Court Opinion

ID: 2975622
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:37:28.330142+00
Date Added: 2024-06-11T09:32:54.174902
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 07a0685n.06
                           Filed: September 21, 2007

                                            Nos. 06-1582
                                                 06-1687

                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT

SPARTON TECHNOLOGY, INC.,                       )
                                                )
  Plaintiff-Appellee/Cross-Appellant,           )
                                                )
v.                                              )       ON APPEAL FROM THE UNITED
                                                )       STATES DISTRICT COURT FOR THE
UTIL-LINK, LLC, and                             )       EASTERN DISTRICT OF MICHIGAN
NATIONAL RURAL                                  )
TELECOMMUNICATIONS                              )
COOPERATIVE,                                    )
                                                )
  Defendants-Appellants/Cross-Appellees.        )

        Before: MARTIN and McKEAGUE, Circuit Judges; and GREER, District Judge.*

                GREER, District Judge. The defendants-appellants/cross-appellees in this breach

of contract/promissory estoppel case appeal from the denial by the district court of their motion for

judgment as a matter of law and new trial after a jury trial. The plaintiff-appellee/cross-appellant

appeals the district court’s denial of its post-verdict motions for prejudgment interest and for Rule

11 sanctions. For the reasons which follow, we AFFIRM in part and REVERSE in part.

        *
          The Honorable J. Ronnie Greer, United States District Judge for the Eastern District of
Tennessee, sitting by designation.
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

                    I. FACTUAL AND PROCEDURAL BACKGROUND

               National Rural Telecommunications Cooperative (“NRTC”) is a District of Columbia

cooperative corporation which acts as a purchasing cooperative for its member rural electric and

telephone utilities. Util-Link, LLC (“Util-Link”), a Delaware limited liability company, was a

partnership formed to develop and obtain production of “LINKs,” automated electric utility meter

reading units, which in turn were sold to NRTC, which then marketed and sold the devices to its

member utilities. NRTC was part owner of Util-Link and provided operating capital to Util-Link.

Sparton Technology, Inc. (“Sparton”) is a New Mexico corporation engaged in contract

manufacturing. It was stipulated by the parties that Util-Link was, for the purposes of this action,

acting as the agent of NRTC. The district court treated Util-Link and NRTC as a single entity and

this Court will do so as well.

               In May 1997, Sparton and Util-Link entered into a manufacturing agreement for

Sparton to manufacture and Util-Link to purchase 75,000 LINKs. The LINKs were to be

manufactured pursuant to the design and testing specifications provided by Util-Link. From the

outset, the LINK product was beset by serious problems related to various design and manufacturing

flaws which led to numerous design changes in the product. As a result, certain raw materials that

had been purchased by Sparton became obsolete and could no longer be utilized in production.

Although not on the delivery schedule originally contained in the manufacturing agreement, the

                                                -2-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

75,000 LINKs were eventually produced and paid for by Util-Link. As a result of the alleged

manufacturing defects, NRTC recalled all LINKs to have them examined and repaired as necessary.

This recall was ultimately addressed under a “retrofit agreement” entered into between Sparton and

NRTC, under which costs were shared.

               In late 2000, Sparton and Util-Link began negotiations for a new manufacturing

agreement. These negotiations continued for several months without a new agreement being

executed. In February 2001, Sparton threatened to cancel advance orders for raw materials if

Sparton failed to promptly receive a purchase order for additional LINKs. Util-Link told Sparton

repeatedly that it could not issue a purchase order without receiving a corresponding purchase order

from NRTC. On February 2, 2001, Util-Link notified Sparton that it had requested a purchase order

from NRTC for an additional 35,000 LINKs and, as soon as NRTC’s purchase order was received,

Util-Link would issue a purchase order to Sparton. Sparton advised Util-Link that advance materials

were on order to support this additional production. A host of e-mails and letters were exchanged

between March and May 2001, relating to the possible additional purchase of LINKs.

