Opinion ID: 700674
Heading Depth: 1
Heading Rank: 2

Heading: The Sufficiency of the Admissible Evidence

Text: 18 Quality next contends that CPI's complaint failed to allege fraud with sufficient particularity to satisfy the requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Accordingly, it argues the district court erred in denying Quality's motion for judgment notwithstanding the verdict or, alternatively, for a new trial because allegations set forth in CPI's Third Amended Complaint (the complaint) were insufficient to support a claim of fraud. 19 A motion for judgment notwithstanding the verdict (now motion for judgment as a matter of law) 4 presents the legal question of whether there is sufficient evidence to support a jury verdict. White v. Pence, 961 F.2d 776, 779 (8th Cir.1992). When reviewing a district court's ruling on a motion for judgment notwithstanding the verdict, we review the evidence in the light most favorable to the prevailing party and must not engage in a weighing or evaluation of the evidence or consider questions of credibility. Id. Judgment notwithstanding the verdict is appropriate only when all the evidence points one way and is susceptible of no reasonable inference sustaining the position of the nonmoving party. Id. We apply a more deferential standard in our review of a district court's denial of a motion for a new trial: The denial of a motion for a new trial is within the sound discretion of the district court, and its ruling will not be reversed unless there is a clear abuse of discretion. McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1400 (8th Cir.1994); Ryko Mfg. Co. v. Eden Serv., 823 F.2d 1215, 1221-22 (8th Cir.1987), cert. denied, 484 U.S. 1026, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988). 20 Rule 9(b) requires that [i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.  'Circumstances' include such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby. Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir.1982), adhered to on reh'g, 710 F.2d 1361 (8th Cir.) (en banc), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983). Because one of the main purposes of the rule is to facilitate a defendant's ability to respond and to prepare a defense to charges of fraud, Greenwood v. Dittmer, 776 F.2d 785, 789 (8th Cir.1985), conclusory allegations that a defendant's conduct was fraudulent and deceptive are not sufficient to satisfy the rule. In re Flight Transp. Corp. Sec. Litig., 593 F.Supp. 612, 620 (D.Minn.1984). 21 Quality does not dispute that CPI properly pleaded the time, place, and contents of the misrepresentations alleged to be fraudulent. See Jt.App. at 62; Supp.App. at 39. Rather, Quality contends that the district court improperly allowed the admission of evidence of myriad representations [that were] not pleaded. Appellant's Br. at 26. It cites the following as examples of representations that were not pleaded: (1) Francois claimed to be an officer of Quality; (2) Francois misrepresented his involvement in developing the prototype for the Comfort Inn construction; (3) Francois exaggerated the number of Comfort Inns then existing and on the drawing board; (4) Francois misrepresented the need for a bar or restaurant near the hotel; (5) Francois misled CPI about its abilities to manage the hotel on its own; (6) Francois misrepresented the expense portion of the pro forma; and (7) Francois misrepresented the source of the occupancy figures in the pro forma. 5 Id. at 26-27. Quality argues that this information was grossly prejudicial because Francois died nearly two years before trial and thus could not counter these allegations at trial. Relying on our holding in Greenwood, supra, it argues the district court erred in allowing the admission of these representations at trial. 22 We reject Quality's arguments for two reasons. First, Francois had ample opportunity to respond to the representations prior to trial. Francois' deposition was taken in February 1992 (two years before trial commenced) to preserve his testimony for trial. During the deposition, Francois was specifically asked about the subject matters of each of the above representations. See Walter Francois Depo., Feb. 4, 1992, at 38-39, 85, 107, 108, 126-29, 164-69, 177-80. Quality, thus, plainly had an opportunity to explore Francois' position on these issues. 23 Second, although perhaps lacking in some specifics that were later developed at trial, CPI's complaint stated with sufficient particularity the fraudulent misrepresentations and omissions that formed the basis of CPI's common-law fraud claim. CPI specifically averred the following in its complaint, see Jt.App. at 1-11: 24 1. Francois was an authorized agent of Quality. 25 2. In 1985 and 1986, Francois offered to sell Nielsen/CPI a Quality Inns franchise for a new Comfort Inn Motel to be constructed on property in Roseville, Minnesota. In the course of their discussions, Francois represented to Nielsen that he had substantial experience in evaluating potential motel franchise operations, including relevant financial aspects of new motel franchise operations. Francois knew that Nielsen did not have prior experience in the motel business and that, in determining whether to purchase the franchise, Nielsen was relying on Francois' claimed expertise. 