Razorback Concrete Co. v. Dement Constr. Co.

• Decision Date: 06 August 2012
• Docket Number: No. 11–3499.,11–3499.
• Parties: RAZORBACK CONCRETE COMPANY, Plaintiff–Appellant v. DEMENT CONSTRUCTION COMPANY, LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

688 F.3d 346

RAZORBACK CONCRETE COMPANY, Plaintiff–Appellant

v.DEMENT CONSTRUCTION COMPANY, LLC, Defendant–Appellee.

No. 11–3499.

United States Court of Appeals, Eighth Circuit.

Submitted: April 19, 2012.

Filed: Aug. 6, 2012.

Danny Ray Crabtree, Jr., argued, Timothy Oliver Dudley, on the brief, Little Rock, AR, for appellant.

Edwin Earl Wallis, III, argued, Memphis, TN, Teresa Michelle Young, St. Louis, MO, Edwin Earl Wallis, Jr., Jackson, TN, on the brief, for appellee.

Before MURPHY, MELLOY, and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

Razorback Concrete Company (“Razorback”) sued Dement Construction Company (“Dement”) for breach of contract and fraud based on disputes over performance of a concrete supply contract. The district court ¹ granted summary judgment to Dement on the fraud claim and partial summary judgment to Dement as to the measure of damages for the breach of contract claim, holding that Razorback was not entitled to recover damages under a lost profits theory. After obtaining a judgment on the contract claim that it deems inadequate, Razorback appeals the grants of summary judgment. We affirm.

I. BACKGROUND²

Dement was the prime contractor on a bridge construction project, and Razorback was its concrete provider. Pursuant to a written contract requiring payment by Dement within thirty days of receiving monthly statements, Razorback was to supply concrete that met the requisite strength level for the bridge. However, some of the concrete failed strength tests after a specified twenty-eight-day interval (occurrences the parties describe as “low breaks”). As a result, Dement had to allow extra time for the concrete to strengthen to an acceptable level for the project. Dement sent a letter to Razorback on April 4, 2007 noting that the project had a time charge of $5,000 for each day that it took Dement to complete the project and that Dement considered “that thirty (30) days of time charged for [Razorback's] account would be equitable.” Razorback responded in writing that the concrete was not substandard, but rather that the tests—which were not conducted by Razorback—were flawed. Additionally, Razorback inquired of Dement

whether it is your intention to attempt to set off payments due [Razorback] for future deliveries of concrete with your claim for damages.... [U]nless we are told to the contrary, [Razorback] will assume that you will pay for material as it is delivered to the site. If this assumption is unwarranted you need to say so, because [Razorback] will rely upon your failure to correct this assumption in order to make future deliveries of concrete to the site.

After receiving no response from Dement, Razorback wrote another letter on May 8 stating that it would rely on Dement's failure to respond as a representation that no amount due Razorback would be withheld as an offset. Razorback also stated that should Dement later try to offset moneys due Razorback, Razorback would have claims for breach of contract, fraud, deceit, and misrepresentation.

Dement responded on May 9 that, to Dement's knowledge, there were no more low breaks after Razorback had changed its mix design for the concrete. It also noted that it had never intended “to unilaterally deduct monies due Razorback based on this issue” and that it would continue to pay all invoices in a timely manner. In reliance on Dement's assurances, Razorback continued to supply concrete to Dement.

On May 18, Dement learned that concrete used in a “critical zone” of what it described as “probably the most critical pier in the structure” had substandard strength-test results. Furthermore, Dement was informed on June 8 that the Federal Highway Administration (“FHWA”) might require concrete to be replaced if a low break were to occur in a certain area of the construction. According to Razorback, Dement's payments in June and August withheld some of the amount owed for delivered concrete and Dement stopped making any payments after August 2007. In light of what it viewed as a breach of contract by Dement, Razorback terminated the contract and refused to supply any additional concrete.

In its suit against Dement, Razorback asserted that it was entitled to $318,767, representing lost profits that it would have earned by supplying concrete for the remainder of the project. Razorback also asserted that Dement was liable for fraud because it withheld payments after promising Razorback that it would not. The district court granted summary judgment to Dement as to Razorback's fraud claim, holding that Razorback's evidence was insufficient for a reasonable jury to find fraud. The district court granted partial summary judgment to Dement on the issue of lost profits as the measure of damages on Razorback's breach of contract claim because Razorback's evidence did not create a material question of fact regarding whether Razorback was entitled to that measure of damages under the Uniform Commercial Code (“U.C.C.”). The case proceeded to trial on the remaining breach of contract claim, and Razorback obtained a jury verdict in its favor. Razorback now appeals the grants of summary judgment as to the fraud claim and the lost profits measure of damages on the contract claim.

