## Judge He nley died on October 18, 1997. This opinion is consistent with hi s 1 

## vote at the panel's conference following oral argument on September 11, 1997. 

# United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_______________ Nos. 96-3266/3457

_______________ Vicki Grabinski, *
* Appellee/Cross-Appellant, *
*

v. * Appeals from the United State s * District Court for th e Western Blue Springs Ford Sales, Inc.; Blue * District o f Missouri. Springs Ford Wholesale Outlet, Inc.; * Don Isom; Fred Graham; and Bob * Dudley, *
* Appellants/Cross-Appellees. *

_______________ Submitted: September 11, 1997 Filed: February 12, 1998

_______________ Before B OWMAN, Circuit Judge, HENLEY, Senior Circuit Judge, and MORRI S 1 SHEPPARD ARNOLD, Circuit Judge.

_______________

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MORRIS SHEPPARD ARNOLD, Circuit Judge.

Blue Springs Ford Sales, Inc. (BSF), Blue Springs Ford Wholesal e Outlet, Inc. (Outlet), and three Outlet employe es, Don Isom, Fred Graham, and Bob Dudley, appeal from a judgment entered on jury verdicts in favor of Vicki Grabinski on her claims based on the common law and on th e Missour i Merchandising Practices Act, see Mo. Rev. Stat. §§ 407.010

- 407.1020. The jury awarded Ms. Grabinski $7,835 in actual damages an d $210,000 in punitive damages. Ms. Grabinski cross-appeals from the trial court's denial of her motion for attorney fees. We affirm the judgment as to liability and actual damages, reverse and remand as to punitive damages , and dismiss the cross-appeal as moot.

I. Bob Balderston is the owner and president of BSF, Mark Talbott is the vice-pre sident and general manager of BSF, and Tom Riddings is th e president and general manager of the Outlet. Mr . Balderston, Mr. Talbott, and Mr. Riddings own the Outlet in equal shares. About seventy percent of the Outlet's cars come from BSF.

Early in 1993, BSF took a 1984 GMC Jimmy truck as a trade-in, an d Steve Lotspeich, BSF' s used-car manager, examined it. As a general rule, Mr. Lotspeich looked at vehicles for about ten t o fifteen minutes and took themfor a short drive at speeds of up to thirty-five miles an hour

. Bec ause the Jimmy was to be wholesaled, however, Mr. Lotspeich probabl y spent less time examining it. Mr. Lotspeich then called Mr. Isom, th e Outlet's business manager, to offer the Jimmy for sale. Mr. Lotspeich, wh o expected his descriptions of vehicles to be passed along to the Outlet's cust omers, described the Jimmy as "very nice" and stated that it wa s "driving fine" and needed only a cleanup and standard servicing.

Afew days later, Ms. Grabinski called the Outlet and spoke t o Mr. Gr aham, a salesman, about buying a dependable four-wheel-driv e vehicle. Mr. Graham told her

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about the Jimmy. Later that day, Ms. Grabinski and her fiancé, Mat t Walker, went to the Outlet. Mr. Graham showed them the Jimmy, telling the m th at except for an obvious crack in the windshield it was in "A-1 " condition. He also stated that it had never bee n in a wreck, had had only

one ow ner, and ran perfectly. After a short test drive and som e negotiatio ns, Ms. Grabinski agreed to pay $5,500 for the Jimmy. Whe n Ms. Grabinski talked to Mr. Isom about financing, he assured her that she was getting a good deal because the Jimmy was de pendable and in "excellent condition." Ms. Grabinski then put a deposit on the Jimmy.

After obt aining financing from a bank, Ms. Grabinski and Mr. Walker returned to the Outlet the next week to close the deal. Mr. Graham told her that she had to s ign a "tow-away" affidavit, which, in relevant part, stated:

I u nderstand that the [Jimmy] which I purchased from [th e Outlet] has not been Missouri State inspected and i s considered to be in an unsafe mechanical condition. This vehi cle is being purchased for the purpose of rebuilding, salvage, or junk. I understand that the vehicle cannot be operated in its present
con dition[;] therefore I agree that the vehicle be towed o r hauled from its place of purchase.

