Opinion ID: 810835
Heading Depth: 1
Heading Rank: 1

Heading: Lafarge’s Issues

Text: Lafarge first contends that Andersons lacks standing to bring this suit because it is not the real party in interest to the lease. See Fed. R. Civ. P. 17(a)(1)(“An action must be prosecuted in the name of the real party in interest.”); Shealy v. Campbell, 485 N.E.2d 701 (Ohio 1985) (discussing real party in interest requirement under Ohio law). This is because, according to Lafarge, the 2008 repurchase options reconveyed the cars themselves but not any legal interest in the lease as a chose in action since the sale documents were silent on the matter. Under this theory, only U.S. Bancorp and National City would be able to sue Lafarge for the breach of contract, leaving Andersons stuck with the damaged cars once it decided to repurchase them. The district court rejected this argument quickly, as it should have, holding that the financing institutions “relinquished any interest in the railcars” and that Lafarge’s recognition of Andersons as the leaseholder at the end of the term estops it from taking a contrary position. We review this interpretation of state law de novo. Firestone v. Galbreath, 976 F.2d 279, 283 (6th Cir. 1992) (citing Salve Regina College v. Russell, 499 U.S. 225, 231 (1991)). There is no dispute that Andersons successfully conveyed its interest in the lease to the financing institutions at the beginning of the lease term. Given that both the 1998 and 2008 Vaughn/U.S. Bancorp transactions used identical language to refer to the property being conveyed, we hold that an interest in the lease was first conveyed and then reconveyed. The transfer to National City expressly referred to the lease whereas the transfer from National City did not. However, the bill of sale did convey “all of [National City’s] rights, title and interest in and to” the -5- Nos. 11-3984/11-4029 Andersons, Inc. v. LaFarge North America, Inc. cars and specified that the cars were sold “AS-IS-WHERE-IS without any covenant or warrant, express or implied, of any nature whatsoever.” Further, a letter from National City to the Surface Transportation Board pursuant to the Interstate Commerce Act4 provided “formal notification” that the cars had been “paid in full” and that National City “hereby releases all of its right, title and interest” in the cars. Despite the absence of an express reference to the lease, we conclude that these documents served to reconvey the interest in the lease back to Andersons. Cf. Restatement (Third) of Property (Servitudes) § 5.1 (2000) (“An appurtenant benefit or burden transferable . . . passes automatically with the property interest to which it is appurtenant.”).5 The lease also reverted back to Andersons under a theory of equitable assignment. Equitable assignment is a form of conveyance recognized by Ohio law which is evidenced by “any words or transactions which show an intention on one side to assign and an intention on the other to receive, if there is a valuable consideration.” Langhals v. Holt Roofing Co., 547 N.E.2d 401, 403 (Ohio Ct. App. 1988). “Since intent is the controlling factor, it is to be ascertained from all the language used, construed in the light of the surrounding circumstances. The object to be accomplished through the assignment may, therefore, be taken into consideration, as well as the conduct of the parties.” Gen. Excavator Co. v. Judkins, 190 N.E. 389, 391 (Ohio 1934). As the district court concluded, there can 4 “A . . . lease . . . intended for a use related to interstate commerce shall be filed with the [Surface Transportation] Board in order to perfect the security interest that is the subject of such instrument. . . . When filed under this section, that document is notice to, and enforceable against, all persons.” 49 U.S.C. § 11301(a). 5 Ohio courts have relied on this treatise for other issues. E.g. McCumbers v. Puckett, 918 N.E.2d 1046, 1052 (Ohio Ct. App. 2009); Walbridge v. Carroll, 920 N.E.2d 1046, 1049-50 (Ohio Ct. App. 2009); Kienzle v. Myers, 853 N.E.2d 1203, 1207-08 (Ohio Ct. App. 2006). -6- Nos. 11-3984/11-4029 Andersons, Inc. v. LaFarge North America, Inc. be no doubt from the documents and conduct of all parties involved that the transactions were part of a financing plan from which National City would have no interest in anything once Andersons exercised its option to repurchase the cars. Thus, we conclude that Andersons is the real party in interest to enforce the lease for both sets of cars.
