Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-09-02692/USCOURTS-ca8-09-02692-0/pdf.json

Parties Involved:
Curtis Lumber Company, Inc.
Appellee
Louisiana Pacific Corporation
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 09-2602/09-2692

___________

Curtis Lumber Company, Inc., doing *

business as Caldwell Lumber Company, *

*

Plaintiff-Appellant/ *

Cross-Appellee, *

* Appeals from the United States

v. * District Court for the 

* Eastern District of Arkansas.

Louisiana Pacific Corporation, *

*

Defendant-Appellee/ *

Cross-Appellant. *

___________

Submitted: June 16, 2010

Filed: August 24, 2010

___________

Before MELLOY, HANSEN, and SMITH, Circuit Judges.

___________

MELLOY, Circuit Judge.

Louisiana Pacific Corporation ("LP") is a national manufacturer of building

materials. This case involves a rebate promotion that LP offered to builders and

contractors who purchased a certain amount of LP's siding products. Curtis Lumber

Company, Inc. ("Curtis Lumber"), a retail supplier of building materials, presented

LP's rebate promotion to many of its customers. Eighty-two of those customers

purchased or ordered LP's siding products with the expectation that LP would pay

rebates worth up to $2,400. After the customers submitted rebate applications, LP

Appellate Case: 09-2692 Page: 1 Date Filed: 08/24/2010 Entry ID: 3696547
-2-

demanded that the customers also submit proof that the siding products had been

installed. That requirement surprised a large majority of the customers, many of

whom cancelled orders with Curtis Lumber, refused to pay Curtis Lumber, or

demanded a rebate from Curtis Lumber. In the end, Curtis Lumber allegedly lost over

$100,000 as a result of LP's acts, but none of Curtis Lumber's customers suffered outof-pocket expenses. Curtis Lumber brought this diversity action against LP. The

district court granted summary judgment to LP on all of Curtis Lumber's claims, from

which Curtis Lumber now appeals. LP asserts a conditional cross-appeal, claiming

that Curtis Lumber lacks standing and is not the real party in interest for this dispute.

We affirm in part and reverse in part.

I. Background

In late 2006 or early 2007, LP announced a rebate promotion for a line of siding

products called SmartSide. The purpose of the promotion was to encourage builders

and contractors to install SmartSide products. LP offered rebates for several types of

siding products—trim ($500), soffit ($300), lap ($800), and panel ($800)—for a

maximum rebate of $2,400. The rebate promotion applied to orders received and

acknowledged between January 15, 2007 and May 18, 2007. 

LP relied on wholesalers and retailers to market the rebate promotion, and for

guidance, it distributed an information sheet listing the promotion's details. The

information sheet listed two qualifications: (1) "This promotion is open to new

Builders or Contractors who purchase at least one house worth of SmartSide

products," and (2) "Builder/Contractor will receive checks based upon purchases."

In addition, the information sheet stated that LP required invoice documentation for

a rebate to be paid. LP also distributed an application for builders and contractors to

complete and submit. Under the heading "Terms and Conditions," the rebate

application stated: "Please indicate products used and expected rebate, with a $2,400

Appellate Case: 09-2692 Page: 2 Date Filed: 08/24/2010 Entry ID: 3696547
1

It appears that, with one exception, LP did not send the June 25 letter or a

similar letter to rebate applicants who purchased SmartSide products from other

retailers.

-3-

maximum." Following this instruction was a chart for an applicant to write in how

much of each category of siding product he or she ordered. 

Upon learning of the rebate promotion, Curtis Lumber solicited orders from its

customers who were builders and contractors. By the promotion's deadline, Curtis

Lumber sold SmartSide products to eighty-two of its customers with the expectation

that LP would pay a rebate worth up to $2,400 to each customer. Most of the orders

were close to $2,400, so the customers expected to receive the SmartSide products

with little or no out-of-pocket cost. Curtis Lumber placed orders with LP's wholesale

distributor, Boise Cascade, to fulfill its customers' orders. Curtis Lumber also helped

most of the customers complete rebate applications and submit them to LP along with

the required invoices. Curtis Lumber expected to make roughly $600 in profit on each

$2,400 purchase of SmartSide products. 

LP was suspicious of the rebate applications from Curtis Lumber's customers

because they were submitted in batches, written in the same handwriting, and were at

or near the minimum purchase amount for the maximum rebate. LP was also

concerned because the applications were submitted with sequentially numbered

invoices that did not indicate purchases of other building materials. These

characteristics were unusual among the nearly 1,000 rebate applications LP received

from builders and contractors across the country. Therefore, on June 25, 2007, LP

sent a letter to all of the rebate applicants who purchased SmartSide products from

Curtis Lumber, requesting the following information in order to process their rebates:

(1) a picture of the home showing SmartSide products, (2) the street address of the

newly sided home, and (3) responses to a short questionnaire. If a rebate applicant did

not submit proof of use, then LP would not pay a rebate.1

 

Appellate Case: 09-2692 Page: 3 Date Filed: 08/24/2010 Entry ID: 3696547
-4-

Upon receiving LP's letter, rebate applicants complained to Curtis Lumber. A

majority of the applicants purchased SmartSide products for future use and therefore

had not yet installed the products. Curtis Lumber told the complaining customers not

to respond to the June 25 letter since it believed LP should pay the rebates instead of

imposing an additional requirement for the rebate promotion. On July 6, 2007, Curtis

Lumber's counsel sent an email to LP, detailing the customers' complaints, requesting

LP to process the rebates, and threatening to sue LP if it did not pay rebates to the

customers.

In the end, only nine of Curtis Lumber's customers responded to the June 25

letter with proof of use. LP paid rebates to those nine customers along with one other

customer who did not respond (Habitat For Humanity). The remaining seventy-two

rebate applicants either cancelled their orders with Curtis Lumber, demanded a rebate

from Curtis Lumber, or refused to pay invoices sent by Curtis Lumber. Curtis Lumber

complied with its customers' requests. Forty-one orders of SmartSide products were

cancelled prior to delivery. Curtis Lumber paid rebates to seventeen customers, "out

of concern for losing [the customers'] other business and as a result of having

presented this program to them." Curtis Lumber was unable to collect the amount due

on fourteen of the SmartSide sales. None of Curtis Lumber's customers incurred any

out-of-pocket costs for which they were not reimbursed, and no customer has filed suit

in connection with the SmartSide rebate promotion.

In April 2008, Curtis Lumber sued LP in Arkansas state court, asserting four

causes of action: (1) breach of the Arkansas Deceptive Trade Practices Act

("ADTPA"), (2) negligent misrepresentation/constructive fraud, (3) equitable

estoppel, and (4) intentional misrepresentation/fraud. Curtis Lumber alleged that LP's

acts caused it to suffer just over $100,000 in damages, including lost profits from the

cancelled sales, costs associated with carrying a large inventory of SmartSide

products, the value of sales that Curtis Lumber was unable to collect, and costs of

Appellate Case: 09-2692 Page: 4 Date Filed: 08/24/2010 Entry ID: 3696547
-5-

rebates paid to customers. Further, Curtis Lumber requested that LP pay attorneys'

fees and punitive damages.

LP removed this case to federal court and moved for summary judgment on

three grounds: (1) Curtis Lumber lacked standing and was not the real party in

interest, (2) Curtis Lumber's claims were meritless, and (3) Arkansas law precludes

the alleged damages. The district court rejected LP's threshold challenges but granted

partial summary judgment, finding that the negligent misrepresentation/constructive

fraud claim failed on the merits. The remainder of Curtis Lumber's claims survived

because questions of material fact remained as to Curtis Lumber's fraud and ADTPA

claims—specifically, whether LP's omission of a "proof of use" requirement in the

rebate documents was a material omission, whether the omission was intentional, and

whether it caused Curtis Lumber's damages. Also, the court held that Curtis Lumber

could amend its complaint to allege promissory estoppel and two additional claims

under the ADTPA. However, the court limited the available damages, concluding that

Arkansas's voluntary payment rule prohibited Curtis Lumber from seeking the value

of rebates or refunds paid to customers, and that the evidence was insufficient to

support a punitive damages award. 

LP then moved for reconsideration, contending that the district court

overlooked the terms "products used" in the rebate application. During a

teleconference, the court acknowledged that it had given Curtis Lumber the benefit

of a favorable inference on that question. Nonetheless, the court granted LP's motion

for reconsideration, concluding that LP included a "use" requirement in its rebate

program documents. As such, the court dismissed the remainder of Curtis Lumber's

claims and also held that the voluntary payment rule precludes recovery of lost profits.

Curtis Lumber appeals the dismissal of all of its claims and the district court's

limitations on damages. LP conditionally cross-appeals the district court's

determinations that Curtis Lumber has standing and is the real party in interest. Our

discussion begins with LP's threshold challenges and then addresses the merits of

Curtis Lumber's claims and the available damages.

Appellate Case: 09-2692 Page: 5 Date Filed: 08/24/2010 Entry ID: 3696547
2

Curtis Lumber's reply brief groups the arguments on standing and the realparty-in-interest rule, and LP contends that Curtis Lumber therefore waived the

standing issue. However, LP's arguments on these two issues are virtually the same.

Indeed, the district court appears to have adjudicated the standing issue along with the

real-part-in-interest issue, even though they are "distinct concepts." Mitchell Food

Prods., Inc. v. United States, 43 F. App'x 369, 369 (Fed. Cir. 2002) (unpublished).

We believe it was implicit in the district court's order that Curtis Lumber has standing

to pursue this lawsuit. See United States v. Taylor, 544 F.2d 347, 349 (8th Cir. 1976)

("[T]he court in examining an order appealed from can look behind the label placed

by the lower court on its order to determine the substance and effect of the order.").

Given that the district court's order blended these issues and that the arguments are

closely intertwined, we decline to hold that Curtis Lumber waived the standing issue.

This case is a far cry from the case LP cites, Heerman v. Burke, 266 F.2d 935 (8th Cir.

