Schooley v. Orkin Extermination, Co., Inc.
| Decision Date | 19 September 2007 |
| Docket Number | No. 06-3326.,No. 06-3486.,06-3326.,06-3486. |
| Citation | 502 F.3d 759 |
| Parties | Wayne SCHOOLEY; Laurie Schooley, Plaintiffs-Appellants, v. ORKIN EXTERMINATION, CO., INC., a wholly-owned subsidiary of Rollins, Inc.; Rollins, Inc., a foreign corporation, Defendants-Appellees. Wayne Schooley; Laurie Schooley, Plaintiffs-Appellees, v. Orkin Extermination, Co., Inc., a wholly-owned subsidiary of Rollins, Inc.; Rollins, Inc., a foreign corporation, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Marc A. Humphrey, argued, Urbandale, IA, Justin K. Swain, and Kurt Swain, on the brief, Bloomfield, IA, for appellants.
Joseph W. Winner, argued, Columbus OH, Heather L. Palmer, on the brief, Des Moines, IA, for appellees.
Before BYE and SMITH, Circuit Judges, and NANGLE,1 District Judge.
Wayne and Laurie Schooley (Schooleys) hired Orkin Exterminating Co., Inc., (Orkin) to protect their home against termites. After the home sustained extensive termite damage, the Schooleys sued Orkin claiming fraudulent and negligent misrepresentation. The Schooleys sought compensatory damages for repair costs, loss of use, and reduction in value, and punitive damages. A jury found in favor of the Schooleys on the fraud and negligent misrepresentation claims, and awarded $138,000 in compensatory damages and $276,000 in punitive damages. The district court granted Orkin's post-trial motion for judgment as a matter of law (JAML) on the claim for punitive damages and granted Orkin's new trial motion on the award of compensatory damages. The court denied Orkin's JAML motion on the fraudulent misrepresentation claim.2 A second jury returned a compensatory damages award of $96,030.
On appeal, the Schooleys argue the district court erred by granting JAML on the claim for punitive damages and by granting a new trial on compensatory damages. In its cross-appeal, Orkin argues the district court erred by denying its JAML motion on the fraudulent misrepresentation claim. It also appeals the second award of compensatory damages, arguing the district court's instruction on compensatory damages was erroneous and it asks us to reduce the compensatory damages to $25,030. We reverse the district court's order granting JAML on punitive damages and the order granting a new trial on compensatory damages, and reinstate the original damage awards.
The facts viewed in the light most favorable to the fraudulent misrepresentation claim and punitive damages award are as follows. In Re Knickerbocker, 827 F.2d 281, 284 (8th Cir.1987).
The Schooleys purchased their home in 1978 and observed no signs of termite activity until 1992. After discovering evidence of termites in 1992, they contacted Orkin. An Orkin representative inspected the home and told the Schooleys the company's treatment process would create a complete chemical barrier against termites and protect the home. The Schooleys purchased Orkin's treatment package, including an annual renewable option for a limited lifetime retreatment guarantee which stated: "Orkin guarantees that it will, at no extra cost, apply any necessary additional treatment to the premises if an infestation of the aforesaid wood infesting organism is found in the treated premises during the period this Guarantee is in force."
The house was first treated in 1992 to establish the complete chemical barrier against termites. In 1993, Orkin conducted an annual inspection and found no termite activity. Satisfied the problem was under control, the Schooleys began a remodeling project which initially consisted of a multilevel deck attached to the back of the home. In 1994, Laurie discovered evidence of termite activity and contacted Orkin. Orkin sprayed the infested area and assured the Schooleys the problem was under control. At trial, however, Kent Heinzman, a branch manager for Orkin, testified the appearance of termite activity within two years of an initial application indicated the application had been inadequately applied or the chemical barrier had broken down. He testified the complete chemical barrier from the initial application would generally be expected to last between six to fourteen years. The Schooleys testified Orkin never provided this information to them.
