Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-02035/USCOURTS-ca10-89-02035-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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\: 

ROBERT L. HOECKER 

CLERK 

~ttiteh ~httes Qfourt of J\ppeals 

TENTH CIRCUIT 

OFFICE OF THE CLERK 

C404 UNITED STATES COURTHOUSE 

DENVER, COLORADO 80294 

May 25, 1990 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RE: No. 89~2035 - Amigo Sales, Inc. vs. Conway 

Filed April 25, 1990 by Judge James E. Barrett 

TELEPHONE 

(303) 844·3157 

<FTSl 564·3157 

Attached is new page 2 to be substituted for page 2 in the 

original Order and Judgment which was sent to you on Ap!il 25, 1990. 

RLH:fg 

Enclosure 

Ve~y truly yours, 

ROBERT L. HOECKER, CLERK 

By .. / 

Patri.ck Fisher 

Chief Deputy Clerk 

Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 1 
in favor of Amigo Sales, Inc. (Amigo), appellee, and Allan Thieme, 

Charles and Jill Priest# third-party defendants/appellees. 

Amigo, a Michigan corporation, was formed by Thieme in 1968. 

Amigo manufactures "mobility aids," motorized scooters used by 

handicapped individuals. In Marc~, 1985, Conaway purchased an 

Amigo distributorship, Amigo of Indiana, from the Priests for 

$159,000.00. Jill Priest is Thieme's daughter. The Priests were 

living in New Mexico at the time of the sale. Under the terms of 

the purchase, Conaway made a cash down payment and executed a 

note as president of Rainbow in favor of the Priests under which 

Rainbow was obligated to make minimum monthly payments of 

$1,770.80 to the Priests until they were paid in full. 

In conjunction with the purchase, Conaway formed Rainbow as 

the corporate entity under the laws of Indiana to own and operate 

Amigo of Indiana. Conaway also executed a limited personal 

guaranty under which he agreed to "fully pay any and all 

liabilities, obligations or indebtedness . which now exist or 

may hereafter arise or accrue in any manner from (Rainbow) 

to Amigo." The guarantee, which was personal in nature and not 

binding on Rainbow, stipulated that all disputes were to be 

resolved in the courts of New Mexico. 

As an Amigo distributor, Conaway was precluded from selling 

competing products and equipment without authorization from Amigo. 

Notwithstanding this restriction, Conaway formed a second company, 

Mobility Aids, Inc., through which he proceeded to sell equipment 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 2 
Plt:SO 

Uoited Sttitfn Cmu~ of Appeals ·'tenth Circuit 

UNITED STATES COURT OF APPEALS APR 2 5 1990 

ROBERT L HOECKER 

Clerk 

TENTH CIRCUIT 

AMIGO SALES, INC., a Michigan 

corporation, 

Plaintiff-Appellee, 

v. 

F. KEITH CONAWAY, Individually: 

and RAI.NBOW MOBILITY, INC., 

an Indiana corporation, 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

Third-party plaintiffs-Appellants, ) 

v. 

ALLAN R. THIEME, 

Third-party defendant, 

CHARLES w. PRIEST: and JILL M. PRIEST, 

Third-party~defendants-Appellees. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

ORDER AND JUDGMENT* 

No. 89-2035 

(D.C. No.86-835 JB, 

88-485) 

(Dist. of N.M.) 

Before LOGAN, BARRETT and SEYMOUR, Circuit Judges. 

F. Keith Conaway {Conaway) and Rainbow Mobility, Inc. 

{Rainbow) appeal from a judgment entered following a jury verdict 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 3 
in favor of Amigo Sales, Inc. (Amigo), appellee, and Allan Thieme, 

Charles and Jill Priest, third-party defendants/appellees. 

Amigo, a Michigan corporation, was formed by Thieme in 1968. 

Amigo manufactures "mobility aids," motorized scooters used by 

handicapped individuals. In March, 1985, Conaway purchased an 

Amigo distributorship, Amigo of Indiana, from the Priests for 

$159;000.00. Jill Priest is Thieme's daughter. The Priests were 

living in New Mexico at the time of the sale and the sales 

contract stipulated that all disputes were to be resolved in the 

courts of New Mexico. Under the terms of the purchase, Conaway 

made a cash down payment and executed a note as president of 

Rainbow in favor of the Priests under which Rainbow was obligated 

to make minimum monthly payments of $1,770.80 to the Priests until 

they were paid in full. 

In conjunction with the purchase, Conaway formed Rainbow as 

the corporate entity under the laws of Indiana to own and operate 

Amigo of Indiana. Conaway also executed a limited personal 

guaranty under which he agreed to "fully pay any and all liabilities, obligations or indebtedness •.. which now exist or 

may hereafter arise or accrue in any manner from . . • (Rainbow) 

to Amigo". 