Under Miss ouri law, if a purchaser of a vehicle executes an affidavi t stati ng that the vehicle is being purchased for "junk, salvage, or fo r rebuilding," the sell er is exempt from a state requirement that "[a]t the selle r's expense [the] vehicle ... shall immediately prior to sale b e fully inspected regardless of any current certificate of inspection an d approval, and an appropriate new certificate of inspection and approval ..

. shall be obtained." See Mo. Rev. Stat. § 307.380.

After Ms . Grabinski refused to sign the affidavit, Mr. Graham , contraryto the law, told her that Missouri law required buyers of al l vehicles to sign such an affidavit because until the vehicle was inspected it was considered unsafe. Ms. Grabinski still r efused to sign, asking why she had to sign the affidavit since she needed a dependable

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vehicle and did not have any more money to put into the Jimmy. Mr. Isom and Mr. Dudley, another salesman, then came into Mr. Graham's office

. During a fifteen-minute discussion, Mr. Graham, Mr. Isom, and Mr. Dudley tried to persuade Ms. Grabinski to sign the affidavit, claiming that use of the affidavit was "universal" in sales of vehicles in Missouri. They also assured her that the Jimmy was not a "piece of junk." Mr. Dudley and Mr. Isom told her the only reason that it would not pass inspection was th e cracke d windshield and reiterated that it had never been wrecked

. Ms. Grabinski then signed the affidavit and comp leted the sale, and, after the Outlet's mechanic replaced the spark plugs, she drove the Jimmy off th e lot.

About a week later, while Mr Walker was driving the Jimmy back from Oklahoma, the engine began overheating. Mr. Walker had the vehicle towed back to the Outlet. Mr. Isom told Ms. Grabinski that the engine heads wer e cracked and offered to repair them for $360. Ms . Grabinski had the repair done elsewhere. After the repair, the Jimmy continued to experienc e difficulties, includi ng lack of power, swaying, and low gasoline mileage.

Ms. Grabinski soon undertook an investigation of the Jimmy's hi story. She dis covered that one James Cox had bought the vehicle in 1986 from a wreckin g company, which had obtained it as salvage after it sustaine d considerable damage in a roll-over accident. Mr . Cox then spent about two

or three months rebuilding the Jimmy. When Ms. Grabinski and Mr. Walker went back to the Outlet and confronted Mr. Isom about what she had learned , Mr. Isom offered to repurchase the Jimmy, but at a substantial reduction fromthe price that Ms. Grabinski had paid because it needed repair

. Mr. I som told them that if the Jimmy was not in good condition, BSF ha d "screwed" the Outlet because BSF had represented that it was in "goo d shape."

Ms. Grab inski then filed suit, raising claims under the common la w of fraud and under the Missouri Merchandising Pr actices Act, the latter of which provides that the "use or employment by any person of any deception, fraud, ... misrepresentation, [or]

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unfair practice ... i n connection with the sale ... of any merchandise in trade o r commerce ... is declared to be an unlawful practice." See Mo

. Rev. Stat. § 407.020.1. Ms. Grabinski subsequently replaced the Jimmy's engine, and th e defen dants then offered to repurchase the Jimmy for the sale price an d certain co sts but less depreciation. The offer was not contingent o n Ms. Grabinski's dismissal of her lawsuit. Ms. Grabinski rejected the offe r and eventually traded the Jimmy.

At trial, in addition to presenting evidence relating to the sa le and the history of the Ji mmy, Ms. Grabinski presented the expert testimony of Richar d Diklich, an instructor in automotive technology. Mr. Diklic h testified that based on his examination of the Jimmy there were signs of wreck damage, such as repainting and poor door f it, which should have been obvious t o a vehicle appraiser on a visual examination. He also opine d that the power diffic ulty should have been obvious to an appraiser during

a test drive. According to Mr. Diklich, had the condition of the Jimmy been as represented, it would have been worth $8,000 but at the time o f purchase was worth $2,500 to $3,000.

