Court Opinion

ID: 20954
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:39:40+00
Date Added: 2024-06-11T15:04:14.283237
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                          FOR THE FIFTH CIRCUIT

                                No. 98-50559

        KAEPA, INC.,

                                   Plaintiff-Appellant-Cross-Appellee,

             versus

        ACHILLES CORPORATION,

                                   Defendant-Appellee-Cross-Appellant.

             Appeal from the United States District Court
            for the Western District of Texas, San Antonio

                                May 17, 2000

Before POLITZ, GARWOOD and DAVIS, Circuit Judges.

GARWOOD, Circuit Judge:*

        Plaintiff-appellant-cross-appellee Kaepa, Inc. (Kaepa), a United

States shoe manufacturer, brought this action against its Japanese shoe

distributor, defendant-appellee-cross-appellant Achilles Corporation

(Achilles), alleging, inter alia, breach of the parties’ distributorship

agreement–executed April 30, 1993 to be effective June 1, 1993--and

fraudulent inducement by Achilles to enter into the agreement.       In

response, Achilles filed several counterclaims, including breach of

    *
     Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under the
limited circumstances set forth in 5TH CIR. R. 47.5.4.
contract and fraud. After the parties presented their evidence, the

district court entered judgment as a matter of law against Kaepa on its

fraudulent inducement claim. The jury then found that Achilles had

breached its distributorship agreement with Kaepa, but that Kaepa had

waived any breach. Based on the verdict, the district court entered a

take-nothing judgment and ordered each party to bear its own costs.

Kaepa moved for a new trial on the ground that the jury’s finding of

waiver was against the great weight of the evidence and that the

evidence was legally insufficient to constitute waiver. The district

court denied this motion. Kaepa now appeals the district court’s grant

of judgment as a matter of law on its fraudulent inducement claim, as

well as the denial of its motion for a new trial based on the jury’s

waiver finding. Achilles appeals the district court’s denial of its

motion for costs.   We affirm.

                              Discussion

I.   Kaepa’s Fraudulent Inducement Claim

     Kaepa argues that the district court erred in entering judgment as

a matter of law in favor of Achilles on Kaepa’s fraudulent inducement

claim. At trial, Kaepa’s theory in support of this claim had been that

Achilles fraudulently induced it to enter into the distributorship

agreement by promising to market Kaepa shoes in Japan as a full-line

product, including men’s and women’s shoes, all the while secretly

intending to position Kaepa as only a women’s “niche” product. Having

reviewed the record and briefs, we conclude that the district court did

                                  2
not err in granting judgment as a matter of law on this claim.

     We review the grant of judgment as a matter of law de novo. See

Hidden Oaks Ltd. v. City of Austin, 138 F.3d 1036, 1042 (5th Cir. 1998).

Under Boeing Co v. Shipman, 411 F.2d 365 (5th Cir. 1969) (en banc),

judgment as a matter of law is appropriate “[i]f the facts and

inferences point so strongly and overwhelmingly in favor of one party

that the Court believes that reasonable men could not arrive at a

contrary verdict.” Boeing, 411 F.2d at 374. “There must be a conflict

in substantial evidence to create a jury question.” Id. at 375. In

considering the grant of judgment as a matter of law, we will view all

evidence “in the light and with all reasonable inferences most favorable

to the party opposed to the motion.”          Id. at 374.

     The elements of fraudulent inducement under Texas law (which

the parties and the district court have treated as controlling)

are: (1) a material representation was made; (2) the representation

was false when made; (3) the speaker knew it was false, or made it

recklessly   without   knowledge   of   its    truth   and   as   a   positive

assertion; (4) the speaker made it with the intent that it should

be acted upon; (5) the party acted in reliance; and (6) the

misrepresentation caused injury. See Formosa Plastics Corp. USA v.

Presidio Engineers and Contractors, Inc., 960 S.W.2d 41, 47 (Tex.

