In the

United States Court of Appeals

For the Seventh Circuit

Nos. 10-2052 & 10-2068

GARRY BOYD,

BOYD MEDICAL, INC.,

CHARLES WETHERILL,

and ADDISON MEDICAL, INC.,

Plaintiffs-Appellees,

Cross-Appellants,

v.

TORNIER, INC.,

Defendant-Appellant,

Cross-Appellee.

Appeals from the United States District Court 

for the Southern District of Illinois.

No. 07 cv 751—Donald G. Wilkerson, Magistrate Judge.

ARGUED NOVEMBER 29, 2010—DECIDED AUGUST 24, 2011

Before BAUER, WOOD, and SYKES, Circuit Judges.

WOOD, Circuit Judge. Tornier is a manufacturer of

medical goods related to joint replacement and soft

tissue repair. It has distributors all over the United
2 Nos. 10-2052 & 10-2068

States, including Boyd Medical, run by Garry Boyd,

(collectively “Boyd”) in Missouri and Addison Medical,

run by Charles Wetherill, (collectively “Wetherill”) in

Iowa. Both Boyd and Wetherill had exclusive distributorship agreements with Tornier and relied heavily on that

relationship for their financial health. Tornier, sadly for

them, had other ideas and terminated its agreements

with each one. As with many breakups, somebody got

hurt. This time it was Boyd and Wetherill, both of

whom were forced to shut down their businesses.

Soon after, they sued Tornier for breach of contract,

intentional misrepresentation, and negligent misrepresentation. Additionally, both asked for punitive

damages on the intentional misrepresentation claims.

The district court dismissed Wetherill’s negligent

misrepresentation claim at summary judgment but

allowed the other claims to proceed to trial. The jury

returned a verdict against Tornier on all of the remaining

claims, awarding both actual and punitive damages to

both plaintiffs. The magistrate judge, presiding by the

consent of the parties under 28 U.S.C. § 636(c), set aside

the punitive damages awards, finding that the evidence

did not support the jury’s decision. The court then

entered judgment for each distributor’s actual damages.

This appeal and cross-appeal followed. Tornier argues

that the contract expressly precludes the award of lost

profits for the breach of contract; that the plaintiffs’

intentional and negligent misrepresentation claims fail

as a matter of law and fact; and that the damages

awards on the tort claims were not adequately sup-
Nos. 10-2052 & 10-2068 3

ported by the evidence. Boyd and Wetherill counter that

the punitive damages awards should be reinstated.

We conclude that each side must win something and

lose something. We vacate the awards for the plaintiffs

of lost profits on their breach of contract action. We

affirm the verdicts against Tornier on intentional misrepresentation and negligent misrepresentation, but we

vacate the jury’s awards of actual damages, as they were

supported by insufficient evidence. Finally, we affirm

the court’s decision to set aside the punitive damages

awards. We thus remand the case to the district court

for a recalculation of damages consistent with this opinion.

I

In 2003, Tornier entered into exclusive distributorship

agreements with Boyd and with Wetherill. Each agreement specified that the local agent was to be the only

authorized seller of Tornier products in its designated

regions. The agreements also demanded exclusivity for

Tornier: each distributor was restricted from selling

products that competed with Tornier products. As an

added layer of contractual protection, Tornier had the

right to set sales quotas for Boyd and Wetherill; if the

distributor did not meet the quotas, Tornier could terminate the agreement. These arrangements were confined

to Tornier’s product markets; Boyd and Wetherill were

still free to sell non-competing, non-Tornier products.

The agreements included a Texas choice-of-law clause.

In truth, Tornier was not necessarily committed to

its existing model of exclusive distributors. At the same
4 Nos. 10-2052 & 10-2068

time as it was signing these agreements, it was crafting

alternative plans for its future expansion and growth.

One of Tornier’s ideas was to “capture” the distributors

so that they were selling only Tornier products. This

meant that Tornier needed to persuade its distributors to

drop the non-competing non-Tornier products and

become dedicated Tornier outlets. To this end, Tornier

told Boyd and Wetherill that it was going to acquire

some bigger and better products and give them exclusive distribution rights in a solid long-lasting relationship. At one point Tornier told Boyd that if Boyd

dropped the non-Tornier products, he would be Tornier’s

“guy in St. Louis.” To Wetherill, Tornier similarly promised that he was the “chosen one” in Iowa. Tornier also

promised Wetherill that Wetherill would get exclusive

distribution rights to Nexa, a popular orthopedic brand

that Tornier was soon going to acquire. Buoyed by

these lofty promises, Boyd and Wetherill each began to

prepare for their future with Tornier, by dropping some

of their other products and concentrating on Tornier’s.