1959), where this Court held that an appellee was precluded from asserting on

rehearing a procedural challenge as to error preservation because it took issue only

with the merits of the appeal in the original hearing. Id. at 940. In any event, standing

is a threshold issue that we are obligated to scrutinize. Roberts v. Wamser, 883 F.2d

617, 620 (8th Cir. 1989).

-6-

II. Analysis

A. Standing

"Standing is a threshold inquiry and jurisdictional prerequisite that must be

resolved before reaching the merits of a suit." Medalie v. Bayer Corp., 510 F.3d 828,

829 (8th Cir. 2007) (internal quotations omitted). Standing requires (1) an injury in

fact (2) fairly traceable to the defendant's actions and (3) likely to be redressed by a

favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). LP

argues that although Curtis Lumber's customers were potentially injured, Curtis

Lumber does not have standing because it voluntarily paid rebates and refunds to its

customers. Accordingly, Curtis Lumber's alleged injuries are not fairly traceable to

LP's acts.2

 The district court concluded that Curtis Lumber has shown that it sustained

damages based upon LP's actions. Reviewing de novo, see Hodak v. City of St.

Appellate Case: 09-2692 Page: 6 Date Filed: 08/24/2010 Entry ID: 3696547
-7-

Peters, 535 F.3d 899, 903 (8th Cir. 2008), cert. denied, 129 S. Ct. 1352 (2009), we

conclude that Curtis Lumber has standing to bring this lawsuit. 

Curtis Lumber has alleged distinct injuries that would not have occurred had

LP paid rebates owed to the customers. Specifically, Curtis Lumber alleges that it lost

the expected profits on the cancelled sales of SmartSide products and that it paid costs

related to carrying the large inventory it ordered in reliance on the rebate promotion.

These injuries are actual, particularized to Curtis Lumber, traceable to LP's acts, and

redressable by a verdict in Curtis Lumber's favor. As such, the standing requirements

are satisfied. See Lujan, 504 U.S. at 560–61. We decline LP's invitation to use the

principle of constitutional standing to enforce Arkansas's voluntary payment rule.

Whether Curtis Lumber can recover the rebates it paid to customers is a question

better left to the applicable substantive law. See infra Section II-D-(2).

B. Real Party in Interest

Federal Rule of Civil Procedure 17(a) provides that every "action must be

prosecuted in the name of the real party in interest." The function of this rule "is

simply to protect the defendant against a subsequent action by the party actually

entitled to recover, and to insure generally that the judgment will have its proper effect

as res judicata." Fed. R. Civ. P. 17(a) advisory committee note (1966). Accordingly,

Rule 17(a) requires that the plaintiff "actually possess, under the substantive law, the

right sought to be enforced." United HealthCare Corp. v. Am. Trade Ins. Co., Ltd.,

88 F.3d 563, 569 (8th Cir. 1996). This inquiry presents legal issues, see In re Isbell

Records, Inc., 586 F.3d 334, 336–37 (5th Cir. 2009), which we review de novo, see

Manion v. Nagin, 392 F.3d 294, 300 (8th Cir. 2004). 

LP contends that the rebate applicants are the real parties in interest, not Curtis

Lumber. Curtis Lumber is merely seeking to recover on the customers' claims, LP

argues, and thus the real-party-in-interest rule is necessary to protect LP from double

liability. The district court rejected LP's argument, concluding that Curtis Lumber set

Appellate Case: 09-2692 Page: 7 Date Filed: 08/24/2010 Entry ID: 3696547
-8-

forth causes of action based on damages allegedly sustained by itself, not the rebate

applicants. We conclude that Rule 17(a) does not bar Curtis Lumber's lawsuit. Curtis

Lumber has alleged injuries that the customers could not allege—e.g., lost profits on

the cancelled sales and the costs associated with unsold inventory. Conceivably, the

rebate applicants could have asserted a breach-of-contract claim against LP after it

refused to pay rebates. However, it is undisputed that none of those applicants

suffered an injury, and therefore, there is no risk of duplicative litigation. As such,

Curtis Lumber is the real party in interest. 

C. Curtis Lumber's Claims

We now turn to whether the district court erred in granting LP's motion for

summary judgment as to Curtis Lumber's four causes of action. "Summary judgment

is appropriate when there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law." Landon v. Nw. Airlines, Inc., 72 F.3d 620,

624 (8th Cir. 1995). Like the district court, we give the nonmoving party, Curtis

Lumber, the benefit of all reasonable inferences from the evidence in the record.

Kukla v. Hulm, 310 F.3d 1046, 1047–48 (8th Cir. 2002). Our standard of review is

de novo, and we may affirm summary judgment on any basis supported by the record.

In re Baycol Prods. Litig., 596 F.3d 884, 888 (8th Cir. 2010). 

Arkansas law applies in this case. We are bound by decisions of the Arkansas

Supreme Court as to the meaning of Arkansas law. See Progressive N. Ins. Co. v.

McDonough, 608 F.3d 388, 390 (8th Cir. 2010). "If the [Arkansas Supreme Court]

has not decided an issue we must attempt to predict how the [Arkansas Supreme

Court] would resolve the issue, with decisions of intermediate state courts being

persuasive authority." Id. Where Arkansas law is undeveloped, we may also "look

to 'relevant state precedent, analogous decisions, considered dicta, and any other

reliable data' to determine how the Supreme Court of [Arkansas] would construe

[Arkansas] law." In re W. Iowa Limestone, Inc., 538 F.3d 858, 866 (8th Cir. 2008)

(citation omitted).

Appellate Case: 09-2692 Page: 8 Date Filed: 08/24/2010 Entry ID: 3696547
-9-

1. Fraud

Under Arkansas law, fraud requires: "(1) a false representation of material fact;

(2) knowledge that the representation is false or that there is insufficient evidence

upon which to make the representation; (3) intent to induce action or inaction in

reliance upon the representation; (4) justifiable reliance on the representation; and

(5) damage suffered as a result of the reliance." Goforth v. Smith, 991 S.W.2d 579,

586 (Ark. 1999). Fraud also extends to concealment of material information and nondisclosure of certain pertinent information. Farm Bureau Policy Holders & Members

v. Farm Bureau Mut. Ins. Co. of Ark., Inc., 984 S.W.2d 6, 14 (Ark. 1998).

The central focus of this litigation has been whether LP actually misrepresented

the terms of the rebate promotion. Based on the word "used" in the rebate application

("Please indicate products used and expected rebate . . ."), LP contends that the rebate

application included an "obvious" requirement that the builder or contractor actually

have installed the SmartSide products in order to receive a rebate. LP also argues that

the word "trial" on the information sheet ("Purpose: Encourage Builders and

Contractors to trial SmartSide products") implicitly indicated LP's intent that

applicants install the products. We disagree with LP's argument for several reasons.

First, the information sheet that LP provided to wholesalers and retailers listed

qualifications, limits, and documentation requirements for the rebate promotion. Yet,

the information sheet never mentioned a requirement that the SmartSide products had

to be installed by a certain date, much less that they had to be installed by the time that

the rebate applications were submitted. LP could merely have added two words to the

information sheet: "Qualifications: This promotion is open to new Builders or

Contractors who purchase and install at least one house worth of SmartSide products."

Instead, LP's interpretation is premised on the word "used," which appears in a small

font in the middle the rebate application. Viewing the "whole context" of the rebate

information sheet and application rather than "particular words and phrases," a person

Appellate Case: 09-2692 Page: 9 Date Filed: 08/24/2010 Entry ID: 3696547
-10-

could reasonably infer that LP misrepresented or omitted a material term of the rebate

promotion. Coleman v. Regions Bank, 216 S.W.3d 569, 574 (Ark. 2005).

Second, LP's interpretation of the rebate documents is untenable. It is

undisputed that some of Curtis Lumber's customers had not received SmartSide

products by the time they submitted the rebate applications. Without delivery of the

SmartSide products, it would have been impossible for those customers to have "used"

the SmartSide products. Given the delay between ordering the products and

distribution and delivery, LP's proffered interpretation of the rebate requirements is

unreasonable. Indeed, Ben Skoog, the LP employee in charge of the rebate program,

testified that customers who ordered the products late in the promotional period would

qualify for the rebate program if they installed the products "within a reasonable

time."

Third, even if we credit LP's argument that prior use was required in order to

qualify for the rebate promotion, the rebate documents did not say that applicants

would have to submit proof of use (e.g., photos, address) in order to receive a rebate.

For these reasons, we conclude there is a question of material fact as to whether LP's

rebate documents misrepresented or omitted a material term of the rebate promotion.

Alternatively, LP argues that, even if the rebate documents misrepresented a

material term, there is insufficient evidence that it knew about the misrepresentation.

In order to prove fraud, Curtis Lumber must demonstrate scienter, i.e., that LP "made

a material false statement knowing that it was false at the time made." McAnally v.

Gildersleeve, 16 F.3d 1493, 1497 (8th Cir. 1994); see also South County, Inc. v. First

W. Loan Co., 871 S.W.2d 325, 326 (Ark. 1994) ("Proof of a mere naked falsehood or

representation is not enough even though the complaining party relied on it and

sustained damages, but, in addition thereto, the false statement must have been

knowingly or intentionally made.") (quotation omitted). To satisfy this element,

Curtis Lumber is not required to put forth "direct evidence or positive testimony" of

fraud. Receivables Purchasing Co., Inc. v. Eng'g & Prof'l Servs., Inc., 510 F.3d 840,

Appellate Case: 09-2692 Page: 10 Date Filed: 08/24/2010 Entry ID: 3696547
-11-

844 (8th Cir. 2008). "'Circumstantial evidence can provide a basis for the jury to infer

fraud where . . . the circumstances are inconsistent with honest intent.'" Id. (quoting

Stine v. Sanders, 987 S.W.2d 289, 293 n.3 (Ark. Ct. App. 1999)). However, "the

circumstances must be so strong and well connected as to clearly show fraud." Allred

v. Demuth, 890 S.W.2d 578, 580 (Ark. 1994). 

