Opinion ID: 221235
Heading Depth: 2
Heading Rank: 3

Heading: Southern's Breach of the Implied Covenant of Good Faith and Fair Dealing

Text: Mountain Valley argued that Southern breached the Agreement's implied covenant of good faith and fair dealing by failing to carry and market its high-end glass bottled water products and focusing instead on selling Mountain Valley's less-profitable small plastic bottled water products. The jury returned a verdict in favor of Mountain Valley on its counterclaim for breach of the implied covenant of good faith and fair dealing, awarding damages of $183,341.65. In its renewed motion for judgment as a matter of law, see Fed. R.Civ.P. 50(b), Southern argued that Mountain Valley failed to present a sufficient evidentiary basis to link Mountain Valley's alleged damages to its claim for breach of the implied covenant of good faith and fair dealing, as opposed to its claims for tortious interference with business relationships, defamation, and fraud, which ultimately were not submitted to the jury. Southern argued that Mountain Valley failed to establish a sufficient factual basis on which the jury could award damages on its claim for breach of the implied covenant of good faith and fair dealing because Mountain Valley's damages expert, Barclay Griffiths, failed to differentiate between Mountain Valley's four claims and instead calculated one total damage amount. The district court agreed and set aside the jury's verdict. As we have noted, we review the grant of a renewed motion for judgment as a matter of law under the same standard followed by the district court. Brosnahan v. W. Air Lines, Inc., 892 F.2d 730, 732 (8th Cir.1989). Judgment as a matter of law is only appropriate when no reasonable jury could have found for the nonmoving party. Mattis, 295 F.3d at 860. In our analysis, we may not weigh the credibility of evidence, and conflicts in the evidence must be resolved in favor of the verdict. Schooley, 502 F.3d at 764. According to Nevada law, [w]here the terms of a contract are literally complied with but one party to the contract deliberately countervenes [sic] the intention and spirit of the contract, that party can incur liability for breach of the implied covenant of good faith and fair dealing. Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 107 Nev. 226, 808 P.2d 919, 922-23 (1991); see also Frantz v. Johnson, 116 Nev. 455, 999 P.2d 351, 358 n. 4 (2000) (An implied covenant of good faith and fair dealing exists in every Nevada contract and essentially forbids arbitrary, unfair acts by one party that disadvantage the other.); Overhead Door Co. of Reno v. Overhead Door Corp., 103 Nev. 126, 734 P.2d 1233, 1235 (1987) ([A]n implied covenant of good faith forbids arbitrary action by one party that disadvantages the other. (alteration in original) (quoting Resource Mgmt. Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1037 (Utah 1985))). Also, under Nevada law, [t]he plaintiff has the burden to prove the amount of damages it is seeking. Clark Cnty. Sch. Dist. v. Richardson Constr., Inc., 123 Nev. 382, 168 P.3d 87, 97 (2007). Although the amount of damages need not be proven with mathematical certainty, testimony on the amount may not be speculative. Id.; see also Mort Wallin of Lake Tahoe, Inc. v. Commercial Cabinet Co., 105 Nev. 855, 784 P.2d 954, 955 (1989) (holding that the plaintiff has the burden to provide the court with an evidentiary basis upon which it may properly determine the amount of plaintiff's damages). According to the district court, [a] review of Griffiths' testimony fails to disclose any evidence of facts which would establish a link between any conduct on the part of Southern ... with damages suffered by Mountain Valley specifically because of Southern[`s] alleged breach of the implied covenant of good faith and fair dealing. Southern contends that the district court reached the correct conclusion: Griffiths could not segregate harm allegedly caused by Southern from other factors, much less point out the harm caused by Southern's alleged breach of the implied covenant of good faith and fair dealing. In opposition, Mountain Valley argues that [t]he law does not require an expert to pair his opinion on damages to a particular cause of action. Likewise, Mountain Valley asserts that Griffiths did not identify a legal cause of action; he identified the actions of Southern that resulted in the damages to Mountain Valley that he calculated, i.e. Southern performed better as a distributor for other high-end waters (Voss, Fiji and Evian) than did the overall U.S. market, and worse for Mountain Valley than did the overall U.S. market. We agree with Mountain Valley that Griffiths's testimony, when taken in the context of Mountain Valley's claim for breach of the implied covenant of good faith and fair dealing, provided a sufficient evidentiary basis on which the jury could award damages to Mountain Valley for this claim. Griffiths testified that, if Southern... could over-perform for [Voss, Fiji, and Evian], then if you took that average over-performance, which is about 13 percent, then Mountain Valley sales in Nevada would have been much higher. So it's really calculating what it should have been if Mountain Valley did as well as the average of these three brands. Griffiths's testimony is consistent with Mountain Valley's evidence supporting its claim for breach of the implied covenant, which suggested that Southern contravened the intention and spirit of the contract by failing to carry out Mountain Valley's brand repositioning and by failing to promote and distribute Mountain Valley's high-end glass bottled water products in the same manner as it promoted and distributed other similar products. See Hilton Hotels, 808 P.2d at 922-23. Griffiths calculated Mountain Valley's damages by first determining the percentage by which Mountain Valley products underperformed in the Nevada market as compared to the national market. Griffiths next determined the percentage by which other high-end bottled water products distributed by Southern over-performed in the Nevada market as compared to their sales in the national market. He then determined the number of extra cases of Mountain Valley products that would have been sold had Mountain Valley products over-performed in the Nevada market to the same degree as the three other high-end brands. At this point, Griffiths multiplied the number of cases that Southern allegedly would have sold by Mountain Valley's profit per case for the years 2004, 2005, and 2006, and added this number to an estimate of future lost profits derived from the Gordon growth model. [4] As a result, Griffiths determined Mountain Valley's total damages to be $399,713.00. We believe that this was a reasonable method of estimating the damage that would be caused by the failure to carry, market, and promote Mountain Valley's high-end glass bottled water products. Moreover, Griffiths fully explained to the jury how he reached his damage amount, and Southern subjected Griffiths to lengthy cross-examination regarding his assumptions and calculations. Southern's criticism of Griffiths's methodology and assumptions goes to the weight of the evidence, Weitz Co. v. M.H. Washington, 631 F.3d 510, 527 (8th Cir.2011), and does not lead to the conclusion that the jury had insufficient evidence on which to base its damage award. In fact, the jury awarded less than half of the amount Griffiths had calculated, lending further support to the notion that, when the jury determined that Southern had breached the implied covenant of good faith and fair dealing, the evidence was sufficient to enable the jury to make an intelligent estimate of ... damages without resorting to mere speculation. See United Fire & Cas. Co. v. Historic Pres. Trust, 265 F.3d 722, 730 (8th Cir.2001). As such, the district court erred when it set aside the jury's verdict on Mountain Valley's claim for breach of the implied covenant of good faith and fair dealing.