But all was not as it seemed: Tornier was in fact not

pleased with either Boyd or Wetherill. Tornier had decided

internally that Boyd and Wetherill did not fit the new

business model it had devised for itself. Indeed, it had

already positioned alternative distributors to take over

for them. Tornier then hiked Boyd’s and Wetherill’s

2007 quotas to an unreasonable level—for Boyd, 56%

higher than the previous year, and for Wetherill, 82%

higher than the previous year. When Boyd and Wetherill

could not meet those expectations, Tornier cut them

from the team and brought in their replacements. By that
Nos. 10-2052 & 10-2068 5

time, Boyd and Wetherill had become financially dependent on their relationships with Tornier and consequently

went out of business.

Boyd and Wetherill then sued Tornier for breach of

contract, intentional misrepresentation, and negligent

misrepresentation. In addition, they asked for punitive

damages in connection with their intentional misrepresentation theories. Invoking diversity jurisdiction, see

28 U.S.C. § 1332, they brought their action in the federal

court in the Southern District of Illinois. Tornier is a

Delaware corporation with its principal place of business

in Minnesota; Boyd and his company are citizens of

Missouri, and Wetherill and his company are citizens of

Iowa. Boyd’s tort claims are governed by Missouri law

and Wetherill’s by Iowa law. The breach-of-contract

claims are governed by Texas law, as stipulated in the

agreements’ choice-of-law clauses.

At summary judgment, the district court allowed the

breach-of-contract claims to proceed based on Tornier’s

unreasonable hiking of Boyd’s and Wetherill’s sales

quotas. It allowed the intentional misrepresentation

claims to go forward based on Tornier’s allegedly misleading statements telling Boyd and Wetherill to drop

other product lines to ensure a promising relationship

with Tornier and promising Wetherill that Tornier

would grant him the distribution rights to the Nexa

brand. Finally, with regard to the negligent misrepresentation counts (which were predicated on the same

statements as the intentional misrepresentation charges),

the district court allowed Boyd’s claim to proceed, but
6 Nos. 10-2052 & 10-2068

it dismissed Wetherill’s claims because Iowa law limits

such claims to attorneys, accountants, and other professionals in the business of guiding others in their affairs.

At trial, the jury returned a verdict against Tornier on all

of the claims that had survived summary judgment,

awarding $1,491,000 in actual damages for Boyd and

$1,100,000 in actual damages for Wetherill. The jury also

gave Boyd and Wetherill $2 million each in punitive

damages. In response to Tornier’s post-trial motions

under Federal Rules of Civil Procedure 50(b) and 59(e),

the magistrate judge upheld the jury verdicts on the

misrepresentation claims, set aside the punitive damages,

and entered judgment for the actual damages. All parties

timely appealed.

II

A

We begin by discussing Tornier’s argument that the

court erred when it upheld the jury’s award of lost

profits for each plaintiff’s breach of contract claims. We

review the denial of Tornier’s motion to alter the judgment for abuse of discretion, noting that for relief under

Rule 59(e) the movant must demonstrate a manifest error

of law or fact or present newly discovered evidence.

FED. R. CIV. P. 59(e); Kapelanski v. Johnson, 390 F.3d 525,

530 (7th Cir. 2004); County of McHenry v. Insurance Co. of

the West, 438 F.3d 813, 819 (7th Cir. 2006).

The Tornier Agency Agreement signed by both plaintiffs addressed the subject of lost profits in a manner that
Nos. 10-2052 & 10-2068 7

is not helpful to the plaintiffs. Article 9.6, which was

identical in the two agreements, says, “Upon termination

of this Agreement, neither party shall be liable to the

other for any loss of profits of any kind or nature sustained or arising out of such termination.” Despite this

language, the court upheld the jury’s decision to award

one year’s lost profits for both Boyd and Wetherill. In so

doing, it relied on a principle of Texas law to the effect

that a contractual limitation on damages may not be

enforced when a disparity of bargaining power exists—i.e., when one party has no real choice in accepting

the agreement limiting the liability of the other party.

