Court Opinion

ID: 3020106
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:22:15.245976+00
Date Added: 2024-06-11T18:02:56.069897
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                _______________

                               Nos. 96-3266/3457
                                _______________

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

      v.                                    *     Appeals from the United States
                                                  *     District Court for the
Western
Blue Springs Ford Sales, Inc.; Blue                      *     District        of
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 BOWMAN, Circuit Judge, HENLEY,1 Senior Circuit Judge, and MORRIS
     SHEPPARD ARNOLD, Circuit Judge.
                            _______________

      1
        Judge Henley died on October 18, 1997. This opinion is consistent with his
vote at the panel's conference following oral argument on September 11, 1997.
MORRIS SHEPPARD ARNOLD, Circuit Judge.

      Blue Springs Ford Sales, Inc. (BSF), Blue Springs Ford Wholesale
Outlet, Inc. (Outlet), and three Outlet employees, 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 the
Missouri Merchandising Practices Act, see Mo. Rev. Stat. §§        407.010-
407.1020. The jury awarded Ms. Grabinski $7,835 in actual damages and
$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-president and general manager of BSF, and Tom Riddings is the
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, and
Steve Lotspeich, BSF's used-car manager, examined it. As a general rule,
Mr. Lotspeich looked at vehicles for about ten to fifteen minutes and took
them for a short drive at speeds of up to thirty-five miles an hour.
Because the Jimmy was to be wholesaled, however, Mr. Lotspeich probably
spent less time examining it. Mr. Lotspeich then called Mr. Isom, the
Outlet's business manager, to offer the Jimmy for sale. Mr. Lotspeich, who
expected his descriptions of vehicles to be passed along to the Outlet's
customers, described the Jimmy as "very nice" and stated that it was
"driving fine" and needed only a cleanup and standard servicing.

      A few days later, Ms. Grabinski called the Outlet and spoke to
Mr. Graham, a salesman,    about buying a dependable four-wheel-drive
vehicle. Mr. Graham told her

                                    -2-
about the Jimmy.    Later that day, Ms. Grabinski and her fiancé, Matt
Walker, went to the Outlet. Mr. Graham showed them the Jimmy, telling them
that except for an obvious crack in the windshield it       was in   "A-1"
condition. He also stated that it had never been in a wreck, had had only
one owner, and ran perfectly.        After a short test drive and some
negotiations, Ms. Grabinski agreed to pay $5,500 for the Jimmy.       When
Ms. Grabinski talked to Mr. Isom about financing, he assured her that she
was getting a good deal because the Jimmy was dependable and in "excellent
condition." Ms. Grabinski then put a deposit on the Jimmy.

      After obtaining 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 sign a "tow-away" affidavit, which, in relevant part,
stated:

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

Under Missouri law, if a purchaser of a vehicle executes an affidavit
stating that the vehicle is being purchased for "junk, salvage, or for
rebuilding," the seller is exempt from a state requirement that "[a]t the
seller's expense [the] vehicle ... shall immediately prior to sale be
fully inspected regardless of any current certificate of inspection and
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,
contrary to the law, told her that Missouri law required buyers of all
vehicles to sign such an affidavit because until the vehicle was inspected
it was considered unsafe. Ms. Grabinski still refused to sign, asking why
she had to sign the affidavit since she needed a dependable

                                    -3-
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 the
cracked windshield and reiterated that it had never been wrecked.
Ms. Grabinski then signed the affidavit and completed the sale, and, after
the Outlet's mechanic replaced the spark plugs, she drove the Jimmy off the
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 were
cracked and offered to repair them for $360. Ms. Grabinski had the repair
done elsewhere.    After the repair, the Jimmy continued to experience
difficulties, including lack of power, swaying, and low gasoline mileage.

      Ms. Grabinski soon undertook an investigation of the Jimmy's history.
She discovered that one James Cox had bought the vehicle in 1986 from a
wrecking company, which had obtained it as salvage after it sustained
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
from the price that Ms. Grabinski had paid because it needed repair.
Mr. Isom told them that if the Jimmy was not in good condition, BSF had
"screwed" the Outlet because BSF had represented that it was in "good
shape."