As an Amigo distributor, Conaway was precluded from selling 

competing products and equipment without authorization from Amigo. 

Notwithstanding this restriction, Conaway formed a second company, 

Mobility Aids, Inc., through which he proceeded to sell equipment 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 4 
and products not authorized by Amigo. Conaway also transferred 

funds, products and equipment from Rainbow to Mobility Aids. 

A large asset of Amigo of Indiana was an "equity credit," 

also known as an "equity plan value," in the amount of 

$108,227.11. Conaway understood that the credit could be useq 

(1) as a franchise fee if he converted the distributorship to a 

franchise, (2) to purchase inventory from Amigo, and (3) as a 60% 

credit should he sell the business back to Amigo. Amigo 

understood that the credit could be utilized by a distributor to 

(1) receive 60% of the credit in cash over a three-year period 

after the distributor ceased doing business, or (2) become an 

Amigo franchisee in which case the credit could be used to pay 

100% of the Amigo franchise fees with any balance to be applied to 

the retail value of the inventory to stock the franchise. 

In September, 1985, Conaway attempted to pay Amigo for goods 

shipped on open account to Rainbow by applying his equity credit. 

After Amigo refused to apply the credit to Rainbow's account, 

Conaway declined to pay the bill. During this time frame, 

Conaway also stopped making the monthly payments to the Priests. 

Amigo subsequently sued Rainbow and Conaway for "not less 

than $45,000" for goods delivered to Rainbow on its open account. 

Conaway and Rainbow filed separate motions to dismiss under Fed. 

R. Civ. P. 12(b)(3), or, in the alternative, to transfer the 

action to the Southern District of Indiana pursuant to 28 u.s.c. § 

1404(a). Conaway and Rainbow also answered, alleging that: Thieme 

had represented that they could utilize the equity credits for the 

payment of Amigo products purchased by Rainbow; Amigo was estopped 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 5 
from denying that the equity credits could be applied to the outstanding obligations; the outstanding obligations had been paid in 

full; the obligations were obtained through fraud on the part of 

Amigo's agents; and the limited guaranty obtained from Conaway was 

obtained under duress and was null and void. 

Conaway and Rainbow counterclaimed, seeking (1) $159,000.00 

in actual damages and $1,000,000.00 in punitive damages for fraud 

perpetrated by the agents of Amigo, and (2) damages "in an amount 

sufficient to compensate it for its losses" for Amigo's breach of 

Rainbow's distributorship agreement by selling to others in 

Indiana in violation of Rainbow's exclusive distributorship 

rights. Within its answer, Amigo denied the existence of any 

fraudulent activities and denied that Conaway's limited guaranty 

had been obtained by duress. 

Prior to the court ruling on Conaway's and Rainbow's 

respective motions to dismiss or, in the alternative, to transfer 

the action to the Southern District of Indiana, Conaway and 

Rainbow filed a third- party complaint against Thieme and Charles 

and Jill Priest seeking: $159,000.00 in actual damages and 

$1,000,000.00 in punitive damages for fraud; $159,000.00 in actual 

damages and $477,000.00 in treble damages for conspiracy to commit 

criminal mischief in violation of Ind. Code§ 35-43-l-2(a)(2); and 

recission of the contract for the sale of Amigo of Indiana and the 

return of all monies paid pursuant to the contract. 

Thereafter, the district court entered an order denying 

Conaway's and Rainbow's motions to dismiss or, in the alternative, 

to transfer the action to Indiana. The court noted that within 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 6 
the limited guaranty, Conaway had consented to jurisdiction in 

New Mexico, that forum selection clauses are prima facie valid and 

should be enforced unless they can be shown to be unreasonable 

under the circumstances, and that Conaway and Rainbow had failed 

to establish that the forum selection clause was procured by fraud 

so is to render it invalid. The court concluded that an examination of the guaranty with penciled-in changes initialed ''KC" 

indicated that Conaway had read and understood the agreement and 

had voluntarily agreed to the forum selection provision and that 

"the provision is therefore a proper basis for venue in this 

district". 

Subsequent thereto, Thieme answered Conaway's and Rainbow's 

third-party complaint denying any liability and asserting, inter 

alia, that the third-party plaintiffs were estopped from asserting 

the claims and that their claims were barred by the statute of 

frauds. The Priests also answered Conaway's and Rainbow's thirdparty complaint by denying any liability and asserting, inter 

alia, that the complaint was barred by waiver, estoppel, and accord and satisfaction. The Priests also sought actual and punitive 

damages for Conaway's default on his note to them. 