Federated Dep’t Stores, Inc. v. Houston Lighting & Power

Co., 646 S.W.2d 509, 511-12 (Tex. App. 1982). The court

reasoned that the question whether this kind of imbalance of power existed was one of fact and thus for

the jury. See id. (stating that the existence of this

disparity is a question of fact). The jury in turn found the

necessary disparity. We conclude, to the contrary, that

on this record the jury should never have been asked

to make this determination.

Boyd and Wetherill point to little that indicates a substantial disparity in bargaining power. They state that

they were both dependent on Tornier’s business and

that they had been unable to negotiate contractual terms

before, but if that is enough to meet the Texas rule, then

the state might as well have outlawed the topic of

damage limitations for private orderings—and it has not

done so. Neither of these statements tells us much about

the bargaining dynamic. The mere fact that Tornier

was firm in negotiation does not indicate substantially
8 Nos. 10-2052 & 10-2068

unequal bargaining power. Moreover, Boyd and Wetherill

were both selling non-Tornier products. It may be that

over time they became dependent on Tornier, but both

were sophisticated businesses and their resulting financial dependence was the product of their choices.

They protest that they were fraudulently manipulated

by Tornier and thus any apparent element of choice was

illusory, but that is a different point. There is no necessary correlation between disparity in size and ability of

one party to defraud another. We recognize that, in the

appropriate case, fraudulent statements may vitiate a

contracting party’s real choice and alter the party’s

access to information, and in that way create some kind

of power disparity. But we do not think that this is

such a case. As we will see below, Boyd and Wetherill

were led astray, much to their detriment, by Tornier’s

falsehoods, and for this they will receive compensation.

At the same time, they were successful distributors,

with access to Tornier’s competitors and other similarly

situated companies. They had the choice of rejecting

Tornier’s demands, of driving a harder bargain, or of

diversifying their own businesses in a way that

preserved Tornier’s exclusivity in the medical devices

market. They chose instead to accept Tornier’s terms,

and, at least for purposes of their contract theories, that

is the contract with which they must contend.

There is little else to say about the award of lost-profits

damages. Article 9.6 specifically excludes this form of

relief. Neither plaintiff has offered any other reason why

its lost-profit award does not fall within the scope of
Nos. 10-2052 & 10-2068 9

that article. We therefore conclude that these damages

must be set aside.

B

We turn now to Tornier’s arguments that the the plaintiffs’ misrepresentation claims should have been rejected

both on the law and as a matter of fact. We review the

court’s denial of Tornier’s post-trial motion for judgment as a matter of law de novo, viewing the evidence in

the light most favorable to the nonmoving parties,

Boyd and Wetherill. Liu v. Price Waterhouse LLP, 302

F.3d 749, 754 (7th Cir. 2002). If any reasonable jury could

have reached the same conclusion, then the motion

was properly denied. Id.

Under both Missouri and Iowa law, to establish a

claim of intentional misrepresentation, one must show:

(1) there was a false, material representation; (2) the

speaker knew of its falsity; (3) the speaker intended

to deceive; (4) the hearer justifiably relied on the representation being true; and (5) damages. Murray v. Crank,

945 S.W.2d 28, 31 (Mo. App. 1997); City of McGregor v.

Janett, 546 N.W.2d 616, 619 (Iowa 1996). The jury found

that Tornier made three intentional misrepresentations—one to Boyd and two to Wetherill. The first

occurred when Tornier told Boyd that if he dropped

other non-Tornier product lines that Boyd was carrying,

he could look forward to a long, productive relationship with Tornier; the second involved the same promise

to Wetherill; and the third was Tornier’s promise to

give Wetherill an exclusive distributorship for the
10 Nos. 10-2052 & 10-2068

Nexa product line. Tornier argues that these findings

must be rejected because Boyd and Wetherill have failed

to establish two essential elements: justifiable reliance

on the part of Boyd and Wetherill, and Tornier’s knowledge that the statements were false.

