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REMEE PRODUCTS CORP. v. SHO-ME POWER ELECTRIC COOPERATIVE

United States District Court, Southern District of New York


January 17, 2003

REMEE PRODUCTS CORP., PLAINTIFF,
v.
SHO-ME POWER ELECTRIC COOPERATIVE AND TM SALES, INC., DEFENDANTS.

The opinion of the court was delivered by: Harold Baer, Jr., United States District Judge.

AMENDED OPINION & ORDER
Remee Products Corp. ("plaintiff' or "Remee") moves for a post-trial judgment as a matter of law pursuant to Fed.R.Civ.P. 50(b), or, in the alternative, for a new trial pursuant to Fed.R.Civ.P. 59. For the reasons detailed more fully below, Remee's post-trial motion for judgment as a matter of law is denied in its entirety. In addition, Remee's post-trial motion for a new trial with respect to Sho-Me's fraud claim and the Court's refusal to instruct the jury with respect to the statutory measure of damages applicable to Sho-Me's breach of warranty claims is also denied.

I. BACKGROUND

Remee, a manufacturer of fiber optic cable, brought an action against Sho-Me Power Electric Cooperative ("defendant" or "Sho-Me") to recover approximately $400,000 for the latter's refusal to accept a final shipment of fiber optic cable under purchase order 29544 ("P0 29544"). Sho-Me counterclaimed against Remee asserting claims for breach of contract, breach of express and implied warranties, fraud and economic duress deriving from Remee's shipment of defective cable to Sho-Me; Sho-Me sought damages totaling approximately $5.1 million. A jury trial took place from October 28, 2002 to November 1, 2002. The jury found that Sho-Me anticipatorily repudiated P0 29544 and awarded Remee $399,539 for the final shipment of fiber optic cable. However, the jury also found that Remee breached its implied warranties of merchantability and fitness for intended use by shipping defective cable, and awarded Sho-Me damages totaling $3,443,627. Further, the jury found that Remee made intentional misrepresentations and omissions with respect to its defective fiber optic cable and awarded Sho-Me $1,732,942 in damages on Sho-Me's intentional misrepresentation claim. The total amount of damages thus awarded to Sho-Me is $5,176,569.

Remee timely filed a motion for judgment as a matter of law pursuant to Rule 50, or, in the alternative, for a new trial pursuant to Rule 59 on the following grounds: (1) the verdicts returned by the jury are inconsistent; (2) the evidence adduced at trial does not support those verdicts; and (3) the Court erred by refusing to dismiss Sho-Me's fraud claim and by refusing to instruct the jury that Sho-Me's damages for breach of warranty are governed by UCC 2-714(2). Specifically, Remee contends that Remee's fraud claim failed as a matter of law because it was duplicative of its contract claim, and that such claims cannot be maintained under New York law. (Remee memorandum at 4). In addition, Remee argues that the jury's answer to Interrogatory 1B is inconsistent with its answer to Interrogatory 2. (Id. at 9). The jury answered "no" to interrogatory 1B, which reads:

Did Sho-Me prove, by a preponderance of the evidence, that Remee breached its contract with Sho-Me with respect to purchase order 29544 by delivering defective fiber optic cable and that Sho-Me notified Remee of the allegedly defective fiber optic cable in a timely manner?
The jury answered "Yes" to interrogatory 2, which reads:

Did Sho-Me prove, by a preponderance of the evidence, that Remee breached its implied warranties of merchantability and fitness for intended use by delivering defective cable and that Sho-Me notified Remee of the allegedly defective fiber optic cable in a timely manner?
Consequently, the jury awarded Sho-Me compensatory damages in the amount of $3,443,627 for Remee's breach of its implied warranties of merchantability and fitness for intended use. Remee further submits that even if the Court does not find these answers to be inconsistent, it must still find that the evidence adduced at trial was legally insufficient to support an award of $3,443,627. (Id. at 11). For these reasons, Remee argues that the Court must either grant a judgment as a matter of law in its favor, or, in the alternative, order a new trial with respect to Sho-Me's fraud and breach of warranty claims. I disagree.