1998).   “A promise to do an act in the future is actionable fraud

when made with the intention, design, and purpose of deceiving, and

with no intention of performing the act.”          Spoljaric v. Percival

                                    3
Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).      In order to survive

Achilles’s motion, Kaepa had to present evidence that Achilles made

representations with the intent to deceive and with no intention of

performing.     Formosa, 960 S.W.2d at 48.      Moreover, the evidence

presented had to be relevant to Achilles’s intent at the time the

representations were made.     Id.    The element of intent is crucial

in distinguishing fraudulent inducement cases “from situations in

which a party has made a promise with an existent intent to fulfil

its terms and who then changes his mind and refuses to perform;

otherwise, every breach of contract would involve fraud.”            Oliver

v. Rogers, 976 S.W.2d 792, 804 (Tex. App.–Houston [1st Dist.] 1998,

pet. denied).

      The evidence that Kaepa relies on to show that Achilles never

intended to market its shoes as a full line but instead only as a

women’s niche dissipates in light of the fact that from the

beginning Kaepa knew very well what Achilles was doing.            In fact,

Kaepa was affirmatively in favor of focusing its marketing efforts

in   Japan   primarily,   though   not   exclusively,   on   its   “niche”

products–cheerleading, volleyball, and tennis–which were largely

women’s shoes.     Kaepa hoped this strategy would enable it to

establish a new foundation in Japan for its flagging product line

and position it for an eventual expansion as a significant player

in all areas of the Japanese athletic shoe market.           According to

Kaepa, the following items, individually and collectively, at least

                                     4
create a jury issue about whether Achilles ever intended to keep

its promises that it would not limit Kaepa to being a “niche”

product in Japan; we will address them seriatim.

     1.    The February 16, 1993 meeting between Kaepa and Achilles

officials at Achilles’s offices in Tokyo.                During the meeting,

Achilles Senior Manager Takeshi Yagi (Yagi) drew several diagrams

to illustrate Achilles’s vision for its marketing and distribution

of Kaepa shoes in Japan.       In one of these diagrams, Yagi depicted

Kaepa as Achilles’s women’s brand and Spalding as its men’s brand.

Kaepa     President   Frank    Legacki       (Legacki)    objected   to   this

characterization because Kaepa intended to be a full-line product

in Japan, not merely a niche product.           Yagi corrected the diagram

accordingly.      Without     more,   this    episode    evidences   merely   a

preliminary negotiation and does not demonstrate an intent by

Achilles to undercut Kaepa’s plan for the Japanese athletic shoe

market.

     2.     The March 16, 1993 letter from Legacki to Achilles

President Sadao Nakagima (Nakagima), in which Legacki expressed

concern about Yagi’s initial diagram and the possibility that

Achilles would position Kaepa as its “female” brand.                  Legacki

stated that it was Kaepa’s intent to become “a large, dominant top-

quality, performance brand” and that the only way for Kaepa “to

develop to its full potential” was to remain flexible to enter all

segments of the athletic shoe market, including men’s shoes.                  On

                                       5
March 17, 1993, Nakagima wrote back and assured Legacki that

Achilles would be “more than happy to cooperate” with Kaepa’s

vision for its product line “if Kaepa will be strongly developing

[sic] in the [men’s] basketball and cross training field.”

     What Kaepa fails to note is that in correspondence a week

earlier, Legacki outlined for Nakagima his vision for Kaepa’s

strategy in    Japan    that   was   explicitly      premised    on   a   primary

emphasis on the women’s brand niche products.                   Kaepa had been

declining as a brand in Japan before it entered the distributorship

agreement with Achilles.         In its relationship with its former

distributor, Diawa Corporation (Diawa), Kaepa had gone from a peak

of 1.2 million shoes sold to Diawa in 1988 to 566,000 pairs in

1992, and in the first three months of 1993, orders were down an

additional seventy percent.          On March 8, 1993, Legacki wrote to

Nakagima and told him that Kaepa needed to enter a “transition

period” during which its Japanese strategy would “coordinate more

closely” with its strategy in the United States.                 In the United

States, Kaepa had aimed at a stable market niche of cheerleading,

tennis,   volleyball,    and   aerobics      shoes.     Its     primary   target

audience had been high school girls and female college students.