We agree that evidence of scienter is lacking in this case. Curtis Lumber has

not identified any unusual or suspicious conduct or circumstances surrounding LP's

statements from which we could reasonably infer a fraudulent state of mind. Cf.

Interstate Freeway Servs., Inc. v. Houser, 835 S.W.2d 872, 874 (Ark. 1992) (holding

that a jury could infer proof of fraud based on several circumstances surrounding the

employment offer in question, including the short duration of the plaintiff's

employment and the reasons and circumstances for the plaintiff's termination).

Moreover, LP has consistently maintained its interpretation of the rebate promotion

requirements, unlike situations where fraud can be inferred from a defendant's

contradiction of the representation in question. See, e.g., Morrill v. Becton, Dickinson

& Co., 747 F.2d 1217, 1222–23 (8th Cir. 1984) (holding that misrepresentations may

be actionable fraud based in part on internal memoranda from the defendant company

that contradicted the representations in question). 

Curtis Lumber argues that LP's knowledge of a false statement can be inferred

from Skoog's testimony that (1) LP intended retailers and customers to rely on the

rebate program documents, (2) LP intended to include a proof-of-use requirement in

the rebate program, and (3) that the rebate program documents are incomplete because

they did not specify the requirement that rebate applicants must install the SmartSide

products by a certain date. However, Skoog's testimony, even when it is construed in

the light most favorable to Curtis Lumber, amounts merely to an admission in

hindsight that the rebate documents were incomplete. The mere admission of a

misstatement is not enough to presume a fraudulent state of mind. See Houser, 835

S.W.2d at 873 ("Fraud is never presumed, and must be affirmatively proved . . . .").

At most, Skoog's testimony supports an inference that the omission in the rebate

Appellate Case: 09-2692 Page: 11 Date Filed: 08/24/2010 Entry ID: 3696547
-12-

documents was a product of an honest mistake, which is insufficient to prove fraud.

See Morrill, 747 F.2d at 1222 (some of the defendant's misrepresentations could not

be actionable fraud where the only evidence of scienter was testimony that the

inaccuracies "were honest mistakes"). This testimony falls short of the elevated

burden for proving fraud by circumstantial evidence. 

Curtis Lumber also contends that scienter can be inferred from the fact that LP

deviated from its procedures for processing rebate applications by sending the June

25 letter demanding proof of use. Even if we assume that the June 25 letter was a

deviation from LP's procedures, we fail to see how this fact assists Curtis Lumber's

case. If anything, the fact that LP established procedures for processing rebate

applications, and that it followed those procedures in nearly all other instances, shows

that there was no fraudulent scheme at work. 

In sum, Curtis Lumber has not presented evidence to shed light on LP's state of

mind when it issued the rebate documents. As such, no reasonable fact-finder could

conclude that LP falsely represented the terms of the rebate promotion with

knowledge of such falsity. Accordingly, summary judgment was appropriate as to

Curtis Lumber's fraud claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)

(summary judgment is mandated "against a party who fails to make a showing

sufficient to establish the existence of an element essential to that party's case, and on

which that party will bear the burden of proof at trial.").

Appellate Case: 09-2692 Page: 12 Date Filed: 08/24/2010 Entry ID: 3696547
3

Curtis Lumber originally titled its second cause of action, "Negligent

Misrepresentation." The district court correctly stated that Arkansas does not

recognize a tort of negligent misrepresentation, see South County, 871 S.W.2d at 326,

and then analyzed Curtis Lumber's claim under the doctrine of constructive fraud,

which is a cognizable tort in Arkansas, id. at 327. Giving Curtis Lumber the benefit

of the doubt, we also construe the second cause of action as a claim for constructive

fraud. 

4

There is confusion within Arkansas law as to whether constructive fraud

requires a particular type of relationship between the plaintiff and defendant. On one

hand, Arkansas courts have said constructive fraud involves "a breach of a legal or

equitable duty," e.g., Miskimins v. City Nat'l Bank of Fort Smith, 456 S.W.2d 673,

679 (Ark. 1970); Beatty v. Haggard, 184 S.W.3d 479, 485 (Ark. Ct. App. 2004), and

that "[c]onstructive fraud can exist in cases of rescission of contracts or deeds and

breaches of fiduciary duties," Farm Bureau, 984 S.W.2d at 14. We note, however, that

the Arkansas courts have not expressly defined the types of relationships or

transactions that may trigger constructive fraud. Additionally, the Arkansas Supreme

Court has stated more recently that the existence of a fiduciary relationship is not

-13-

2. Constructive Fraud3

Constructive fraud is doctrine of "limited reach" that Arkansas courts have used

to broaden tort liability. Receivables Purchasing, 510 F.3d at 843. As explained in

the previous section, traditional fraud requires an intent to deceive and knowledge that

a material misrepresentation is false. Constructive fraud, by comparison, does not

require a deceptive intent or knowledge of falsity. Knight v. Day, 36 S.W.3d 300, 303

(Ark. 2001). "[T]he test for constructive fraud . . . has been defined as the making of

misrepresentations by one who, not knowing whether they are true or not, asserts them

to be true without knowledge of their falsity and without moral guilt or evil intent."

South County, 871 S.W.2d at 327. Thus, a representation that is not fraudulent in the

traditional sense may be construed as fraudulent "because of its tendency to deceive

others." Knight, 36 S.W.3d at 303; see also Lane v. Rachel, 389 S.W.2d 621, 624

(Ark. 1965) ("[R]epresentations are construed to be fraudulent when made by one who

either knows the assurances to be false or else not knowing the verity asserts them to

be true.").4

 

Appellate Case: 09-2692 Page: 13 Date Filed: 08/24/2010 Entry ID: 3696547
always an essential element of constructive fraud. South County, 871 S.W.2d at 327.

We assume that the relationship between LP and Curtis Lumber was within the

general parameters of constructive fraud. 

-14-

Curtis Lumber's complaint alleged that statements made by LP's wholesaler,

Boise Cascade, were false. The district court correctly concluded that this allegation

was without evidentiary support. Accordingly, summary judgment was proper to the

extent Curtis Lumber's constructive fraud claim was based on alleged

misrepresentations by Boise Cascade.

Curtis Lumber's argument on appeal, however, is that the district court ignored

an aspect of its constructive fraud claim—that LP committed constructive fraud by

misrepresenting the terms of the rebate promotion. Curtis Lumber contends that the

constructive fraud claim should have survived summary judgment for the same reason

that the fraud claim should have survived. In support, Curtis Lumber relies on the

statements in Arkansas cases that constructive fraud has all of the elements of fraud

without intent to deceive. E.g., Downum v. Downum, 274 S.W.3d 349, 352 (Ark. Ct.

App. 2008). 

We believe that Curtis Lumber misconstrues constructive fraud. The doctrine

does not apply to all material misrepresentations regardless of the defendant's state of

mind. If that were the case, then constructive fraud would encompass negligent

misrepresentations as well, which is a result precluded by Arkansas law. See South

County, 871 S.W.2d at 326. Rather, constructive fraud merely extends tort liability

to recklessly false statements. See Receivables Purchasing, 510 F.3d at 843 ("[T]he

Arkansas Supreme Court would hold that liability for fraud attaches in cases where

a defendant lacked knowledge that his or her representation was false but did not

know whether it was true or not."). As we stated in the previous section, the evidence

in the record demonstrates that LP's misrepresentation was merely negligent or the

result of an honest mistake. A jury could not reasonably find that LP's rebate

Appellate Case: 09-2692 Page: 14 Date Filed: 08/24/2010 Entry ID: 3696547
5

Curtis Lumber's complaint alleged only three ADTPA theories. In its first

summary judgment order, the district court granted leave to amend the complaint to

add the claims under Arkansas Code §§ 4-88-107(a)(5)(B) and 4-88-108. No

amended complaint was filed, however, because the district court subsequently

granted LP's motion for reconsideration and dismissed all of Curtis Lumber's claims.

Although the latter two ADTPA claims have yet to be pleaded, LP does not contend

that they are not properly before this Court. In any event, our analysis of the latter

two ADTPA claims parallels our analysis of the original ADTPA claims, and thus, we

take the opportunity to clarify which claims should survive summary judgment after

a remand.

-15-

documents were recklessly false. Accordingly, summary judgment was appropriate

as to the constructive fraud claim.

3. ADTPA

Curtis Lumber has alleged that LP's acts constitute deceptive trade practices or

unlawful acts under the ADTPA in five ways.5

 First, LP knowingly made a false

representation as to the characteristics and benefits of goods, in violation of Arkansas

Code § 4-88-107(a)(1). Second, LP advertised goods with the intent not to sell them

as advertised, in violation of Arkansas Code § 4-88-107(a)(3). Third, LP employed

bait-and-switch advertising consisting of an attractive but insincere offer to sell a

product that LP in truth did not intend or desire to sell, evidenced by the requirement

of an undisclosed condition precedent to the purchase, in violation of Arkansas Code

§ 4-88-107(a)(5)(B). Fourth, LP's acts in business and commerce were

unconscionable, false, and deceptive, in violation of Arkansas Code § 4-88-

107(a)(10). Lastly, LP concealed or omitted a material fact in connection with the sale

of goods with the intent that others rely upon the concealment or omission, in

violation of Arkansas Code § 4-88-108(2). 

The district court granted summary judgment on Curtis Lumber's ADTPA

claims based on the finding that LP included a "use" requirement in the rebate

application. We disagree. See supra p. 9–10. As with the fraud claim, however, our

Appellate Case: 09-2692 Page: 15 Date Filed: 08/24/2010 Entry ID: 3696547
-16-

analysis continues to the state-of-mind requirements under the ADTPA. Although the

district court did not reach this issue, we must address the state-of-mind element

because it is a dispositive issue. If the ADTPA requires Curtis Lumber to prove

knowing/intentional deception, then summary judgment should be affirmed just as

with the fraud claim.