               No purchase order was forthcoming after the February 2, 2001, notification and, on

March 5, 2001, Sparton again threatened to cancel orders for raw materials needed for additional

production. Util-Link responded on March 7, 2001, with an e-mail which stated: “there will be a

purchase order released to Sparton to build 15,000 units beyond the original 75,000 unit order.” On

March 22, 2001, Util-Link issued a purchase order to Sparton for 15,000 LINKs units, though at a

different price than had been discussed. The next day, Sparton scheduled delivery of the needed raw

                                                -3-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

materials for the 15,000 units. Sparton and Util-Link continued to discuss a mutually agreeable price

and Sparton indicated it would be willing to reduce the price if more than 15,000 units were

purchased. On May 1, 2001, Sparton proposed a price of $109.00 per unit to produce 35,000

additional LINKs units. Util-Link concurred with the proposal through a pair of e-mails on the same

day. In one of these e-mails, Util-Link stated: “Util-Link will pay Sparton $109.00/LINK 340-HL

delivered under the current purchase order of 15,000 units . . .” Util-Link committed to order such

additional units by purchase order to be issued within the next 90 to 150 days.

               No purchase order had been received by Sparton by mid-June 2001. Around mid-

year, Util-Link determined that it would not be able to continue in business without receiving

additional capital contributions from NRTC. NRTC declined to make further capital contributions

and, in August, 2001, it was decided that Util-Link would be dissolved and its LINK business

merged into NRTC. NRTC then informed Sparton that it did not intend to go forward with purchase

of additional LINK units.

               Sparton filed suit in the federal district court on September 24, 2002, alleging the

following counts: (I ) breach of contract to purchase an additional 35,000 LINK units; (II) breach of

the 1997 manufacturing agreement; (III) breach of the retrofit agreement; (IV) promissory estoppel

regarding the additional 35,000 LINK units; and (V) equitable estoppel regarding the additional

35,000 LINK units. The promissory estoppel and equitable estoppel claims were stated alternatively,

i.e., “[i]n the event that it is determined that there was not a contract for the manufacture of an

additional 35,000 “LINK” units as alleged in Count I . . .” (First Amended Complaint, para. 54, 63).

                                                -4-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

NRTC filed an answer and counter-complaint alleging breach of the manufacturing agreement and

the retrofit agreement.

               NRTC filed a motion for summary judgment on Counts I and III and partial summary

judgment on Counts IV and V shortly thereafter and Sparton moved for summary judgment on the

issue of whether a contract between Sparton and Util-Link existed as alleged in Count I of its

complaint. On June 25, 2004, Sparton’s counsel informed NRTC’s counsel that Sparton would

stipulate to the dismissal of its promissory and equitable estoppel claims (Counts IV and V).

Sparton’s agreement was announced to the court on June 30, 2004, at the hearing on the parties’

motions for summary judgment. No order was entered, however, as a result of Sparton’s stipulation.

On September 2, 2004, the district court denied Sparton’s motion for summary judgment, and denied

in part and granted in part NRTC’s motion. Sparton’s claims for breach of the retrofit agreement

and for promissory and equitable estoppel were dismissed on the merits.

               The matter proceeded to trial by a jury in September 2005, on Sparton’s claims for

breach of contract for the additional 35,000 LINK units and breach of the manufacturing agreement,

as well as NRTC’s counterclaim. On the fourth day of trial, the district court invited a motion from

Sparton to reconsider its prior grant of summary judgment on the estoppel claims, saying it was

“embarrassed” by the previous decision. Sparton’s motion, opposed by NRTC, was then granted and

the estoppel claims were reinstated.

               At the conclusion of the trial, which continued sporadically over 16 days, the jury

returned a verdict in the case. The jury found that NRTC had breached the 1997 manufacturing

                                                -5-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

agreement and awarded Sparton $494,644.23 in damages for “obsolete materials.” The jury further

found that Sparton and NRTC had entered into a contract for the purchase of 35,000 additional

LINKs, but determined that NRTC did not breach the agreement and awarded no damages to

Sparton. The jury then found for Sparton on the “estoppel claims” and awarded damages of

$3,087,043.09. The jury had been instructed by the district court that it must consider the estoppel

claims if it did not award damages to Sparton for breach of contract to purchase the additional

35,000 LINK units. Judgment was entered on the jury verdict on November 9, 2005.