Currently,    Legacki    explained,        Kaepa’s   Japanese    business    was

“broader” and “more fashion-oriented” than in the United States;

for 1994, he envisioned Kaepa’s Japanese strategy to come more in

line with its U.S. strategy, with “more emphasis . . . on Kaepa

cheerleading and volleyball.”          According to the minutes of the

                                       6
March   23,    1993    meeting    between      Achilles      and   Kaepa,    Legacki

reiterated this strategy, expressing his desire to “excite the

Japanese market” with cheerleading shoes.

      In light of these statements, it is clear that Kaepa intended

to move toward more emphasis on its niche brand positioning in

Japan, while hoping to maintain some presence in the men’s brand

markets (though its Japanese sales in all product areas had been

down in recent years). There is no evidence that Achilles intended

to diverge from this strategy.

      3.     The March 17, 1993 meeting between Kaepa Vice-President

John Holsinger (Holsinger), who was in charge of Kaepa’s Asian

operations, and various Achilles officers at Achilles’s offices

regarding the selection of Kaepa products to be marketed in Japan

by   Achilles.        According    to    Holsinger,    the    Achilles      officers

expressed the most interest in marketing women’s shoes; Holsinger

objected      and    pointed    out     that   Kaepa   had    historically      been

successful selling men’s tennis and basketball shoes. The Achilles

officials then assured Holsinger that they would market a broader

range of products.

      Whatever inference of fraudulent intent on Achilles’s part

that this episode might suggest evaporates in light of the fact

that on March 24, 1993, Kaepa and Achilles officials jointly

selected seventeen models of shoes to be marketed in Japan, twelve

of   which    were    women’s    models.       Kaepa   and    Achilles   conducted

extended meetings in Tokyo on March 23-25, 1993.                   This selection

                                           7
signaled a clear move away from the strategy Kaepa had employed

with Diawa, in which sixty-seven percent of its shoes in the

Japanese market were men’s.         Legacki and Holsinger, among other

Kaepa executives, attended this meeting and made no objection to

the selection.    Indeed, on April 6, 1993, Legacki wrote to Yagi to

discuss the March 23-25 meetings, and noted that “the transition

plan essentially reflects the model line-up that we agreed upon in

our meeting.”     To illustrate the transition plan, Legacki included

replicas of the charts that he presented at the meetings.              The

“Kaepa Global Strategies Japanese Transition” chart noted that in

Japan, Kaepa would move away from its “fashion” oriented line

toward a line with “more emphasis on U.S.A. products,” including

“cheerleading, volleyball, tennis.” From these charts, it is clear

that Kaepa wanted to streamline its strategies in both Japan and

the United States, so that in both markets Kaepa would use its

predominantly women’s “niche” shoes to obtain a “critical mass” and

then   expand   into   a   more   full-range   product   line.   The   only

perceptible difference reflected by these charts between Kaepa’s

Japanese and Untied States strategies appears to be that in Japan,

Kaepa would maintain something of a “broad line,” which presumably

would include some men’s shoes.        Achilles’ actions–selecting some

men’s shoes and marketing them–is consistent with this strategy.

       4.   Achilles’s representations during the negotiation period

that it was an experienced company which knew the Japanese athletic

                                      8
shoe market well and would achieve better results for Kaepa than

Diawa.       Achilles’s puffery about its expertise in the Japanese

market were not misrepresentations of material fact and thus do not

demonstrate fraudulent intent.     See, e.g., Prudential Ins. Co. v.