Following a jury trial, the jury returned the following 

verdicts: in favor of Amigo in the amount of $59,654.11 on its 

claim against Conaway and Rainbow for goods sold on open account; 

in favor of Amigo in the amount of $59,654.11 on its claim for 

recovery on the personal guarantee of Conaway; in favor of the 

Priests in the amount of $250,169.11 on their claims against 

Conaway and Rainbow; in favor of the Priests and against Conaway 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 7 
and Rainbow on their (Conaway's and 

conspiracy to commit criminal mischief; 

Rainbow on their third-party complaint 

Rainbow's) claims of 

against Conaway and 

for fraudulent misrepresentation; and in favor of Amigo and against Rainbow on the 

latter's claim of breach of the distributorship contract. 

Conaway and Rainbow subsequently moved for a new trial alleging, inter alia, that the verdicts were contrary to the evidence 

and that the court erred in: admitting certain evidence; 

prohibiting them from impeaching one Mark Stabler; limiting the 

examination of Jill Priest; failing to transfer the case to the 

Southern District of Indiana; and in instructing the jury. The 

district court denied the motion via a minute order. 

On appeal, Conaway and Rainbow contend that the court erred 

in (1) denying their motions to dismiss or transfer the action; 

(2) denying their motion for new new trial on the grounds that the 

verdicts were contrary to the evidence, not supported by the 

evidence, and excessive; (3) prohibiting them from calling one 

Jack Whitehorn, CPA; (4) refusing to allow them to present 

evidence that Amigo had not registered a franchise in Indiana; and 

(5) in admitting into evidence three exhibits which were not 

relevant and which were prejudicial. 

I. 

Conaway and Rainbow contend that the district court erred in 

denying their motions to dismiss the action due to improper venue 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 8 
under Fed. R. Civ. P. 12(b)(3) 1 or to transfer the action pursuant 

2 to 28 u.s.c. 1404(a). 

28 u.s.c. 139l(a) provides that a civil action predicated on 

diversity of citizenship "may, except as otherwise provided by 

law, be brought only in the judicial district where all plaintiffs 

or defendants reside or in which the claim arose." Predicated 

thereon, Conaway and Rainbow contend that inasmuch as Amigo was a 

Michigan corporation and its claim was against a resident of 

Indiana (Conaway) and an Indiana corporation (Rainbow) that venue 

was proper in Indiana rather than New Mexico, notwithstanding 

that Amigo had its principal place of business in New Mexico at 

the time that the action arose. 

Conaway and Rainbow cite to Johns-Manville Sales Corp. v. 

U.S., 796 F.2d 372, 373 (10th Cir. 1986) for the proposition that 

"the residence of a plaintiff corporation . is limited to the 

state of incorporation; it does not include other states where it 

may do business or have its principal place of business." 

Conaway and Rainbow also argue that: the majority of witnesses who 

were not parties resided in Indiana; the purpose of § 1404(a) is 

Rule 12(b)(3) provides: 

Every defense, in law or fact, to a claim for relief in any 

pleading, whether a claim, counterclaim, cross-claim, or thirdparty claim, shall be asserted in the responsive pleading thereto 

if one is required, except that the following defenses may at the 

option of the pleader be made by motion: ••• (3) improper venue. 

2 28 u.s.c.A. s 1404(a) provides: 

For the convenience of the parties and witnesses, in the 

interest of justice, a district court may transfer any civil 

action to any other district or division where it may have been 

brought. 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 9 
to insure that claims are tried in the district which is most 

convenient taking into consideration the location of the parties 

and witnesses. Thus, they contend that venue was not appropriate 

in New Mexico and should have been transferred to Indiana and 

that the court erred in denying their motions to dismiss under 

Fed. R. Civ. P. 12(b)(3). 

Amigo responds that an order of the district court denying a 

motion to dismiss under Rule 12(b)(3) or to transfer the action 

pursuant to § 1404(a) will not be set aside on appeal absent an 

abuse of discretion, Wm. A. Smith Contracting Company, Inc. v. 

Travelers Indemnity Company, 467 F.2d 662, 664 (10th Cir. 1972), 

and that no abuse of discretion has beep shown here. 

a. 

In addressing Conaway's motion to dismiss or transfer, the 

district court found: 

Defendant [Conaway] argues (1) that trial of this case 

in New Mexico would be unreasonably inconvenient for 

him, and (2) that the forum selection clause is invalid 

because the agreement in which it is contained was 

allegedly signed by defendant under duress. Under The 

Bremen v. Zapata Off-Shore Co., supra, defendants have a 

heavy burden of proof in respect to these allegations. 