Ms. Grabi nski also presented evidence that BSF knew that the Outlet

use d tow-away affidavits in sales of vehicles, in violation of Missour i law. Mr. Talbott, vice-president and general manager of BSF and vice

pre sident of the Outlet, read from a July, 1990, automobile associatio n bullet inadvising its members, which included BSF, that the "Missour i AttorneyGeneral's Office had published guidelines concerning the proper

use of the 'junk, salvage or rebuilding affidavit.' " The bulletin warned : "You CANNOT substitute a 'junk affidavit' for a motor vehicle safet y inspection" if "[t]he vehicle is operable and is driven rather than towed

or hauled away." Mr. Talbott testified that shortly before trial th e Outlet stopped using the affidavits.

### -6- The jury awarded actual damages of $ 7,835. It also awarded punitive damages of $100,000 against the Outlet, of $50,0 00 against BSF, of $30,000 against Mr. Isom, of $20,000 against Mr. Dudley, and of $10,000 agains t Mr. Graham.

After the verdicts, the trial court informed the parties that b ecause under state law the matter of statutory punitive damages was left to the discretion of the court, the court would not ent er judgment until it heard argument on the matte r of punitive damages and on Ms. Grabinski's request for sta tutory attorney fees. Before argument, the defendants filed a
mem orandumasserting that the jury's punitive damages awards wer e
exc essive, and, with the exception of BSF, they submitted affidavits o f their net worth in support. The trial court did not rule on the matters at the conclusion of argument, but later held that it would not consider the net-worth affidav its and could not "second guess" the jury's verdicts becaus e of "equitable considerations." The trial court also denie d Ms. Grabinski's reque st for attorney fees on the ground that the punitive dama ges awards were "generous." The trial court entered judgment i n accordance with the v erdicts. The defendants filed a postjudgment motion for judgment as a mat ter of law; in the alternative, they requested a new trial or remittitur, asserting that the punitive damages awards wer e excessive under state law and the United States Constitution.

II. Th e defendants first argue that the trial court erred in denyin g their motion for judgment as a matter of law; they assert tha t Ms. Gra binski failed to prove that they made misrepresentations as t o existing facts. See State ex rel. Danforth v. Independence Dodge, Inc. , 494 S.W.2d 362, 368 (Mo. Ct. App. 1973). In particular, BSF argues that Mr. Lotspeich's representation that the Jimmy was "very nice" was merely an expression of opinion and thus not actionable. We disagree.

"Agiven representation can be an expression of opinion or a statement of fact depending upon the circumstances surrounding th e representation." Carpenter v.

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Chrysl er Corp. , 853 S.W.2d 346, 358 (Mo. Ct. App. 1993). In th e circumstances here, we believe that Mr. Lotspeich's representation that th e Jimmy was "very nice" could reasonably be taken as a statement of fact as to the condition of t he Jimmy. See id. (salesperson's statement that car was "good" and "reliable" was misrepresentation of fact). In addition, as Ms. G rabinski points out, Mr. Lotspeich also stated that the Jimmy wa s "dr iving fine" and "only needed a clean-up and standard service," whic h were clearly misrepresentations as to facts.

Contrary to BSF's argument, moreover, the fact that Mr. Lotspeich's statements were not made "directly to" Ms. Grabinski is not a defense to her dama ge claim. Freeman v. Myers , 774 S.W.2d 892, 894 (Mo. Ct. App

. 1989). BSF is liable to Ms. Grabinski because Mr. Lotspeich expected his representations "to e xtend to and be relied upon by a retail purchaser of the car from the automobile dealership to whom [BSF] sold the car." Id. at 893-94. Not only did Mr. Lotspeich testify that he knew that the Outle t relied on his expertise in examining vehicles and "expected [the Outlet] to be abl e to pass on things that [he] represented," there was evidenc e fromwhich a jury could reasonably have concluded that the Outlet had in fact p assed on Mr. Lotspeich's representations about the Jimmy t o Ms. Grabinski. Mr. Isom and Mr. Dudley both testified that the informatio n that they received about the Jimmy came from Mr. Lotspeich and that they relied up on him to disclose problems, such as if the Jimmy had bee n wrecked. Especially significant, we think, is Mr. Isom's statement t o Ms. Grabinski that if the Jimmy was in bad shape when she bought it, BSF had "screwed" the Outlet by representing that it was in "good shape."