Tornier first argues that Boyd and Wetherill took no

action in reliance on the statements. Though Boyd and

Wetherill both dropped other non-Tornier product

lines, Tornier asserts that they did so for reasons

unrelated to the alleged misrepresentations. But there

was evidence to the contrary in the record. Garry Boyd

testified that after Tornier had made its promises to him

he dropped the Alphatech and Exactech product lines,

both non-Tornier products, in order to focus on the

Tornier brands. Similarly, Charles Wetherill testified

that he dropped the Exactech product line and did not

pursue opportunities with two other companies, Integra

LifeSciences and Depuy Orthopaedics, in reliance on

Tornier’s promises. Furthermore, Wetherill hired a salesman to focus on Nexa sales. A reasonable jury could

have found that these facts established justifiable reliance.

Tornier responds that even if Boyd and Wetherill

relied on its promises, they did so unjustifiably. Tornier

asserts that its representations to Boyd and Wetherill

were expressly conditional: it said only that if they

dropped all other non-Tornier product lines, there

would be a long, stable relationship awaiting them.

Since neither Boyd nor Wetherill dropped all of their

non-Tornier product lines, neither fulfilled the condition

of the promise. Thus, there was no justifiable reliance.
Nos. 10-2052 & 10-2068 11

Unfortunately for Tornier, the evidence does not

support this story. Boyd testified that he was told that

he should “[f]ocus on Tornier,” in exchange for the promised benefits. Similarly, Wetherill testified that he was

supposed to “envision what [Tornier’s] business plan

was” and drop lines that may compete. Nothing in

either Boyd’s or Wetherill’s testimony indicates that

they were required to drop every single non-Tornier line

in order to qualify for a long-term relationship with

Tornier. A reasonable jury could have credited Boyd’s

and Wetherill’s account of the scope of the commitment Tornier was seeking and thus conclude that both

Boyd and Wetherill justifiably relied on Tornier’s promises

when they dropped some non-Tornier brands and forewent other opportunities.

Tornier also argues that the evidence is not sufficient

to permit the jury to find that Tornier knew at the time

it made its promises that they were false. All of the evidence, it asserts, is equally consistent with goodfaith promises, subsequently changed plans, and thus

at most a failure to perform in accordance with those

promises. In response, Boyd and Wetherill point to the

fact that at the same time it was talking to them, Tornier

was quietly positioning alternative distributors in

their regions. Even more telling was the evidence

showing that Tornier insiders had discussed Boyd’s and

Wetherill’s lack of “fit” with its business model before

the misrepresentations were made. This provides sufficient, maybe even compelling, reason for finding that

Tornier knew at the time it spoke that the promises

were false, as it indicates that Tornier had no intention
12 Nos. 10-2052 & 10-2068

of pursuing a long-term relationship with either Boyd or

Wetherill. Tornier protests that, as part of its business

strategy, it had set up substitutes for all of its distributors, not only Boyd and Wetherill. This does little

to persuade. If it was behaving duplicitously with the

other distributors, then it sounds like an assertion that

lots of lies are better than a few. If it was not leading

the others on, then its plans for them are immaterial.

In light of the evidence presented in this case, a reasonable jury could have rejected Tornier’s explanation

and found instead that Tornier knew its promises were

false. In short, we conclude that there was sufficient

evidence to affirm the jury’s verdicts against Tornier on

all three intentional misrepresentation claims.

The jury also found for Boyd on the theory of

negligent misrepresentation based once again on Tornier’s

promise of a future close relationship. In Missouri, “[t]he

elements of negligent misrepresentation are: (1) the

speaker supplied information in the course of his

business; (2) because of the speaker’s failure to exercise

reasonable care, the information was false; (3) the information was intentionally provided by the speaker for the

guidance of limited persons in a particular business

transaction; (4) the hearer justifiably relied on the information; and (5) due to the hearer’s reliance on the information, the hearer suffered a pecuniary loss.” Renaissance

Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 134

(Mo. 2010). “ ‘[O]ne who, in the course of his business,

profession or employment, or in any other transaction

in which he has a pecuniary interest, supplies false information for the guidance of others in their business trans-
Nos. 10-2052 & 10-2068 13

actions, is subject to liability for pecuniary loss caused

to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.’ ”

CADCO, Inc. v. Fleetwood Enters., Inc., 220 S.W.3d 426, 438-

39 (Mo. App. 2007) (quoting RESTATEMENT (Second)

OF TORTS, § 552(1) (1977)).

