Walser v. Toyota Motor Sales, U.S.A., Inc.

• Decision Date: 27 December 1994
• Docket Number: Nos. 93-2342,93-2575,s. 93-2342
• Citation: 43 F.3d 396
• Parties: Paul Martin WALSER; Philip Martin McLaughlin, Plaintiffs/Appellants, v. TOYOTA MOTOR SALES, U.S.A., INC., Defendant/Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 396

43 F.3d 396

Paul Martin WALSER; Philip Martin McLaughlin, Plaintiffs/Appellants, v. TOYOTA MOTOR SALES, U.S.A., INC., Defendant/Appellee.

Nos. 93-2342, 93-2575.

United States Court of Appeals,

Eighth Circuit.

Submitted March 16, 1994.

Decided Dec. 27, 1994.

Robert Arthur Brunig, Minneapolis, MN, argued, for appellant.

Hildy Bowbeer, Minneapolis, MN, argued (John Q. McShane and Kim Schmid, on the brief), for appellee.

Before HANSEN, Circuit Judge, HEANEY, Senior Circuit Judge, and JOHN R. GIBSON, Senior Circuit Judge.

HANSEN, Circuit Judge.

The plaintiffs, Paul Martin Walser and Philip Martin McLaughlin, appeal from a jury verdict in this diversity case awarding them $232,131 in damages on their promissory estoppel claim against Toyota Motor Sales. The plaintiffs argue that the district court ¹ erred by instructing the jury that the plaintiffs' damages on their promissory estoppel claim were limited to out-of-pocket expenses. The plaintiffs also argue that the district court erred in declining to award specific performance as an alternative remedy on their promissory estoppel claim, in denying their motion for judgment as a matter of law on their contract claim, in instructing the jury on their contract claim, in requiring them to accept payment from Toyota for $.89 less than the amount of damages and interest awarded, in granting summary judgment on their claim under the Minnesota Motor Vehicle Sale and Distribution Regulations, and in precluding them from taxing costs prior to a final determination of this case on appeal. We affirm.

I.

In 1987, Toyota Motor Sales, U.S.A., conducted market surveys throughout the United States to identify the best markets for the new line of "Lexus" automobiles that Toyota planned to introduce in 1989. The market studies identified the Minneapolis/St. Paul, Minnesota, metropolitan area as a two-dealership market and recommended establishing dealerships in two suburban areas--Wayzata and the Bloomington/Richfield area.

In April 1988, Toyota issued letters of intent for the prospective dealerships in the two locations. The recipient of the letter for the Bloomington/Richfield dealership was unwilling or unable to comply with the conditions of the letter of intent and returned it to Toyota in early 1989. Soon after, Toyota began to search anew for a dealer for the Bloomington/Richfield location. Lexus Central Region Area Manager, James Melton, asked Stephen Haag, the Central Region Market Manager, to contact Walser, who was then co-owner with McLaughlin of a BMW dealership and a Lincoln-Mercury dealership both located in Bloomington. Both Walser and McLaughlin met with Haag and indicated that they would be interested in obtaining the Lexus dealership.

Toyota had instituted a three-step process to establish dealerships. First, the prospective dealer would fill out a formal application and propose a dealership plan to Toyota. If acceptable, then Toyota would issue a letter of intent signed by the head of the Lexus division and to be signed by the prospective dealer, which would contain final conditions that had to be satisfied before the agreement was finalized. If all conditions were satisfied, then a formal dealership agreement would be approved by Toyota and signed by the parties to establish the dealership.

Walser and McLaughlin applied for the Lexus dealership by completing and signing the formal application for the dealership. The application specifically provided that a dealership agreement was not effective until a formal dealership agreement was approved and signed by an officer of Toyota. Walser's preliminary proposals, to have the Lexus dealership share space with the BMW dealership or to move the BMW business and to retrofit the BMW facility for Lexus, were both rejected by Toyota, but negotiations continued between the parties. However, unknown to Toyota, Walser and McLaughlin were also negotiating at the same time to buy a Mazda/BMW dealership in St. Paul.

After the retrofit proposal was rejected, Walser and McLaughlin began negotiating to acquire additional property adjacent to the their Bloomington BMW dealership as a site for the Lexus dealership. On October 15, 1989, Walser's father, R.J. Walser, reached a "handshake deal" to purchase that property for the proposed Lexus dealership from its owner. On October 16, 1989, Walser and McLaughlin wrote Haag and informed him of the agreement to purchase the land but did not disclose that R.J. Walser was buying the land.

