Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-02-02833/USCOURTS-ca8-02-02833-0/pdf.json

Parties Involved:
American Chemistry Council
Amicus on Behalf of Appellant(s)
Marvin Lumber and Cedar Company
Appellee
Marvin Windows of Tennessee, Inc.
Appellee
PPG Industries
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 02-2833

___________

Marvin Lumber and Cedar Company; *

Marvin Windows of Tennessee, Inc., *

*

Plaintiffs - Appellees, *

*

v. *

* Appeals from the United States

PPG Industries, Inc., * District Court for the

* District of Minnesota.

Defendant - Appellant. *

*

----------------------------------- *

*

American Chemistry Council, *

*

Amicus on Behalf of Appellant. *

___________

No. 02-2869

___________

Marvin Lumber and Cedar Company; *

Marvin Windows of Tennessee, Inc., *

*

Plaintiffs - Appellants, *

*

v. *

*

PPG Industries, Inc., *

*

Defendant - Appellee. *

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___________

Submitted: June 9, 2003

 Filed: March 23, 2005 

___________

Before BYE, BOWMAN, and BEAM, Circuit Judges.

___________

BOWMAN, Circuit Judge.

PPG Industries, Inc., appeals from the judgment entered in favor of Marvin

Lumber and Cedar Company and Marvin Windows of Tennessee, Inc. (collectively,

Marvin), on Marvin's claim for breach of express warranty of future performance.

Marvin cross appeals. We affirm in part and reverse in part.

I.

This case is before us for the second time. See Marvin Lumber & Cedar Co.

v. PPG Indus., Inc., 223 F.3d 873 (8th Cir. 2000). As we explained in our first

opinion, Marvin is a family-owned company that manufactures, among other things,

millwork products—wooden doors and windows. PPG sells wood preservatives and

coatings. The genesis of this lawsuit was Marvin's use, from 1985 to 1988, of PPG's

wood treatment PILT (preservative in-line treatment) on Marvin's doors and

windows. PILT replaced the industry standard in wood preservatives, products

containing pentachlorophenol (Penta). Marvin had used Penta products successfully

for years until environmental concerns were raised about the active ingredient.

In 1994, Marvin filed this diversity suit seeking damages on a number of legal

theories, claiming that PILT had failed to prevent premature rot and decay in Marvin's

wood products. The district court dismissed or granted summary judgment to PPG

on all counts. On appeal, we affirmed in large part. But we remanded for trial

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1

In the part of the trial transcript where Marvin's motion was argued and

throughout the briefs, the parties repeatedly refer to the decision as a "directed

verdict." That was a term of art in federal civil practice that has been abandoned.

Fed. R. Civ. P. 50 advisory committee notes, 1991 Amendment, subd. (a).

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Marvin's claim for breach of an express warranty of future performance, having

concluded that there remained genuine issues of material fact on the claim. The

warranty arose, Marvin said, from representations by PPG to Marvin employees that

wood products treated with PILT would last as long or longer than Penta-treated

products. See id. at 879–80.

On remand, at the request of PPG, the four-month jury trial was bifurcated. In

part one, the jury found that PPG had given Marvin a warranty of future performance

and that such warranty formed part of the basis of the bargain between the parties and

was incorporated into their agreement. In the second phase, the jury found the

warranty was breached and awarded damages: $53.6 million for out-of-pocket costs,

$25.2 million for past lost profits; $27 million for future lost profits; and $30 million

for loss of goodwill. The District Court entered judgment for Marvin, awarding

$156,118,625.92 for damages (including third-party litigation costs) with interest (not

including post-judgment interest). PPG appeals and Marvin cross appeals. We

address the issues in the order presented.

II.

For its first issue on appeal, PPG contends that the District Court erred when

it granted judgment as a matter of law (JAML) in favor of Marvin on the question of

notice.1

 Under Minnesota law, after acceptance of goods, a "buyer must within a

reasonable time after the buyer discovers or should have discovered any breach notify

the seller of breach or be barred from any remedy." Minn. Stat. § 336.2-607(3)(a)

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2

This provision is found in the Uniform Commercial Code or U.C.C., which

Minnesota has adopted. In this opinion, as a kind of shorthand, we may refer in text

to the U.C.C. section numbers instead of the Minnesota Statutes section numbers, for

example, § 2-607 instead of § 336.2-607.

3

Indeed, on remand that question was submitted to the jury in phase two of the

trial, and the jury found that PPG had not proved by a preponderance of the evidence

that Marvin knew or should have known of the breach before April 22, 1990, four

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(2002).2

 We review de novo the District Court's decision to grant JAML to Marvin,

applying the same standard as the District Court, that is, Rule 50(a) of the Federal

Rules of Civil Procedure. Arabian Agric. Servs. Co. v. Chief Indus., Inc., 309 F.3d

479, 482 (8th Cir. 2002). The question for us is: PPG having been "fully heard" on

the issue of notice, was there a "legally sufficient evidentiary basis for a reasonable

jury to find for" PPG so that granting JAML in Marvin's favor was error? Id.

(quoting Fed. R. Civ. P. 50(a)(1)).

PPG claims that Marvin had discovered or should have discovered the breach

no later than 1990; that the notice finally given to PPG in April 1993 was inadequate;

and that adequate notice was not given until September 1997. According to PPG,

whether the notice was given in 1993 or 1997, it was not, as a matter of law, given

"within a reasonable time," and so Marvin is not entitled to any remedy for breach.

PPG asks that we order judgment for PPG on the question of notice or at the very

least remand for a new trial so the issue can be decided by a jury.

Initially, PPG asserts in its brief that "this Court held in Marvin I that a

reasonable jury could find that Marvin discovered or should have discovered its claim

for breach" in early 1990, suggesting that our comment foreclosed JAML on the

question of notice. Brief of Appellant at 23. We did note that fact questions existed

on the issue of when Marvin knew or should have known of the breach for purposes

of a statute of limitations issue—was suit filed within four years of the time when the

alleged breach was known or should have been known?3

 But the District Court's

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years before suit was filed.

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conclusion as a matter of law that Marvin gave reasonable notice of breach to PPG

is not in any way inconsistent with our determination in Marvin I, on the record

before the Court at that time, that a jury could find Marvin knew or should have

known of the problems with PILT before April 1990. The language from Marvin I

noting that fact questions made summary judgment inappropriate on the statute of

limitations question on the record before us in that case does not preclude JAML on

the notice issue on the record before us now. The District Court's decision on notice

followed a full-blown trial. Marvin, no doubt having read our opinion in Marvin I

as carefully as did PPG, presumably worked to tighten up its evidence in hopes of

winning a jury verdict—or better yet, JAML—on the question of notice.

It is true that the sufficiency of notice under § 2-607 ordinarily is a question of

fact to be determined by a jury. Church of the Nativity of Our Lord v. WatPro, Inc.,

491 N.W.2d 1, 5 (Minn. 1992), overruled on other grounds, Ly v. Nystrom, 615

N.W.2d 302 (Minn. 2000). But if, as the District Court decided, "no reasonable jury

could have determined" that Marvin failed to give the requisite notice, it was not error

for that court to decide the issue and enter judgment as a matter of law in favor of

Marvin on the issue. Order and Memorandum of June 7, 2002, at 3. We now look

at the evidence before the court on the question of notice.

Under § 2-607, Marvin's duty to give notice to PPG arose when Marvin

discovered or should have discovered the breach—by early 1990, according to PPG.

Marvin's position is that it was unaware of the breach until just before it gave PPG

notice in April 1993. The undisputed evidence at trial showed that Marvin indeed had

some concerns about wood deterioration before 1993 but that company employees did

not know that the rot problems correlated with the switch to PILT until 1993.

Moreover, given the representations about PILT's superior ability to prevent rot, it

was reasonable that Marvin did not come quickly to the realization that the wood

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preservative might be the cause of the problem until it had explored and ruled out

other potential causes—which it had done by 1993. Marvin's duty under the "should

have known" standard, once it became aware of excessive rot problems, was to

investigate further and determine whether PILT was the problem. This it did. 