Even though Lafarge presented evidence at trial that it was responsible under the contract for as much as $646,118 in damages, Lafarge inconsistently argues on appeal that the court should not have awarded “any” damages because (1) Andersons could not establish the amount of repair damages with the requisite degree of certainty and (2) the holdover rent provision is an unenforceable penalty which should be barred by Andersons’s failure to mitigate.6 Andersons crossappealed the court’s holdover rent determination, arguing that the court erred in finding that Andersons failed to mitigate those damages after sixth months. 1. Repair Damages.—The Andersons’s expert credited by the court, Jerry Charaska, testified that an accurate determination of the cost to fix a particular car would require sand blasting to remove the corrosion and determine the remaining amount of metal thickness. In the absence of sand blasting, Charaska explained that he could provide an opinion with a reasonable degree of certainty only as to the average cost to fix each car but conceded on cross-examination that he could not provide an estimate for each car individually. 6 A heading and the summary of argument in Lafarge’s principal brief allude to an improper admission of hearsay, but this assignment of error is forfeited because the brief fails to offer any argument on that issue. See Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 525 n.4 (6th Cir. 2006). -7- Nos. 11-3984/11-4029 Andersons, Inc. v. LaFarge North America, Inc. According to Lafarge, Charaska’s uncertainty bars relief because Ohio contract law requires proof of damages with a reasonable degree of certainty. However, as Andersons correctly observes, Ohio law provides that “once the existence of damages is shown, mere uncertainty as to amount will not preclude recovery.” Collins v. Mullinax E., Inc., 795 N.E.2d 68, 71-72 (Ohio Ct. App. 2003). In such cases the courts have established a broad standard: “the evidence need only tend to show the basis for that computation of damages to a fair degree of probability . . . which is that degree of certainty of which the nature of the case admits.” Id. at 71. A review of the record makes clear that Lafarge conceded the existence of at least some damages. Charaska’s conclusions were sufficient to satisfy the applicable standard for measuring the amount of damages. We also note that the court did not adopt Charaska’s calculation as to damages entirely, but rather discounted it by averaging that number with the total cost estimated by Barios, a methodology challenged by neither party. Accordingly, we affirm the district court’s determination as to repair costs. 2. Holdover Rent.—Lafarge claims that Andersons is not entitled to any holdover rent. Item 7(d) of the lease provided that any car not delivered in the appropriate condition within thirty days of the expiration of the lease period would be subject to holdover rentals at a rate of one and one-half times the pro-rata daily rate of the rental. The court found that Andersons “reasonably waited six months while attempting to work out its dispute with” Lafarge; it awarded holdover rent for that period. But after six months, the court found, “there was no reasonable expectation [Lafarge] would accede to [Andersons’s] payment demand,” and so Andersons had a duty to mitigate by either starting repairs or selling the cars for scrap parts. Thus, the court concluded that -8- Nos. 11-3984/11-4029 Andersons, Inc. v. LaFarge North America, Inc. Andersons’s inaction barred it from recovering holdover rent indefinitely after a reasonable time to resolve the dispute had passed. As a threshold matter, Lafarge contends that the holdover provision is an unenforceable liquidated damages clause. The Ohio Supreme Court has established as an exception to the freedom to contract that stipulated damages which constitute a “penalty” are unenforceable for public policy reasons. Lake Ridge Acad. v. Carney, 613 N.E.2d 183, 187 (Ohio 1993). “A punitive remedy is one that subjects the breaching party to a liability disproportionate to the damage which could have been anticipated from breach of the contract.” Id. at 188 (citation and internal quotation marks omitted). Determining whether stipulated damages are punitive is a searching inquiry that requires consideration of whether the damages would be “uncertain as to amount and difficult of proof,” whether “the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intention of the parties,” and whether “the contract is consistent with the conclusion that it was the intention of the parties that damages in the amount stated should follow the breach thereof.” Id. (citation and internal quotation marks omitted). Lafarge explains that the holdover award is contrary to public policy because Andersons had possession of the cars and therefore had unilateral control over how and when the cars may become usable. Thus, Andersons could “apply the holdover rent provision seemingly indefinitely.” Applied indefinitely, Lafarge is correct that holdover rent would have no bearing on Andersons’s actual damages. However, the court only awarded Andersons holdover rent for the six month period following the end of the lease in which Andersons reasonably could have expected to reach a -9- Nos. 11-3984/11-4029 Andersons, Inc. v. LaFarge North America, Inc. settlement. During this time, Andersons was without use of its property and had to expend resources to seek Lafarge’s compliance with the contract. The damages were hard to quantify and were the types of losses the parties contemplated when assenting to the holdover provision. Such damages do not rise to the level of a penalty. On the question of whether Lafarge is correct in claiming that Andersons did not properly mitigate damages, under Ohio contract law, “mitigation is a fundamental tenet of a damage calculus.” Frenchtown Square P’ship v. Lemstone, Inc., 791 N.E.2d 417, 419 (Ohio 2003). Lafarge argues that the district court erred in awarding holdover rent despite its determination that Andersons failed to satisfy its duty to mitigate by either scrapping the cars or fixing them. The problem with this assignment of error is that the court only awarded damages for the six months in which it found Andersons had no duty to mitigate, a finding Lafarge does not challenge (or directly acknowledge). Lafarge and the district court are in complete agreement that Andersons is not entitled to damages during the remaining time in which it should have mitigated, so this issue is without merit.