II. DISCUSSION

1. Standard for Judgment as a Matter of Law Pursuant to Rule 50(b)

Rule 50(b) states, in pertinent part, that

[t]he movant may renew its request for judgment as a matter of law by filing a motion no later than 10 days after entry of judgment — and may alternatively request a new trial or join a motion for a new trial under Rule 59. In ruling on a renewed motion, the court may:
(1) if a verdict was returned:

(A) allow the judgment to stand,

(B) order a new trial, or

(C) direct entry of judgment as a matter of law.

To decide whether judgment as a matter of law is warranted, the Court must decide "whether the evidence is such that, without weighing the credibility of witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable [people] could have reached." Mallis v. Bankers Trust Co., 717 F.2d 683, 688 (2d Cir. 1983) (internal citations and quotations omitted). The trial court should grant judgment as a matter of law only when: (1) there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture; or (2) there is such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded people could not arrive at a verdict against the movant. Lambert v. Genesee Hosp., 10 F.3d 46, 56 (2d Cir. 1993), cert. denied, 511 U.S. 1052 (1994). On a motion for judgment as a matter of law, the district court "must view the evidence in the light most favorable to the party against which the motion was made . . . making all credibility assessments and drawing all inferences in favor of the non-movant." EEOC v. Ethan Allen. Inc., 44 F.3d 116, 119 (2d Cir. 1994) (internal citations omitted).

2. Standard for Motion for a New Trial Pursuant to Rule 59(a)

Rule 59(a) states, in pertinent part, that

[a] new trial may be granted to all or any of the parties and on all or part of the issues . . . in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States.
The decision whether to grant a new trial following a jury trial under Rule 59 is "committed to the sound discretion of the trial judge." Metromedia Co. v. Fugazy, 983 F.2d 350, 263 (2d Cir. 1992), cert. denied, 508 U.S. 952 (1993). However, the trial judge should exercise such discretion only in "the most extraordinary circumstances." United States v. Locasido, 6 F.3d 924, 949 (2d Cir. 1993). Further, the power of a district court to grant a new trial based on the weight of the evidence is limited to instances in which the court is "`convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice.'" Ishay v. City of New York, 158 F. Supp.2d 261, 263 (E.D.N.Y. 2001) (quoting Hugo Boss Fashions. Inc. v. Fed. Ins. Co., 252 F.3d 608, 623 (2d Cir. 2001)). In considering whether a verdict is so "seriously erroneous" as to justify a new trial, the district court "is free to weigh the evidence and `need not view [the evidence] in the light most favorable to the verdict winner.'" Farrior v. Waterford Bd. of Educ., 277 F.3d 633, 634 (2d Cir. 2002) (quoting DCL Mgmt. Corp. v. Town of Hyde Park, 163 F.3d 124, 134 (2d Cir. 1998)). In addition, ""[b]efore a [district] court may set aside a special verdict as inconsistent and remand the case for a new trial, it must make every attempt "to reconcile the jury's findings, by exegesis if necessary.'" The Cayuga Indian Nation of New York v. Pataki, 165 F. Supp.2d 266, 281 (N.D.N.Y. 2001) (quoting Turley v. Police Dep't of N.Y., 167 F.3d 757, 760 (2d Cir. 1999) (other citation omitted)). In assessing whether a given verdict is inconsistent, the Second Circuit has held that "`[w]here the district court properly instructed the jury. . . . [t]here is a strong presumption that the jury in reaching its verdict complied with those instructions,'" and that "`[a] jury's verdict reached after proper instructions must be upheld where there is a reasonable explanation for the jury's seemingly inconsistent answers.'" Id. at 282-83 (internal citations omitted).