But PPG cites evidence in the record from which, it says, a reasonable jury

would have found (or at the very least, could have found) that Marvin knew or should

have known about the breach of warranty by early 1990. First, PPG identifies a

Marvin document dated December 12, 1989, that lists thirty-five "anticipated

concern[s]," among which is number twenty-nine, "wood rotting complaints," with

"wood treatment systems" under the corresponding "comment." Defendant's Exhibit

624. But the document does not indicate that complaints were escalating or that they

were primarily in the newer, PILT-treated products. And as we have learned from our

review of the trial transcript, wood treatment "systems" would refer not only to the

preservative pretreatment, but also to coatings that go on top of the treated wood (e.g.,

paint) and the method by which the pretreatment and the coatings are applied. In

other words, a reasonable jury could not have found that the Marvin employees who

saw this document knew or should have known—because of the content of this

document—that PILT had failed to live up to PPG's promises regarding its future

performance.

PPG also brings to this Court's attention Marvin's "Wood Deterioration

Project" of 1990. Defendant's Exhibit 1576. Significantly, the bulk of the report lists

the specific millwork products about which complaints had been received and the

location of the deterioration within those products. Exterior finish is noted, but type

of pretreatment is not. Instead, PPG suggests that Marvin should have known PILT

was the problem because the report noted that of the 554 windows and doors with

reported deterioration problems, 139 of the units reported upon were manufactured

from 1985 to 1988, during which time Marvin was using PILT. But the Wood

Deterioration Project is simply a report of raw numbers; no statistical analysis

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accompanied the project. For example, the numbers do not reflect the actual

percentage of production for a given year that was affected with deterioration

problems. In truth, the most dramatic correlation, if there is one, is between

deterioration and geography: 373 of the reports came from the northeast, more than

the other three geographical areas combined. No reasonable jury could find from the

results of this project that Marvin knew or should have assumed in 1990 that the use

of PILT was causing an increase in wood-rot complaints. The report does suggest

that additional inquiry might be in order, and as we have said, Marvin undertook a

further investigation.

In addition, PPG points to an internal Marvin memorandum from a territory

manager to the customer service manager dated September 14, 1990, that notes

rotting problems in its products installed in buildings in southern states. Defendant's

Exhibit 170. But the memo says that the problems are "due to sash separation, which

then leads to a rotting problem." Id. The proposed corrective measures listed in the

memo all relate to the joints and attachments of the sashes; there is no indication that

a failure of wood pretreatment, whether Penta or PILT (we cannot tell from the memo

when the sashes at issue were manufactured), was or should have been suspected as

the root cause of the problem. Indeed, the memo references a wholly unrelated

cause—sash separation.

Finally, PPG notes a report sent to a PPG employee from a Marvin employee

on July 14, 1993, showing that from 1990 through 1992, deterioration complaints

about PILT-treated products had outstripped complaints about the older Penta-treated

products. Plaintiff's Exhibit 1586. The undisputed testimony, however, was that

numerous factors could have contributed to the rot problems. And it was not until a

committee of Marvin employees studied the problem in 1992 and 1993 that a

determination was made that PILT was the common denominator in the products

about which Marvin was receiving complaints.

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"In deciding whether the notice requirement has been complied with, the jury

must evaluate 'the factual setting of each case and the circumstances of the parties

involved.'" WatPro, Inc., 491 N.W.2d at 5 (quoting Wagmeister v. A.H. Robins Co.,

382 N.E.2d 23, 25 (Ill. App. Ct. 1978)). We must agree with the District Court that,

on these facts, Marvin was entitled to JAML on the issue of § 2-607 notice. Even

taken together, the documents upon which PPG relies in its argument are not

sufficient to show that Marvin knew or should have known that the wood-rot

problems it was experiencing beginning in 1989 through 1992 were the result of

pretreatment with PILT, and no reasonable jury could so find. While PPG receives

the benefit of all reasonable inferences that may be drawn from the evidence, an

inference is not reasonable unless it may be drawn "without resort to speculation."

Arabian Agric. Servs. Co., 309 F.3d at 482 (citations to quoted cases omitted). And

it would be pure speculation for a jury to conclude that the evidence of rot that

Marvin had in its possession in 1990 was such that Marvin knew or should have

known that PILT was the singular or even primary culprit. There was no conceivable

reason for Marvin not to advise PPG as soon as it was confirmed that PILT was the

problem. It was in Marvin's best interests to identify the cause, remedy the problem,

and seek redress from the responsible party as soon as possible. Shortly after Marvin

realized that the pattern of rot complaints it was receiving had only PILT in common,

in spite of the promises of superior performance it had received from PPG regarding

the wood treatment, it notified PPG—well within a "reasonable" time.

PPG contends that even if we agree with the District Court that Marvin was

entitled to JAML because it did not know, nor should it have known, there was a

breach of warranty until 1993, the notice given at that time was inadequate because

it did not mention specifically the warranty upon which Marvin ultimately prevailed.

Marvin did not rely upon an express warranty of future performance for recovery of

damages from PPG until it amended its complaint to add the claim in 1997. The 1993

notice therefore failed as a matter of law, according to PPG. But "[t]he notice

provision is not intended to 'operate as a technical procedural barrier to deny

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claimants the opportunity to litigate the case on the merits.'" WatPro, 491 N.W.2d at

5 (quoting Prutch v. Ford Motor Co., 618 P.2d 657, 661 (Colo. 1980) (en banc)). We

think PPG demands more of the notice than Minnesota law requires. See State v.

Patten, 416 N.W.2d 168, 172 (Minn. Ct. App. 1987) (citing Moosbrugger v.

McGraw-Edison Co., 170 N.W.2d 72, 80 (Minn. 1969)). 

On the subject of § 336.2-607 notice and its adequacy, the Minnesota Supreme

Court has said that it "need merely be sufficient to let the seller know that the

transaction is still troublesome and must be watched." WatPro, 491 N.W.2d at 5

(quoting Minn. Stat. Ann. § 336.2-607 U.C.C. cmt. 4 (West 1966)). Marvin's 1993

notice to PPG did just that, advising PPG that the common factor in the spate of rot

complaints it was receiving was wood pretreatment with PILT. In fact, a

December 28, 1993, internal PPG memorandum demonstrates that PPG knew full

well that Marvin was claiming warranty, breach, and damages. That document

summarized a December 14, 1993, meeting "Regarding Rot Claims" and described

Marvin's position as PPG understood it: "In 1984 PILT was sold to Marvin as a

superior product and better than anything previously used [the warranty]. Now they

have rot problems [the breach] and would like PPG to ante up [the damages]."

Plaintiff's Exhibit 1664. As we have said, Marvin had every reason to get notice to

PPG as soon as Marvin knew that PILT was the problem. PPG thus cannot claim

"commercial bad faith" on the part of Marvin, so Marvin should not, on the basis of

the notice given here, be denied its remedy for breach. WatPro, 491 N.W.2d at 5

(quoting Minn. Stat. Ann. § 336.2-607 U.C.C. cmt. 4 (West 1966)).

We affirm the District Court's decision to grant JAML to Marvin on the issue

of notice.

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III.

PPG next argues that the District Court erred when it declined to enforce a term

that appeared in the order acknowledgments for PILT that PPG sent to Marvin. That

term purports to limit damages to the price Marvin paid PPG for PILT, $1.6 million.

PPG sent Marvin sixty-six acknowledgments of Marvin purchase orders for

PILT. On the face of the form acknowledgment, PPG avers that it accepts the order

with the understanding that the only terms and conditions to which it consents are set

forth in the acknowledgment. Although there is a line for an "authorized signature"

just below this statement, none of the acknowledgments is signed anywhere by

anyone. On the back of the acknowledgment, in fine print, in the last item under

"TERMS AND CONDITIONS," is this language: "In no event shall Seller's liability

for damages in respect to products sold hereunder, or otherwise exceed the purchase

price attributable to the specific product as to which a claim is made." E.g.,

Defendant's Exhibit 7. On its face, this disavowal would seem to limit Marvin's

damages as PPG claims.

Under Minnesota law and the U.C.C., a written order acknowledgment from

one merchant to another that contains terms in addition to those originally agreed

upon by the parties will be considered part of the agreement unless:

(a) The offer expressly limits acceptance to the terms of the offer;

(b) [The new terms] materially alter [the agreement]; or

(c) Notification of objection to them has already been given or is given

within a reasonable time after notice of them is received.