The state-of-mind requirements for claims under the ADTPA would be an issue

of first impression for the Arkansas Supreme Court. To interpret the ADTPA, we

adhere to Arkansas's canons of statutory interpretation:

Where a term in a statute is clear and unambiguous, it will be given its

ordinary meaning. Cash v. Ark. Comm'n on Pollution Control &

Ecology, 778 S.W.2d 606, 607 (Ark. 1989). A statutory term is

ambiguous when it is capable of two or more constructions, or when it

is so unclear that reasonable minds could disagree or be uncertain as to

its meaning. R.K. Enter., L.L.C. v. Pro-Comp Mgmt., Inc., 158 S.W.3d

685, 688 (Ark. 2004). When an ambiguity exists, the court will interpret

the provision in a way consistent with the legislature's intent. Cent. &

S. Cos. v. Weiss, 3 S.W.3d 294, 297 (Ark. 1999). That intent may be

divined by looking "to the language of the statute, the subject matter, the

object to be accomplished, the purpose to be served, the remedy

provided, the legislative history, and other appropriate means that throw

light on the subject." Saforo & Assocs., Inc. v. Porocel Corp., 991

S.W.2d 117, 124 (Ark. 1999).

Design Prof'ls Ins. Co. v. Chicago Ins. Co., 454 F.3d 906, 910 (8th Cir. 2006).

It is clear from the text of the ADTPA that Curtis Lumber's first three theories

require that the defendant knowingly and intentionally engage in a deceptive trade

practice. See Ark. Code § 4-88-107(a)(1) ("Knowingly making a false representation

. . . .") (emphasis added); id. § 4-88-107(a)(3) ("Advertising the goods or services with

the intent not to sell them as advertised") (emphasis added); id. § 4-88-107(a)(5)

("The employment of bait-and-switch advertising consisting of an attractive but

insincere offer to sell a product or service which the seller in truth does not intend or

Appellate Case: 09-2692 Page: 16 Date Filed: 08/24/2010 Entry ID: 3696547
6

For example, the New Jersey Consumer Fraud Act prohibits inter alia "the

knowing, concealment, suppression, or omission of any material fact with intent that

others rely upon such concealment, suppression or omission, in connection with the

sale or advertisement of any merchandise or real estate." N.J. Stat. § 56:8-2 (emphasis

added). Accordingly, New Jersey courts have concluded, "when the alleged consumer

fraud consists of an omission, a plaintiff must show that the defendant acted with

knowledge, thereby making intent an essential element of the fraud." Vukovich v.

Haifa, Inc., Civ. Action No. 03-737, 2007 WL 655597, at *9 (D.N.J. Feb. 27, 2007);

see also Cox v. Sears Roebuck & Co., 647 A.2d 454, 462 (N.J. 1994). 

Similarly, the Kansas Consumer Protection Act prohibits "the willful

concealment, suppression or omission of a material fact." Kan. Stat. Ann. § 50-

626(b)(3) (emphasis added). Predictably, Kansas courts have held that mere

nondisclosure of a material fact is insufficient to state a claim under the KCPA—a

plaintiff must show a willful omission of a material fact. See, e.g., Porras v. Bell, 857

P.2d 676, 678 (Kan. Ct. App. 1993); Heller v. Martin, 782 P.2d 1241, 1244 (Kan. Ct.

App. 1989).

-17-

desire to sell . . .") (emphasis added); see also Gen. Steel Domestic Sales, LLC v.

Hogan & Hartson, LLP, 230 P.3d 1275, 1281–83 (Colo. Ct. App. 2010) (holding that

the bait-and-switch advertising prohibition in the Colorado Consumer Protection Act

includes the element of an intent to deceive). In other words, the state-of-mind

requirement for those three theories mirrors the state-of-mind requirement for

traditional fraud. And since there is no genuine dispute of fact that LP knowingly

misrepresented or omitted a term of the rebate promotion, summary judgment was

appropriate on Curtis Lumber's first three ADTPA theories.

For several reasons, though, we conclude that claims pursuant to Arkansas

Code §§ 4-88-107(a)(10) and 4-88-108(2) do not require knowing or intentional

deception. First, neither provision on its face requires an intent to deceive or

knowledge that a representation is false. The Arkansas legislature could easily have

added the word "knowingly," "intentionally," or "willfully" to §§ 4-88-107(a)(10) and

4-88-108(2), just as it did under several portions of § 4-88-107(a).6

 Accordingly, the

absence of one of these terms is evidence that the Arkansas legislature did not intend

Appellate Case: 09-2692 Page: 17 Date Filed: 08/24/2010 Entry ID: 3696547
7

Arkansas Code § 4-88-108 provides in its entirety:

When utilized in connection with the sale or advertisement of any goods,

services, or charitable solicitation, the following shall be unlawful: 

(1) The act, use, or employment by any person of any deception,

fraud, or false pretense; or 

(2) The concealment, suppression, or omission of any material fact

with intent that others rely upon the concealment, suppression, or

omission. 

8

To be sure, the Illinois statute is distinguishable from Arkansas Code § 4-88-

108(2) because it expressly states that neither actual deception nor injury is required.

Moreover, the statute also instructs that courts should interpret the IFCA with

consideration for "the interpretations of the Federal Trade Commission and the federal

courts relating to Section 5(a) of the Federal Trade Commission Act." 815 Ill. Comp.

Stat. 505/2. These differences, however, are immaterial as to the issue for which we

believe the Illinois jurisprudence is persuasive—the requisite state of mind for a

statutory violation. 

-18-

to limit §§ 4-88-107(a)(10) and 4-88-108(2) to intentional or knowing deception. Cf.

Arkansas v. Owens, 260 S.W.3d 288, 291 (Ark. 2007) ("Had the legislature intended

for the five years to run only from the initial order of conditional release it could have

easily said so by including such language in the statute.").

Second, states with laws virtually identical to Arkansas Code § 4-88-108(2)7

have overwhelmingly concluded that intent to deceive is not required under their

analogous provisions. For example, the Illinois Consumer Fraud Act ("ICFA")

prohibits "unfair or deceptive acts or practices, including but not limited to . . . the

concealment, suppression or omission of such material fact, with intent that others rely

upon the concealment, suppression or omission of such material fact . . . in the

conduct of any trade or commerce . . . ." 815 Ill. Comp. Stat. 505/2.8

 Illinois courts

have stated that the seller's intent to deceive (or lack thereof) is immaterial for a claim

under the ICFA because innocent misrepresentations are also actionable. See, e.g.,

Cripe v. Leiter, 703 N.E.2d 100, 103 (Ill. 1998); Duhl v. Nash Realty, Inc., 429

N.E.2d 1267, 1277 (Ill. App. Ct. 1981). Indeed, in a case where the plaintiffs brought

Appellate Case: 09-2692 Page: 18 Date Filed: 08/24/2010 Entry ID: 3696547
9

See Ariz. Rev. Stat. Ann. § 44-1522(A); Flagstaff Med. Ctr., Inc. v. Sullivan,

773 F. Supp. 1325, 1661–62 (D. Ariz. 1991), rev'd in part on other grounds, 962 F.2d

879 (9th Cir. 1992) ("It is not necessary to show specific intent to deceive; the intent

to do the act involved is sufficient."); Arizona ex rel. Babbitt v. Goodyear Tire &

Rubber Co., 626 P.2d 1115, 1118 (Ariz. Ct. App. 1981) (same). 

10See Del. Code Ann. tit. 6, § 2513(a); Nash v. Hoopes, 332 A.2d 411, 413 (Del.

Super. Ct. 1975) ("The only reference to 'intent' in this section is that the outlawed

action be done 'with intent that others rely upon such concealment, suppression or

omission . . .'. Fraudulent intent in connection with the making of such unlawful

practice is not requisite to the availability of the remedies of the statute."). 

11See Iowa Code § 714.16(2)(a); Iowa ex rel. Miller v. Pace, 677 N.W.2d 761,

771 (Iowa 2004) ("[I]t is not necessary . . . to prove that the violator acted with an

intent to deceive, as is required for common law fraud. . . . [T]he only intent required

by the statute is that the defendant act 'with the intent that others rely' upon his

-19-

an ICFA claim against an exterminating company based on the company's failure to

disclose material facts in a termite inspection report, the Appellate Court expressly

rejected the argument that the defendant could be held liable under the ICFA because

it did not intend to deceive the plaintiffs:

This . . . is no defense. Under the statute, state of mind is immaterial,

and a defendant need not be motivated by an intent to deceive. . . . [A]

violator's good or bad faith is not important. Even innocent

misrepresentations may be actionable. By its own terms, the statute

requires only that a violator intend for a purchaser to rely on his acts or

omissions. A party is considered to intend the necessary consequences

of his own acts or conduct. 

Warren v. LeMay, 491 N.E.2d 464, 474 (Ill. App. Ct. 1986) (internal citations

omitted). Accordingly, the court held that the defendant's mere submission of the

termite inspection report "evinces the requisite intent" under the ICFA because the

"sole purpose for the requested report . . . was to assist plaintiffs in securing VA

financing." Id. Similar persuasive evidence exists in judicial interpretations of

materially indistinguishable consumer protection laws in Arizona,9

 Delaware,10 Iowa,11

Appellate Case: 09-2692 Page: 19 Date Filed: 08/24/2010 Entry ID: 3696547
omissions.") (internal citations omitted).

12See Minn. Stat. § 325F.69, subdiv. 1; McNamara v. Nomeco Bldg. Specialties,

Inc., 26 F. Supp. 2d 1168, 1171 (D. Minn. 1998) ("Simply stated, one making

representations in the sale of consumer goods can be held liable, even though he had

no specific intent to falsely mislead the consumer."). 

13See Mo. Rev. Stat. § 407.020, subdiv. 1; Missouri ex rel. Webster v. Areaco

Inv. Co., 756 S.W.2d 633, 635 (Mo. Ct. App. 1988) ("It is the defendant's conduct, not

his intent, which determines whether a violation has occurred."); Missouri ex rel.