Nor, con trary to its arguments, can BSF be shielded from liabilit y because Mr. Lotspeich's brief visual inspection and test drive might not have provided him with knowledge of the Jimmy's defects. It is sufficien t that Mr. Lotspeich "made the representations with the consciousness that [he] was without knowledge as to their truth or falsity, when, in fact , they were false." Sc ott v. Car City Motor Co., Inc. , 847 S.W.2d 861, 865 (Mo. Ct. App. 1992). In any event, the jury could reasonably have

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concluded that Mr. Lotspeich, as an experienced vehicle appraiser, knew or should have known that the Jimmy had been in a wreck because of obvious signs of damage and knew or should have known of its power problems during the test drive.

The statements of Mr. Isom, Mr. Graham, and Mr. Dudley that the Jimmy was in excellent cond ition, had had one owner, and had never been wrecked

we re likewise actionable misrepresentations. We reject Mr. Dudley' s argument that because he did not speak to Ms. Gr abinski until a week after she p ut down her deposit on the Jimmy, she could not have relied on hi s representations in deciding to buy the Jimmy. The defendants' evidence wa s that Mr. Dudley told Ms. Grabinski that if she was "uncomfortable" wit h signing the tow-away affidavit, the Outlet would be "happy to return her moneyto her and just end the sale right then." Ms. Grabinski testified that she completed the sale only because she relied on th e misrepresentations, i ncluding Mr. Dudley's, that use of the affidavit was "univ ersal" in sales of vehicles in Missouri and that despite what th e affidavit said, the Jimmy was not a "piece of junk" and was, in fact, in excellent condition.

The defendants also argue that there was insufficient evidence t o support the jury's award of $7,835 in actual damages. We disagree. At

a minimum, Ms. Grabinski was entitled to "the difference between the actua l value of the property and what its value would h ave been if it had been as represented." Sunset Pools v. Schaefer , 869 S.W .2d 883, 886 (Mo. Ct. App. 1994) ("benefit-of-bargain" rule applies to fraud and Merchandisin g Practices Act claims). Here Mr. Diklich testified that the Jimmy wa s worth$2,500 to $3,000 but would have been worth $8,000 as represented

. Ms. Grabinski was also entitled to recover other expenses of which there

was evidence, including interest charges, repair costs, lost time fro m work, excessive gasoline costs, towing charges, and other costs relating to "problems arising from the fraudulent transac tion." Hughes v. Box , 814 F.2d 498, 503 (8th Cir. 1987) (applying Missouri law); see also Carpenter , 853 S.W.2d at 361. The jury's award thus finds ample support in th e record.

### -9- III. We turn now to the defendants' arguments concerning the punitiv e damages awards. They contend that the trial court erred in instructing th e jury a s to a mitigating circumstance, in rejecting their postverdic t affidavi ts of net worth, and in failing to review the verdict fo r excessiveness.

The tr ial court instructed the jury that it could consider th e defend ants' offer to repurchase the Jimmy as mitigating evidence wit h respec t to punitive damages, but also instructed the jury tha t Ms. Grabinski "reasonably rejected the offer bec ause of uncertain details" and because her acceptance "would indirectly create risks" for her lawsuit

. The defendants contend that whether Ms. Grabinski's rejection of the offe r was reasonable was a question of fact for the jury.

InMissouri, evidence of a defendant's conduct subsequent to tha t defendant's wrongful acts is admissible to mitig ate punitive damages if it is " 'so connected with the particular acts as t ending to show defendant's disposition, intention, or motive in the commiss ion of the particular acts for which damages are claimed.' " Maugh v. Chrysler Corp. , 818 S.W.2d 658 , 663 (Mo. Ct. App. 199 1), quoting Charles F. Curry and Co. v. Hedrick , 378 S.W.2d 52 2, 536 (Mo. 1964). Because Ms. Grabinski was not obligated t o accept the repurchase offer and because her reasons for rejecting the offe r
are irrelevant to the defendants' state of mind at the time of th e transaction, see Maugh , 818 S.W.2d at 664, any e rror in the instruction is harmless. Given all of the circumstances of thi s case, including the fact that the offer was made after the filing of the complaint and testimon y that the o ffer was intended "to avoid the expense of litigation," th e def endants, as the trial court noted, "got more mileage out of th e [evidence] than they were entitled to."