Jefferson Assocs., Ltd., 896 S.W.2d 156, 163 (Tex. 1995) (finding

that statements that a building was “superb,” “super fine,” and

“one of the finest little properties in the City of Austin” were

not misrepresentations of material fact, but instead expressions of

opinion that could not constitute fraud); Dyer v. Caldcleugh &

Powers, 392 S.W. 2d 523, 530 (Tex. Civ. App.–Corpus Christi 1965,

writ ref’d n.r.e.).     Statements that are merely predictions, such

as outselling Diawa, are similarly not actionable.     See Presidio

Enters., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674, 680

(5th Cir. 1986) (applying Texas law to hold that a prediction of

film’s box office success was an opinion only and not actionable as

a fraudulent misrepresentation).1

        5.    The March 26, 1993 meeting of the Achilles board of

directors, at which Yagi stated that Achilles would concentrate on

Kaepa’s “ladies goods for the present.”         As discussed above,

shifting Kaepa’s focus in Japan to concentrate primarily on the

    1
       We also observe that the distributorship agreement contained
no requirement that Achilles purchase a set minimum number of shoes
from Kaepa; Achilles agreed only to work toward projected “target
purchases.”     In the event that Achilles did not achieve its
“targeted purchases,” Kaepa would have the option of terminating
the agreement but could not hold Achilles liable for any damages
for not achieving these figures.

                                   9
women’s niche products was exactly the strategy that Legacki

outlined at various points during the negotiation process.   Kaepa

also points to Yagi’s statement at this meeting that Achilles would

sell 200,000 pairs in the first year as evidence that Achilles

intended to breach the distribution agreement before ever signing

it.   Achilles was to purchase 1,440,000 pairs of shoes from Kaepa

during the first forty-two months.    However, it does not follow

from projections for the first twelve months that Achilles intended

not to meet its targeted figure for the first forty-two months.

Moreover, the fact that Achilles was planning to sell 200,000 in

the first year, followed by 550,000 “in an early period” (as Yagi

stated) is not inconsistent with the agreement’s target figures.

If Achilles had sold 200,000 the first year, and 550,000 per year

for the following years (assuming that is what the “early period”

meant), it would have exceeded that figure.2

      6.   The “Yamada Report,” an Achilles marketing report that

Kaepa believes demonstrates Achilles’s intent to relegate Kaepa to

a women’s only niche brand by listing Kaepa’s main categories as

“Cheer, Volleyball, Tennis.”    This “report” does not help Kaepa’s

cause.     First, it is not shown to be anything more than a mere

reprint of an independent trade publication journal article, which

      2
       Shoe sales of 200,000 pairs for year one, 496,000 pairs for
years two and three, 248,000 pairs for the first six months of year
four would equal the 1,440,000 figure for the first forty-two
months. If Achilles sold 550,000 pairs in year two, it would be
54,000 pairs ahead of schedule.

                                 10
had been received by an Achilles executive.    Second, the content of

this report is inconclusive because in another section it lists as

Kaepa’s main categories of shoes “men’s tennis, lady’s fitness, and

men’s basketball.”

     7.   The “Asatsu” plan, an unsolicited advertising proposal

from the Asatsu advertising agency that suggests, among other

things, a decidedly feminine Kaepa logo.      Like the Yamada report,

this evidence does not support any possible finding of fraudulent

intent on the part of Achilles.       First, the proposal was the

unsolicited work of a third party.     Second, the proposal itself

contains many possible marketing plans, including running ads in

men’s magazines.

     8.   The June 2, 1993 press conference in Tokyo announcing the

formation of the Kaepa-Achilles distribution agreement.     Yagi sent

to Legacki a copy of Achilles’s proposed press release, which

discussed launching the “New Kaepa” with a focus on “promising

categories such as cheerleader and volleyball.”      The release also

stated that Achilled would “enrich especially [the] ladies[’]

field” through its marketing of Kaepa.     In response, Legacki did

not object to this characterization of Achilles’s strategy for

Kaepa, even though he made a suggestion regarding the release’s

mention of an air intake system.      In his remarks for the press

conference, Legacki included a history of Kaepa’s success in the

United States market, noting its primary focus on tennis and

cheerleading models. This statement is telling in light of Keapa’s

                                 11
stated     plan    to     refocus       its    Japanese   strategy     to     mirror,

essentially, its U.S. strategy.

