Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-08-04060/USCOURTS-ca7-08-04060-0/pdf.json

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

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The Honorable William J. Hibbler, District Judge for the 

Northern District of Illinois, sitting by designation.

In the

United States Court of Appeals

For the Seventh Circuit

No. 08-4060

MMG FINANCIAL CORPORATION,

Plaintiff-Appellee,

v.

MIDWEST AMUSEMENTS PARK, LLC,

KAL GRONVALL, DR. R.C. SAMANTA ROY

INSTITUTE OF SCIENCE AND TECHNOLOGY,

INC. and U.S. ACQUISITIONS & OIL, INC.,

Defendants-Appellants.

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 06-C-929—William C. Griesbach, Judge.

ARGUED APRIL 16, 2010—DECIDED JANUARY 5, 2011

Before EASTERBROOK, Chief Judge, FLAUM, Circuit Judge,

and HIBBLER, District Judge.

HIBBLER, District Judge. A tangled web of corporate

relationships and oral promises lies at the center of this

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Gronvall operated Midwest’s racetrack, USA International 1

Raceway. Midwest’s sole member is the Dr. R.C. Samanta

Roy Institute of Science and Technology (SIST), another of

the Defendants. MMG added SIST (and also U.S. Acquisitions

& Oil, Inc. (USAO)) in an amended complaint, fearing that

Midwest had fraudulently transferred some of its assets.

When Gronvall and Midwest filed this appeal, MMG had

moved for default judgment against SIST and USAO, but the

district court had not yet ruled on the motion. Finding no

just reason to delay Gronvall’s and Midwest’s appeal, the

district court certified the entry of final judgment against

Gronvall and Midwest pursuant to Fed. R. Civ. P. 54(b).

2 The trial testimony makes clear that while Malcolm

McMaster and Bob Cameron, MMG’s and Cameron Motorsports’

(continued...)

contract dispute. In short, Midwest Amusements Park,

LLC (Midwest) purchased 24 go-karts from Team Hurricane, Inc. (Team Hurricane), which MMG Financial

Corporation (MMG) financed. When the go-karts did not

meet Midwest’s expectations, it refused to pay for them.

This litigation followed.

I.

In early 2005, Kal Gronvall attended a go-kart trade

show in Chicago on Midwest’s behalf. At the show, 1

Gronvall met a salesman of Team Hurricane, Lorne

Kelly. Team Hurricane was a joint venture between

Cameron Motorsports, Inc. (Cameron Motorsports) and

MMG. Kelly promoted go-karts branded by Cameron 2

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No. 08-4060 3

(...continued) 2

respective sole shareholders, once embraced the Team

Hurricane partnership, they had a significant falling-out. Their

dispute revolves around the handling of Team Hurricane’s

finances, with each believing that the other had improperly

diverted money from Team Hurricane’s accounts.

Motorsports, which were manufactured by CRG Spa

(CRG), an Italian Corporation. Thus, Cameron branded

the go-karts, Team Hurricane sold the go-karts, and

MMG financed Team Hurricane’s customers’ purchases.

Shortly after the trade show, Kelly traveled to Midwest’s

racetrack in Shawano, Wisconsin, in hopes of selling gokarts to Midwest. Malcolm McMaster, MMG’s president

and sole shareholder, traveled with Kelly. McMaster,

however, attended the Wisconsin meeting as a representative of Team Hurricane, unaware that Midwest

intended to finance its purchase.

Kelly touted the “arrive and drive” program, in which

the go-karts sold by Team Hurricane would be available

for customers to test their racing skills on Midwest’s

racetrack. Additionally, Kelly implied that as part of the

arrive and drive program, Cameron Motorsports would

completely assemble the go-karts, break-in the go-karts’

engines, supply training materials for Midwest’s staff,

and provide service for the go-karts. At the conclusion

of the meeting, Midwest indicated to Kelly and McMaster

that it might be interested in short-term financing for

the purchase it would later make.