Minn. Stat. § 336.2-207(2) (2002). There is no contention here that Marvin's

purchase order (its offer) expressly stated that acceptance was limited "to the terms

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4

Even if an additional term appearing only in an acknowledgment is

incorporated into a contract under § 2-207, if it is a limitation "on the measure of

damages recoverable," as is the term at issue here, it may not be enforceable. Minn.

Stat. § 336.2-719. An "exclusive or limited remedy" will not stand if it "fail[s] of its

essential purpose." Id. § 336.2-719(2). Likewise, a limitation on consequential

damages will have no effect if it is "unconscionable." Id. § 336.2-719(3). PPG

contends that "the district court apparently applied the 'failed of its essential purpose'

standard to hold under section 2-719 that the damages limitation was unenforceable."

Brief of Appellant at 37. PPG is mistaken. The District Court clearly said that the

"damage provision would constitute a material alteration of the contract," applying

§ 2-207. Order and Memorandum of June 7, 2002, at 5. See Christian v. Sony Corp.

of America, 152 F. Supp. 2d 1184, 1189 (D. Minn. 2001), where the same District

Court judge demonstrated his understanding of the distinction by actually applying

the "failed of its essential purpose" test. Because we hold that the damages limitation

never became a part of the contract under § 2-207, we do not consider whether the

damages limitation clause at issue here either fails of its essential purpose or is

unconscionable under § 2-719.

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of the offer" (subsection (a)) nor that Marvin ever objected to the limitation of

damages in the course of its dealings with PPG (subsection (c)). But as for subsection

(b), Marvin contends that the damages limitation was a material alteration to the

contract for purchase and sale.4

 PPG disagrees, relying on U.C.C. commentary that

says "a clause . . . limiting remedy in a reasonable manner" (citing U.C.C. § 2-719)

involves "no element of unreasonable surprise" and will become a part of the contract

unless an objection is raised. Minn. Stat. Ann. § 336.2-207 U.C.C. cmt. 5 (West

1966). The "unreasonable surprise" is a reference to a previous comment wherein the

drafters gave examples of clauses that "would normally 'materially alter' the contract

and so result in surprise or hardship if incorporated without express awareness." Id.

cmt. 4. Quoting this Circuit and U.C.C. § 2-207 Comment 4, the Minnesota Court of

Appeals has said, "An agreement is materially altered if an addition would 'result in

surprise or hardship if incorporated without express awareness by the other party.'"

TRWL Fin. Establishment v. Select Int'l, Inc., 527 N.W.2d 573, 579 (Minn. Ct. App.

1995) (quoting N & D Fashions, Inc. v. DHJ Indus., Inc., 548 F.2d 722, 726 (8th Cir.

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5

In N & D Fashions, it was unclear whether the laws of Minnesota, Missouri,

or New York applied. The Court determined that it was unnecessary to resolve the

question, as each state had "enacted UCC § 2-207 without modification." N & D

Fashions, 548 F.2d at 724 n.2.

6

Although the Minnesota courts and this Court are not among them, there are

courts that have read U.C.C. § 2-207 Comments 4 and 5 together to exclude hardship

as a factor to be considered in the analysis: that is, material alteration is not defined

by hardship (it does not appear in Comment 5); hardship is a consequence of a

material alteration (it does appear in Comment 4). The Seventh Circuit, for example,

has said that "[h]ardship is a consequence, not a criterion. (Surprise can be either.)"

Union Carbide Corp. v. Oscar Mayer Foods Corp., 947 F.2d 1333, 1336 (7th Cir.

1991). At first blush, that seems a fair reading of the comments, given the way they

are worded. On the other hand, why would the drafters even mention "hardship" if

it were not a factor to be considered in determining materiality? In any event, the

comments do not have the force of law, and courts applying Minnesota law have

declared that a finding of either surprise or hardship will result in a material

alteration.

PPG quotes the Union Carbide language in its brief—but in a discussion of

unconscionability, again blurring the line between § 2-207 material alteration and

§ 2-719 unconscionability. Brief of Appellant at 38. The Seventh Circuit's comments

clearly apply to an analysis of material alteration under § 2-207—indeed, that court

was dealing with an indemnity clause, and § 2-719(3)'s limitation on consequential

damages and the unconscionability thereof would have no relevance.

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1976) (quoting Comment 4 to U.C.C. § 2-207)).5

 Likewise, in applying § 2-207, we

have said, "Considerations of surprise and hardship must remain a part of the

[material alteration] analysis." Shur-Value Stamps, Inc. v. Phillips Petroleum Co., 50

F.3d 592, 599 (8th Cir. 1995) (applying Texas law); see Johnson v. Murray, 648

N.W.2d 664, 670 (Minn. 2002) ("Uniform laws are interpreted to effect their general

purpose to make uniform the laws of those states that enact them. Accordingly, we

give great weight to other states' interpretations of a uniform law." (citation

omitted)).6

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Before we move on to our legal analysis, we must address the matter of our

standard of review. The Minnesota Court of Appeals has said that "[w]hether an

additional term materially alters an agreement is a question of fact which must be

resolved on a case by case basis." TRWL Fin. Establishment, 527 N.W.2d at 579

(citing N & D Fashions, 548 F.2d at 726). In such a case, we would review the

District Court's finding of material alteration only for clear error. But the District

Court itself concluded that the damages limitation term was a material alteration "as

a matter of law." Order & Memorandum of June 7, 2002, at 5. If that is the case, we

should review the decision de novo, as PPG acknowledges in its main brief. See

Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991) ("[A] court of appeals should

review de novo a district court's determination of state law."). In its reply brief, PPG

cites TRWL for the first time for the proposition that the question of material

alteration is one of fact but then makes no effort to clarify our standard of review.

Further, PPG does not challenge on appeal the District Court's having usurped the

role of the jury, if indeed TRWL is correct. Marvin ignores the standard of review

altogether. We decline to sort out the difficulties of ascertaining our standard of

review because it is not necessary for us to do so. The result we reach would be the

same if we reviewed the decision for clear error as a question of fact or if we applied

de novo review as though the decision were a conclusion of law.

The facts of this case concerning material alteration, that is, those which go to

prove hardship or surprise, are really without dispute. After considering them, we

conclude that enforcement of the damages limitation provision would result in both

hardship and surprise to Marvin.

Economically, the hardship to Marvin is clear—the $1.6 million PPG says it

owes under the terms of the acknowledgment is a fraction of the out-of-pocket costs

to Marvin resulting from PILT's failure, not even considering any consequential

damages. Under the terms of the boilerplate limitation, the distribution between

Marvin and PPG of risk of the product's failure is dramatically altered, with Marvin

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7

We recognize the similarity of what we say here to an application of the "fails

of its essential purpose" test of § 2-719. See supra n.4. Nevertheless, we are aware

of the distinction between the two tests. We are simply saying here that catastrophic

failure of PILT, with the distribution of risk shifted dramatically to Marvin by the

form acknowledgment, is a significant hardship to Marvin.

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bearing the brunt of it. The warranty that the jury found was for future performance.

The failure of the product in the future—after it was applied to the wood and the

wood was made into a window and installed in a building—would be, and was,

catastrophic in terms of damages. Given that the warranty was for PILT's future

performance, the damages should remedy a failure of that future performance, not just

refund the money spent for the product. Reimbursing the cost of the

product—essentially "replacing" the product—would not enforce the warranty that

PPG gave to Marvin. Moreover, most of the damages at issue were unquestionably

foreseeable.7

As for surprise, the provision was not negotiated by PPG and Marvin. While

it appeared in all the acknowledgments, it was boilerplate language, in small print, on

the back side of a form that was dense with other small print. Cf. TRWL Fin.

Establishment, 527 N.W.2d at 579 ("If the forum selection clause is contained in the

boilerplate language of a confirmatory memorandum, and is not bargained for, this

presumption [that a party adversely affected by the clause has received consideration

at the time of contracting] is untenable."). Marvin witnesses testified concerning their

surprise that a damages limitation clause may have become part of the contract with

PPG. While this testimony is self-serving, it was uncontradicted and not without

support elsewhere in the record. Marvin also proffered evidence that PPG and other

coatings manufacturers had always made things right when a product of theirs failed

with consequences, not just refunding the purchase price of the product sold but

replacing the Marvin product that was damaged as a result of the failure. Granted,

the catastrophic nature of PILT's failure was new to the relationship between PPG and

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Marvin, but that would be all the more reason that PPG's refusal to pay consequential

damages would be both a surprise and a hardship.