Ashcroft v. Mktg. Unlimited of Am., Inc., 613 S.W.2d 440, 445 (Mo. Ct. App. 1981)

(same).

The Alaska Consumer Fraud Act and the West Virginia Consumer Credit and

Protection Act ("WVCCPA") also contain state-of-mind standards virtually identical

to Arkansas Code § 4-88-108(2). See Alaska Stat. § 45.50.471(b)(12); W. Va. Code

§ 46A-6-102(7)(M). However, our research reveals no cases in which a court has

analyzed those statutes with regard to the state-of-mind requirement. Admittedly, the

Fourth Circuit has stated that plaintiffs must satisfy the standard requirements for

fraud in order to invoke the WVCCPA. Jones v. Sears Roebuck & Co., 301 F. App'x

276, 287 (4th Cir. 2008) (unpublished per curiam). However, that opinion neither

analyzes the language of the WVCCPA nor cites any case law to support the

proposition that the WVCCPA requires a fraudulent intent. As such, we respectfully

find the opinion to be of little guidance in predicting how the Arkansas Supreme Court

would interpret the ADTPA. 

-20-

Minnesota,12 and Missouri.13 We see no basis for concluding that Arkansas courts

would interpret Arkansas Code § 4-88-108(2) differently with regard to the state-ofmind requirement.

Third, the Arkansas legislature intended to proscribe more than traditional fraud

when used it the term "deceptive act or practice" in the ADTPA's catch-all provision.

See Ark. Code § 4-88-107(a)(10) (proscribing "any other unconscionable, false, or

deceptive act or practice in business, commerce, or trade"). Because, "deceptive act

or practice" is not defined in any Arkansas statute, regulation, or opinion, we look

elsewhere. Arkansas is one of many states that enacted a deceptive and unfair trade

Appellate Case: 09-2692 Page: 20 Date Filed: 08/24/2010 Entry ID: 3696547
14See, e.g., F.T.C. v. Verity Int'l, Ltd., 443 F.3d 48, 63 (2d Cir. 2006); F.T.C.

v. Bay Area Bus. Council, Inc., 423 F.3d 627, 635 (7th Cir. 2005); F.T.C. v. Freecom

Commc'ns, Inc., 401 F.3d 1192, 1204 n.7 (10th Cir. 2005); Removatron Int'l Corp. v.

F.T.C., 884 F.2d 1489, 1495 (1st Cir. 1989); Orkin Exterminating Co. v. F.T.C., 849

F.2d 1354, 1368 (11th Cir. 1988); Chrysler Corp. v. F.T.C., 561 F.2d 357, 363 n.5

(D.C. Cir. 1977); Beneficial Corp. v. F.T.C., 542 F.2d 611, 617 (3d Cir. 1976);

Doherty, Clifford, Steers & Shenfield, Inc. v. F.T.C., 392 F.2d 921, 925 (6th Cir.

1968); Feil v. F.T.C., 285 F.2d 879, 896 (9th Cir. 1960); see also United States v.

Johnson, 541 F.2d 710, 712 (8th Cir. 1976) ("[L]iability for civil penalties [under the

FTCA] arises without a need for any showing that the practices were intentional or

malicious."); Benrus Watch Co. v. F.T.C., 352 F.2d 313, 318 (8th Cir. 1965)

("Whether a trade practice . . . is deceptive depends . . . on the impression which such

a practice makes on the minds of the consuming public."). 

15See, e.g., In re Pharm. Indus. Average Wholesale Price Litig., 582 F.3d 156,

185 (1st Cir. 2009) (interpreting the Massachusetts consumer protection statute); Doe

-21-

practices act, or a "little FTC act," in the 1960s or 1970s. The majority of states with

such laws do not require knowing or intentional deception in order to state an

actionable claim under their respective acts. See Carolyn L. Carter & Jonathan

Sheldon, Unfair and Deceptive Acts and Practices, § 4.2.4.1, at 193–95 (7th ed. 2009)

(collecting authorities); Donald M. Zupanec, Annotation, Practices Forbidden by State

Deceptive Trade Practice and Consumer Protection Acts, 89 A.L.R.3d 449, at § 4

(1979); see also Wallis v. Ford Motor Co., 208 S.W.3d 153, 161–62 (Ark. 2005)

(surveying other states' consumer-protection statutes to interpret the ADTPA). Those

states' interpretations of deceptive trade practices are further buttressed by many

federal court opinions holding that a defendant's good faith is immaterial to whether

a "deceptive act" has occurred under § 5 of the Federal Trade Commission Act

because that statute does not require an intent to deceive.14 Along the lines of the

Federal Trade Commission's definition of deception, many courts have defined trade

practices as deceptive if they are likely to deceive or have a capacity to deceive a

reasonable consumer. See Black's Law Dictionary 435 (8th ed. 2004) (defining

"deceptive act": "As defined by the [FTC] and most state statutes, conduct that is

likely to deceive a consumer acting reasonably under similar circumstances.").15

Appellate Case: 09-2692 Page: 21 Date Filed: 08/24/2010 Entry ID: 3696547
v. SexSearch.com, 551 F.3d 412, 418 (6th Cir. 2008) (Ohio); Zlotnick v. Premier

Sales Group, Inc., 480 F.3d 1281, 1284 (11th Cir. 2007) (Florida); Bober v. Glaxo

Wellcome PLC, 246 F.3d 934, 938–39 (7th Cir. 2001) (Illinois); cf. Doe v. Boys

Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 479–80 (Tex. 1995) ("Generally, an

act is false, misleading, or deceptive if it has the capacity to deceive an 'ignorant,

unthinking, or credulous person.'") (citation omitted). But see Missouri ex rel. Nixon

v. Telco Directory Pub., 863 S.W.2d 596, 601–602 & n.2 (Mo. 1993) (listing cases

from twenty-one states adopting the "capacity to deceive" standard but holding that,

under Missouri's act, deception is a species of fraud). 

-22-

In addition, Arkansas Code § 4-88-108(1) lists both fraud and deception as

unlawful acts. These terms cannot be coterminous, as that result would violate the

basic principle that a statute must be construed so that every word is given meaning

and effect, if possible, "so that no word is left void, superfluous or insignificant."

Rose v. Ark. State Plant Bd., 213 S.W.3d 607, 614 (Ark. 2005). 

Finally, our interpretation of the ADTPA is influenced by the fact that the

preamble to the ADTPA provides that the statute was enacted "to protect the interests

of both the consumer public and the legitimate business community." Mosby v. Int'l

Paper Co., No. 5:07CV00314-WRW, 2008 WL 2669148, at *2 (E.D. Ark. July 1,

2008) (unpublished) (quoting the ADTPA preamble). Furthermore, the Arkansas

Supreme Court has recognized "the legislature's remedial purpose" in enacting the

ADTPA and also that a "liberal construction of the [A]DTPA is appropriate."

Arkansas ex rel. Bryant v. R & A Inv. Co., 985 S.W.2d 299, 302 (Ark. 1999). Liberal

construction in this context means that the ADTPA should protect consumers from

trade practices beyond common law fraud.

In light of these considerations, we conclude that summary judgment was

inappropriate as to Curtis Lumber's claims under §§ 4-88-107(a)(1) and 4-88-108(2).

A reasonable fact-finder could conclude that LP omitted a material term from the

rebate documents with the intent that retailers and customers rely on the rebate

documents—and likewise that LP's rebate documents constituted a deceptive trade

practice. But unlike the fraud and constructive fraud claims, the ADTPA claims are

Appellate Case: 09-2692 Page: 22 Date Filed: 08/24/2010 Entry ID: 3696547
16Curtis Lumber originally alleged a claim for equitable estoppel. When the

district court partially granted summary judgment, it also granted Curtis Lumber leave

to amend the complaint to state a claim for promissory estoppel. That leave to amend

became moot when the court later found that LP included a "use" term in the rebate

documents. The parties argue on appeal whether a promissory estoppel claim should

survive summary judgment, and we evaluate the claim accordingly.

-23-

viable despite the lack of evidence regarding LP's knowledge of a false or deceptive

practice or it's specific intent to deceive. 

4. Promissory Estoppel16

Under Arkansas law, promissory estoppel requires that the plaintiff clearly

show four elements: "(1) the making of a promise, (2) intent by the promisor that the

promise be relied upon, (3) reliance upon the promise by the promisee, and

(4) injustice resulting from a refusal to enforce the promise." In re Hilyard Drilling

Co., 840 F.2d 596, 602 (8th Cir. 1988); see also K.C. Props. of N.W. Ark., Inc. v.

Lowell Inv. Partners, LLC, 280 S.W.3d 1, 14 (Ark. 2008) ("[T]he party asserting

estoppel must prove it strictly, there must be certainty to every intent, the facts

constituting it must not be taken by argument or inference, and nothing can be

supplied by intendment."). Curtis Lumber alleges that LP promised to pay rebates if

customers met the qualifications on the rebate documents, LP intended retailers like

Curtis Lumber and end-user customers to rely on the promise, Curtis Lumber

detrimentally relied on LP's promise, and Curtis Lumber's injuries constitute an

injustice. Notably, other courts have held that a plaintiff is not required to show that

a defendant harbored a fraudulent intent in order to recover under the doctrine of

promissory estoppel. See Harris v. Chicago Hous. Auth., No. 97 C 6285, 1998 WL

386371, at *3 n.2 (N.D. Ill. July 2, 1998) (unpublished) ("Defendant's contention that

fraud or intent to deceive is a required element of a promissory estoppel claim is flatly

incorrect."). 

Appellate Case: 09-2692 Page: 23 Date Filed: 08/24/2010 Entry ID: 3696547
-24-

LP contends that Curtis Lumber cannot prove the elements of promissory

estoppel for two reasons. First, LP argues that it fulfilled the promises it made

regarding the rebate program. However, we believe a reasonable fact-finder could

disagree. LP promised to pay rebates to customers who purchased SmartSide products

and, importantly, failed to state a condition to this payment that the customers use the

products by a certain date or submit proof of their use to LP. See supra pp. 9–10. As

such, LP's first argument fails. 