A. Inconsistent Jury Verdicts

Remee maintains that it is entitled to judgment as a matter of law, or, in the alternative, to a new trial with respect to two allegedly inconsistent jury verdicts. Specifically, it is Remee' s view that the jury's negative answer to interrogatory 1B necessarily precludes an affirmative answer to interrogatory 2 insofar as Remee could not have breached its implied warranties (interrogatory 2) if Sho-Me failed to prove both that Remee breached P0 29544 by delivering defective cable as well as that Sho-Me notified Remee of the allegedly defective cable in a timely manner (interrogatory 1 B). For this reason, Sho-Me contends that, at the very least, the jury's award of damages to Sho-Me for breach of warranties should not have included any amounts paid by Sho-Me on P0 29544, totaling $1,966,086.

I disagree. As Sho-Me points out, at trial Remee espoused a theory of anticipatory repudiation vis-à-vis P0 29544 (interrogatory 1B), according to which the jury found that Remee was excused from performance with respect to its last shipment under this purchase order after Sho-Me notified Remee that it was canceling this shipment — and only this shipment. (Tr. 490-91). In addition, I charged the jury on Remee's theory of anticipatory repudiation with respect to the last shipment of P0 29544. (Tr. 632).*fn1 For this reason, I find it completely reasonable for the jury to have found that Remee's performance with respect to the last shipment of P0 29544 — in the total amount of $399,539 — was excused (because of Sho-Me's anticipatory repudiation) whereas its performance with respect to all other deliveries — in the total amount of $3,443,627 — was not excused. Furthermore, I disagree with Remee that the evidence is insufficient to support an award of compensatory damages for implied warranties. Indeed, the record contains ample evidence to support the jury's finding that Remee breached its implied warranties of merchantability and fitness for intended use. Sho-Me adverts to a number of instances in the record that overwhelmingly support a finding that Remee was aware of defects in the Sterlite glass used to manufacture cable for Sho-Me and that Remee failed to inform Sho-Me of this fact. For instance, the March 9, 2001 report created by Remee, trial exhibit 49, concludes that "there is a very strong possibility that all of the fiber received from Sterlite since 3 August 2000 exhibits this flaw [fiber breaks]. As such, our liability with regard to potential problems and returns is enormous." (Sho-Me Trial Ex. 49; Tr. 142). In addition, Sho-Me points to several witnesses who credibly testified with respect to the defects in Remee's cable. Terry Arndt, Sho-Me's chief engineer for fiber optic cable, testified at length about the brittle glass and kinked buffer tubes that Sho-Me noticed when it began to splice the Remee cable that was received in January 2001:

Q: What problems did you see in the cable?

A: The buffer tubes were kinked, more than just kinked, they were smashed. The tubes when the suppliers would begin to work on them to put them into the splice trays, the tubes would kink over and break. When they would kink over, the glass would sever, literally just cut it off, just cut the glass in two. That was our initial problems [sic]. Along with [sic] we found a very brittle glass, the splicers were having a difficult time cutting the fiber square to get it to fuse together.
Q: And did you actually see the Remee cable?

A: Yes, I did.

Q: When was that?

A: I saw it on many different occasions, but in particular, in the mid part of June, Randy Arthur, which is our splicing superintendent, fiber superindendent, had brought a piece of the fiber into my office that they had been having problems with, a sample of it, and had showed me in good detail what the problem was.
Q: And what did you see when Mr. Arthur brought you that particular piece of cable?
A: Again, the buffer tubes in many cases were basically smashed about halfway in two. They were very thin. There was some additional problems in just the cable itself was the inner jacket and the outer jacket was stuck together. But those were the evident problems at that point. (Tr. 223-34).
Weighing all the evidence in the light most favorable to Sho-Me, as I must, I cannot find that a judgment as a matter of law is warranted here with respect to the alleged inconsistencies between interrogatory 1B and interrogatory 2. Indeed, the record overwhelmingly supports a finding of breach on Remee's part with respect to its implied warranties of merchantability and of intended use, and I do not believe that reasonable and fair minded people could find otherwise. In addition, with respect to Remee' s motion for a new trial on this issue, I simply do not find that Remee has satisfied the stringent standard of demonstrating that the verdict was so "seriously erroneous" as to justify a new trial.