We have said that "Uniform Commercial Code remedies should be liberally

administered." Soo Line R.R. v. Fruehauf Corp., 547 F.2d 1365, 1373 (8th Cir. 1977)

(applying Minnesota's § 2-719). It is true that Comment 5 to U.C.C. § 2-207 lists "a

clause . . . limiting remedy in a reasonable manner" as one that will "involve no

element of unreasonable surprise" and therefore will "be incorporated in the contract."

Apart from the fact that the commentary does not have the force of law, we conclude

on the facts of this case that the provision in reality did involve "an element of

unreasonable surprise" to Marvin. The damages limitation language from the PPG

acknowledgment forms therefore did not become a part of the contract between PPG

and Marvin and is not enforceable.

IV.

For its next issue, PPG challenges the awards to Marvin of goodwill damages

($30 million) and damages for past and future lost profits ($25.2 million and $27

million, respectively).

A.

In arguing that the damages for lost goodwill should be vacated, PPG raises

three points: the evidence was insufficient to sustain the award, the award duplicated

the damages for future lost profits, and the claim was submitted to the jury without

proper notice to PPG. We are somewhat troubled by the short notice given to PPG

that Marvin was seeking damages specifically for lost goodwill and that the claim

would be submitted to the jury in addition to a claim for future lost profits. But we

reverse because we determine that the record cannot support awards for both $30

million in lost goodwill and $27 million for future lost profits. The fact is, the

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evidence supporting an award of goodwill damages to which Marvin directs our

attention is the very same evidence used to support an award of damages for future

lost profits. We conclude that this evidence warranted an instruction on, and

ultimately an award of, damages for future lost profits, as we will explain, but not an

instruction on (or an award of) damages for lost goodwill in addition.

We review de novo the District Court's decision to submit an instruction on lost

goodwill. Porous Media Corp. v. Midland Brake, Inc., 220 F.3d 954, 961 (8th Cir.

2000). Because we conclude that the court erred in giving the instruction, we will not

consider sufficiency of the evidence per se. Nonetheless, our analysis will entail a

review of the evidence that Marvin claims supports the award. See C.L. Maddox, Inc.

v. Benham Group, Inc., 88 F.3d 592, 601, 602 (8th Cir. 1996) (noting that certainty

of damages and sufficiency of evidence are "very closely related issues" but

"analytically distinct").

Marvin presented evidence of the importance to a wooden window and door

manufacturer of a good reputation among distributors, builders, homeowners, and

others. The undisputed testimony was that damage to reputation would be a serious

problem. Before the problems with PILT, Marvin had an excellent reputation in the

industry. But when the volume of rot problems became so great that Marvin was

unable to continue to replace windows and repair incidental damage that resulted

from the deteriorated millwork, customers became "quite hostile," even threatening

lawsuits, according to Gary Daniels, a Marvin employee who handled PILT-related

complaints. Transcript at 5223. President Susan Marvin testified to spending "hours

on the phone with customers who are so angry and so distressed." Id. at 7333. Susan

attributed stagnant growth at Marvin after the PILT problems "to homeowners telling

friends and neighbors and associates that the product isn't good." Id. at 7462. She

said, "Our reputation has been seriously damaged. And we have lost a lot of loyal

customers." Id. As for specifics, Susan testified that an institutional customer,

having become aware of the problems others were having with Marvin millwork

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8

In concluding that the award of damages for lost goodwill should be affirmed,

Judge Bye relies upon our decision in Porous Media Corp. v. Pall Corp., 173 F.3d

1109 (8th Cir. 1999), opining that "the quality and quantity of evidence presented by

Marvin in this extensive case was similar in nature to the quality and quantity of

evidence found sufficient to support the jury's award in Porous Media." Post at 36.

But the sufficiency issue in Porous Media was not whether the same evidence was

used to prove both lost profits and lost goodwill. Indeed, the Court in that case

concluded that the entire Lanham Act (false advertising) award of $1.6 million was

supported by the record "because Porous produced sufficient evidence of loss to its

goodwill." Porous Media, 173 F.3d at 1122. The Court specifically declined to

resolve another question that had been raised in the case: "whether the jury found that

Porous lost any sales as a result of" the defendant's actions. Id.; see also id. at 1123

("[B]ecause Porous produced sufficient evidence of lost goodwill, we need not

resolve the parties' disagreements about the jury's special verdict.").

-17-

products, required Marvin to purchase a performance bond before the customer would

proceed with a project, already underway, to replace existing windows with Marvin

windows.

On the basis of this evidence, the jury was instructed that it could consider

whether Marvin "suffered any measurable loss to its goodwill" and award damages

for such loss. Id. at 10846. The court instructed the jury that "[t]he measure of

Marvin's damage is the difference between such goodwill before and after its

experience with wood rot." Id. at 10847. The problem we see with Marvin's claim

is in the quantification of goodwill damages, translating angry or cautious customers

into dollars and cents. While we are not suggesting that mathematical certainty is

required, the jury's decision that Marvin suffered a $30 million loss of goodwill was

conjecture. Marvin does not—indeed, it cannot—point to any evidence in the record

separate and apart from its evidence of future lost profits to support an award of $30

million in lost goodwill.8

 Marvin's trial counsel admitted as much, suggesting to the

jury that goodwill damages are "something that you just have to go into your tummy

and get." Id. at 10814. It was goodwill, not the damages for a loss thereof, that was

described for the jury as an "intangible business value." Id. at 10846. The damages

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-18-

must be measurable. The problem is not so much that lost goodwill and future lost

profits are duplicative in this case (in fact, the jury was instructed that they are

different from each other). The problem is that Marvin did not make a submissible

case of lost goodwill damages. There was no testimony that any Marvin entity was

worth less because of the problems with PILT and certainly no evidence giving a

measure of, or a way of measuring, how much less. A loss of goodwill resulting in

a quantifiable diminution in the value of Marvin's millwork businesses was not shown

with sufficient certainty, as a matter of law, to have been submitted to the jury. The

award of goodwill damages must be vacated.

B.

As for lost profits, past and future, PPG also challenges the sufficiency of the

evidence to support those awards. PPG maintains there was only a scintilla of

evidence of past lost profits and no evidence of lost profits from 2002 through 2004.

On appellate review, when the issue is sufficiency, we view the evidence in the light

most favorable to the verdict and will reverse only if a reasonable jury could not have

found as this jury did. United States v. Larry Reed & Sons P'ship, 280 F.3d 1212,

1214 (8th Cir. 2002). Consequential damages such as the lost profits in question

must be proved "with a reasonable degree of certainty and exactness." County of

Blue Earth v. Wingen, 684 N.W.2d 919, 924 (Minn. Ct. App. 2004) (citation to

quoted case omitted). For future losses specifically, Marvin cannot collect damages

that are "remote, speculative, or conjectural." Pietrzak v. Eggen, 295 N.W.2d 504,

507 (Minn. 1980). Absolute exactitude is not required, however. "Instead, the

plaintiff must prove the reasonable certainty of future damages by a fair

preponderance of the evidence." Id. We think the record evidence satisfies these

requirements.

We have carefully reviewed the record (no small task in this case). There most

definitely was evidence that Marvin's profits had suffered since the problems with

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9

PPG cites Racicky v. Farmland Industries, Inc., 328 F.3d 389, 397 (8th Cir.

2003), in a letter submitted under Rule 28(j) of the Federal Rules of Appellate

Procedure for the proposition that the award of lost profits was speculative because

it was based only on testimony of the owners and was unsupported by expert

testimony or financial data. PPG is mistaken for at least two reasons. First, the

Racicky Court was interpreting Nebraska law in a tort case, which specifically

requires financial data be admitted in support of a claim for lost profits before such

damages can be awarded. And second, the testimony of Jake and Susan Marvin was

based on financial data.