We next consider the defendants' arg ument that the trial court erred inrefusing to consider their postverdict affidavits of net worth. Th e defendants contend that

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because the purposes of punitive damages are punishment and deterrence, net worth is an essential consideration. They concede that in Missour i "[w]hile the net worth of a party is admissible on the issue of punitive damages, there is no requirement that the net worth be shown." Mullen v. Dayringer , 705 S.W.2d 531, 536 (Mo. Ct. App. 1985). The defendant s suggest, however, that as a matter of federal constitutional law a trial court in its postverdict review must consider evidence of a defendant's ne t worth. Ms . Grabinski responds that the defendants' failure to put o n evidence of their net worth at trial constitutes a waiver.

We agr ee with Ms. Grabinski. In Kemezy v. Peters , 79 F.3d 33, 3 4 (7th Cir. 1996), the Seventh Circuit held that as a matter of federal law it is a defendant's burden to introduce evidence of net worth before a jur y for purposes of minimizing a punitive damages aw ard. The court noted that none of "the purposes that are served by the awarding of punitive damages

... dep ends critically on proof that the defendant's income or wealt h exceeds some specified level." Id. at 35 (emphasis in original). Althoug h the court acknowledged "that losing $1 is likely to cause less unhappiness (disutility) to a ric h person than to a poor one," id. , the court likened

an award of punitive damages to a fine. Id. at 36. The court observe d that "[t]he usual pra ctice with respect to fines is not to proportion the fine to the defendant's wealth, but to allow him to argue that the fin e should be waived or lowered because he cannot possibly pay it." Id. In the context of punitive damages, we agree with the Seventh Circuit tha t "[t]he defendant who cannot pay a large award of punitive damages can poin t this out to the jury so that they will not waste their time ... by awardin g
an amount that exceeds his ability to pay." Id. Accord Smith v. Lightnin g Bolt P roductions, Inc. , 861 F.2d 363, 373 (2d Cir. 1988) ("it is th e defend ant's burden to show that his financial circumstances warrant a limitation of the [punitive damages] award").

The def endants also argue that the trial court erred in failing t o reviewthe jury's award of punitive damages, as required by Pacific Mut. Life Ins. Co. v. Haslip , 499 U.S. 1, 20 (1991). Ms. Grabinski suggests, however, that the trial court conducted an

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adequat e review because it held postverdict argument on the matter o f punitive damages. Cf. TXO Prod. Corp. v. Alliance Resources Corp. , 50 9 U.S. 443, 464-65 (1993) (plurality opinion). In this case, however, the trial court heard postverdict argument not because of due process concerns , but because it believed that under state law statutory punitive damage s
were a matter for the court, not the jury. (Although the issue was no t raised on appeal, we note that, contrary to the trial court's belief, in a diversity case "[f]ederal law controls the iss ue" of the right to a jury trial, "e ven in cases ... where the federal court is enforcing a state

created right and 'even when a state statute ... would preclude a jur y trial i n state court.' " Kampa v. White Consol. Indus., Inc. , 115 F.3 d 585, 587 (8th Cir. 1997), quoting Gipson v. KAS Snacktime Co. , 83 F.3d 225 , 230 (8th Cir. 1996). Where, as here, the state statute " 'allows, and the plaintiff seeks, at least in part a legal remedy,' " the plaintiff has a right to a federal jury trial. Kampa , 115 F.3d at 586, quoting Gipson , 83 F.3d at 231.)

Even though the trial court heard po stverdict argument for a purpose other tha n reviewing the verdicts as required by Haslip , if at tha t argument the court had rejected the defendants' excessiveness arguments an d indicated its agreement with the jury's verdicts, a remand would perhaps be unnecessary. At that argument, however, the trial court stated that it would take the matter under advisement, and in its opinion, the court did not treat the jury verdicts as advisory and revi ew them for excessiveness,

as it indicated it would do. To the contrary, the trial court held that it was bound by "equitable considerations" to en ter judgment in accordance withthe verdicts, relying on the principle that a court is collaterally estopped from relitig ating a jury's factual findings when the court later considers equitable remedies on the same claim. See , e.g. , Brownlee v. Yellow Freight Syst., Inc. , 921 F.2d 745, 749 (8th Cir. 1990). Tha t reliance was misplaced. Not only are punitive d amages a legal remedy, but the trial court had a duty under state and federal law to review the award s for excessiveness.