To support a finding of unreasonable inconvenience, 

defendant would have to show that 'trial in the 

contractual forum will be so gravely difficult that [the 

party seeking to avoid the contract] will for all 

practical purposes be deprived of his day in court.' 

407 U.S. at 18. 

* * * 

Defendant further argues that the agreement 

containing the forum selection clause in question was 

signed under duress and therefore should not be given 

effect. However, defendants cannot, in making this 

argument, rely solely on their defense to enforcement of 

the entire agreement on the grounds of fraud. Rather, 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 10 
defendants must present some evidence that the forum 

selection clause itself was procured by fraud, to render 

such a clause invalid under the Bremen standard. The 

evidence presented by the defendants in support of this 

motion consists of conclusory allegations of fraud and 

duress in the signing of the limited guaranty agreement 

in general, but nothing in these allegations indicates 

to the Court that the forum selection clause was itself 

procured by fraud and duress. Further, upon examining 

Plaintiff's Exhibit A which is a copy of the agreement 

itself, the Court notes that this agreement is replete 

with penciled-in changes initialed 'KC' which the Court 

assumes to be the initials of defendant. This is 

evidence that defendant read and understood the agreement and retained some power to alter its provisions. 

The court concludes only that defendants voluntarily 

agreed to the forum selection provision, and the provision is therefore a proper basis for venue in this 

district. 

(R., Vol. I at Tab 33, pp. 3-4). 

Conaway has not challenged the district court's findings that 

he read and understood the limited guaranty agreement and that he 

voluntarily agreed to the forum selection provision contained 

therein, consenting to the jurisdiction of any court in New 

Mexico. Moreover, counsel for Conaway acknowledged during trial 

that he did not present any evidence supportive of the allegations 

that the guaranty was obtained under duress. (R., Vol. IV at p. 

846). Conaway was a successful vice-president of national sales 

for a very profitable specialty lubricant firm at the time that he 

began exploring the idea of purchasing his own business based 

on advice from his accountant that "it was time to do something 

different to reduce our tax exposure". (R., Vol. II at p. 181). 

It "[i]s settled • that the parties to a contract may 

agree in advance to submit to the jurisdiction of a given court." 

National Rental Equipment v. Szukhent, 375 U.S. 311, 315-316 

(1964). A party may waive venue limitations. Olberding v. 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 11 
Illinois Railroad Company, 346 U.S. 338, 340 (1953). We hold that 

venue was proper in New Mexico because Conaway did not overcome 

the presumption that forum selection clauses are valid. Bremen v. 

Zapata Off-Shore Co., 407 U.S. 1, 9-12 (1972). 

Nothing in the record undermines or invalidates the district 

court's findings that Conaway read and understood the guaranty and 

voluntarily accepted the forum selection provision contained 

therein. Under these circumstances, the enforceability of the 

provision is clear: 

The choice of that forum was made in an arm'slength negotiation by experienced businessmen, and 

absent some compelling and countervailing reason it 

should be honored by the parties and enforced by the 

courts. 

Bremen v. Zapata Off-Shore Co., 407 U.S. at P• 12. No less a 

standard should be applied here. 

Conaway has failed to establish that the guaranty which 

included the forum selection provision was signed under duress. 

Thus, in the absence of any compelling and countervailing reason, 

we hold that the district court's denial of Conaway's motion to 

dismiss or transfer did not constitute an abuse of discretion. 

b. 

We also hold that the court's denial of Rainbow's motion to 

dismiss or transfer did not give rise to an abuse of discretion. 

Although the forum selection provision included in Conaway's 

guaranty to the Priests was personal in nature and therefore not 

binding on Rainbow, other factors in the record support the 

district court's denial of Rainbow's motion to dismiss or transfer. 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 12 
Rainbow and Amigo agree that venue in this action is 

controlled by § 139l(a), under which a civil action predicated on 

diversity of citizenship may be brought in the judicial district 

where all plaintiffs or all defendants reside, or "in which the 

claim arose". See Cochrane v. Iowa Beef Processors, 596 F.2d 254, 

260-261 (8th Cir.), cert denied, 442 U.S. 921 (1979) (the principal 

standards for determining where the claim arose under § 139l(a) are 

the weight of contacts rule, the place of injury rule, and the rule 

which allows venue in any district in which a substantial part of 

the events or omissions giving rise to the claim occurred). 