-19-

PILT began to surface, and that they likely would remain flat. PPG's quarrel with the

sufficiency of that evidence appears to have its roots in the fact that the evidence

came in largely through the testimony of Marvin senior executives Susan Marvin and

Jake Marvin, who based their testimony on their review of the company's financial

records.9

 PPG also complains that the witnesses focused only on selected years,

instead of all years, resulting in skewed calculations of Marvin's projected growth but

for the PILT problems. But PPG had the opportunity to—and did—cross-examine

Marvin's witnesses on these points, using the demonstrative exhibit prepared by

Marvin that noted profits for all the years in question. To the extent that PPG is

challenging the court's admission of the evidence in question, we see no abuse of

discretion. And we think the evidence before the jury proved lost profits, past and

future, and the amounts thereof, with the required degree of certainty. The jury heard

it all and determined an award was in order. We cannot say that no reasonable juror

could have found that Marvin's damages from the failure of PILT to work as

warranted included $52.2 million in past and future lost profits.

V.

PPG contends that Marvin's evidence of breach and causation was not

admissible under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999) ("We conclude that

Daubert's general holding—setting forth the trial judge's general 'gatekeeping'

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-20-

obligation—applies not only to [expert] testimony based on 'scientific' knowledge,

but also to [expert] testimony based on 'technical' and 'other specialized' knowledge."

(citing Fed. R. Evid. 702)). According to PPG, the District Court failed in its

gatekeeping role when it allowed testimony regarding the results of statistical studies

that were conducted by one of Marvin's experts, Dr. Frank Martin, which PPG claims

was the only evidence of breach and causation.

PPG's arguments are drawn largely from purported deviations from the Federal

Judicial Center's Reference Manual on Scientific Evidence 2d (2000). It goes without

saying that the Manual does not have the force of law, nor are judges required to

follow it. The reference guides therein, including the one on statistics, "are not

intended to instruct judges concerning what evidence should be admissible or to

establish minimum standards for acceptable scientific testimony." Reference Manual

at vi. We do not review Martin's adherence vel non to the standards recommended

in the guide. Our only question is whether the District Court abused its discretion in

allowing Martin to testify about the results of his studies. Gen. Elec. Co. v. Joiner,

522 U.S. 136, 146 (1997) (standard of review). That is, was the evidence sufficiently

relevant and reliable to be put before the jury. See Kumho Tire, 526 U.S. at 152

("The objective of [Daubert's gatekeeping] requirement is to ensure the reliability and

relevancy of expert testimony.").

Martin was a statistician who was hired by Marvin in 1994 to evaluate the

mounting wood-rot data Marvin was collecting. Over time, he conducted a series of

statistical studies analyzing the information. He was permitted to testify to two

conclusions based on those studies: first, PILT-treated windows did not outlast Pentatreated windows, and second, the excessive wood-rot problems that Marvin was

experiencing in its products were the result of the failure of PILT as a wood

preservative.

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-21-

PPG challenges Martin's "methodology" and the "reliability" of the studies'

results, invoking these catchwords relating to the admissibility of expert opinion

testimony under Rule 702 of the Federal Rules of Evidence. See, e.g., Bonner v. ISP

Techs., Inc., 259 F.3d 924, 929 (8th Cir. 2001). Specifically, PPG complains that the

studies were done in anticipation of litigation; that data was collected by an employee

of Marvin's legal department who was aware of the purpose of the studies; that the

sample size was too small and the samples were not taken from a representative

geographical cross-section; that "Martin failed to perform elementary tests of

reliability"; and that the studies did not account for factors other than the wood

preservative that could have caused the wood deterioration. Brief of Appellant at 51.

As we see these arguments, PPG's challenge is primarily to the factual basis for

Martin's analysis, not to its evidentiary reliability. Generally, even post-Daubert, "the

factual basis of an expert opinion goes to the credibility of the testimony, not the

admissibility." Bonner, 259 F.3d at 929 (citations to quoted cases omitted). To the

extent PPG's complaints about Martin's studies are well-founded, they go to the

weight to be accorded his opinions by the jury. It was PPG's responsibility at trial,

through careful cross-examination of Martin and direct examination of its own

experts, to alert the jury to the weaknesses in the factual basis of Martin's

opinion—and from our review of the record, PPG attempted to do just that. See

Daubert, 509 U.S. at 596 ("Vigorous cross-examination, presentation of contrary

evidence, and careful instruction on the burden of proof are the traditional and

appropriate means of attacking shaky but admissible evidence."). But the jury

believed Martin and the other Marvin witnesses and it is not for us to second-guess

that reasonable decision.

In sum, we hold that the District Court did not abuse its considerable discretion

in allowing Martin's testimony.

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-22-

VI.

PPG next argues that the jury's decision that Marvin's suit was timely

filed—the statute of limitations issue we mentioned in Part II and footnote 3—was

tainted by the District Court's instruction on equitable estoppel. The jury was

instructed that the statutory period could be "tolled or . . . temporarily suspended" if

Marvin had shown that it reasonably relied on representations made by PPG (such as

a "promise of future action") and that Marvin would be harmed if the statute of

limitations was not tolled. Transcript at 10851. The District Court has broad

discretion in instructing the jury, and absent an abuse of that discretion and an

encroachment upon the substantial rights of PPG, a new trial will not be ordered.

Children's Broad. Corp. v. Walt Disney Co., 357 F.3d 860, 867 (8th Cir. 2004).

We have reviewed the record and conclude that it was not an abuse of

discretion to give the instruction. Although it did not consume many pages of the

voluminous transcript in this case, there was some evidence that PPG early on, when

PILT was suspected as the wood-rot culprit, made representations to Marvin about

making things right. Given the close and long-standing relationship between PPG

and Marvin, and among individual employees of each company, a jury could easily

find that Marvin would rely on those representations.

The District Court did not abuse its discretion in giving the equitable estoppel

instruction.

VII.

Finally, PPG charges that Marvin tried its alleged fraud and general warranty

claims that we dismissed in Marvin I, and the District Court erred in allowing it to do

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-23-

so. PPG's argument consists of a laundry list of claims: evidentiary errors,

inflammatory examination of witnesses by Marvin, instructional errors, improper

argument, and sufficiency questions. PPG maintains that the errors require that it be

given a new trial. 

We will reverse the District Court's denial of PPG's motion for a new trial only

if the court clearly abused its discretion. Children's Broad. Corp., 357 F.3d at 867.

We decline to enumerate PPG's claims of error and explain for each why PPG is not

entitled to a new trial. Suffice it to say that we have considered each claim of error

and now reject all of them, holding that either the claims were not preserved for

appellate review absent plain error (and there is none), the District Court did not

abuse its discretion in its rulings, or errors the court did make were not prejudicial to

PPG. See, e.g., id. at 864 (noting there must be a clear and prejudicial abuse of

discretion for this Court to grant a new trial based on error in admitting evidence); id.

at 867 (explaining that instructional error must have affected substantial rights to be

reversible); Ratliff v. Schiber Truck Co., 150 F.3d 949, 957 (8th Cir. 1998) (stating

that the district court must have abused its discretion in controlling closing argument

to be reversed on appeal, and that we review only for plain error any issues not

properly preserved).

This was a very long trial, and frankly, we think the District Court on balance

did a fine job of ruling on the potential sources of error. For the asserted errors PPG

pulls together in its sixth and final argument, we have considered each one and see

nothing that requires us to order a new trial.

VIII.

We turn now to Marvin's cross appeal.

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-24-

A.

For its first issue, Marvin contends it was entitled to preverdict interest, as

provided by Minnesota law, on "pecuniary damages" (except awards for future

damages) calculated "from the time of the commencement of the action." Minn. Stat.

§ 549.09 subd. 1(b) (2002); id. subd. 1(b)(2) (noting no preverdict interest is allowed

for "judgments or awards for future damages"). The District Court declined to award

interest from the start of the lawsuit on damage amounts that had not been incurred

at the time the complaint was filed. Marvin contends that the statute is unambiguous

and that the District Court therefore had no choice but to award interest on all

"pecuniary damages" (except awards for future damages) from April 22, 1994, the

date Marvin filed suit, regardless of when the damages were incurred. We review the

District Court's decision on its authority to award damages de novo and any challenge

to the calculation for an abuse of discretion. Children's Broad. Corp., 357 F.3d at

868. We agree with Marvin that the decision here, one interpreting the Minnesota

statute, is reviewed de novo. Because the Minnesota Supreme Court has not decided

the issue before us, we must predict how the state's highest court would rule if faced

with the same question. See Sloan v. Motorists Mut. Ins. Co., 368 F.3d 853, 856 (8th

Cir. 2004).