LP's second argument is that relief under promissory estoppel is limited to

"enforcement of the promise" between LP and the customers, and therefore Curtis

Lumber cannot recover for the costs it incurred in reliance on LP's promise. The sole

remedy, according to LP, is requiring LP to pay rebates to the customers. However,

LP's argument is contrary to Section 90 of the Restatement (Second) of Contracts,

which, in Arkansas, is the "black-letter law on promissory estoppel." K.C. Props., 280

S.W.3d at 14. Comment d to § 90 expressly contemplates a variety of available

remedies:

A promise binding under this section is a contract, and full-scale

enforcement by normal remedies is often appropriate. But the same

factors which bear on whether any relief should be granted also bear on

the character and extent of the remedy. In particular, relief may

sometimes be limited to restitution or to damages or specific relief

measured by the extent of the promisee's reliance rather than by the

terms of the promise.

Restatement (Second) of Contracts § 90, cmt. d (1981) (emphasis added). Moreover,

the Restatement also contemplates claims brought by third parties who detrimentally

rely on a promise. See id. § 90(1) ("A promise which the promisor should reasonably

expect to induce action or forbearance on the part of the promisee or a third person

and which does induce such action or forbearance . . . .") (emphasis added); see also

id. § 90 cmt. c. (reliance by third parties). LP cites two Arkansas cases, Peoples

National Bank v. Linebarger Construction Co., 240 S.W.2d 12 (Ark. 1951), and

Country Corner Food & Drug, Inc. v. Reiss, 737 S.W.2d 672 (Ark. Ct. App. 1987),

Appellate Case: 09-2692 Page: 24 Date Filed: 08/24/2010 Entry ID: 3696547
-25-

for the position that the remedies under promissory estoppel are limited, but neither

case is apposite. Therefore, we conclude that Arkansas law permits Curtis Lumber to

recover damages it incurred in reliance on LP's promise under the doctrine of

promissory estoppel. 

D. Damages

Curtis Lumber seeks damages for lost profits on the sales of SmartSide

products, increased costs associated with carrying extra inventory, the value of rebates

that Curtis Lumber paid to its customers, the value of sales it was unable to collect due

to LP's acts, injuries to goodwill, attorneys' fees, and punitive damages. LP argues

that several of the damages claims are barred by law, but it does not appear to

challenge the damages sought for inventory costs, goodwill, or attorneys' fees. 

(1) Lost Profits

Arkansas has not decided whether lost profits are recoverable under promissory

estoppel. See S. Beach Beverage Co. v. Harris Brands, Inc., 138 S.W.3d 102, 108

(Ark. 2003) (reserving this question). Lost profits are recoverable, however, under

the ADTPA. See Ark. Code § 4-88-113(f) ("Any person who suffers actual damage

or injury as a result of an offense or violation as defined in this [Act] has a cause of

action to recover actual damages, if appropriate, and reasonable attorney's fees."); cf.

Smith v. Walt Bennett Ford, Inc., 864 S.W.2d 817, 825 (Ark. 1993) ("[L]ost profits

are recoverable under the [Federal Odometer Fraud] Act as 'actual damages' provided

they are proved to the requisite levels of certainty and causation."). 

The district court initially held that Curtis Lumber has presented enough

evidence to recover damages for lost profits. In its order granting LP's motion for

reconsideration, however, the court determined that the voluntary payment rule

precludes Curtis Lumber from recovering lost profits. This result is incorrect.

Although Curtis Lumber's payments to customers arguably were "voluntary," Curtis

Appellate Case: 09-2692 Page: 25 Date Filed: 08/24/2010 Entry ID: 3696547
17We do not interpret LP's argument to apply to the fourteen orders that Curtis

Lumber was unable to collect allegedly due to LP's acts. Curtis Lumber did not pay

those customers either in the form of a cash refund or an account credit. At most,

Curtis Lumber failed to pursue legal action to collect the amounts owed. Even if we

consider Curtis Lumber's inaction to be a "payment," we would find that there exists

a factual question as to whether it was involuntary under the duress exception. See

infra pp. 28–32. 

-26-

Lumber's alleged lost profits were not. LP does not argue to the contrary.

Accordingly, we hold that Curtis Lumber may pursue damages for lost profits on the

cancelled sales. 

(2) Rebates Paid by Curtis Lumber

This section concerns the rebates that Curtis Lumber paid, either in the form of

a cash refund or an account credit, to seventeen of its customers after LP refused to

pay the rebates. LP argues that Curtis Lumber cannot recover "any payments or

account credits it gave to its customers," because Curtis Lumber voluntarily gave

those payments and credits.17 Under Arkansas's well-established voluntary payment

rule, a person cannot recover money that he or she has voluntarily paid. See Boswell

v. Gillett, 295 S.W.2d 758, 761 (Ark. 1956); see also TB of Blythesville, Inc. v. Little

Rock Sign & Emblem, Inc., 946 S.W.2d 930, 932 (Ark. 1997). A payment is deemed

voluntary, and thus not recoverable, "when a person without mistake of fact or fraud,

duress, coercion, or extortion pays money on a demand which is not enforceable

against him." Ritchie v. Bluff City Lumber Co., 110 S.W. 591, 592 (Ark. 1908).

Curtis Lumber admits that it had no enforceable obligation to pay rebates to its

customers. Instead, it argues that the fraud and duress exceptions to the voluntary

payment rule apply, and therefore, payment of the rebates was not voluntary.

The fraud exception does not apply because, as we stated previously, Curtis

Lumber has not shown a viable fraud claim. Moreover, even if Curtis Lumber could

establish the requisite state of mind for fraud, it has not shown that it paid rebates to

Appellate Case: 09-2692 Page: 26 Date Filed: 08/24/2010 Entry ID: 3696547
18LP argues that we should not consider these statements at the summaryjudgment stage because they are inadmissable hearsay. See Fed. R. Civ. P. 56(e)(1).

However, the customers' statements are offered to show the effect of the out-of-court

statements on the listener (Curtis Lumber) and thus, they are not hearsay. See United

States v. Cline, 570 F.2d 731, 734 (8th Cir. 1978) (statements are non-hearsay when

used to show the listener's state of mind); United States v. Herrera, 600 F.2d 502, 504

(5th Cir. 1979) (statements are non-hearsay when used to show listener's duress).

19 See Wermers Floorcovering, Inc. v. Santanna Natural Gas Corp., 794 N.E.2d

1012, 1014 (Ill. App. Ct. 2003) ("Protest may also serve as evidence of compulsion

and an unwillingness to pay . . . ."); see also 70 C.J.S. Payment § 119 (same); Richard

A. Lord, 28 Williston on Contracts § 71:18 (4th ed.) (same). 

-27-

customers in reliance on LP's allegedly fraudulent statement. Stated differently, LP's

alleged fraud did not induce Curtis Lumber to pay rebates. At most, Curtis Lumber

has shown causation—i.e., that LP's statements caused a situation in which it felt

compelled to pay rebates to the customers. That is different, however, from the

situation where a payor is fraudulently induced to make a payment, in which case the

law treats the payment as involuntary. See 70 C.J.S. Payment § 120.

Curtis Lumber's duress argument is more compelling. The record shows that

Curtis Lumber marketed LP's products and the rebate promotion to customers

representing seventy-five percent of its business. After LP's June 2007 letter to the

rebate applicants, Curtis Lumber's owner, who was relatively new to the business,

stated that he was compelled to pay customers the rebates "[o]ut of concern for losing

their other business and as a result of having presented this program to them." Indeed,

two of Curtis Lumber's customers stated that they would have considered withdrawing

their business from Curtis Lumber if the rebates were not paid.18 The coercive

pressures on Curtis Lumber are further evidenced by the email it sent to LP through

counsel in July 2007 demanding the rebates be paid.19 Drawing all reasonable

inferences in favor of Curtis Lumber, there is at minimum a factual dispute as to

whether Curtis Lumber's decision to pay rebates was compelled by a threat of losing

Appellate Case: 09-2692 Page: 27 Date Filed: 08/24/2010 Entry ID: 3696547
-28-

substantial business. The question, then, is whether this type of pressure was enough

to render payment involuntary under the doctrine of duress. 

LP first argues that the pressure from customers is irrelevant because Curtis

Lumber can only assert the duress exception against the party who exerted pressure

over it. In other words, Curtis Lumber cannot complain about pressure from the

customers and allege duress against a third party (e.g., LP). Admittedly, this rule finds

some support in a 113-year old Arkansas case:

The doctrine established by the authorities is that a payment is not to be

regarded as compulsory, unless made to emancipate the person or

property from an actual and existing duress imposed upon it by the party

to whom the money is paid. . . . It is sufficient . . . when there is some

actual or threatened exercise of power possessed, or believed to be

possessed, by the party exacting or receiving the payment over the

person or property of another from which the latter has no other means

of immediate relief than by making the payment.

Vick v. Shinn, 4 S.W. 60, 61 (Ark. 1887) (emphasis removed and added; quotations

and internal citations omitted). However, the emphasized language from Vick was

dicta because the issue on appeal in that case was the sufficiency of evidence to show

duress. The court found that the payment was voluntary, and it did not decide whether

duress can be asserted against a person different from the payee exerting pressure. Id.

In Bishop v. Bishop, 250 S.W.3d 570 (Ark. Ct. App. 2007), a modern Arkansas

court bypassed a clear opportunity to embrace the rigid rule that LP now proposes.

In Bishop, the plaintiff sought reimbursement from his ex-wife for payments that he

made to a car dealership on his ex-wife's car, and the ex-wife claimed the payments

were voluntary. Id. at 572–73. The plaintiff alleged duress because he made

payments to protect his credit rating—i.e., that he was under pressure from third-party

creditors. Id. at 573. Bishop ultimately held that the plaintiff's payments made prior

to seeking legal relief were voluntary, but payments made afterward were involuntary

Appellate Case: 09-2692 Page: 28 Date Filed: 08/24/2010 Entry ID: 3696547
20We stress that our reasoning does not obviate the basic element of

causation—Curtis Lumber must still prove that LP' acts caused it to pay rebates to

seventeen customers. We agree with LP that an "unrelated third party" should not be

held liable for the acts of a payee who exerts pressure on a payor. See W.R.