Amigo's evidence that its claim against Rainbow arose in New, 

Mexico, included: its principal place of business was in New 

Mexico at the time it commenced its action against Conaway and 

Rainbow; Rainbow sent orders and payments to New Mexico; some of 

the goods shipped to Rainbow were shipped from New Mexico; and 

since its principal place of business was in New Mexico, the harm 

from Rainbow's non-payment was incurred there. We hold that Amigo 

presented sufficient evidence supportive of its contention that 

venue over Rainbow in New Mexico was proper in that its claim arose 

there under § 139l(a). 

Our holding relative to venue is not inconsistent with JohnsManville Sales Corporation v. United States, supra. JohnsManville was an interlocutory appeal in which we were asked to 

determine whether a plaintiff corporation organized in New York 

and Delaware but whose principal place of business was in Colorado 

could sue the United States in Colorado under §§ 139l(e) and 

1402(b). We there held, consistent with other circuits, that "the 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 13 
residence of a plaintiff corporation under those statutes is 

limited to the state of incorporation; it does not include other 

states where it may do business or have its principal place of 

business." 796 F.2d at p. 373. 

Johns-Manville was a single issue case which did not address 

the challenges to venue raised by Conaway and Rainbow. Thus, it 

is clearly distinguishable and not dispositive herein. 

II. 

Conaway and Rainbow contend that the district court erred in 

denying their motion for a new trial on the grounds that the 

verdicts were contrary to the evidence, were not supported by the 

evidence, and were excessive. 

Our review of a district court's decision on a motion to 

grant a new trial is limited to whether the district court's 

refusal to set aside the jury's verdict constituted an abuse of 

discretion. Harvey by Harvey v. General Motors, 873 F.2d 1343 

(10th Cir. 1989). If a reasonable basis exists for the jury's 

verdict, we will not disturb the district court's ruling. 

McAlester v. United Air Lines, Inc., 851 F.2d 1249, 1260 (10th 

Cir. 1988). In order to justify an order for a new trial, the 

moving party must demonstrate that "the verdict is clearly, decidedly, or overwhelming against the weight of the evidence." King v. 

Southern Pacific Transportation Company, 855 F.2d 1485, 1491 (10th 

Cir. 1988), quoting Black v. Hieb's Enter's., 805 F.2d 360, 363 

(10th Cir. 1986). A trial court may grant a new trial if the 

verdict is against the weight of the evidence or if prejudicial 

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l 

error has occurred. Anderson v. Phillips Petroleum Company, 861 

F.2d 631 (10th Cir. 1988). 

a. 

Conaway and Rainbow contend that the verdicts in favor of the 

Priests, Thieme, and Amigo on their (Conaway's and Rainbow's) 

claims for misrepresentation in the sale of the business are 

contrary to the evidence. Conaway and Rainbow argue that there 

was one central factual dispute in the trial, i.e., the 

representations made to Conaway before the sale of the 

distributorship relative to the use of the equity qredit. 

Conaway and Rainbow contend that Conaway was told that the 

credit could be used to purchase inventory. (R., Vol. I, Tab 80, 

Consolidated Pre-Trial Order, p. 4). The Priests and Amigo 

contend that the equity credit could be used to purchase inventory 

only by a franchisee and that Conaway was aware of this. Id., pp. 

9-10. Amigo also notes that Conaway's pre-closing addendum, 

proposing changes to the equity plan consistent with his alleged 

understanding of the plan, 

Conaway did not request 

terms. 

was rejected in its entirety and 

any documentation of the equity plan's 

Our review of the sufficiency of the evidence underlying a 

jury verdict in a diversity case is whether the record contains 

substantial evidence to support the jury's verdict, viewing the 

evidence in the light most favorable to the prevailing party. 

Kitchens v. Bryan County National Bank, 825 F.2d 248, 250 (10th 

Cir. 1987). The jury has the exclusive function of appraising 

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credibility, determining the weight to be given to the testimony, 

drawing inferences from the facts established, and resolving 

conflicts in the evidence. Id. at p. 251. The appellate court 

does not try to second-guess the jury. Id. 

Applying these standards to the facts herein, we hold that 

although the evidence was conflicting as to the manner in which 

the equity credit could be utilized by an Amigo distributor, the 

record contains sufficient evidence supportive of the jury verdict 

that Conaway and Rainbow were not misled. Conaway did not request 

written documentation of the plan. Furthermore, notwithstanding 

the complete rejection of Conaway's pre-closing addendum proposing changes to the plan consistent with his understanding, 

Conaway nonetheless closed and purchased the Amigo of Indiana 

distributorship. Obviously, these factors were carefully 

considered by the jury in rejecting Conaway's and Rainbow's claims 

of misrepresentation. 

b. 