Because context is critical to our analysis, we set out the applicable statutory

language in its entirety (with a few omissions based on relevance).

Except as otherwise provided by contract or allowed by law,

preverdict . . . interest on pecuniary damages shall be computed as

provided in clause (c) from the time of the commencement of the

action . . . except as provided herein. . . . If either party serves a written

offer of settlement, the other party may serve a written acceptance or a

written counteroffer within 30 days. After that time, interest on the

judgment or award shall be calculated by the judge . . . in the following

manner. The prevailing party shall receive interest on any judgment or

award from the time of commencement of the action . . . , or as to

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10We express no opinion on whether the damages at issue in this case were

"special" within the meaning of Minnesota law. It is not necessary for us to do so

because there is no indication from the parties that any written settlement offers were

made in this litigation.

-25-

special damages from the time when special damages were incurred,

if later, until the time of verdict . . . only if the amount of its offer is

closer to the judgment . . . than the amount of the opposing party's offer.

Minn. Stat. § 549.09, subd. 1(b) (emphasis added). The statute goes on to explain

how the calculation is made if the losing party's settlement offer was closer to the

judgment.10

Preverdict interest is not conventional "interest" because it cannot be calculated

until after the verdict. Lienhard v. State, 431 N.W.2d 861, 865 (Minn. 1988).

"Rather, it is an element of damages awarded to provide full compensation by

converting time-of-demand . . . damages into time-of-verdict damages." Id. But full

compensation is not the exclusive purpose of preverdict interest in Minnesota. As the

state court of appeals has recognized, in order "to promote settlements," the state

legislature amended the statute in 1984 to omit a previous requirement that damages

be liquidated or readily ascertainable before preverdict interest would accrue.

Skifstrom v. City of Coon Rapids, 524 N.W.2d 294, 297 (Minn. Ct. App. 1994).

Before 1984, "[t]he interest obligation of the common law provided a motivation to

settle with respect to 'ascertainable' damages" but none as to those—such as

unincurred expenses—that were not so readily determined. Id. (explaining legislative

purpose of § 549.09 in applying provision for preverdict interest to damages for pain

and suffering in negligence action). Both purposes are served by starting the clock

running on preverdict interest when suit is filed. The prevailing party is fully

compensated (indeed, more than fully compensated when preverdict interest is

ordered on damages that were not incurred when suit was filed). And the manner of

calculating preverdict interest when settlement offers are made, as set forth in the

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11In Minnesota's neighboring state of Iowa, the highest court has held, "We do

not believe the legislature intended to have prejudgment interest assessed on amounts

due on transactions that did not occur until after the litigation commenced." Rowen

v. LeMars Mut. Ins. Co., 347 N.W.2d 630, 641 (Iowa 1984). We do not believe the

Minnesota Supreme Court would follow suit, however, because the Iowa prejudgment

statute at the time made no mention of settlement offers and clearly did not have the

same goal of encouraging settlement as does the Minnesota statute.

12The 1990 version of § 549.09, subdivision 1(b), has been amended but is the

same in relevant part as the 2002 version.

-26-

statute, surely should encourage at least good-faith efforts at settlement, especially

when potentially large unincurred special damages may be in play.11

There is a case wherein the Minnesota Court of Appeals has said, "Whether

interest on the judgment accrues from the time the action is commenced or the time

damages were incurred depends upon the nature of the damages." Tyroll v. Private

Label Chems., Inc., 493 N.W.2d 128, 132 (Minn. Ct. App. 1992), rev'd in part on

other grounds, 505 N.W.2d 54 (Minn. 1993). The court went on to quote a part of the

statute as follows: "The prevailing party shall receive interest on any judgment or

award from the time of commencement of the action * * * , or as to special damages

from the time when special damages were incurred, if later, until the time of verdict."

Id. (quoting Minn. Stat. § 549.09, subd. 1(b) (1990)).12 But this quote is out of

context, and the omitted language changes the meaning of the statute altogether. The

reference to interest calculation "when special damages were incurred" applies only

after one or more settlement offers have been made. Minn. Stat. § 549.09, subd. 1(b)

(2000) ("If either party serves a written offer of settlement, the other party may serve

a written acceptance or a written counteroffer within 30 days. After that time,

interest . . . shall be calculated . . . in the following manner."). Reading the statute in

its entirety makes that clear. The statute relieves the losing party, to a degree, from

the obligation to pay preverdict interest on special damages incurred after suit was

filed—that is, such interest does not accrue until special damages are incurred—if,

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13In its short response to Marvin's argument, PPG argues that awarding

prejudgment interest as Marvin suggests would be illogical, "absurd," and in violation

of Minnesota law on statutory interpretation. Reply Brief of Appellant/Cross

Appellee at 42. The state and federal constitutional arguments put forward by Judge

Beam in his concurring and dissenting opinion never were raised by PPG.

-27-

and only if, that party has made some legitimate attempt to settle the dispute. While

the statute might not have been artfully drafted, it is not ambiguous in its intention to

allow preverdict interest on all pecuniary damages from the time suit was filed,

assuming no written settlement offers were made in the course of the litigation.

The District Court read "the explicit language of the statute, '[e]xcept as

otherwise provided by contract or allowed by law,' to permit alternative calculations."

Order and Memorandum of June 7, 2002, at 17. The court also cited Minnesota law

that interpreted the 1984 amendments as allowing preverdict "interest in situations

where it was not already provided for by law." Id. (citing Seaway Port Auth. v.

Midland Ins. Co., 430 N.W.2d 242, 252 (Minn. Ct. App. 1988)). The court

recognized § 549.09 as amended in 1984 as expanding a prevailing party's rights to

preverdict interest. Indeed, the statute compels the computation of preverdict interest

from the date suit was filed except as "otherwise . . . allowed by law," not as

otherwise restricted by law. But the court's calculation of such interest on damages

not yet incurred when suit was filed is not true to the Minnesota legislature's intent.

We conclude that the Minnesota Supreme Court would read the plain language of

§ 549.09 and hold that Marvin was entitled to preverdict interest on all pecuniary

damages (except future profits) from the inception of the litigation, regardless of

when the damages were incurred.13

Accordingly, we remand to the District Court for the recalculation of preverdict

interest consistent with this opinion.

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14Because it is not necessary for us to do so, we do not decide whether this is

a correct statement of the law.

-28-

B.

In Marvin I, we affirmed the dismissal of Marvin's claims brought under

Minnesota statutory law and held that "[i]n the circumstances of this case, the

Minnesota consumer protection statutes do not apply to a merchant such as Marvin."

223 F.3d at 887. Marvin now says that a case from the Minnesota Supreme Court

decided in January 2001 requires that the claims be reinstated. See Group Health

Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2 (Minn. 2001). According to Marvin,

"the jury's verdict establishing PPG's liability for breach of warranty establishes

PPG's liability under Minnesota's consumer protection and anti-fraud statutes." Brief

of Appellee/Cross Appellant at 83.14 Damages would thus be duplicative, but Marvin

contends it is entitled to attorney fees, costs, and expenses under the fee-shifting

provisions of the law, with no further proceedings required. The District Court

denied Marvin's motion to revive the claim before trial. Since Marvin is appealing

the court's interpretation of state law, we review de novo. Salve Regina Coll., 499

U.S. at 231. We will revisit our decision in Marvin I if the intervening decision from

Minnesota's highest court in Group Health "clearly demonstrates the law of the case

is wrong." Madison v. IBP, Inc., 330 F.3d 1051, 1059 (8th Cir. 2003) (quoting

Morris v. Am. Nat'l Can Corp., 988 F.2d 50, 52 (8th Cir. 1993)).

We agree with PPG that Marvin is mistaken on the law. In the first appeal, we

held that Marvin's statutory claims did not survive dismissal because Marvin is a

merchant, not a consumer. In Group Health, no merchants were involved. The

plaintiffs who were seeking to invoke the statutes were HMOs (health maintenance

organizations) that insured consumers of the product in issue (tobacco). "Although

the Minnesota Supreme Court held that a plaintiff need not be a purchaser of the

defendant's product in order to properly plead a claim under the CFA [Minnesota

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-29-

Prevention of Consumer Fraud Act], the case involved plaintiffs who were, in effect,

indirect consumers of the defendant's products . . . ." Popp Telecom, Inc. v. Am.