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In April 2005, Midwest ordered 24 go-karts at a

purchase price of $89,502.12. Shortly thereafter, Gronvall

contacted MMG to discuss financing the purchase. According to MMG, McMaster and Gronvall agreed to a

contract to finance the purchase. MMG sent Gronvall a

“conditional sales agreement” that documented the

parties’ oral agreement. That sales agreement identifies

Gronvall and USA International Raceway (the name

under which Midwest did business) as the buyers, MMG

as the finance company, and Team Hurricane as the

dealer. The sales agreement specifies a purchase price

of $89,502.12, and calls for Midwest to make 24

monthly payments of $4,468.31, which amounts to a

steep 24% annual percentage rate.

Gronvall never signed the agreement. Nevertheless, the

go-karts arrived directly from CRG several months later.

Soon after Midwest received the go-karts, Gronvall

voiced several complaints. He complained to Cameron

Motorsports and CRG that the go-karts did not perform

as expected. Gronvall informed the companies that some

of the go-karts “blew-up” upon first being driven and

others no longer worked. Cameron Motorsports only

grudgingly responded to Gronvall’s complaints. Gronvall

also complained to MMG that the previously agreed

upon interest rate was too onerous.

Gronvall and MMG dickered over a revised interest

rate. Gronvall requested that MMG lower the annual

percentage rate. MMG responded that it might lower

the annual percentage rate to 18% if Midwest caught up

on missed payments. Gronvall eventually created and

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No. 08-4060 5

signed a sales agreement that called for a 12% annual

percentage rate and conditioned payments on a portion

of Midwest’s revenue from USA International Raceway. MMG never signed the agreement created by

Gronvall, and neither Gronvall nor Midwest made

any payments to MMG.

By June 2006, Midwest still had not made any payments to MMG. MMG filed suit, alleging a breach of

contract, naming Midwest and Gronvall as co-defendants.

Midwest filed a counterclaim, in which it alleged that

MMG had breached the finance agreement by failing

to pay Cameron Motorsports for the go-karts. Midwest

also claimed that MMG breached both express and

implied warranties because the go-karts did not

function properly. Midwest did not file a third-party

complaint against Cameron Motorsports, Team Hurricane, or CRG raising the same breach of warranty

claims. The district court granted MMG’s motion for

summary judgment on Midwest’s counterclaim, and

MMG’s claim proceeded to the jury.

At trial, Midwest and Gronvall denied that they had

agreed to any contract with MMG. In the alternative,

Midwest raised an affirmative defense, arguing that it

was entitled to a set-off because MMG had failed to

pay Cameron Motorsports for the go-karts, which in

turn caused Cameron Motorsports to refuse to service

the malfunctioning go-karts. The parties presented testimony, mostly from McMaster and Gronvall, regarding

the details of Midwest’s and MMG’s agreement (or

the absence thereof). Midwest also elicited testimony

from Bob Cameron in an attempt to persuade the jury

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Gronvall joins in Midwest’s arguments. For convenience’s 3

sake, we hereafter refer to the appellants collectively as Midwest.

to award it a set-off of any amount it owed to MMG.

During Cameron’s testimony, Midwest sought to introduce an e-mail that Cameron Motorsports had received from CRG purporting to demonstrate that the gokarts that had been shipped to Midwest had not been

paid for. The district court excluded the e-mail, concluding that it constituted hearsay. At the end of the

trial, the jury credited MMG’s evidence and found that

the parties had orally agreed on a contract with a 24%

annual percentage rate.

Midwest raises five arguments on appeal. First, 3

Midwest argues that the district court erred in granting

MMG summary judgment on its counterclaim. Second,

Midwest argues that the district court erred in refusing

to admit the e-mail from CRG to Cameron Motorsports

that summarized outstanding invoices. Third, Midwest

argues that the district court erred in failing to give a

statute of frauds or usury instructions. Fourth, Midwest

argues that the district court’s special verdict was

flawed. Fifth, Midwest argues that the jury’s verdict

was against the manifest weight of the evidence.