26 3. Francois advised Nielsen/CPI there was no need to hire an outside consultant to advise Nielsen/CPI regarding the venture and that Francois would provide the necessary expertise. 27 4. Francois further advised Nielsen/CPI that in the event a financing forecast was required, Francois should be contacted first so that he could provide information to influence the forecast. 28 5. Francois repeatedly represented that the Comfort Inn at the Roseville location would have a first-year occupancy rate of 67 to 70 percent, and that, in a worst case scenario, it would have an occupancy rate of at least 60 percent. 29 6. Francois stated that the motel would at least break even during the first year of operation. 30 7. Francois further represented that the Comfort Inn would have an occupancy rate that would equal or exceed the performance of other specific hotel/motel operations in the Roseville area, which had occupancy rates in the high 70's to 90 percent range. 31 8. Francois failed to state that motel franchise operations of the sort contemplated by the parties typically neither achieve a 60 percent occupancy rate nor break even in the first year. 32 9. Francois provided CPI with a document entitled 128-room Comfort Inn Sample Pro Forma, which included projections for the first three years of operation of a Comfort Inn of similar size to the Comfort Inn being considered by Nielsen/CPI. 33 10. At no time did Francois or Quality provide Nielsen/CPI with a statement setting forth the assumptions or data upon which the estimations or projections in the pro forma were based, or indicate the number of operations involved, the length of time the operations were in business, the period covered by the data, and the ownership status of the operations. 34 11. In October 1987, CPI opened and began operating the Comfort Inn Motel under the Franchise Agreement it entered into with Quality. 35 12. In March 1988, CPI's interest in the Comfort Inn was transferred to Everest II, a general partnership and affiliate of CPI. Although CPI and Everest II made reasonable efforts to successfully operate the motel, they experienced a net loss in excess of $50,000 during the first year of operation. 36 13. The occupancy rate of the motel during its first year of operation was 33.7 percent. During the second year of operation, Everest II experienced additional losses in excess of $50,000. 37 Consistent with the Rule 9(b)'s purpose of facilitating a defendant's response to and preparation of a defense to charges of fraud, the complaint adequately apprised Quality of the claims against it and the factual grounds upon which the claims were based. 38 Quality relies on our decision in Greenwood, supra, for the proposition that misrepresentations not specifically pleaded cannot be considered in deciding whether there is sufficient evidence to sustain an action in fraud. We decline to interpret Greenwood, whose holding is limited to the specific facts in that case, as broadly as Quality does. In Greenwood, the plaintiff brought an action against a commodity brokerage business and its agents under the Commodity Exchange Act, 7 U.S.C. Sec. 6b, for common-law fraud and breach of the firm's fiduciary duties. Greenwood's complaint alleged that brokers at the firm advised him to take short positions on certain feeder cattle contracts on the assurance that the firm's president was pursuing a similar strategy when in fact the president was taking a long position on the market. 776 F.2d at 789. The complaint further alleged in conclusory fashion that the defendant, through its agents, made untrue statements of material facts or omitted or failed to state material facts necessary to make other statements not misleading. Id. We held that Greenwood's latter, conclusory allegation was not stated with sufficient particularity to satisfy the requisites of Rule 9(b) and, thus, concluded that the district court's grant of the defendant's judgment notwithstanding the verdict should have been made only with reference to the former allegation. Id. Based on record evidence that the brokers who advised Greenwood themselves elected to take short positions in the feeder cattle market, we agreed with the district court that  '[i]t is hardly open to dispute that had these brokers known or suspected their advice to be erroneous, they would not have been risking their personal accounts....'  Id. (quoting Greenwood v. Dittmer, 596 F.Supp. 235, 239 (W.D.Ark.1984)). Accordingly, we held that the mere fact that the brokers' opinions concerning the feeder cattle market turned out to be erroneous was, standing alone, insufficient to support a fraud judgment. Id. at 790. 39 In contrast to Greenwood's paltry complaint, CPI's complaint unambiguously stated the core of CPI's claims against Quality and the factual grounds upon which its claims were based. The allegations in CPI's complaint, far from being conclusory, stated with particularity the various misrepresentations and omissions by Quality that CPI alleged constituted fraud. These allegations were more than adequate to support the jury's judgment in CPI's favor. 6 Accordingly, we find that the district court did not err in denying Quality's motion for judgment notwithstanding the verdict or, in the alternative, for a new trial.