Conaway and Rainbow make a very brief, general argument that 

the jury verdict against Conaway personally and against Rainbow 

in favor of the Priests in the amount of $250,169.11 is excessive 

and not supported by the evidence. Conaway and Rainbow argue that 

the Priests' claims were based on the promissory note and allegations of punitive damages. They contend that the undisputed facts 

established that the balance on the note at -the time of the trial 

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was $170,161, and that it "is impossible to reach" the jury's 

verdict of $250,169.ll based on the evidence. 

The Priests respond that if one assumes that $170,161 of the 

award relates to the note, that the remaining $80,000 is attributable to punitive damages and "is reasonable, just and not disproportionate to the circumstances." (Brief of Appellees-Priests 

at pp . 3 3-3 4 ) . 

A district court's refusal to grant a new trial based on 

excessive damages is afforded considerable deference on appeal. 

Karns v. Emerson Electric Company, 817 F.2d 1452, 1460 (10th Cir. 

1987). Moreover, absent an award so excessive as to shock the 

judicial conscience and to raise an irresistible inference that 

passion, prejudice, corruption or other improper cause invaded the 

trial, the jury's determination of damages is inviolate. Specht 

v. Jensen, 832 F.2d 1516, 1528 (10th Cir. 1987), quoting Malandris 

v. Merrill Lynch, Pierce, Fenner & Smith, 703 F.2d 1152, 1168 

(10th Cir. 1981) (en bane), cert. denied, 464 U.S. 824 (1983). 

We cannot hold that the damage award was so excessive as to 

shock the judicial conscience. The Priests 

on the amount due and owing on the note 

transferred the assets of Rainbow to Mobility 

presented evidence 

and that: Conaway 

Aids and caused 

Rainbow to become insolvent; Conaway diverted Rainbow funds for 

non-corporate purposes; and Conaway breached his fiduciary duties 

to Rainbow and the Priests. Under these circumstances, we reject 

Conaway and Rainbow's allegations that the verdict is excessive 

and not supported by the evidence. 

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c. 

Conaway makes a brief, general argument, without any supporting authority, that the verdict in favor of the Priests and 

against Conaway personally is contrary to the evidence. Conaway 

argues that Rainbow purchased Amigo of Indiana from the Priests_, 

that the promissory note due to the Priests was a corporate note 

from Rainbow, that he signed the note as president of Rainbow, and 

that he did not personally guarantee the note. The Priests respond 

that the verdict against Conaway personally is supported by the 

evidence, that an officer is personally liable for his 

corporation's torts when he personally participates in or directs 

the wrongful activity, that Conaway misapplied Rainbow's assets 

and· diverted funds for noncorporate purposes, and that Conaway 

breached his fiduciary duty to Rainbow and the Priests by diverting Rainbow's assets and staff to Mobility Aids. 

Within Instruction 3Sc, the jury was charged: 

If you should decide in favor of the Priests on any 

of their claims, then you must fix the amount of money 

damages which will restore to the Priests what was lost 

by F. Keith Conaway's and Rainbow Mobility's breach and 

what Priests reasonably could have expected to gain. 

The Priests' claims damages are: unpaid balance of the 

original contract price, interest, punitive damages, and 

attorney's fees. 

(R., Vol. I, Tab 104, Instruction 3Sc). 

Conaway did not object to this instruction. Accordingly, 

Conaway waived any right which he might otherwise have had to 

challenge his personal liability to the Priests arising under 

Instruction 35c. See Zimmerman v. First Federal Savings & Loan, 

848 F.2d 1047, 1054 (10th Cir. 1988) (each party in a civil case 

must live with the legal theory reflected in instructions to which 

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 18 
it does not object, citing, Davis v. Consolidated Rail Corp., 788 

F.2d 1260, 1268 (7th Cir. 1986), quoting Will v. Comprehensive 

Accounting Corp., 776 F.2d 665, 675 (7th Cir. 1985), cert. denied, 

475 U.S. 1129 (1986)). 

d. 

Conaway and Rainbow contend that the jury award of punitive 

damages in favor of the Priests and against Conaway and Rainbow is 

not supported by the evidence. 

i. 

Conaway and Rainbow argue that inasmuch as the sale of Amigo 

of Indiana took place in Indiana and involved the sale of an 

Indiana business to an Indiana corporation, Indiana law controls 

the Priests' claim for punitive damages. Conaway and Rainbow cite 

to Traveler's Indemnity Company v. Armstrong, 442 N.E.2d 349 (Ind. 

1982) for the proposition that punitive damages are not to be 

awarded merely upon evidence of a breach of contract, but rather, 

that there must also be evidence of wanton and oppressive conduct. 

This argument was not presented to district court. We will 

generally not consider issues on appeal which were not considered 

by the district court. Burnett v. Dresser Industries, Inc., 849 

F.2d 1277 (10th Cir. 1988). 