B. Dismissal of Sho-Me's Fraud Claim

Remee further argues that Sho-Me's fraud claim — interrogatory 4 — should be dismissed on the ground that the ""misrepresentations or omissions' found by the jury necessarily relate to breach of contract and, as such, are not actionable as fraud." (Remee's memorandum of law at 4). Specifically, Remee argues that under New York law courts have dismissed causes of action premised on theories of fraud on the ground that a failure to perform a promise is merely a breach of contract, not fraud. See, e.g., Colucci v. O'Brien, 204 A.D.2d 257, 611 N.Y.S.2d 594 (2d Dep't 1994). Sho-Me counters by adverting to several instances in which the Second Circuit did indeed find that a separate fraud claim exists where a party alleges misrepresentation of present facts as opposed to a misrepresentation of a promise to perform under the contract. See, e.g., Grappo v. Alitalia Linee Aeree Italiane, 56 F.3d 427, 434 (2d Cir. 1995) ("A fraud action is permitted. . . where the plaintiff alleges that the defendant engaged in other fraudulent conduct besides entering the contract with no intention to perform); Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 989-99 (2d Cir. 1980) (finding that both breach of contract and tort claims existed where defendant allegedly sold diseased vines to plaintiff vineyard and misrepresented to plaintiff that the vines were healthy). At the charging conference, Sho-Me further explained to the Court that "[w]e are not saying [Remee] never intended to perform, which would be redundant of a contract claim. . . There are, and the evidence has shown, that there are collateral misstatements of fact that were made." (Tr. 505).

I disagree with Remee that Sho-Me's misrepresentations claims — for which the jury awarded Sho-Me $1,732,942 — are mere contract claims masquerading as fraud claims. To be sure, Remee did not merely fail to maintain a promise to perform but affirmatively breached a duty to disclose to Sho-Me that it was shipping defective cable. Because for the reasons stated supra I find that the record is replete with evidence that Remee knowingly shipped defective cable, and because I find that as with the inconsistent verdict claim Remee has failed to satisfy the exacting standards for either a judgment as a matter of law or for a new trial under the Federal Rules, its post-trial motion seeking to set aside Sho-Me's intentional misrepresentations cause of action is denied.

C. The Court's Failure to Provide Proper Jury Instructions

Remee finally contends that a new trial may be granted here because the Court failed to instruct the jury with respect to the statutory measure of damages applicable to Sho-Me's warranty claims, for which Sho-Me was awarded $3,443,627. Remee urges that "the Court's refusal to charge the jury as to the applicable measure of damages for breach of warranty was seriously prejudicial to Remee. In the absence of such an instruction, the jurors may well have believed that any breach of warranty would justify a complete refund to Sho-Me of all sums paid for Remee cable." (Remee' s memorandum of law at 17). Specifically, Remee submits that UCC 2-714(2) is controlling here because "[t]he measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount." UCC 2-714(2). Put another way, Remee contends that the evidence is legally insufficient to support an award of $3,443,627 for breach of implied warranties because the jury's award suggests that the cable had no value whatsoever and the evidence clearly suggests otherwise.

I disagree. As noted supra evidence adduced at trial overwhelmingly demonstrated that the cable was unsuitable and that, of the small amount of cable that was presently in use, Sho-Me expected the cable to fail but has not yet dismantled it because of the large expense involved. (Tr. 458). Sho-Me's Chief Financial Officer, John Richards, testified that the "vast majority" of Remee's cable is still in Sho-Me's store yard. (Tr. 585). Sho-Me's General Manager, John Davis, testified that Remee's cable was "unsuitable" and was not used in any place that it would constitute a threat to life. (Tr. 189-90). Because I do not believe that the Court's refusal to give a jury instruction with respect to UCC 2-714(2) was seriously erroneous or constituted a miscarriage of justice, Remee's motion with respect to my jury charge is denied.

III. CONCLUSION

For the foregoing reasons, Remee's post-trial motion for judgment as a matter of law and/or for a new trial is denied in its entirety. The clerk of the court is instructed to close this and any other open motions in this matter.

IT IS SO ORDERED.


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