 2003, warranty claims had been filed on only 3.5% of the total colored fencing produced with calcium carbonate. Other evidence suggested that the rate of chalking would vary with regional climate differences and that the chalking would be more noticeable with some fence colors than with others. Cheese's estimate of future damages addressed none of these relevant facts.³

We agree with Nebraska Plastics that "[a]s a general rule, the factual basis of an expert opinion goes to the credibility of the testimony, not the admissibility, and it is up to the opposing party to examine the factual basis for the opinion in crossexamination." Hartley v. Dillard's, Inc., 310 F.3d 1054, 1061 (8th Cir.2002) (quoting Bonner v. ISP Tech., Inc., 259 F.3d 924, 929 (8th Cir.2001)). However, it also is true that if the expert's opinion is so fundamentally unsupported that it can offer no assistance to the jury, it must be excluded. Id. An expert opinion that fails to consider the relevant facts of the case is fundamentally unsupported:

If a party believes that an expert opinion has not considered all of the relevant facts, an objection to its admission is...