Grimshaw Co. v. Nevil C. Withrow Co., 248 F.2d 896, 904 (8th Cir. 1957) ("The

assertion of duress must be proven by evidence that the duress resulted from

defendant's wrongful and oppressive conduct and not by plaintiff's necessities."). But

LP is not an "unrelated third party." Viewing the record as we must, LP created a

situation in which it was likely that customers would demand satisfaction from Curtis

Lumber. In these circumstances, a reasonable jury could find LP's acts caused Curtis

Lumber's dilemma and thereby caused Curtis Lumber to pay the rebates. 

-29-

because they were made under protest. Id. Although the court quoted Vick's limited

formulation of duress, it did not adopt the rule that duress can only be asserted against

the person exerting pressure. Id.

Furthermore, we are not aware of any case in which a court has held that duress

cannot be asserted against a non-payee. Duress is often asserted against payees, but

it does not necessarilly follow that duress is limited to that scenario. The duress

exception, in essence, recognizes that payments made under compulsion are not

voluntary. We believe it makes little difference who exerts pressure and who receives

the payment, so long as the duress is causally tied to the defendant and the pressure

is sufficient to reasonably deem a payment involuntary.20 Any limitation on this

doctrine based on the identity of the party exerting pressure would be artificial. In

sum, we believe the duress exception is flexible. See BMG Direct Mktg. Inc. v.

Peake, 178 S.W.3d 763, 776 (Tex. 2005) ("[T]he voluntary-payment rule is an

equitable one and may require balancing competing interests depending upon the

parties' circumstances."). 

Next, LP argues that the evidence is insufficient to show duress because Curtis

Lumber "had the absolute right" to deny the customers' requests for payment. Surely,

duress is limited to situations in which the payor had "no other means of immediate

relief than by making the payment." Vick, 4 S.W. at 61. The problem with LP's

Appellate Case: 09-2692 Page: 29 Date Filed: 08/24/2010 Entry ID: 3696547
-30-

argument, though, is that Curtis Lumber's alternative options, in reality, would not

have afforded relief. See 25 Am. Jur. 2d Duress & Undue Influence § 24 ("[T]he

adequacy of the remedy is to be tested by a practical standard, which takes into

consideration the exigencies of the situation of the alleged victim."). Curtis Lumber

presented this promotion to its customers, and the customers who ordered SmartSide

products represented a substantial portion of Curtis Lumber's overall business. To put

it coloquially, it would have been penny wise but pound foolish for Curtis Lumber to

demand payment from the customers and to refuse to pay rebates. That is, Curtis

Lumber would have fared well in the short-term with the SmartSide promotion but

suffered severe repercussions in its overall revenue. As such, a reasonable fact-finder

could find that Curtis Lumber had no other means of immediate relief. 

Finally, LP contends that Curtis Lumber is actually alleging "business duress"

(also referred to as "economic duress" or "business compulsion"), which Arkansas

courts have not recognized. Curtis Lumber responds that the modern trend in a wide

variety of jurisdictions is to relax the voluntary payment rule to recognize that duress

can exist from business pressures just as much as threats of physical harm. See, e.g.,

Machinery Hauling, Inc. v. Steel of W. Va., 384 S.E.2d 139, 142 (W. Va. 1989)

(collecting authorities and summarizing: "Through the years, there has been a steady

expansion of duress principle such that direct dire harm is no longer essential, the

focus instead being on whether the threat overbears the exercise of free will.").

Neither party cites Cox v. McLaughlin, 867 S.W.2d 460 (Ark. 1993), which we

find informative as to how the Arkansas Supreme Court would apply the duress

exception in the context of the voluntary payment rule. In that case, a cargo

transportation broker arranged for a trucking company to deliver a shipment of pet

food from a factory in Nebraska to a warehouse in Texas. Id. at 461. The trucking

company leased a truck and agreed to pay a driver to haul the shipment. Id. While

the shipment was en route, however, the trucking company told the driver that it could

not pay for the delivery. Id. The driver refused to continue on the trip unless paid.

Id. The broker, who did not want to lose its valuable brokerage account with the pet

Appellate Case: 09-2692 Page: 30 Date Filed: 08/24/2010 Entry ID: 3696547
21Cox is also persuasive authority against LP's argument that duress exists only

where pressure is exerted by the payee. In Cox, the economic pressure originated

from the third-party pet food company, but the payee was the trucker. By remanding

the case for trial, the Arkansas Supreme Court implicitly held that duress can exist

where a third party exerts pressure. 

-31-

food company, agreed to pay the driver roughly the amount owed by the trucking

company. Id. at 462. The broker later refused to pay the full amount, and the driver

sued for breach of contract. Id. The broker sought to void the agreement with the

driver on the basis of duress—even though there was no express threat from the pet

food company, let alone a threat of physical harm. The Arkansas Supreme Court

expressly recognized "[e]conomic duress . . . as a valid excuse for voiding a contract."

Id. at 463. Ultimately, the court held that questions of fact precluded summary

judgment on the duress issue, e.g., whether the broker would have suffered "serious

financial hardship," whether the broker was "the victim of a wrongful act," and

whether "other remedies would be inadequate." Id. at 464. Although Cox dealt with

a party seeking to void a contract, we believe its analysis is instructive for duress in

general.21 In light of Cox and the persuasive circumstances of this case, we believe

the Arkansas Supreme Court would hold that duress may have existed in this case.

Thus, summary judgment was inappropriate to the extent it limited damages based on

the voluntary payment rule. 

(3) Punitive Damages

By statute in Arkansas, punitive damages are restricted to situations where:

(1) The defendant knew or ought to have known, in light of the

surrounding circumstances, that his or her conduct would naturally and

probably result in injury or damage and that he or she continued the

conduct with malice or in reckless disregard of the consequences, from

which malice may be inferred; or (2) The defendant intentionally

pursued a course of conduct for the purpose of causing injury or damage.

Appellate Case: 09-2692 Page: 31 Date Filed: 08/24/2010 Entry ID: 3696547
-32-

Ark. Code § 16-55-206. Moreover, plaintiffs are required to satisfy the above

standard by clear and convincing evidence. Id. § 16-55-207. 

Curtis Lumber argues that punitive damages are particularly appropriate in

cases involving fraud. That is true, see Ray Dodge, Inc. v. Moore, 479 S.W.2d 518,

524 (Ark. 1972), but Curtis Lumber's claims based on intentional deception fail as a

matter of law. Upon careful review of the record, we believe no reasonable jury could

find that LP acted with malice or an intent to harm Curtis Lumber. As such, Curtis

Lumber is not entitled to pursue punitive damages. 

III. Conclusion

For the foregoing reasons, we affirm the district court's judgment with regard

to Curtis Lumber's claims for fraud, constructive fraud, and knowing/intentional

deceptive trade practices. We reverse the judgment with regard to the claims under

Arkansas Code §§ 4-88-107(a)(10) and 4-88-108(2) and promissory estoppel. As to

damages, we affirm the district court's limitation on punitive damages but reverse the

limitation based on the voluntary payment rule. We remand for further proceedings

consistent with this opinion. 

SMITH, Circuit Judge, concurring in part and dissenting in part.

I respectfully dissent because I conclude that, applying Arkansas substantive

law with respect to all of Curtis Lumber's claims, Curtis Lumber is not the real party

in interest to prosecute the present action. 

[Federal Rule of Civil Procedure] Rule 17(a) provides: "[e]very action

shall be prosecuted in the name of the real party in interest." Fed. R. Civ.

P. 17(a). The real party in interest is a party who, under governing

substantive law, possesses the rights to be enforced. See Iowa Public

Serv. Co. v. Medicine Bow Coal Co., 556 F.2d 400, 404 (8th Cir. 1977).

Appellate Case: 09-2692 Page: 32 Date Filed: 08/24/2010 Entry ID: 3696547
-33-

"In a diversity action, state law determines the issue of who is a real

party in interest." Jaramillo v. Burkhart, 999 F.2d 1241, 1246 (8th Cir.

1993).

Consul Gen. of Republic of Indonesia v. Bill's Rentals, Inc., 330 F.3d 1041, 1045 (8th

Cir. 2003) (emphasis added). "Such a requirement is in place 'to protect the defendant

against a subsequent action by the party actually entitled to recover, and to insure

generally that the judgment will have its proper effect as res judicata.'" United

HealthCare, 88 F.3d at 569 (quoting Fed. R. Civ. P. 17(a) Advisory Committee Note).

Here, Arkansas law governs who "possesses the rights to be enforced." Consul

Gen., 330 F.3d at 1045. Curtis Lumber has brought claims under Arkansas law for

violation of the ADTPA, negligent misrepresentation/constructive fraud, equitable

estoppel, and intentional misrepresentation/fraud. Therefore, we must look to

Arkansas's "substantive law" to determine whether Curtis Lumber is the proper party

to bring these claims. 

With regard to the ADTPA, Arkansas law provides that "[a]ny person who

suffers actual damage or injury as a result of an offense or violation as defined in this

chapter has a cause of action to recover actual damages, if appropriate, and reasonable

attorney's fees." Ark. Code Ann. § 4-88-113(f) (emphasis added). Similarly, Arkansas

law provides that in order for a plaintiff to recover for fraud, "a plaintiff must

show,"among other things, "damage suffered as a result of the reliance [upon the false

representation of material fact]." McAdams v. Ellington, 970 S.W.2d 203, 205 (Ark.

1998) (emphasis added). The same is true for constructive fraud, see Knight v. Day,

36 S.W.3d 300, 302 (Ark. 2001), and promissory estoppel, see Shaw v. Smith, No. CA

87-393, 1988 WL 42674, at *2 (Ark. Ct. App. May 4, 1988) (unpublished). 