                 NRTC moved for judgment as a matter of law (JMOL) and/or a new trial on grounds,

among others, that the jury’s finding of an express contract for the purchase of 35,000 additional

LINK units precluded the jury’s verdict on the estoppel claims and the evidence at trial did not

support the damage awards. The district court denied NRTC’s motion on the estoppel claims,

holding that “[t]here is no need for the Court to involve itself in the esoterica of the right of plaintiff

to assert both a contract and an estoppel, whether when there is a contract which binds the parties,

a party may not rely on an estoppel. The fact of the matter is that there was not an enforceable

contract for 35,000 additional LINKS.” The district court did, however, suggest a remittitur in the

damage award on the estoppel claims to $1,747,415.94 and to $171,360 on the obsolete materials

claim. (Amended Decision On Defendant’s Motions For Judgment As A Matter Of Law And New

Trial, pp. 8-9). Sparton accepted the proposed remittiturs and an amended judgment was entered on

April 5, 2006.

                 On November 21, 2005, Sparton filed a motion to amend the judgment to include

                                                   -6-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

prejudgment interest. The motion was denied by the district court on January 31, 2006. On

November 23, 2005, Sparton filed a motion seeking Rule 11 sanctions against NRTC regarding

NRTC’s counterclaim. This motion was denied by the district court on February 2, 2006.

                  NRTC timely filed a notice of appeal from the amended judgment on May 1, 2005.

Sparton’s notice of cross-appeal from the orders on its motions for prejudgment interest and Rule

11 sanctions was filed on February 2, 2005. For the reasons which follow, we REVERSE the district

court’s judgment on Sparton’s estoppel claims, AFFIRM the district court’s judgment on NRTC’s

counterclaim and AFFIRM the district court’s orders on Sparton’s motions for prejudgment interest

and Rule 11 sanctions.

                                            II. ANALYSIS

                  On appeal, NRTC raises the following issues: (i) whether the district court erred in

denying NRTC’s motion for JMOL because the jury verdict, finding a contract for the sale of an

additional 35,000 LINK units, precluded judgment on Sparton’s alternative estoppel claims; (ii)

whether the estoppel damage award is unsupportable as a matter of law; and (iii) whether the district

court erred in not granting judgment as a matter of law on NRTC’s counter-claim. Sparton claims:

(i) that an award of prejudgment interest is mandatory under Michigan law; and (ii) that the district

court abused its discretion in denying Sparton’s motion for Rule 11 sanctions. We will address each

issue in turn.1

        1
          The jury’s verdict with respect to breach of the 1997 “retrofit agreement” and the resulting
judgment in favor of Sparton on that issue have not been appealed.

                                                   -7-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

A. Estoppel

               A district court’s legal conclusions are reviewed de novo. Hadix v. Johnson, 182 F.3d
400, 404 (6th Cir. 1999). Likewise, a district court’s determination of a motion for judgment as a

matter law is reviewed de novo. Greene v. B.F. Goodrich Avionics Systems, Inc., 409 F.3d 784, 788

(6th Cir. 2005). In this diversity case, state law governs a Rule 50(b) motion. Morales v . American

Honda Motor Co., Inc., 151 F.3d 500, 506 (6th Cir. 1998). Under Tennessee law, which the parties

have agreed governs this case, in ruling on a motion for judgment as a matter of law (referred to as

a directed verdict under Tenn. R. Civ. Pro. 50.01), trial courts must take the strongest legitimate view

of the evidence in favor of the non-moving party, construing all evidence in that party’s favor and

disregarding all countervailing evidence. Gaston v. Tennessee Farmers Mutual Ins. Co., 120 S.W.
3d 815, 819 (Tenn. 2003)(citing Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn. 1994)). A court may

grant the motion only if reasonable minds could reach only one conclusion from the evidence. Id.

               Sparton described its alternative estoppel claims as both promissory estoppel and

equitable estoppel in its complaint. As an initial matter, equitable estoppel is not recognized as a

cause of action in Tennessee but rather is an affirmative defense which creates no rights or cause of

action but acts to protect rights acquired previously. Jacobs v. Underhill, 2003 WL 22955930 at *1

(Tenn. App. 2003) (citing Alexander v. Armentrout, 24 S.W.3d 267, 272 (Tenn. 2000)); see also 21

Tennessee Practice Series Contract Law and Practice §11.47 (2006). Count V of Sparton’s amended

complaint, therefore, does not state a cause of action and should have been dismissed for that reason.