      Ms. Grabinski then filed suit, raising claims under the common law
of fraud and under the Missouri Merchandising Practices Act, the latter of
which provides that the "use or employment by any person of any deception,
fraud, ... misrepresentation, [or]

                                    -4-
unfair practice ... in connection with the sale ... of any merchandise in
trade or commerce ... is declared to be an unlawful practice." See Mo.
Rev. Stat. § 407.020.1.
      Ms. Grabinski subsequently replaced the Jimmy's engine, and the
defendants then offered to repurchase the Jimmy for the sale price and
certain costs but less depreciation.     The offer was not contingent on
Ms. Grabinski's dismissal of her lawsuit. Ms. Grabinski rejected the offer
and eventually traded the Jimmy.

      At trial, in addition to presenting evidence relating to the sale and
the history of the Jimmy, Ms. Grabinski presented the expert testimony of
Richard Diklich, an instructor in automotive technology.       Mr. Diklich
testified that based on his examination of the Jimmy there were signs of
wreck damage, such as repainting and poor door fit, which should have been
obvious to a vehicle appraiser on a visual examination. He also opined
that the power difficulty 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 of
purchase was worth $2,500 to $3,000.

      Ms. Grabinski also presented evidence that BSF knew that the Outlet
used tow-away affidavits in sales of vehicles, in violation of Missouri
law. Mr. Talbott, vice-president and general manager of BSF and vice-
president of the Outlet, read from a July, 1990, automobile association
bulletin advising its members, which included BSF, that the "Missouri
Attorney General'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 safety
inspection" if "[t]he vehicle is operable and is driven rather than towed
or hauled away."    Mr. Talbott testified that shortly before trial the
Outlet stopped using the affidavits.

                                    -5-
      The jury awarded actual damages of $7,835. It also awarded punitive
damages of $100,000 against the Outlet, of $50,000 against BSF, of $30,000
against Mr. Isom, of $20,000 against Mr. Dudley, and of $10,000 against
Mr. Graham.

      After the verdicts, the trial court informed the parties that because
under state law the matter of statutory punitive damages was left to the
discretion of the court, the court would not enter judgment until it heard
argument on the matter of punitive damages and on Ms. Grabinski's request
for statutory attorney fees.     Before argument, the defendants filed a
memorandum asserting that the jury's punitive damages awards were
excessive, and, with the exception of BSF, they submitted affidavits of
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 affidavits and could not "second guess" the jury's verdicts
because of "equitable considerations."       The trial court also denied
Ms. Grabinski's request for attorney fees on the ground that the punitive
damages awards were "generous."      The trial court entered judgment in
accordance with the verdicts. The defendants filed a postjudgment motion
for judgment as a matter of law; in the alternative, they requested a new
trial or remittitur, asserting that the punitive damages awards were
excessive under state law and the United States Constitution.

                                   II.
      The defendants first argue that the trial court erred in denying
their motion for judgment as a matter of law; they assert that
Ms. Grabinski failed to prove that they made misrepresentations as to
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.

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

                                    -6-
Chrysler Corp., 853 S.W.2d 346, 358 (Mo. Ct. App. 1993).            In the
circumstances here, we believe that Mr. Lotspeich's representation that the
Jimmy was "very nice" could reasonably be taken as a statement of fact as
to the condition of the Jimmy. See id. (salesperson's statement that car
was "good" and "reliable" was misrepresentation of fact). In addition, as
Ms. Grabinski points out, Mr. Lotspeich also stated that the Jimmy was
"driving fine" and "only needed a clean-up and standard service," which
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 damage 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 extend 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 Outlet
relied on his expertise in examining vehicles and "expected [the Outlet]
to be able to pass on things that [he] represented," there was evidence
from which a jury could reasonably have concluded that the Outlet had in
fact passed on Mr. Lotspeich's representations about the Jimmy to
Ms. Grabinski. Mr. Isom and Mr. Dudley both testified that the information
that they received about the Jimmy came from Mr. Lotspeich and that they
relied upon him to disclose problems, such as if the Jimmy had been
wrecked. Especially significant, we think, is Mr. Isom's statement to
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, contrary to its arguments, can BSF be shielded from liability
because Mr. Lotspeich's brief visual inspection and test drive might not
have provided him with knowledge of the Jimmy's defects. It is sufficient
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." Scott v. Car City Motor Co., Inc., 847 S.W.2d 861, 865
(Mo. Ct. App. 1992).   In any event, the jury could reasonably have