As the majority notes, Curtis Lumber alleges that it has sustained actual

damages for lost profits and rebates that it paid to its customers. See supra Part

II.D.1–2. The question of whether Curtis Lumber has sustained actual damages under

Appellate Case: 09-2692 Page: 33 Date Filed: 08/24/2010 Entry ID: 3696547
-34-

Arkansas substantive law and, in turn, is the proper party in interest to bring the

present suit, turns on whether Arkansas's voluntary payment rule applies to its claims

for damages. 

Originally, the district court found that Curtis Lumber could not recover the

rebates or refunds that it paid to its customers because those payments were

"voluntary," and Curtis Lumber was under no legal obligation to make those

payments. The court also found that the "economic duress" exception to the voluntary

payment rule did not apply because that rule would only apply if LP had exerted

economic duress over Curtis Lumber to force Curtis Lumber to pay the rebates to

LP—not the customers. But the court found that Curtis Lumber had provided enough

evidence of lost profits and increased costs to withstand LP's summary judgment

motion on the issue of actual damages.

Thereafter, LP filed a motion for reconsideration, arguing that any Curtis

Lumber damage must be "separate and independent from a claim of a rebate applicant,

which would only be the $2,400 if they ever sued LP." LP asserted that

the lost profit that they [Curtis Lumber] would seek in this case could

only be a part of a $2,400 rebate claim, because that is the amount of

money that Mr. Curtis built into his sales price when he sold the

SmartSide products. And, thus, if he were to sue us for a lost profit—and

he's already told us on the average the lost profit per customer who

bought $2,400 of material was $600. If he sues us for that and the Court

lets him do that and then a customer later sues LP for its rebate of

$2,400, we ultimately pay a $3,000 amount on a $2,400 rebate.

So [L.P.'s] position is that the lost profit could only be a part of the

rebate claim of the claimant and he has no right to recover that, because

it's not separate and distinct.

LP then asserted that no exception to the voluntary payment rule applied.

Appellate Case: 09-2692 Page: 34 Date Filed: 08/24/2010 Entry ID: 3696547
-35-

Curtis Lumber also confirmed for the district court that it had initially charged

the accounts of customers who had not made a payment on their account; when the

customers then informed Curtis Lumber that they did not want the product, Curtis

Lumber then "wrote off the account or credited the account for the amount that had

been originally billed under an invoice." Curtis Lumber did not consider this to be a

"voluntary payment" because it had not paid the customers anything; furthermore, the

customers did not receive the product, nor had they ever paid Curtis Lumber. 

But the district court found that this was a "distinction without a difference,"

explaining:

If they paid you money and you refund them money to erase a debt, then

if they have been charged and then you forgive that charge by writing off

the account, the bottom line is the same. All of the money has been

refunded to the customer either in the form of cash if they advanced cash

or credit if they have just been charged on an account. It seems to me

that . . . under these circumstances, if it's undisputed that all of the

customers were either refunded cash for what they were advanced or

given credit to cancel their account, that they all fall under this voluntary

payments rule and would not be included as damages. 

In its order granting LP's motion for reconsideration, the district court found that "the

voluntary payment rule precludes the Plaintiff from recovering lost profits based upon

the facts of this case." 

On appeal, Curtis Lumber argues that the district court erred in holding that the

voluntary payment rule barred its recovery because its "cancelation [sic] of orders and

payment of refunds and rebates to its customers were not 'voluntary' in either the

common-sense or legal meaning of the word" because its "actions and damages

. . . were the result of L[.]P[.]'s fraud and duress placed on Curtis Lumber." (Emphasis

added.)

Appellate Case: 09-2692 Page: 35 Date Filed: 08/24/2010 Entry ID: 3696547
22As an initial matter, Curtis Lumber's assertion that it paid its customers

because of L.P.'s "fraud and duress" is an implicit concession that the voluntary

payment rule is applicable because fraud and duress are two exceptions to the

voluntary payment rule. See Larrimer, 82 S.W. at 169.

-36-

"It has long been settled that money voluntarily paid in satisfaction of an unjust

or illegal demand, with full knowledge of the facts, and without fraud, duress, or

extortion, cannot afterwards be recovered by the payor." Larrimer v. Murphy, 82 S.W.

168, 169 (Ark. 1904).22 "In order for the voluntary-payment rule to apply, [the payor]

must not have had [a legal] duty [to pay]." TB of Blytheville, 946 S.W. 2d at 933. 

Under Arkansas law, "the making of the advancements and the placing of the

credits to [an] account" is a "payment." Ritchie, 110 S.W. at 592. 

Where there is an open account between two parties, in the absence of

an agreement to the contrary, all items of the account become constituent

parts thereof, and are applied in payment of the oldest item in the

account on the other side; and he only is entitled to recover in whose

favor the final balance upon the whole account is found. The rule is,

where there are mutual accounts, the credits on one side are applied, to

the extinguishment of debits on the other, as payments intentionally

made thereon.

Id. 

As to Curtis Lumber's claim for lost profits, the majority concludes that

"[a]lthough Curtis Lumber's payments to customers arguably were 'voluntary,' Curtis

Lumber's alleged lost profits were not." See supra Part II.D.1. But Curtis Lumber's

claim for lost profits stems from it either (1) refunding in total a customer who already

paid for the SmartSide products or (2) crediting back the account of a customer who

had ordered, but not yet paid for, SmartSide products. Although it may have been

areasonable business decision, Curtis Lumber has failed to produce any evidence that

it was under a legal obligation to make this refund or credit to its customers. See TB

Appellate Case: 09-2692 Page: 36 Date Filed: 08/24/2010 Entry ID: 3696547
-37-

of Blytheville, 946 S.W. 2d at 933. Furthermore, both the refunding of customers and

the crediting back of customers' accounts constitute "payments" under Arkansas law,

as the district court correctly concluded. See Ritchie, 110 S.W. at 592. As a result, the

voluntary payment rule is applicable unless Curtis Lumber can show that an exception

to the rule applies. See Larrimer, 82 S.W. at 169. 

As to the rebates that Curtis Lumber paid to some of its customers, the majority

notes Curtis Lumber's concession that "it had no enforceable obligation to pay rebates

to its customers. Instead, it argues that the fraud and duress exceptions to the

voluntary payment rule apply, and therefore, payment of the rebates was not

voluntary." See supra Part II.D.2. 

I concur in the majority's conclusion that the fraud exception does not apply,

but I extend its conclusion to both Curtis Lumber's claims for rebates and lost profits.

See supra Part II.D.2. I respectfully dissent from the majority's conclusion that "the

Arkansas Supreme Court would hold that duress may have existed in this case." Id.

Instead, I conclude that the duress exception does not apply to either Curtis Lumber's

claim for rebates or lost profits. 

First, I disagree with the majority's dismissal of the Arkansas Supreme Court's

statement in Vick

that a payment is not to be regarded as compulsory, unless made to

emancipate the person or property from an actual and existing duress

imposed upon it by the party to whom the money is paid . . . . It is

sufficient . . . when there is some actual or threatened exercise of power

possessed, or believed to be possessed, by the party exacting or receiving

the payment over the person or property of another from which the latter

has no other means of immediate relief than by making the payment. 

Vick, 4 S.W. at 61 (emphasis removed and added; quotations and internal citations

omitted). "Dicta can, of course, have persuasive value." Pretka v. Kolter City Plaza

Appellate Case: 09-2692 Page: 37 Date Filed: 08/24/2010 Entry ID: 3696547
-38-

II, Inc., 608 F.3d 744, 762 (11th Cir. 2010). Furthermore, "[i]n the absence of a

definitive ruling by the highest state court, a federal court may consider . . . dicta

. . . to show how the highest court in the state would decide the issue at hand . . . ."

Michelin Tires (Canada) Ltd. v. First Nat'l Bank, 666 F.2d 673, 682 (1st Cir. 1981);

see also Kirk v. Hanes Corp. of N. Carolina, 16 F.3d 705, 709 (6th Cir. 1994) ("But,

because even dicta may be of some value in ascertaining the relevant state law, we

consider it on that basis."). 

In the absence of a definitive ruling by the Arkansas Supreme Court regarding

whether duress can be asserted against a non-payee, the language in Vick should be

our guide as to how the highest court in the state would resolve the present issue. Vick

explicitly states that the duress imposed upon the plaintiff must be "by the party to

whom the money is paid." 4 S.W. at 61. Here, Curtis Lumber paid the money to its

customers—not to L.P. 

Second, although the majority relies on Bishop, in Bishop, the Arkansas Court

of Appeals stated that the party asserting duress must have "'no other means of

immediate relief than by making the payment.'" 250 S.W.3d at 573 (quoting Vick, 4

S.W. at 61). As previously discussed, Curtis Lumber has presented no evidence that

it was under any legal obligation to LP or to its customers to pay the refunds and

rebates. Thus, Curtis Lumber was "best able to avoid the loss by not paying" the

customers. See id.

Finally, the Cox case that the majority found "informative as to how the

Arkansas Supreme Court would apply the duress exception in the context of the

voluntary payment rule," see supra Part II.D.2., is distinguishable. In Cox, the

broker—the payor—sought to recover directly from the payee—the driver—not from

a third party—the trucking company. 867 S.W. at 462. In contrast, Curtis

Lumber—the payor—is seeking to recover from a third party—LP—not from the

payees—the customers. 

Appellate Case: 09-2692 Page: 38 Date Filed: 08/24/2010 Entry ID: 3696547
-39-

Accordingly, would apply the Arkansas voluntary payment rule and find that

Curtis Lumber has not sustained actual damages under Arkansas substantive law.

Consequently, I would hold that Curtis Lumber is not the proper party in interest to

bring the present suit. 

Therefore, I would affirm the judgment of the district court. 

______________________________

Appellate Case: 09-2692 Page: 39 Date Filed: 08/24/2010 Entry ID: 3696547