                                                  -8-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

               Some earlier Tennessee decisions, yet to be explicitly overruled, hold that Tennessee

does not recognize a claim for promissory estoppel. See Pitts v. McGraw-Edison Company, 329
F.2d 412, 416 (6th Cir. 1964) (citing Barnes v. Boyd, 18 Tenn. App. 55, 72 S.W.2d 573 (Tenn.

App.1934)). Some federal courts sitting in Tennessee, on the other hand, have accepted and applied

the doctrine for many years. See United States For Use of E &R Construction Co., Inc. v. Guy H.

James Construction Company, 390 F. Supp. 1193 (M.D. Tenn. 1972), aff’d 489 F.2d 756 (6th Cir.

1974). Despite this confusion, there exists no reasonable question today about whether promissory

estoppel is clearly recognized in Tennessee. In 1978, a Tennessee Court of Appeals decision

explicitly recognized a remedy on this basis, although the decision relied on out of state precedents.

Foster & Creighton Co. v. Wilson Contracting Company, Inc., 579 S.W.2d 422 (Tenn. App. 1978).

Finally, however, the Tennessee Supreme Court, after finding it unnecessary to decide the issue as

late as 1982, see Alden v. Presley, 637 S.W.2d 862 (Tenn. 1982), unequivocally accepted

promissory estoppel as a cause of action in 1991. Bill Brown Construction Co., Inc. v. Glen Falls

Insurance Company, 818 S.W.2d 1 (Tenn. 1991).

               Promissory estoppel in Tennessee is described as:

               A promise which the promisor should reasonably expect to induce
               action or forbearance on the part of the promisee or a third person and
               which does induce such action or forbearance is binding if injustice
               can be avoided only by enforcement of the promise. The remedy
               granted for breach may be limited as justice requires.

Amacher v. Brown-Forman Corp., 826 S.W.2d 480, 482 (Tenn. App. 1991) (quoting Restatement

of Contracts 2d. § 90). “The limits of promissory estoppel are: (1) the detriment suffered in reliance

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Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

must be substantial in an economic sense; (2) the substantial loss to the promisee in acting in reliance

must have been foreseeable by the promisor; and (3) the promisee must have acted reasonably in

justifiable reliance on the promise as made.” Calabro v. Calabro, 15 S.W.3d 873, 879 (Tenn. App.

1999).

               Although Tennessee does recognize a claim of promissory estoppel, it does not

liberally apply the doctrine and limits its application to “exceptional cases.” Barnes & Robinson

Company, Inc. v. OneSource Facility Services, Inc., 195 S.W.3d 637 (Tenn. App. 2006). Such

exceptional cases are found only where defendant’s conduct is akin to fraud. Shedd v. Gaylord

Entertainment Company, 118 S.W.3d 695 (Tenn. App. 2003). A promissory estoppel claim is not

dependent on the finding of an express contract between the parties, Engenius Entertainment, Inc.

v. Herenton, 971 S.W.2d 12, 19 (Tenn. App. 1997), but the court must first determine whether an

enforceable contract exists. Calabro, 15 S.W.3d at 879. Promissory estoppel is an alternative

theory to recovery on an express contract. Operations Management International, Inc. v. Tengasco,

Inc., 35 F. Supp. 2d 1052 (E.D. Tenn. 1999). While cases do exist where the doctrine has been

applied where the parties have contracts, these cases have been limited to cases where a claim of

promissory estoppel was advanced to expand the terms of, not change the terms of, an existing

contract. Bill Brown, 818 S.W.2d at 9-11. Where the parties have an enforceable contract, however,

and merely dispute its terms, scope or effect, one party cannot obtain recovery based upon

promissory estoppel. Terry Barr Sales Agency, Inc. v. All-Lock Company, Inc., 96 F.3d 174 (6th Cir.