II.

A. Summary Judgment Order

We first address the district court’s entry of summary

judgment in favor of MMG on Midwest’s counterclaim.

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In opposition to MMG’s motion for summary judgment, Midwest argued that MMG failed to pay

Cameron Motorsports for the go-karts and therefore

breached the financing agreement. In support of this

argument, Midwest relied entirely on two letters it received from Cameron Motorsports in which Cameron

Motorsports claimed it had not been paid for the go-karts

and deposition testimony from its employees containing similar assertions. The district court excluded

Midwest’s evidence on hearsay grounds. The district

court further held that MMG had presented evidence—in

the form of testimony from McMaster and receipts attached to a declaration—that it had paid Cameron

Motorsports for the go-karts. The district court concluded that Midwest had failed to offer proof that

MMG had breached the financing agreement and

granted MMG’s motion for summary judgment.

When a district court’s grant of summary judgment is

premised upon an evidentiary finding, we use a combined standard of review. Gunville v. Walker, 583 F.3d 979,

985 (7th Cir. 2009). We review the district court’s determination that a particular statement is inadmissable as

hearsay for abuse of discretion. Id. We then review the

grant of summary judgment de novo and construe all

facts in the light most favorable to the non-moving party.

Id.; Trade Fin. Partners, LLC v. AAR Corp., 573 F.3d 401,

406 (7th Cir. 2009). To survive summary judgment, a

party must point to specific facts showing that there is a

genuine issue for trial. Trade Fin. Partners, LLC, 573 F.3d

at 406-07.

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A party may not rely on inadmissible hearsay to

avoid summary judgment. Eisenstadt v. Centel Corp., 113

F.3d 738, 742 (7th Cir. 1997). The evidence Midwest

offered to establish that MMG had failed to pay

Cameron Motorsports for the go-karts is classic hearsay.

Rather than offer the sworn testimony of a Cameron

Motorsports employee (the declarant), Midwest instead offered only the testimony of its own employees

repeating what Cameron Motorsports had told them.

Similarly, Midwest offered an unsworn statement, in the

form of the letter, from the declarant. Midwest offered

these statements to prove the truth of the matter

asserted, namely that MMG had not paid Cameron

Motorsports for the go-karts shipped to Midwest. The

district court correctly points out that the sworn testimony of a Cameron employee would have been easy to

obtain if Midwest’s assertions were true. Midwest

makes no discernable argument that the district court’s

evidentiary ruling was incorrect, and the district court

correctly excluded the evidence.

Nonetheless, Midwest argues that the district court

erred in granting MMG summary judgment on Midwest’s

breach-of-contract claim. Midwest makes a curious argument that the evidence it presented at trial demonstrates

that the grant of summary judgment was in error. Our

review of the district court’s summary judgment order,

however, is limited to the record presented to the

district court at that time. Joseph P. Caulfield & Assoc., Inc.

v. Litho Prod., Inc., 155 F.3d 883, 888 (7th Cir. 1998).

Midwest also attacks the evidence MMG submitted

in support of its claim that it fulfilled the terms of its

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No. 08-4060 9

contract. Midwest suggests that to succeed on summary

judgment MMG must “demonstrate that the monies

were paid to [Cameron Motorsports].” Midwest, however,

conflates the burden MMG bears in proving its own

breach-of-contract claim, which was not decided on

summary judgment, with its burden as the party

moving for summary judgment on Midwest’s breach-ofcontract counterclaim. A party seeking summary judgment bears an initial burden of proving there is “no

material question of fact with respect to an essential

element of the non-moving party’s case.” Delta Consulting

Grp., Inc. v. R. Randle Constr., Inc., 554 F.3d 1133, 1137

(7th Cir. 2009). MMG met this burden by pointing

to the absence of any evidence to establish that it had

materially breached the parties’ finance agreement, an

essential element of Midwest’s breach-of-contract claim.