                                    -7-
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 condition, had had one owner, and had never been wrecked
were likewise actionable misrepresentations.       We reject Mr. Dudley's
argument that because he did not speak to Ms. Grabinski until a week after
she put down her deposit on the Jimmy, she could not have relied on his
representations in deciding to buy the Jimmy. The defendants' evidence was
that Mr. Dudley told Ms. Grabinski that if she was "uncomfortable" with
signing the tow-away affidavit, the Outlet would be "happy to return her
money to her and just end the sale right then." Ms. Grabinski testified
that she completed the sale only because she relied on the
misrepresentations, including Mr. Dudley's, that use of the affidavit was
"universal" in sales of vehicles in Missouri and that despite what the
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 to
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 actual
value of the property and what its value would have 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 Merchandising
Practices Act claims).     Here Mr. Diklich testified that the Jimmy was
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 from
work, excessive gasoline costs, towing charges, and other costs relating
to "problems arising from the fraudulent transaction." 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 the
record.

                                    -8-
                                  III.
      We turn now to the defendants' arguments concerning the punitive
damages awards. They contend that the trial court erred in instructing the
jury as to a mitigating circumstance, in rejecting their postverdict
affidavits of net worth, and in failing to review the verdict for
excessiveness.

      The trial court instructed the jury that it could consider the
defendants' offer to repurchase the Jimmy as mitigating evidence with
respect to punitive damages, but also instructed the jury that
Ms. Grabinski "reasonably rejected the offer because 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 offer
was reasonable was a question of fact for the jury.

      In Missouri, evidence of a defendant's conduct subsequent to that
defendant's wrongful acts is admissible to mitigate punitive damages if it
is " 'so connected with the particular acts as tending to show defendant's
disposition, intention, or motive in the commission of the particular acts
for which damages are claimed.' " Maugh v. Chrysler Corp., 818 S.W.2d 658,
663 (Mo. Ct. App. 1991), quoting Charles F. Curry and Co. v. Hedrick, 378
S.W.2d 522, 536 (Mo. 1964). Because Ms. Grabinski was not obligated to
accept the repurchase offer and because her reasons for rejecting the offer
are irrelevant to the defendants' state of mind at the time of the
transaction, see Maugh, 818 S.W.2d at 664, any error in the instruction is
harmless. Given all of the circumstances of this case, including the fact
that the offer was made after the filing of the complaint and testimony
that the offer was intended "to avoid the expense of litigation," the
defendants, as the trial court noted, "got more mileage out of the
[evidence] than they were entitled to."

      We next consider the defendants' argument that the trial court erred
in refusing to consider their postverdict affidavits of net worth. The
defendants contend that

                                    -9-
because the purposes of punitive damages are punishment and deterrence,
net worth is an essential consideration. They concede that in Missouri
"[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 defendants
suggest, however, that as a matter of federal constitutional law a trial
court in its postverdict review must consider evidence of a defendant's net
worth.   Ms. Grabinski responds that the defendants' failure to put on
evidence of their net worth at trial constitutes a waiver.