Tornier argues that implicit in the first element is a

limitation of this tort to attorneys, accountants, and

other professionals whose business it is to give others

guidance in their affairs. Tornier is not involved in

the business of providing guidance to people in their

business pursuits—it manufactures medical devices.

Thus, Tornier argues, it cannot be liable for negligent

misrepresentation. Tornier acknowledges that no

Missouri court has so ruled; nevertheless, Tornier

invites us to take that step. Other states have done so,

it points out; indeed, it was for this reason that Iowa

law barred Wetherill’s negligent misrepresentation claim.

Federal courts are not in a position to innovate when

state law provides the rule of decision. Although it is

certainly possible that Missouri some day might want to

follow states like Iowa, we conclude that it has not yet

done so. The Missouri courts, adopting the Restatement’s

view, state that one “who, in the course of his business,

profession or employment, or in any other transaction

in which he has a pecuniary interest” may be liable for negligent misrepresentation. Even though Tornier is not in

the business of providing guidance, its negligent misrepresentation was part of a transaction in which it
14 Nos. 10-2052 & 10-2068

had a pecuniary interest. That is enough, under the Missouri cases we have found; they do not require the defendant to be in the business of giving guidance to others. For

example, in CADCO, Inc., a Missouri appellate court

upheld a verdict finding a mobile home manufacturer

guilty of negligent misrepresentation in its transaction with

a dealer. 220 S.W.3d at 439. The manufacturer told the

dealer that it would be allowed to sell a particular model

and then reneged. Id. Though the appeal in CADCO, Inc.

primarily concerned damages, the court found that all the

elements of the tort had been met. Id. Since Missouri takes

a broader view of negligent misrepresentation than Tornier

suggests, and the evidence supported the jury’s conclusion

in favor of Boyd, we reject Tornier’s effort to set aside

this part of the verdict.

C

Finally, we reach the topic of tort damages, about which

both sides have something to say. Tornier asserts that

the award of actual damages was not supported by sufficient evidence. As this was part of Tornier’s Rule 59(e)

motion to alter the judgment that the district court

denied, our review is once again only for abuse of discretion. The jury’s awards of actual damages for the

plaintiffs included lost profits for six years and

assumed a growth rate of 20% per year for both Boyd

and Wetherill. Tornier argues that the awards should

be limited to one year’s lost profits, as the distributorship

contracts were only for one-year terms. In addition, it

argues that even if the awards in theory can go beyond
Nos. 10-2052 & 10-2068 15

one year, the evidence here of actual damages did not

support such an extension.

Both Missouri and Iowa allow lost profit damages in tort

to exceed the term of the contract if the misrepresentation included promises of an ongoing, lasting relationship. Jacobs Mfg. Co. v. Sam Brown Co., 19 F.3d 1259, 1264

(8th Cir. 1994) (applying Missouri law); Robinson v. Perpetual Servs. Corp., 412 N.W.2d 562, 566-67 (Iowa 1987). As we

have already established, the jury here was entitled to

conclude that Tornier fraudulently promised Boyd and

Wetherill an ongoing, lasting relationship. In principle,

therefore, Boyd and Wetherill could recover beyond

the one-year terms of their contracts.

Nevertheless, any such damages would have had to

find support in the evidence. A plaintiff cannot recover

for damages that are speculative or uncertain. Though a

plaintiff will not be denied recovery merely because

the amount of damages is difficult to ascertain, there

must be a reasonable basis in the record from which the

amount of damages can be inferred or approximated.

Coonis v. Rogers, 429 S.W.2d 709, 714 (Mo. 1968); Robinson,

412 N.W.2d at 567. 

No such reasonable basis is present here. The assumption that Boyd and Wetherill would sustain 20% annual

growth for six consecutive years was buttressed by

little more than conjecture and hope. Boyd and Wetherill

offered as evidence their own testimony and the testimony of expert witness John Kaelblein. Wetherill testified that the basis for his 20%-growth assumption

was that this was the industry standard. Boyd echoed
16 Nos. 10-2052 & 10-2068

this view on the industry’s standard growth and added

that his company would grow by 20% as that was his

commission percentage. But the latter point about his

commission says nothing about his company’s growth.