Once MMG met its burden on summary judgment, Midwest bore the burden of pointing to evidence raising a

genuine issue of material fact. Trade Fin. Partners, LLC,

573 F.3d at 406-07. Because Midwest had relied solely

on the excluded hearsay evidence to prove that MMG

had materially breached the contract, it did not point to

evidence necessary to stave off summary judgment, and

the district court did not err in granting MMG’s motion.

Midwest also argues that the district court erred

in granting MMG summary judgment on its breach of

warranty claims against MMG. At summary judgment,

Midwest argued that MMG warranted the defective gokarts. The district court rejected that argument, noting

that Team Hurricane was the dealer that sold Midwest

the go-karts and MMG was the company that financed

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Midwest’s purchase. Midwest raised no rational argument either before the district court or on appeal that a

finance company warrants the goods that it finances.

Instead, Midwest argues that MMG should be responsible for Team Hurricane’s breaches of warranty because

they share an ownership interest. MMG and Team Hurricane are distinct corporations, however, and not responsible for each others’ liabilities merely because

they share a corporate relationship. Wiebke v. Richardson

& Sons, Inc., 83 Wis. 2d 359, 363-64, 265 N.W.2d 571, 573-

74 (Wis. 1978). Midwest offers no reason why we

should disregard the corporate form, and the district

court did not err in granting MMG summary judgment

on Midwest’s breach of warranty claims.

B. CRG E-Mail

During trial, Midwest reanimated its defeated breach

of contract counterclaim, raising it instead as an affirmative defense. Midwest argued that MMG never fulfilled

its obligations to pay Team Hurricane for the gokarts that it purchased causing Team Hurricane and

Cameron Motorsports to refuse to provide support for

the go-karts when they malfunctioned. Midwest thus

reasoned that it was entitled to a set-off of the amounts

it owed to MMG.

On appeal, Midwest argues that the district court

improperly excluded an e-mail sent by CRG to Cameron

Motorsports that it offered in support of its affirmative

defense. In order to show that it is entitled to relief

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No. 08-4060 11

because of the exclusion of evidence, Midwest must not

only show that the district court erred, but also that the

error affected its substantial rights. Buie v. Quad/Graphics,

Inc., 366 F.3d 496, 504 (7th Cir. 2004); Fed. R. Civ. P. 61.

Midwest’s argument revolves around its misapprehension that MMG and Team Hurricane should be treated

as a single entity merely because they shared common

ownership. Midwest sought to introduce an e-mail that

CRG had sent to Cameron Motorsports, which purported to indicate that CRG had not received payment for the go-karts shipped to Midwest. At best, the

CRG e-mail demonstrates that Cameron Motorsports

owed CRG money for the go-karts. Midwest, however,

purchased go-karts from Team Hurricane, thereby incurring a debt to Team Hurricane that MMG agreed to pay.

MMG’s contract with Midwest did not obligate it to

pay Cameron Motorsports’ debt to CRG. Rather, it obligated MMG to pay MMG’s debt to Team Hurricane.

Whether Cameron Motorsports paid its debt to CRG

bears no relation to the question of whether MMG paid

Midwest’s debt to Team Hurricane. The mere fact that

McMaster had an ownership interest in MMG and Team

Hurricane does not alter MMG’s obligations under the

finance agreement. Therefore, the CRG e-mail simply

is not relevant to Midwest’s affirmative defense.

Midwest’s argument seems to find its origin in the

dispute between McMaster and Cameron. As noted

earlier, McMaster and Cameron each believed the other

owed him money. Cameron testified that he believed

that McMaster, perhaps in his role at Team Hurricane or

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as an accountant for Cameron Motorsports, caused

Cameron Motorsports to fail to pay its bill to CRG. But it

does not logically follow that because McMaster

caused Cameron Motorsports to fail to pay its bill to

CRG that MMG did not pay Midwest’s bill to Team

Hurricane.