1996) (applying Michigan law); Johnson v. Metropolitan Government of Nashville, 2002 WL

                                                 -10-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

31769125 (Tenn. App. 2002); perm. app. denied May 5, 2003. Once an express contract is found,

therefore, the alternative claim of promissory estoppel becomes moot. Johnson, 2002 WL 31769125

at *10.

                NRTC argues that the jury verdict finding a contract between Sparton and NRTC for

the manufacture and sale of 35,000 additional LINKs precluded judgment on the alternative estoppel

claim and that the damage verdict is unsupportable as a matter of law. Sparton responds that NRTC

waived any argument based on the inconsistency in the jury’s finding of both an expressed contract

and promissory estoppel, that the trial court eliminated any inconsistency by its ruling that the

evidence did not support the jury’s finding as to the existence of a contract, and that the jury’s verdict

was not inconsistent under Tennessee law. We hold that the jury’s finding that a contract for the

manufacture and purchase of the additional LINKs existed precludes, as a matter of law, a damage

award based on promissory estoppel concerning the same subject matter and we reject Sparton’s

arguments for the reasons which follow.

                As to NRTC’s alleged waiver of its argument, Sparton argues that NRTC failed to

object to the flaws in the jury instruction and verdict form prior to their submission to the jury and

thus waived its right to later object. This argument is plainly without merit. The record in this case

clearly establishes that NRTC objected numerous times to the inclusion of the promissory estoppel

instructions in the jury instructions and did so just prior to submission of the case to the jury.

Sparton also argues that NRTC’s failure to object to the inconsistent verdict prior to the discharge

of the jury constitutes a waiver under Federal Rule of Civil Procedure 49(b). Rule 49(b) is

                                                  -11-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

inapplicable in this case, however, because the verdict, while technically inconsistent because the

finding of a contract forecloses an award of estoppel damages on the same subject matter, was

consistent with the procedure the jury was instructed to follow in the district court’s instructions.

If the jury had been correctly instructed that it should not consider the promissory estoppel claim if

it first found a contract, the inconsistency would not have occurred. Rather, the jury was instructed

to consider the promissory estoppel claim if they did not award damages for the breach of any

contract found, an instruction which was contrary to Tennessee law. Given the jury instructions,

objected to by NRTC, it would have been fruitless for NRTC to seek to have the jury return for

further consideration of its answers. We find no merit to this argument.

               Sparton next argues that the district court eliminated any inconsistency in the jury

verdict through its determination that the jury’s verdict as to the existence of a contract was not

supported by the evidence. The district court sua sponte held in its order on the motion for JMOL

and/or new trial that it need not determine whether Sparton could recover on its promissory estoppel

claim in the face of the jury’s finding of the existence of a contract “because there was not an

enforceable contract for 75,000 additional LINKS.” Sparton’s argument is flawed for several

reasons.

               It is doubtful, first of all, that the district court could sua sponte grant judgment as a

matter of law on the contract finding where no party had requested that it do so. See, e.g., American

and Foreign Insurance Company v. Bolt, 106 F.3d 155, 159 (6th Cir. 1997) (holding that “allowing

a judge to sua sponte raise a new issue post-verdict, and proceed to overturn a jury verdict on that

                                                 -12-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

basis contravenes the dictates of Rule 50(b)”). Even if the district court could do so, nothing

suggests that the district court applied the appropriate standard in reaching its decision; that is, taking

the strongest legitimate view of the evidence in favor of the existence of the contract finding (a

position Sparton had pursued throughout the litigation as its primary claim), allowing all reasonable

inferences to be drawn therefrom, discarding all countervailing evidence, and denying the motion

if there is any doubt as to the conclusion to be drawn from the whole evidence.

                In addition, when the proof is viewed under the correct standard, the strongest

legitimate view of the evidence supports the finding of the existence of a contract. Whether the

district court, or this Court, would have found the existence of a contract as the trier of fact is

irrelevant. It goes without saying that neither the district court nor this Court may substitute its own

findings for those of the jury and thus disregard a jury verdict, except when the jury’s verdict is

against the clear weight of the evidence. A jury’s verdict that could have reasonably been reached

should be left undisturbed. Bruner v. Dunaway, 684 F.2d 422, 425 (6th Cir. 1982). As the facts set

forth above illustrate, the district court improperly set aside the contract finding. As the district court

noted in its order denying Sparton’s motion for summary judgment on the contract issue, “[a] finder

of fact could conclude, based on the series of communications, that a firm contract for 35,000 LINK

units was agreed upon by the parties... This is a determination for a finder of fact.” (District Court’s

Memorandum and Order at 17). Hence, the breach of contract claim was tried to the jury which, on

consideration of the fully developed record, determined that there was indeed a contract between the

parties governing the 35,000 LINK units, a contract however, which NRTC was found not to have

                                                   -13-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

breached.