Sharecom, Inc., 361 F.3d 482, 493 n.12 (8th Cir. 2004) (citation omitted). There was

no mention of consumers vis-à-vis merchants in Group Health. The court was

answering the certified question, "[M]ust plaintiffs be purchasers of defendants'

products in order to properly plead a claim under" the provisions in question? Group

Health, 621 N.W.2d at 5. The court answered the question in the negative: "The

HMOs need not be actual purchasers of the tobacco companies' products in order to

properly plead claims under" the statutes. Id. at 11. If the Minnesota Supreme Court

thought we got it wrong in Marvin I, one would expect that the court would have

mentioned it in its opinion in Group Health four months later—the opinion that,

according to Marvin, clearly resolved the question in its favor.

Because Marvin cannot show that the decision in Group Health "clearly

undermines our earlier rulings" on the Minnesota statutory law issues, the law of the

case from Marvin I prevails. Madison, 330 F.3d at 1059. The District Court is

affirmed on this second issue in Marvin's cross appeal.

IX.

The judgment of the District Court is affirmed in part and vacated and reversed

in part. The case is remanded to the District Court for recalculation of damages and

interest in accordance with this opinion.

BEAM, Circuit Judge, concurring and dissenting.

I concur in the court's opinion, except for its conclusion that Marvin is entitled

to preverdict interest on unincurred damages. I very respectfully suggest that a plain

reading of the preverdict interest statute indicates that interest may be assessed on

damages only after they are actually incurred after commencement of the action.

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-30-

Accordingly, I dissent on that issue. And, for me this is not just an interesting

analytical exercise. The court's interpretation transfers, according to my calculations,

nearly $14 million of PPG's assets to Marvin simply because PPG had the temerity

to submit an extremely close products liability question to the district court for its

adjudication.

Resolution of the preverdict interest matter turns on the interpretation of

section 549.09 of the Minnesota statutes. Marvin argues that the proper interpretation

is found in the plain language of the statute. I agree. Where I part company with

Marvin and the court is on the issue of what the statute plainly says and how you

properly construe existing Minnesota case law on the subject.

 The district court calculated interest on Marvin's out-of-pocket costs, past lost

profits, and third-party litigation costs, declining to assess "interest" for any periods

of time before the damages were actually incurred. I agree with that decision and

would affirm the district court insofar as it assessed interest on damages from the time

they were incurred after commencement of the action.

As the court notes, since the Minnesota Supreme Court has not specifically

decided this issue, it falls to us to predict how that court would interpret the statute.

In so doing, we are bound by Minnesota's rules of statutory interpretation. See

Gershman v. Am. Cas. Co. of Reading, PA, 251 F.3d 1159, 1162 (8th Cir. 2001). "If

statutory language is plain and unambiguous, the court must look only to the plain

meaning of the statutory language." Boutin v. LaFleur, 591 N.W.2d 711, 715 (Minn.

1999). "Words and phrases are to be given their ordinary meaning." State v. Larivee,

656 N.W.2d 226, 229 (Minn. 2003), cert. denied, 540 U.S. 812 (2003); see also Minn.

Stat. § 645.08 (providing, as a canon of statutory construction, that words are to be

construed "according to their common and approved usage"). The statute provides

that preverdict interest on pecuniary damages is to be computed from the time of

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15Special provisions for calculating interest apply where there have been

written offers of settlement. Since there is no indication from the parties that any

written offers were made in this case, those provisions are not useable.

-31-

commencement of the action.15 There is nothing ambiguous about the words of the

statute, so I believe the Minnesota Supreme Court would simply apply their ordinary

meaning.

The ordinary meaning of the statute's reference to "pecuniary damages" has

been clearly addressed by Minnesota courts. They are damages that are "'[m]onetary;

relating to money; financial; consisting of money or that which can be valued in

money.'" Skifstrom v. City of Coon Rapids, 524 N.W.2d 294, 295 (Minn. Ct. App.

1994) (quoting Black's Law Dictionary 1131 (6th ed. 1990)). The money damages

Marvin seeks, no matter when they were incurred, are, of course, "pecuniary." 

What must be considered, however, is that section 549.09 is an interest statute.

Interest is "a sum paid or charged for the use of money or for borrowing money." The

Random House Dictionary of the English Language 993 (2d ed. 1987) (emphasis

added). Minnesota courts that have examined section 549.09 are in accord. "[P]reverdict interest is compensation 'allowed by law as additional damages for loss of use

of the money due as damages.'" Lienhard v. State, 431 N.W.2d 861, 865 (Minn.

1988) (quoting C. McCormick, Law of Damages § 50, at 205 (1935)) (emphasis

added). Clearly, for PPG to have deprived Marvin of its use of the monies included

in the damages award, Marvin must have been entitled to those funds. Marvin was

simply not entitled to those amounts until it incurred damages for which it could hold

PPG responsible. Before damages are incurred, they are only hypothetical, and I can

find no instance of Minnesota law directing that "interest" be assessed on

hypothetical damages. And to interpret section 549.09 to direct otherwise is to flout

Minnesota rules of statutory interpretation. "In ascertaining the intention of the

legislature the courts may be guided by the following presumptions: (1) The

legislature does not intend a result that is absurd, impossible of execution, or

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unreasonable." Minn. Stat. § 645.17(1). Charging interest on possible damages for

a period of time before they even exist is, at best, unreasonable.

It is true that in Lienhard, the court declared that, in Minnesota, "pre-verdict

interest is not conventional interest on a sum of money." 431 N.W.2d at 865. But the

court explained that this is so only in the sense that "such 'interest' cannot be

calculated until the amount on which interest is allowed has been fixed by verdict."

Id. (emphasis added). Thus, the court in Lienhard recognized that preverdict interest

in Minnesota was unique not because it can be applied to unincurred damages, but

because it can be applied to damages that have indeed been incurred, but remain

unascertained in amount until a jury sets the sum.

The court correctly notes that under Minnesota law, section 549.09 serves two

purposes: "(1) to compensate prevailing parties for the true cost of money damages

incurred, and (2) to promote settlements when liability and damage amounts are fairly

certain and deter attempts to benefit unfairly from delays inherent in litigation." Solid

Gold Realty, Inc. v. Mondry, 399 N.W.2d 681, 683 (Minn. Ct. App. 1987). But

today's decision by the court is not true to the first purpose, and unnecessary for the

second.

As to the first purpose, to award Marvin preverdict "interest" on unincurred

damages does not compensate Marvin "for the true cost of money damages incurred."

Id. (emphasis added). Rather, as the court concedes, Marvin is overcompensated, by

an amount that does not represent any use or deprivation of money. 

The second purpose is fully addressed by allowing interest to accrue on

damages from the time they are incurred. All that remains under that scenario is an

ultimate determination of amount. Interest assessed against this currently unknown

and uncertain but ultimately ascertainable element is and will always be a persuasive

factor in the calculus of whether a party wishes to proceed to trial. Thus, I am left

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with no reason to believe that my view of the plain meaning of the statute diminishes

its power to promote early settlement.

The court references Skifstrom to note that the 1984 amendments to section

549.09 were intended to motivate settlement even where the amount of damages was

unascertained. But the damages with which the court in Skifstrom dealt were not

unincurred; they were merely unascertained–that is, incurred, but not yet quantified.

"The interest obligation of the common law provided a motivation to settle with

respect to 'ascertainable' damages, but not as to general damages for pain and

suffering . . . ." 524 N.W.2d at 297 (emphasis added). Pain and suffering damages

are those that have certainly been incurred as a part of the central claim in a case, but

are not quantified until a jury determines their worth. It is that aspect of

"unascertained" to which the court in Skifstrom was referring, and including

unincurred damages under that case's rationale, as the court does here, does not fit

within the plain words of the statutory language.

Indeed, the court's interpretation of section 549.09 exceeds what is necessary

to encourage settlement. The resulting "surcharge" operates either to punish

unsuccessful litigants for having resorted to the courts, or to charge them for use of

the courts in order to discourage litigation. Either result, of course, raises problems

under both the Minnesota and United States Constitutions. In Harrison v. Springdale

Water & Sewer Commission, 780 F.2d 1422 (8th Cir. 1986), we stated that 

An individual's constitutional right of access to the courts 'cannot be

impaired, either directly . . . or indirectly, by threatening or harassing an

[individual] in retaliation for filing [or defending] lawsuits. . . . [S]tate

officials may not take retaliatory action against an individual designed

either to punish him for having exercised his constitutional right to seek

judicial relief or to intimidate or chill his exercise of that right in the

future.