Because the CRG e-mail is not relevant to Midwest’s

affirmative defense, Midwest cannot demonstrate that

its exclusion affected its substantial rights, and we

need not decide whether the e-mail was hearsay. We

also can put aside the issue of whether the district

court’s factual findings on MMG’s summary judgment

motion precluded Midwest from raising this defense

in the first instance.

C. Jury Instructions and Verdict Form

Midwest’s arguments concerning jury instructions

and the special verdict form merit scant discussion.

Midwest suggests that the district court erred in failing

to provide a usury instruction. But it did not request

such an instruction and has waived any argument that

related to such an instruction. Jabat, Inc. v. Smith, 201

F.3d 852, 857 (7th Cir. 2000) (party who fails to request

jury instruction has waived issue for appeal). Midwest

also argues that the district court erred in failing to

provide a statute of frauds instruction. But the contract

between Midwest and MMG was a finance agreement,

and not one for a sale of goods, so the statute of frauds

is not applicable. See ReMapp Int’l Corp. v. Comfort

Keyboard Co., 560 F.3d 628, 632-33 (7th Cir. 2009)

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No. 08-4060 13

(applying Wis. Stat. § 402.21). Midwest argues that the

special verdict form did not contain separate questions

about the elements necessary to form a contract. Midwest

did not object to the special verdict form on these

grounds, and so has waived this argument as well. Orix

Credit Alliance, Inc. v. Taylor Mach. Works, Inc., 125 F.3d

468, 477-78 (7th Cir. 1997) (party who fails to alert judge

to objections to special verdict questions has waived

such objections).

D. Motion for a New Trial

Finally, Midwest presents a cursory argument that the

district court erred in refusing to grant its motion for a

new trial. Midwest devotes less than a single page of

text in its 43-page brief developing this argument.

Federal Rule of Appellate Procedure 28 requires that an

argument consist of more than a generalized assertion

of error, mandating that it contain “contentions and the

reasons for them, with citations to the authorities and

parts of the record on which the appellant relies.” Fed. R.

App. P. 28(a)(9)(A). Midwest’s argument contains no

authority—other than authority to report our standard

of review—and cites to nothing in the record in support

of its argument that the district court should have

granted it a new trial. Rather, Midwest presents only

general (and largely inaccurate) references to testimony

and evidence. Arguably, Midwest has waived the issue

with its cursory treatment. See Vaughn v. King, 167 F.3d

347, 353 (7th Cir. 1999) (cursory arguments with no analysis are waived).

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Even if its cursory treatment of the issue has not

resulted in a waiver, Midwest’s failure to present its

argument to the district court does result in a waiver of

that argument. Brown v. Auto. Components Holdings, LLC,

622 F.3d 685, 691 (7th Cir. 2010). On appeal, Midwest

argues that the manifest weight of the evidence demonstrated that the jury should have found a contract with

a 12% annual interest rate and not one with a 24%

annual interest rate. In its motion for a new trial before

the district court, however, Midwest argued only that

the manifest weight of the evidence demonstrated that

the parties never agreed to any contract. It cannot change

course on appeal to raise an argument different than

the one it presented to the district court.

III.

Much of Midwest’s arguments are based on the flawed

assumption that Team Hurricane and MMG are interchangeable. They are not, and Midwest made no effort

to pierce the corporate veil. Instead, counsel for Midwest

repeatedly suggested at oral argument that her clients

were left holding the bag because the go-karts so

severely malfunctioned. Of course, this is not a reason to

pierce the corporate veil and hold MMG responsible

for another company’s breach of warranty. Nor is it

even an accurate statement. Midwest could have

sought recovery for the defective go-karts from Team

Hurricane, Cameron Motorsports, or CRG. It did not. The

judgment of the district court is AFFIRMED.

1-5-11

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