                Sparton lastly argues that Tennessee law permits recovery on both breach of contract

and promissory estoppel claims. As set forth above, a recovery for promissory estoppel, where the

parties have an enforceable contract, is limited to situations where promissory estoppel applies to

matters outside the terms or scope of the existing contract. Sparton has cited no case which permits

a recovery on a promissory estoppel theory where the dispute involves the terms of an express

contract. While Sparton claims that NRTC has failed to present a Tennessee case standing for the

proposition that estoppel and breach of contract claims are mutually exclusive, none of the cases

cited by Sparton permit such a dual recovery. Importantly, however, Sparton’s own pleadings

illustrate the lack of merit in Sparton’s position. The estoppel claims were presented in Sparton’s

complaint as alternative claims, upon which recovery could be had “[i]n the event that it is

determined that there was not a contract between the parties for the manufacture of an additional

35,000 “LINK” units.” Moreover, Sparton acknowledged, in a pleading filed on September 10,

2004, the alternative nature of its claims and said: “the plaintiff could prevail on either the contract

claim or the estoppel claims at trial, not both.” Sparton also acknowledged that it had dismissed the

estoppel claims because “it was determined that the prosecution of the remainder of the case would

be stronger and more focused, without the necessity of proceeding with those counts.” (Sparton’s

Brief at 15). Furthermore, a review of Counts I and IV of Sparton’s first amended complaint

indicates that both counts deal with the same terms and scope and, in fact, seek damages in identical

amounts for identical alleged losses.

                                                 -14-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

               We conclude, therefore, that the district court should have granted JMOL on NRTC’s

motion and the judgment in favor of Sparton on its promissory estoppel claim in the amount of

$1,747,415.94 must be reversed and vacated. As a result of our holding, we need not address the

other grounds upon which NRTC attacks the promissory estoppel judgment.

B. Breach of the 1997 Manufacturing Agreement

       In its counter-complaint, NRTC alleges a breach by Sparton of the 1997 manufacturing

agreement and specifically alleges that Sparton failed to produce LINKS units in a workmanlike

manner. NRTC argues on appeal that “[t]he evidence conclusively established that there were

manufacturing defects” in the LINK units manufactured by Sparton, in violation of § 7.1 of the

manufacturing agreement. NRTC cites testimony from Sparton personnel admitting that certain

manufacturing defects existed relating to the LINK units. Sparton, on the other hand, points to

testimony in the record which characterized the defects as minor and occurring in only a small

number of the units produced. There was also testimony that some of the defects were design defects

which were the responsibility of Util-Link, as well as testimony that Sparton cured all of the

referenced manufacturing defects by repairing or replacing the LINK units returned to it.

               Our standard of review on this issue is the same as the standard of review applied on

Sparton’s estoppel claims. We review the district court’s determination of a motion for judgment

as a matter of law de novo, as set forth above. A court should grant the motion only if reasonable

minds could reach only one conclusion from the evidence. We agree with the district court that there

is no need for any extended discussion on this issue. Even a cursory review of the record in this case

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Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

establishes conflicting evidence on this issue which the jury reasonably resolved in favor of Sparton.

We cannot say, as a matter of law, that reasonable minds could draw but one conclusion from the

evidence on this issue and we, therefore, affirm the district court on this issue.

C. Prejudgment interest

                On November 21, 2005, Sparton filed a motion to amend judgment seeking an award

of prejudgment interest on the $3,581,687.32 damages award.2 While acknowledging the parties’

agreement to apply Tennessee law in this case, Sparton, in its motion, asserted that Michigan law

should be applied on the issue and "that the court can allow such interest." Sparton also argued,

however, that, if NRTC were to argue that Tennessee law should be applied to the question of

prejudgment interest, then Tennessee law provides for such interest. (Brief in Support of Motion

to Amend Judgment at 3). NRTC responded that the court should exercise its discretion to deny the

request for prejudgment interest. Relying on Michigan law, the district court denied the motion

based upon its asserted discretion to do so.