Alternatively, Ms. Grabinski urges u s to conduct a review on our own by applying the principles laid out in BMW of No rth America, Inc. v. Gore , 517 U.S. 559,

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116 S. Ct. 1589 (1996). In Gore , the Supreme Court held that i n determining whether a punitive damages award was so "grossly excessive," 517 U.S. at _____, 116 S. Ct. at 1592, as to violate federal due process rights, a court should consider "the degree of reprehensibility of th e defendant's conduct," 517 U.S. at _____, 116 S. Ct. at 1599, the ratio of punitive damages to compensatory damages, 517 U. S. at _____, 116 S. Ct. at 1601-02, and "the civil or criminal penalties that could be imposed fo r comparable misconduct," 517 U.S. at _____, 116 S. Ct. at 1603.

We believ e, however, that Gasperini v. Center for Humanities, Inc. , 116 S. Ct. 2211 (1996), controls this case. In Gasperini , the Secon d Circu it had vacated a jury's damages award pursuant to a state statut e providing that an appellate court "shall determine" whether a verdict is excessive. Id. at 2216. Although the Supreme Court held that the relevan t state's excessiveness standard applies in diversity cases, id. at 2221, th e Court was concerned that the application of the statute might conflict wit h the reexamination clause of the Seventh Amendmen t, which provides that "no fact tr ied by a jury, shall be otherwise reexamined in any Court of th e United States, than according to the rules of the common law."

After reviewing the common law, the Court concluded that "Sevent h Amendment constraints ... lodge[d] in the distri ct court, not the court of appeal s, primary responsibility" for review of a jury's verdict fo r excessive ness. Gasperini , 116 S. Ct. at 2225. The Court also believe d that practical consid erations supported its holding, noting that "[t]rial judges have the 'unique opportunity to consider the evidence in the living courtroom context,' " id. , quoting Taylor v. Washington Terminal Co. , 409 F.2d 145, 148 (D.C. C ir. 1969), cert. denied , 396 U.S. 835 (1969), "while appellate judges see only the 'cold paper record,' " Gasperini , 116 S. Ct

. at 2225, quoting Gasperini v. Center for Humanities, Inc. , 66 F.3d 427, 43 1 (2d Cir. 1995), vacated , 116 S. Ct. 2211 (1996). The Court went on to hold that appel late review of the trial court's determin ationin this regard is limited to an abuse of discretion

. Gasperini , 116 S. Ct. at 2225. In our

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case, sin ce there has been no review by the trial court we can hardl y decide whether the court abused its discretion in the award of punitiv e damages. We therefor e remand the case to the trial court for a review of the punitive damages awards under state and federal excessivenes s standards.

IV. In her cross-appeal, Ms. Grabinski argues that the trial court abused its discretion in denying her claim for statutory attorney fees for th e sole rea son that it believed that the punitive damages awards wer e "generous." She also challenges the trial court's refusal to ente r judgment as of the date of the jury verdicts. In light of our remand on the punitive damages issue, we need not address her arguments and dismiss the cross-appeal as moot .
On remand, Ms. Grabinski can bring t o the district court's attention the cases of O'Brien v. B.L.C Ins. Co. , 768 S.W.2d 64, 71 (Mo. 1989) ( en banc ) , and Moore v. City of Park Hills , 945 S.W.2d 1, 2-3 (Mo. Ct. App

. 1997), which deal with attorney fees, and AT&T v. United Computer Syst., Inc. , 9 8 F.3d 1206, 1211 (9th Cir. 1996), which deals with the entry o f judgment after remand.

V. Accordi ngly, we affirm in part and reverse in part the judgment o f the trial court. We dismiss the cross-appeal as moot and remand the case for further proceedings consistent with this opinion.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.