There is no obvious correlation between growth and

commission percentage. Indeed, one might cultivate a

company’s growth by taking a smaller commission and

reinvesting in the company; conversely, one could

inhibit growth by gobbling up profits through a high

commission that depletes the company’s financial resources. As for Boyd’s and Wetherill’s speculation

about standard growth in the industry, the testimony of

their own expert contradicted their assertions. At the

trial held in 2009, Kaelblein testified that he thought

that all medical companies would grow at significantly

less than 20% for three years and that 20% growth was

not sustainable, especially given the then-sluggish state

of the economy. This is simply not enough evidence

to support a jury finding that the plaintiffs’ businesses

would have grown at a steady rate of 20% per year for

six years.

In addition to the actual damages, the jury awarded

Boyd and Wetherill $2 million each in punitive damages.

In the district court, Tornier argued that there was

no evidentiary basis for the awards and moved to set

them aside. The magistrate judge agreed and granted

Tornier’s motion for judgment as a matter of law on

the requests for punitive damages. In their cross-appeal,

Boyd and Wetherill challenge this determination; they

insist that Tornier’s conduct was reckless with respect

to the grave financial consequences they ultimately suf-
Nos. 10-2052 & 10-2068 17

fered, and this was enough to show legal malice.

Our review is under the familiar de novo standard, viewing

the evidence most favorably to nonmovants Boyd and

Wetherill. Medcom Holding Co. v. Baxter Travenol Labs., Inc.,

106 F.3d 1388, 1402 (7th Cir. 1997). 

Punitive damages may be awarded only upon a

showing of outrageous conduct that demonstrates actual

or legal malice. Jefferson v. American Fin. Group, Inc., 163

S.W.3d 485, 488 (Mo. App. 2005); Peters v. General Motors

Corp., 200 S.W.3d 1, 24 (Mo. App. 2006); Van Sickle Const.

Co. v. Wachovia Commercial Mortgage, Inc., 783 N.W.2d 684,

689 (Iowa 2010). Actual malice may be shown by spite,

hatred, ill will, or vindictive motives. Van Sickle Const. Co.,

783 N.W.2d at 689-90; Bramon v. U-Haul, Inc., 945 S.W.2d

676, 684 (Mo. App. 1997). Legal malice may be shown

by reckless indifference for an act’s consequences. Oster

v. Kribs Ford, Inc., 660 S.W.2d 348, 355 (Mo. App. 1983);

Van Sickle Const. Co., 783 N.W.2d at 690. These standards

are not to be taken lightly: punitive damages are an

extraordinary measure, to be applied sparingly. Artilla

Cove Resort, Inc. v. Hartley, 72 S.W.3d 291, 296 (Mo. App.

2002). Merely objectionable conduct is insufficient to

sustain a punitive damages award. Wolf v. Wolf, 690

N.W.2d 887, 893 (Iowa 2005).

The district court correctly ruled that this record did not

support punitive damages against Tornier. Tornier engaged in tortious behavior, but there was no evidence

that its behavior was with any kind of malice—actual or

legal. Nothing indicates that Tornier bore ill will or

hatred towards them, nor does the evidence show legal
18 Nos. 10-2052 & 10-2068

malice. Tornier engaged in a fraudulent business strategy

with sophisticated business partners. It may have

realized that Boyd and Wetherill could be affected financially by its misrepresentations, but it was acting in the

business arena with parties that were capable of protecting themselves. This falls short of reckless indifference. Moreover, though tortious and objectionable,

Tornier’s conduct was not outrageous. Bad consequences

resulted for Boyd and Wetherill, and they will be compensated for their losses. Punitive damages, however,

would both over compensate Boyd and Wetherill and

unnecessarily punish Tornier. We thus affirm the

district court’s decision to set aside the punitive damages

awards.

* * *

We VACATE the award of lost profits on the breach of

contract action. We AFFIRM the verdicts against Tornier

on intentional misrepresentation and negligent misrepresentation, but we VACATE the jury’s award of actual

damages. Finally, we AFFIRM the order setting aside

the punitive damages awards. The case is REMANDED to

the district court for a recalculation of damages consistent with this opinion. Each side is to bear its own costs.

8-24-11