                Sparton now argues that an award of prejudgment interest is mandatory under

Michigan law and argues that NRTC waived the right to argue that Tennessee law applies by not

explicitly so asserting in its reply to Sparton's motion in the district court. We disagree with Sparton

for a simple reason. Throughout this litigation, the parties agreed to apply Tennessee law. The only

reason advanced by Sparton for applying Michigan law is that NRTC allegedly waived its right to

        2
           As set forth above, this damages award was later reduced to $ 1,918,775.94 when Sparton
agreed to the suggested remittitur by the district court.

                                                 -16-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

insist that Sparton be held to its agreement by not explicitly objecting to Sparton’s claim in its reply

to Sparton’s motion. We find such an argument to be unpersuasive We see no good reason not to

enforce the parties’ agreement and apply Tennessee law.

               Under Tennessee law, prejudgment interest is authorized by T.C.A. § 47-14-123, but

is not allowed as a matter of right on unliquidated claims for damages, and its allowance is within

the sound discretion of the trial judge, B.F. Myers & Son v. Evans, 612 S.W.2d 912 (Tenn. App.

1980). The district court’s decision to deny prejudgment interest will not be reversed absent a

“manifest and palpable” abuse of discretion. Otis v. Cambridge Mut. Ins. Co., 850 S.W.2d 439 (Tenn

1992). Sparton does not argue that there is an abuse of discretion and we find none from the record

in this case. We therefore affirm the district court’s denial of Sparton’s motion.

D. Rule 11 sanctions

               On November 23, 2005, Sparton moved for sanctions pursuant to Federal Rule of

Civil Procedure 11 regarding NRTC’s counterclaim. The district court denied the motion by order

entered on February 2, 2006. In denying the motion, the district court noted that plaintiff’s brief

contained only a brief discussion regarding the lack of merit of the counterclaim and the speculative

evidence of damages introduced by defendants at trial. Sparton made no reference to the court’s

decision on Sparton’s motion for summary judgment nor did it make any reference to the testimony

or exhibits at the 16-day trial which led to the jury’s verdict.

                We review the district court’s determination on the motion for Rule 11 sanctions

                                                 -17-
Nos. 06-1582 and 06-1687
Sparton Technology, Inc. v. Util-Link, LLC
and National Rural Telecommunications Cooperative

under an abuse of discretion standard. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110
S. Ct. 2447, 2460-61, 110 L. Ed. 2d 359 (1990). “An abuse of discretion will not be found unless

we have a definite and firm conviction that the trial court committed a clear error of judgment.”

Friedler v. Equitable Life Assurance Society, 86 Fed. Appx. 50 (6th Cir. 2003) (citing Tahfs v.

Proctor, 316 F.3d 584, 593 (6th Cir. 2003)) (internal quotations marks omitted).

               The district court noted that “Sparton has not taken the time or put forth the effort to

persuade the court” to conclude that NRTC’s claim was frivolous and that Rule 11 sanctions should

be imposed. Sparton has not done so in this court either. Sparton’s brief contains sweeping

conclusory statements concerning the lack of merit of the NRTC counterclaim but has made no effort

to address the deficiencies noted by the district court in its argument. In fact, Sparton completely

ignores the district court’s decision on Sparton’s motion for summary judgment on the counterclaim

and does not cite a single reference to the transcript of the 16-day trial. Under these circumstances,

we find no abuse of discretion and affirm the district court.

                                          CONCLUSION

               For all the reasons set forth above, we REVERSE the judgment of the district

court on Sparton’s estoppel claims and REMAND for entry of judgment in favor of NRTC on

Sparton’s Count IV and V estoppel claims. We also AFFIRM the district court’s denial of

NRTC’s motion for judgment as a matter of law on its counterclaim and AFFIRM the district

court’s orders on Sparton’s motions for prejudgment interest and Rule 11 sanctions.

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