II. DISCUSSION

“As a federal court sitting in diversity jurisdiction, we apply the law that the forum state would apply.” Winthrop Res. Corp. v. Stanley Works, 259 F.3d 901, 904 (8th Cir.2001). Because the district court determined that Arkansas law governs and the parties did not appeal that determination, we too will apply Arkansas law. See Lackawanna Chapter of the Ry. & Locomotive Historical Soc'y, Inc. v. St. Louis Cnty., Mo., 497 F.3d 832, 835 (8th Cir.2007). “If the Supreme Court of [Arkansas] has not addressed an issue, we must predict how the court would rule....” Eubank v. Kan. City Power & Light Co., 626 F.3d 424, 427 (8th Cir.2010).

We review de novo a district court's grant of summary judgment and its interpretation of state law. Best Buy Stores, L.P. v. Benderson–Wainberg Assocs., L.P., 668 F.3d 1019, 1026 (8th Cir.2012). “Summary judgment is appropriate when, viewing the record in the light most favorable to the nonmoving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” Smith v. Arrington Oil & Gas, Inc., 664 F.3d 1208, 1212 (8th Cir.2012). As the moving party, Dement bore “the initial responsibility of informing the district court of the basis for its motion” and needed to identify “those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir.) (en banc) (alterations in original) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)), cert. denied,565 U.S. ––––, 132 S.Ct. 513, 181 L.Ed.2d 349 (2011). If Dement met this burden, Razorback needed to submit “evidentiary materials that set out specific facts showing that there is a genuine issue for trial.” Id. Razorback needed to “do more than simply show that there is some metaphysical doubt as to the material facts....” Id.

A. Fraud Claim

Under Arkansas law, fraud consists of the following five elements: (1) “a false representation of a material fact,” (2) “knowledge that the representation is false or that there is insufficient evidence upon which to make the representation,” (3) “intent to induce action or inaction in reliance upon the representation,” (4) “justifiable reliance on the representation,” and (5) “damage suffered as a result of the representation.” Bomar v. Moser, 369 Ark. 123, 251 S.W.3d 234, 241 (2007). “Fraud is never presumed, but must be affirmatively proved, and the burden of proving fraud is upon the party who alleges it and relies on it.” Interstate Freeway Servs., Inc. v. Houser, 310 Ark. 302, 835 S.W.2d 872, 873 (1992). “An action for fraud or deceit may not be predicated on representations relating solely to future events. However, this rule is inapplicable if the person making the representation or prediction knows it to be false at the time it is made.” Goforth v. Smith, 338 Ark. 65, 991 S.W.2d 579, 586 (1999) (internal citation omitted). “While fraud may be established by circumstantial evidence, the circumstances must be so strong and well connected as to clearly show fraud.” Fowler v. SmithKline Beecham Clinical Labs., Inc., 225 F.3d 1013, 1016 (8th Cir.2000) (quoting Allred v. Demuth, 319 Ark. 62, 890 S.W.2d 578, 580 (1994)).

This case turns on whether Razorback produced sufficient evidence to create a genuine issue of material fact regarding whether Dement, at the time it assured Razorback that it would not withhold payments (a statement relating solely to future events), knew that the representation was false. See Goforth, 991 S.W.2d at 586. Razorback asserts that when Dement assured Razorback in May 2007 that it would not withhold payments, Dement already intended to withhold future payments. In support, Razorback claims that Dement began withholding payments in June 2007 even though there were no problems with the concrete and that nothing, except perhaps testing procedures, had changed from the time of Dement's promise. The record demonstrates, however, that Dement learned consequential news between the time that it made the assurance to Razorback and the time that it began withholding payments. First, Dement learned that concrete used in what it claims was probably the most critical pier in the structure had substandard strength-test results. Second, Dement learned that there was no guarantee that the FHWA would allow certain concrete to remain in place in the event of a low break. In September 2007, Dement wrote to Razorback stating that removal and replacement of the concrete, if necessary, would cost approximately $420,000 to $840,000 and that, in an effort to resolve the matter without withholding payments from Razorback, Dement would...