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Id. at 1427-28 (first and second alterations in original) (emphasis added). Since

Minnesota case law commands that its courts "interpret statutes in a way that avoids

constitutional problems," Hince v. O'Keefe, 632 N.W.2d 577, 582 (Minn. 2001), it

is difficult to believe that the Minnesota Supreme Court would interpret section

549.09 in a way that raises these very serious concerns.

The Minnesota constitution guarantees that "[e]very person is entitled to a

certain remedy in the laws for all injuries or wrongs which he may receive to his

person, property or character, and to obtain justice freely and without purchase,

completely and without denial, promptly and without delay, conformable to the laws."

Minn. Const. art. 1, § 8 (emphasis added). The First Amendment to the United States

Constitution also guarantees access to the courts. "'The right of petition is one of the

freedoms protected by the Bill of Rights.'" Cal. Motor Transp. Co. v. Trucking

Unlimited, 404 U.S. 508, 510 (1972) (quoting E. R.R. Presidents Conference v. Noerr

Motor Freight, 365 U.S. 127, 138 (1961)). "The right of access to the courts is indeed

but one aspect of the right of petition." Id. "[T]he right to petition is 'among the most

precious of the liberties safeguarded by the Bill of Rights.'" Harrison, 780 F.2d at

1427 (quoting United Mine Workers of America, Dist. 12 v. Ill. State Bar Ass'n, 389

U.S. 217, 222 (1967)). As such, "it has 'a sanctity and a sanction not permitting

dubious intrusions.'" Id. (quoting Thomas v. Collins, 323 U.S. 516, 530 (1945)).

"'[A]ccess to the courts is a fundamental right of every citizen.'" Id. (quoting Inmates

of the Neb. Penal and Corr. Complex v. Greenholtz, 436 F. Supp. 432 (D. Neb.

1976)).

The court's interpretation of the statute also implicates the Fifth Amendment

Takings Clause. Absent any purpose of punishment for bringing a case or charging

for the use of the courts, this surcharge is purely a government-enforced transfer of

property (in this case, money) from one private party to another without any lawful

basis for doing so. "The Fifth Amendment's Takings Clause prevents the Legislature

(and other government actors) from depriving private persons of vested property

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rights except for a 'public use' and upon payment of 'just compensation.'" Lynce v.

Mathis, 519 U.S. 433, 440 n.12 (1997) (quoting Landgraf v. USI Film Prods., 511

U.S. 244, 266 (1994)). "It applies to the States as well as the Federal Government."

Brown v. Legal Found. of Wash., 538 U.S. 216, 232 n.6 (2003). And "one person's

property may not be taken for the benefit of another private person without a

justifying public purpose, even though compensation be paid." Thompson v. Consol.

Utils. Gas Corp., 300 U.S. 55, 80 (1937). Charging interest for damages that do not

exist cannot be justified as either a public purpose or a valid private purpose

enforceable through government action, here the United States Courts.

"We interpret statutes to avoid serious constitutional problems, so long as the

statutory language is fairly susceptible to a constitutional construction." Planned

Parenthood of Mid-Missouri and E. Kan., Inc. v. Dempsey, 167 F.3d 458, 463 (8th

Cir. 1999). The "constitutional construction" of which this statute is "fairly

susceptible" allows preverdict interest to be assessed on damages only from the time

they are incurred, not earlier.

Based on a plain reading of section 549.09 of the Minnesota statutes,

Minnesota's rules of statutory construction, Minnesota preverdict interest case law,

and potential constitutional problems, I believe the correct pre-verdict interest

calculation assesses interest from the time the damage is incurred after

commencement of the action. This comports with the statute's dual purpose while

avoiding constitutional infirmity. It is for these reasons that I would affirm the

district court insofar as it assessed preverdict interest in this manner, and therefore

must respectfully dissent from today's decision by the court on that particular matter.

I concur in all other respects.

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BYE, Circuit Judge, concurring in part and dissenting in part.

I concur in the Court's opinion with the exception of Section IV(A), which

eliminates the jury's finding and award of $30 million for lost goodwill. The Court

vacates the award for such damages after concluding Marvin failed to quantify

adequately the precise amount of its lost goodwill. I believe Marvin adequately

proved this separate element while presenting its evidence on the damages sustained

and would therefore affirm the award to include the loss of goodwill as determined

by the jury, thus reflecting a basic human tendency to do business with a merchant

who takes pride in its business reputation and who offers products of the type and

quality which the customer desires and expects, and of a type which is separate and

distinct from all other categories of business damages.

"Reputational damages are often difficult to quantify." Porous Media Corp. v.

Pall Corp., 173 F.3d 1109, 1122 n.12 (8th Cir. 1999). As a result, a plaintiff alleging

lost goodwill "need not prove such damages with exacting precision." Id. I believe

the quality and quantity of evidence presented by Marvin in this extensive case was

similar in nature to the quality and quantity of evidence found sufficient to support

the jury's award in Porous Media, see id. at 1122 (summarizing evidence of the loss

of, and difficulty with, customers similar to the evidence presented by Marvin), with

one exception. In Porous Media, a witness quantified the loss of goodwill by giving

the jury a general estimate of the amount, "between $5 million and $10 million." Id.

Here, while Marvin presented persuasive and compelling evidence of substantial lost

goodwill, no expert witness was specifically asked to gauge the amount.

Marvin's evidence was, however, clearly sufficient to prove a loss of goodwill.

The company’s principal officers established the importance of the company’s welldeserved reputation for manufacturing premium, high-quality products spanning a

time period of several decades. For example, Susan Marvin testified "[w]hen [our

customers] purchase Marvin, they purchase what they believe to be [] a premium

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product. It's advertised as best of quality. It's made to be best of quality [and] they

have said, my home is important to me. I'm going to put the best in it." App. 838-39.

Jake Marvin testified to Marvin's product as being a "high-end window" and a

"premium product" frequently specified by architects for both new home construction

as well as the replacement segment of their window business. App. 956. The jury

repeatedly heard about how important it was to Marvin's business plan, reputation,

and success in the industry to stand behind all of its products, App. 516, 854, 602,

a reputation which was confirmed by Marvin's competitors, App. 498.

In addition, the jury heard detailed accounts of the problems Marvin

encountered with its customers and the damage to its goodwill caused by the PILT

problems, as summarized by the Court at pages 16-17 of its opinion. The Court while

not specifically alluding to it does describe how the jury learned about the PILT

problems and the direct effects on Marvin's cash reserves. In 1994, prior to the worst

of the PILT problem, Marvin’s financial statements revealed cash and securities

reserves in the amount of $75,880,369. App. 1320. By 1998, at the height of the

PILT problem, Marvin's cash and security reserves had shrunk by over $40 million

to $34,989,949. Id. Marvin also presented evidence as to how this severe downturn

in its cash reserves negatively impacted upon and affected its ability to obtain

adequate financing so as to continue its detailed plan for complete business

remediation. When Marvin approached a bank with a loan request of $125 million,

the bank responded with only an offer of a $35 million loan. App. 979-81. It is upon

such a basis and record as found here whereby lost goodwill, also known as

reputational damages, are most often proved.

As stated previously, this court has already recognized that "[r]eputational

damages are often difficult to quantify." Porous Media Corp. v. Pall Corp., 173 F.3d

1109, 1122 n.12 (8th Cir. 1999). As a result, a plaintiff alleging lost goodwill "need

not prove such damages with exacting precision." Id. I believe the strength of

evidence presented by Marvin in this case was equal to or exceeded the type of

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evidence found sufficient to support the jury's award in Porous Media. See id. at

1122 (summarizing the evidence presented by the plaintiff to support an award of

damages based on lost goodwill).

This court is in a far less favorable position than is either the district court, or

more to the point, its petit jury, in the determination and/or adequacy of lost goodwill

damages. Here, I would sustain the damages as found and determined by the jury,

which were left intact by the district court as an important, distinct, necessary, and

separate component of Marvin’s overall business damage and loss as established

during the jury trial. I would therefore affirm the jury’s damage award in every

respect.

_____________________________

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