      We agree with Ms. Grabinski. In Kemezy v. Peters, 79 F.3d 33, 34
(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 jury
for purposes of minimizing a punitive damages award. The court noted that
none of "the purposes that are served by the awarding of punitive damages
... depends critically on proof that the defendant's income or wealth
exceeds some specified level." Id. at 35 (emphasis in original). Although
the court acknowledged "that losing $1 is likely to cause less unhappiness
(disutility) to a rich person than to a poor one," id., the court likened
an award of punitive damages to a fine. Id. at 36. The court observed
that "[t]he usual practice with respect to fines is not to proportion the
fine to the defendant's wealth, but to allow him to argue that the fine
should be waived or lowered because he cannot possibly pay it." Id. In
the context of punitive damages, we agree with the Seventh Circuit that
"[t]he defendant who cannot pay a large award of punitive damages can point
this out to the jury so that they will not waste their time ... by awarding
an amount that exceeds his ability to pay." Id. Accord Smith v. Lightning
Bolt Productions, Inc., 861 F.2d 363, 373 (2d Cir. 1988) ("it is the
defendant's burden to show that his financial circumstances warrant a
limitation of the [punitive damages] award").

      The defendants also argue that the trial court erred in failing to
review the 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

                                   -10-
adequate review because it held postverdict argument on the matter of
punitive damages. Cf. TXO Prod. Corp. v. Alliance Resources Corp., 509
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 damages
were a matter for the court, not the jury. (Although the issue was not
raised on appeal, we note that, contrary to the trial court's belief, in
a diversity case "[f]ederal law controls the issue" of the right to a jury
trial, "even in cases ... where the federal court is enforcing a state-
created right and 'even when a state statute ... would preclude a jury
trial in state court.' " Kampa v. White Consol. Indus., Inc., 115 F.3d
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 postverdict argument for a purpose
other than reviewing the verdicts as required by Haslip, if at that
argument the court had rejected the defendants' excessiveness arguments and
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 review them for excessiveness,
as it indicated it would do. To the contrary, the trial court held that
it was bound by "equitable considerations" to enter judgment in accordance
with the verdicts, relying on the principle that a court is collaterally
estopped from relitigating 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).         That
reliance was misplaced. Not only are punitive damages a legal remedy, but
the trial court had a duty under state and federal law to review the awards
for excessiveness.

      Alternatively, Ms. Grabinski urges us to conduct a review on our own
by applying the principles laid out in BMW of North America, Inc. v. Gore,
517 U.S. 559,

                                   -11-
116 S. Ct. 1589 (1996).       In Gore, the Supreme Court held that in
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 the
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 for
comparable misconduct," 517 U.S. at _____, 116 S. Ct. at 1603.

      We believe, however, that Gasperini v. Center for Humanities, Inc.,
116 S. Ct. 2211 (1996), controls this case.      In Gasperini, the Second
Circuit had vacated a jury's damages award pursuant to a state statute
providing that an appellate court "shall determine" whether a verdict is
excessive. Id. at 2216. Although the Supreme Court held that the relevant
state's excessiveness standard applies in diversity cases, id. at 2221, the
Court was concerned that the application of the statute might conflict with
the reexamination clause of the Seventh Amendment, which provides that "no
fact tried by a jury, shall be otherwise reexamined in any Court of the
United States, than according to the rules of the common law."

      After reviewing the common law, the Court concluded that "Seventh
Amendment constraints ... lodge[d] in the district court, not the court of
appeals, primary responsibility" for review of a jury's verdict for
excessiveness. Gasperini, 116 S. Ct. at 2225. The Court also believed
that practical considerations 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. Cir. 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, 431
(2d Cir. 1995), vacated, 116 S. Ct. 2211 (1996).
      The Court went on to hold that appellate review of the trial court's
determination in this regard is limited to an abuse of discretion.
Gasperini, 116 S. Ct. at 2225. In our

                                   -12-
case, since there has been no review by the trial court we can hardly
decide whether the court abused its discretion in the award of punitive
damages. We therefore remand the case to the trial court for a review of
the punitive damages awards under state and federal excessiveness
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 the
sole reason that it believed that the punitive damages awards were
"generous."    She also challenges the trial court's refusal to enter
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 to 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., 98 F.3d 1206, 1211 (9th Cir. 1996), which deals with the entry of
judgment after remand.

                                 V.
      Accordingly, we affirm in part and reverse in part the judgment of
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.

                                   -13-