During the conference on jury instructions, the following 

colloquy occurred: 

MR. MULLER (Counsel for Conaway and Rainbow): Thank 

you, Your Honor. 

Your Honor, Mr. Conaway and Rainbow Mobility, Inc., 

object to Instruction Number 20. 

* * * 

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On the grounds -- two grounds really. First of all, on 

the grounds that it instructs the jury on punitive damages, and that's the objection that we made earlier on 

the motion for directed verdict. 

* * * 

The defendant -- or the defendants also object to 

Instructions 37-A. And again, that is the instruction 

on punitive damages. 

THE COURT: 

denied. 

All right, sir. That request will be 

(R., Vol. Vat pp. 847-849.) 

The above-cited general objections to the instructions on 

punitive damages were not sufficiently specific to preserve 

Conaway's and Rainbow's right~ on appeal, to allege that the law 

of Indiana controlled the issue of punitive damages. Having 

failed to argue to the district court that the law of Indiana 

controlled the Priests' claim for punitive damages, Conaway and 

Rainbow waived their right to challenge the court's punitive 

damages instructions on appeal. 

Under Fed. R. Civ. P. 51, "[n]o party may assign as error the 

giving or the failure to give an instruction unless that party 

objects thereto before the jury retires to consider its verdict, 

stating distinctly the matter objected to and the grounds of the 

objection." Our standard of review was set forth in Zimmerman v. 

First Federal Savings and Loan Association, supra, in which we 

held: 

Therefore, '[t]his court will not review instructions given to which no objections were lodged before 

the jury retired for deliberations unless they are patently plainly erroneous and prejudicial .... ' In 

civil cases only rarely will we review error when a 

specific objection was not made at trial (citations 

omitted). 

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848 F.2d at p. 105 

Inasmuch as Conaway and Rainbow did not set forth their 

specific objections to the punitive damage instructions prior to 

the jury deliberations, and inasmuch as neither of the instructions were "patently plainly erroneous and prejudicial,'' Conawa~ 

and Rainbow waived their right to challenge the instructions on 

appeal. 

ii. 

Conaway and Rainbow also allege that the evidence 

established only that Rainbow ceased making payments on the note. 

As such, they contend that there was no evidence of malicious and 

oppressive conduct, and no clear and convincing evidence of 

tortious conduct that would justify an award of punitive damages. 

The Priests respond that the weight of the evidence supports 

an award of punitive damages under the laws of Indiana and New 

Mexico, that Conaway's and Rainbow's actions with respect to the 

transfer of assets and the subsequent abandonment of Rainbow are 

clear evidence of intentional and wrongful acts, and that 

Conaway's breach of his fiduciary duty to Rainbow and to the 

Priests in connection with the depletion of Rainbow's assets in 

pursuit of personal interests antagonistic to those of Rainbow 

similarly underscore his wrongful conduct. 

Applying the standards applicable for review of a challenge 

to the sufficiency of the evidence set forth in Kitchens v. Bryan 

County National Bank, supra, 825 F.2d at p. 251, to the facts 

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herein, we hold that the award of punitive damages was supported 

by the evidence. 

It is undisputed that Conaway formed a second company, 

Mobility Aids, through which he proceeded to sell equipment and 

products not authorized by Amigo, in violation of his Amigo 

distributorship agreement. There is also substantial evidence 

upon which the jury could find that: after Mobility Aids was 

formed, funds were transferred from Rainbow to Mobility Aids; 

Rainbow's equipment and product inventory was transferred to 

Mobility Aids; Rainbow paid Mobility Aids $10,000.00 in management fees; and that Rainbow subsequently incurred heavy operating 

losses and ceased making the monthly payments to the Priests. 

This evidence, when considered in the aggregate, provided sufficient, substantial evidence to support the jury's award of punitive damages. 

III. 

Conaway and Rainbow contend that the court erred in prohibiting them from calling Jack Whitehorn, CPA, as an expert witness, 

on the grounds that he had not been disclosed in a timely manner. 

Within its order finding that Conaway and Rainbow would not be 

allowed to call Whitehorn, the court found: 

(2) The deadline for Defendants to identify expert 

witnesses was December 18, 1987. See Order entered 

September 23, 1987. 

(3) On August 26, 1988, Defendants identified Mr. 

Jack Whitehorn as an expert witness. 

* * * 

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(7) It is within the Court's discretion to exclude 

from trial the testimony of any witness not disclosed to 

the opposing party in accordance with the Court's 

scheduling order. This Court will not allow a 

party to construe general guidelines to supercede a 

specific scheduling order. 

