Outdoor Cent., Inc. v. Greatlodge.com, Inc., 11–3264.

• Decision Date: 23 August 2012
• Docket Number: No. 11–3264.,11–3264.
• Parties: OUTDOOR CENTRAL, INC.; The Central Trust Bank, Plaintiffs–Appellees v. GREATLODGE.COM, INC., Defendant–Appellant v. Active Network, Inc., Cross Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

688 F.3d 938

OUTDOOR CENTRAL, INC.; The Central Trust Bank, Plaintiffs–Appellees

v.GREATLODGE.COM, INC., Defendant–Appellant

v.Active Network, Inc., Cross Defendant.

No. 11–3264.

United States Court of Appeals, Eighth Circuit.

Submitted: June 12, 2012.

Filed: Aug. 23, 2012.

Jeremy Root, argued, Charles W. Hatfield, on the brief, Jefferson City, MO, for appellant.

Heidi Doerhoff Vollet, argued, Dale C. Doerhoff, on the brief, Jefferson City, MO, for appellees.

Before LOKEN, GRUENDER, and BENTON, Circuit Judges.

BENTON, Circuit Judge.

The Central Trust Bank and its subsidiary Outdoor Central, Inc. sued GreatLodge.com, Inc. for fraudulent inducement, among other things, arising out of an acquisition agreement. After trial, the district court ¹ found for Central Trust and Outdoor Central, rescinding the acquisition. GreatLodge appeals. Jurisdiction being proper under 28 U.S.C. § 1291, this court affirms.

I.

Central Trust and GreatLodge each provided automated licensing services to state fish and wildlife agencies. Central Trust, with a partner company, established this market using a telephone-based technology. GreatLodge sought to enhance the same services using an internet-based system, but it had both financial and logistical difficulty entering the market. Around the same time, Central Trust's partner company decided to compete independently.

In November 2004, Central Trust representatives traveled to meet with GreatLodge. GreatLodge's CEO made a presentation to Central Trust explaining the “advantages” of a merger. GreatLodge discussed “Imminent Market Opportunities,” stating that ten to fourteen state contracts would become available in the following twelve months. GreatLodge believed that the “dominant contractor” would have “a unique opportunity to build a common technology platform.” GreatLodge's CEO was invited to make a presentation the next month to Central Trust's upper management.

This presentation generates most of Central Trust's fraud allegations. In it, GreatLodge told Central Trust that its system was “scalable to add many new states, simultaneously and quickly.” GreatLodge asserts it warned of the risks in the marketplace, but it expressed a belief that the likelihood and potential impact of those risks were minimal.

Shortly after the presentation, GreatLodge fired three (roughly half) of its engineers, including its Chief Technology Officer. All three were hired by Central Trust's former partner. Learning this, Central Trust was skeptical of GreatLodge's assertion that the firings were best for the company, but GreatLodge persuaded it that performance issues caused the terminations.

Central Trust's Chief Financial Officer encouraged it to conduct more diligence on GreatLodge. Investigating GreatLodge's existing clients and licensing systems, Central Trust discovered that officials in two of GreatLodge's contract states were concerned about the terminations. To evaluate GreatLodge's technology, Central Trust also sent technology experts. One complained about GreatLodge's aging technology and loss of key staff, among other things. Another was concerned by the lack of documentation available for the GreatLodge systems and the managerial shortcomings of the most senior software engineer remaining at GreatLodge. This expert testified that if he had known of the terminations, he would have wanted to discuss them with GreatLodge's former Chief Technology Officer.

On March 1, 2005, Central Trust bought GreatLodge for $965,000 and additional performance-based compensation for nine years after the sale. Central Trust transferred GreatLodge to a subsidiary, Outdoor Central. Though successful in winning contracts, Outdoor Central soon experienced significant difficulties delivering on them.

On May 15, 2008, Central Trust and Outdoor Central sued GreatLodge for fraud in the inducement and breach of warranty (under the common law and the U.C.C.). GreatLodge counter-claimed for breach of contract (because Central Trust missed the first three of the nine yearly payments), unjust enrichment (in the alternative), and breach of the duty of good faith and fair dealing. Around December 2008, Central Trust and Outdoor Central sold their combined system assets, includingthose purchased from GreatLodge, to a third party.

Central Trust's claims for common law breach of warranty, fraud, and declaratory relief survived summary judgment, as did GreatLodge's claims for breach of contract and breach of the duty of good faith and fair dealing. After a bench trial on the fraud claim, the district court found for Central Trust and granted equitable and declaratory relief. The district court also entered judgment for Central Trust on GreatLodge's counter-claims. After briefing, the district court awarded Central Trust $965,000, the purchase price of GreatLodge. After this court resolved other issues and the case was remanded,² Central Trust amended its complaint to allege only fraud, and both parties requested that the award be reduced to $773,270 (the transaction price minus the $191,730 paid for equipment, furniture, and fixtures). The district court reduced the award accordingly.

II.

In reviewing a judgment after a bench trial, this court reviews “the court's factual findings for clear error and its legal conclusions de novo.” Tadlock v. Powell, 291 F.3d 541, 546 (8th Cir.2002). This court also reviews credibility determinations for clear error. Fed.R.Civ.P. 52(a)(6); see also Schaub v. VonWald, 638 F.3d 905, 915 (8th Cir.2011) ( “When findings are based on witness credibility, Rule 52(a) demands even greater deference to the trial court's findings.”).

To establish fraudulent inducement, Central Trust was required to prove that there was a false, material factual representation; GreatLodge knew of its falsity or was ignorant of its truth, and intended that Central Trust would act upon it in a manner reasonably contemplated; and that Central Trust was ignorant of the representation's falsity, relied on its truth, had the right to do so, and that its reliance consequently and proximately caused it injury. Toghiyany v. AmeriGas Propane Inc., 309 F.3d 1088, 1092 (8th Cir.2002) (applying Missouri law); Arnold v. Erkmann, 934 S.W.2d 621, 626 (Mo.App.1996).

A.

GreatLodge argues that its representations were opinions, comparisons, and projections—none of which are factual representations actionable as fraud. In Missouri, generally “whatever is susceptible to exact knowledge is a matter of fact, while that not susceptible is generally regarded as an expression of opinion.” Constance v. B.B.C. Dev. Co., 25 S.W.3d 571, 587–88 (Mo.App.2000) (citation and internal quotation marks omitted) (finding statement that property was “buildable” was not opinion). However, a “given representation can be an expression of opinion or a statement of fact depending upon the circumstances surrounding the representation.” Clark v. Olson, 726 S.W.2d 718, 720 (Mo.banc 1987) (finding statement that a house “was in good condition” actionable as fraud). While “[p]uffing of wares, sales propaganda, and other [similar] expressions of opinion ... are permitted,” representations concerning “the physical condition” or “physical character” of the item being sold are actionable. Id.

In particular, GreatLodge says that “scalable” is a marketing term devoid of technical meaning. This is belied by the expert testimony and the context of the statement. GreatLodge's presentation stated that its system was “[s]calable to add many new states, simultaneously and quickly.” GreatLodge asserts that this statement was related only to the call...