On October 17, 1989, Walser and McLaughlin traveled to California to meet with Lexus management and to present their new dealership proposal and financing arrangements. The fact that R.J. Walser was buying the land and that McLaughlin and Walser were in the process of purchasing a Mazda/BMW dealership in St. Paul were not disclosed. Lexus management viewed the proposal favorably, and one executive stated that he was with Walser and McLaughlin.

On October 24, 1989, Walser called Haag to ask whether the letter of intent for the dealership was forthcoming. Haag told Walser that while the letter was not yet executed, things looked positive, the deal was done, only one more signature was needed, and finalizing the deal was basically a rubber stamp. Later that day, R.J. Walser entered into a purchase agreement and paid $50,000 in earnest money for the land for the proposed Lexus dealership.

In December 1989, the letter of intent was formally approved by Lexus management. Haag called Walser and congratulated him and told him that "you're our dealer" and the letter would be coming by mail. Later in the day, however, Melton told Haag that based on new information Lexus had received regarding Walser and McLaughlin's financing for the new dealership, the letter of intent would be put on hold. A couple days later, Haag called Walser to tell him that a mistake had been made and that the letter had not been finally approved. Haag requested additional financial information.

On January 3, 1990, R.J. Walser closed on the property he was purchasing for the proposed Lexus dealership. On February 5, 1990, Walser and McLaughlin provided additional financial information and disclosed that R.J. Walser was available, but not necessary, to supply the required financing. On February 23, 1990, Haag informed Walser that Lexus would not be issuing the letter of intent to him and McLaughlin.

On March 7, 1990, Walser and McLaughlin filed a seven-count complaint in Minnesota state court against Toyota. Walser and McLaughlin sought relief under the following theories: breach of the Minnesota motor vehicle franchise statute (count I); breach of contract (count II); promissory estoppel (count III); joint venture (count IV); fraud (count V); intentional interference with contractual relations (count VI); and interference with a prospective business advantage (count VII). Toyota removed this action to the United States District Court for the District of Minnesota.

The district court granted Toyota's motion for partial summary judgment and dismissed the claims for breach of the Minnesota motor vehicle franchise statute and for recovery on a joint venture theory. Prior to trial, the parties filed a joint stipulation to dismiss without prejudice the claims for intentional interference with contractual relations and interference with a prospective business advantage. The case went to trial in February 1992 on the breach of contract, promissory estoppel, and fraud claims. Walser and McLaughlin sought approximately $7,600,000 in damages, which included expected lost profits. The jury returned a verdict in favor of Toyota on the contract and fraud claims but in favor of Walser and McLaughlin on the promissory estoppel claim. The jury awarded Walser and McLaughlin $232,131 in accordance with the district court's instruction to limit damages on the promissory estoppel claim to Walser and McLaughlin's out-of-pocket expenses.

The district court denied Walser and McLaughlin's posttrial request for specific performance and their motions for judgment as a matter of law or for a new trial. Walser and McLaughlin filed a notice of appeal. Subsequently, Toyota tendered a check to Walser and McLaughlin for $276,782.82, which Toyota claimed represented the full amount of the judgment, prejudgment interest, and postjudgment interest due. Walser and McLaughlin refused to accept the check because it was $44.98 short of the full amount due. The district court initially entered an order directing them to accept the $276,782.82. Toyota subsequently realized that the amount indeed was short, and the district court entered an amended order to increase the amount due by $44.09. Walser again rejected the payment claiming it was still $.89 short of the full amount due and that additional postjudgment interest continued to accrue. Walser asked the district court to amend its order again to reflect these additional amounts, but the district court refused to do so. Walser then filed an amended notice of appeal to include this issue.

II.

This is a diversity case governed by Minnesota law. We review the district court's analysis of Minnesota law de novo. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1220-21, 113 L.Ed.2d 190 (1991). Walser and McLaughlin raise eight issues in this appeal. ² We will address them in the order presented in the briefs.

A.

Walser and McLaughlin's principal argument in this appeal is that the district court erred in instructing the jury that damages on their promissory estoppel claim were limited to the out-of-pocket expenditures they made in reliance on Toyota's promise. The jury awarded $232,131 in out-of-pocket expenses. Walser and McLaughlin argue that under Minnesota law, the court should have allowed the jury to consider awarding lost profits of up to $7,600,000 allegedly flowing from Toyota's failure to keep its promise.

Minnesota has adopted the statement of the doctrine of promissory...