(8) Defendants' identification of Mr. Whitehorn 

was untimely. 

(R., Vol. I, Tab 90, page 2). 

The parties agree that our standard of review is whether the 

district court abused its discretion. In Long v. Laramie County 

Community College District, 840 F.2d 743, 750 (10th Cir.), cert. 

denied,~- U.S. ~- (1988), we held: 

The terms of the pretrial order prohibiting the 

calling of unlisted witnesses did, of course, have binding effect on the parties .••• However, the 'trial 

court may modify the pretrial order during trial to 

prevent manifest injustice.' ('flexible application of 

pretrial orders is within the sound discretion of the 

district court • (citations omitted) 

The trial judge was in the best position to assess Conaway's 

and Rainbow's request to call Whitehorn. The court concluded that 

Whitehorn should not be allowed to testify because he had not been 

timely identified in accordance with the court's scheduling order. 

We hold that there has been no showing that the trial court abused 

its discretion. 

IV. 

Conaway and Rainbow contend that the trial court committed 

reversible error in refusing to allow them to present evidence 

that Amigo had not registered a franchise in Indiana. Conaway and 

Rainbow argue that such evidence was relevant and tended to prove 

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that Conaway had not been told that the use of the equity credit 

for inventory was limited to franchises. 

Amigo responds that the fact that it had not registered a 

franchise in Indiana had no probative value, and that the only 

fair inference from the excluded evidence was that Amigo h~d 

chosen not to register a franchise but not that it could not or 

would not register a franchise. 

All relevant evidence is considered admissible, unless otherwise properly excluded, whereas evidence which is not relevant is 

not admissible. Fed. R. Evid. Rule 402, 28 u.s.c.A. In reviewing 

the evidentiary rulings of a trial court, we may not reverse in 

the absence of an abuse of discretion. United States v. 

Alexander, 849 F.2d 1293, 1301 (10th Cir. 1988). 

Amigo 

to an 

We hold that the district court's exclusion of evidence that 

had not registered a franchise in Indiana did not give rise 

abuse of discretion. Whether Amigo had or had not 

registered a franchise in Indiana was not relevant. 

v. 

Conaway and Rainbow contend that the district court erred in 

admitting into evidence over objection three exhibits which were 

not relevant and which were prejudicial. 

The exhibits included: a letter from the Priests to Conaway 

in which the Priests related that Rainbow's December note payment 

check had been dishonored by the bank; a letter from Conaway to 

his attorney within which Conaway stated that he wanted to "[m]ake 

it as difficult as possible for them [Amigo] to set up other deal-

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Appellate Case: 89-2035 Document: 01019623036 Date Filed: 04/25/1990 Page: 24 
ers or a mobility center" and "[d]on't let them [Amigo] get ahead 

of me to the point they take some aggressive action in the open 

account problem;" and the financial statement of Mobility Aids as 

of December 31, 1986. 

Conaway argues that these exhibits had no relevance to the 

issues and were injected to divert the jury from the central issue 

in the case, i.e., the representations about the equity credit 

prior to the sale. Amigo responds that the evidence was relevant 

to the issue of Conaway's abandonment of Amigo of Indiana, his 

state of mind, and the issue of damages. The Priests also contend 

that the evidence was relevant to show Rainbow's disregard of its 

obligations under the note, whether a breach of the distributorship agreement had occurred, and the abandonment of Amigo of 

Indiana. 

A trial court's determination whether evidence is relevant 

will not be reversed absent a showing of an abuse of discretion. 

Hill v. Bache Halsey Stuart Shields, Inc., 790 F.2d 817, 825 (10th 

Cir. 1986). The task of balancing the probative value of evidence 

against any harm which may result from its admission is one for 

which the trial judge is particularly suited. McAlester v. United 

Airlines, Inc., 851 F.2d 1249, 1257 (10th Cir. 1988). We will not 

set aside the verdict of a jury based on an error in the admission 

or exclusions of evidence unless the error prejudicially effects a 

substantial right of a party. Agristor Leasing v. Meuli, 865 F.2d 

1150, 1153 (10th Cir. 1988). 

Applying these standards we hold that the court did not err 

in admitting the three exhibits. The Priests' letter relating 

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that the December note payment check had been dishonored by the 

bank was relevant to the issue of Conaway's abandonment of Amigo 

of Indiana. Conaway's letter to his attorney was produced by 

Conaway and Rainbow during discovery. It was relevant to 

establish Conaway's state of mind at the time the letter was 

drafted. The year end financial statement of Mobility Aids was 

relevant to the issue of Conaway's and Rainbow's damages. 

AFFIRMED. 

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Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

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