In 1995, the Schooleys expected Orkin to conduct an annual inspection in March or April — it did not. In October, Laurie again discovered evidence of termite activity in the same location of the house and called Orkin. An inspector inspected the home and recommended a complete retreatment to his superiors instead of a spot retreatment. The recommended complete retreatment was not approved by the branch manager and a second spot retreatment was performed.
At trial, an Orkin technician testified spot retreatments generally do not provide complete termite control. Indeed, they can force termites from the treated area to untreated points of entry. Conversely, an unbreached chemical barrier completely prevents termites from entering the home. The Schooleys testified they were not told the inspector had recommended complete retreatment or that spot treatments could be ineffective in treating termite infestations.
Prior to 1996, the Schooleys had observed evidence of termite activity only on the walls of the basement. In July 1996, Laurie noticed for the first time the termite activity had moved from the basement to the inside wall of the front porch, the east interior wall of the dining room, the main floor, and an internal stairway in the center of the home. Orkin told the Schooleys this was probably old damage, performed another spot retreatment, and in October pronounced the home termite free.
In 1997, the Schooleys embarked on an extensive remodeling project. Before doing so, Laurie called Orkin for assurances the termite problem was under control. Laurie described their remodeling plans and, after inspecting and applying additional chemical prophylactically, Orkin advised the Schooleys there was no termite activity. The Schooleys spent approximately $120,000 on the remodeling project which included, among other improvements, finishing the previously unfinished basement.
Upon completion of the project in 1997, Laurie again noticed termite damage around the front porch. Orkin sprayed the area and told Laurie it was old damage. In 1998, she observed pin holes in newly hung wallpaper and indentations in newly decorated walls. Nonetheless, in September 1998 and February 1999, Orkin conducted annual inspections and reported no termite activity.
Soon after the February 1999 inspection, Laurie noticed termite damage to the basement floor which had been installed as part of the 1997 remodeling project. Faced with proof of an obvious reinfestation, Orkin's inspector reported termite activity. She complained as to the spot retreatments obviously not working and expressed concern because they had extensively remodeled the home. The possibility of a complete retreatment, as suggested by Orkin's inspector in 1995, was never discussed with the Schooleys. Instead, the company installed a bait monitoring system and advised the Schooleys it would resolve the problem in no time. The Schooleys testified they relied on the company's representations of expertise in the field of termite control, believed the inspectors who said the various treatments would control the termite problem, and accepted its invitation to "trust" it to solve the termite problem.
Despite Orkin's promise to monitor the bait stations monthly, there were several months when no one came to the home. In October 1999, after waiting four months for an inspector, Laurie discovered evidence of termites in the basement stairway. She called Orkin and two days later the branch manager, Heinzman, came to the home and left a written message stating one bait trap containing 80,000 dead termites had been consumed and there was no further evidence of termite activity. At trial, Heinzman admitted there are upwards of one million termites in any given colony, capable of infesting several homes at the same time. In other words, the presence of 80,000 dead termites was no indication the infestation was under control.
In 2000, Orkin only inspected the home and bait stations when Laurie called requesting an inspection. During 2000, she observed no further evidence of termites and concluded the bait stations were working. In January 2001, however, she noticed termite damage to the main floor in the center of the home and to the floor in the main-floor bathroom. She also discovered damage to the stairway wall leading from the main floor to the second floor. Further examination revealed the wood flooring in the bathroom had been eaten by termites. Once again, Orkin assured her this was old damage but agreed to install a bait station in the bathroom. Days later, Wayne discovered evidence of active termites in the basement directly under the main-floor bathroom. Orkin was contacted and representatives assured the Schooleys the bait stations would solve the problem.
In March 2001, after being called by the Schooleys, and in April 2001, Orkin inspected the Schooleys' home and reported no activity. Two days after the April inspection, Laurie discovered obvious evidence of termites in three different locations in the basement. She called the inspector and asked why only two days earlier he had reported no activity. She was told:
In June 2001, the Schooleys discovered additional and extensive termite damage to the main floor of the home. They undertook repairs of the damage and in the process observed active termites in the walls of the home. A videotape documenting the damage, repairs, and live termites was presented to the jury.
At this juncture, Orkin chose to apply a different chemical to reestablish a complete chemical...
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