      In light of this evidence, it is clear that Achilles’s actions

were no surprise to Kaepa.                Any disagreement, as evidenced by

Legacki’s March 16 letter, apparently revolved around Kaepa’s

concern that Achilles was going to market Kaepa as a women’s brand

forever,    not    just    in    the    short-term.       However,    there    is   no

indication that Achilles ever intended to thus relegate Kaepa only

to a women’s brand niche.              It did order significant quantities of

men’s shoes and advertised them accordingly.                    While the overall

focus of their activities for 1993-94 was directed at women’s

shoes, that strategy comports with the strategy mutually agreed on

by Kaepa and Achilles. The breakdown in communications between the

parties appears to have resulted from a disagreement over the

length of the transition period, or how closely Achilles was to

mirror in Japan Kaepa’s United States strategy (where Kaepa was a

niche brand), particularly while both parties were attempting to

dispose of the residual, heavily discounted inventory from Diawa.

In sum, we agree with the district court that, considering the

record as a whole, no reasonable jury could find that Achilles

fraudulently      induced       Kaepa    to    enter   into   the   distributorship

agreement.        We therefore affirm the district court’s entry of

judgment as a matter of law on that claim.

II.   Kaepa’s Motion for a New Trial

                                              12
     In its second point on appeal, Kaepa argues that the district

court erred in denying its motion for a new trial.          In its brief,

Kaepa asserts that the jury’s finding that Kaepa waived any breach

of contract by Achilles was “against the great weight of the

evidence.”    As such, Kaepa urges this Court to find that the

district court abused its discretion in not granting a new trial

under FED. R. CIV. P. 59.     Kaepa argues that Achilles’s evidence

demonstrated only mutual agreement to modify the contract, not any

waiver by Kaepa of Achilles’s contractual obligations.             According

to Kaepa, this evidence was thus not “factually sufficient” to

support the jury’s finding of waiver.         However, a Rule 59 motion

addresses the weight, not the sufficiency, of the evidence.             See,

e.g., Conway v. Chemical Leaman Tank Lines, Inc., 610 F.2d 360, 367

(5th Cir. 1980) (finding a trial court abused its discretion by

granting a new trial because the jury’s conclusions were at least

as likely to be true as any other and were not against any great

evidentiary weight).      An argument about the sufficiency of the

evidence is more akin to a Rule 50(a) motion for judgment as a

matter of law.      A court may grant a Rule 50(a) motion if it

determines that a reasonable jury could draw inferences from the

evidence to support a finding in favor of one party only.                See

Burch v. Coca-Cola Co., 119 F.3d 305, 313 (5th Cir. 1997), cert.

denied, 118 S.Ct. 871 (1998).       Kaepa appears to be arguing that

Achilles   failed   to   adduce   any    evidence   that   would    allow   a

                                    13
reasonable   jury   to   conclude   that   Kaepa   waived   the   breach   by

Achilles.    Having reviewed the briefs and record, we cannot agree

that there was no evidence to support the jury’s finding of waiver.

Specifically, we note the numerous instances in which Kaepa acted

in concert with Achilles’s focus of its initial marketing efforts

on Kaepa’s women’s niche shoes.

     Achilles argues that since Kaepa was essentially moving for

judgment as a matter of law, and since Kaepa failed to file a Rule

50(a) motion before the close of evidence, this Court should

evaluate the district court’s ruling under the more deferential

“clear error” standard of review.           See United States ex rel.

Wallace v. Flintco, 143 F.3d 955, 963 (5th Cir. 1998).                 Kaepa

contends that it only wanted a new trial under Rule 59, and this

Court should instead apply the abuse of discretion standard of

review.   This point is ultimately irrelevant.        Even if this Court

construed Kaepa’s motion as a Rule 59 motion, and reviewed the

district court’s denial for an abuse of discretion, Kaepa has not

overcome the very high standard that would allow this Court to find

both the jury and the district court in error on an issue of

evidentiary weight.       See 12 JAMES WM. MOORE    ET AL.,   MOORE’S FEDERAL

PRACTICE § 59.54[4][a] (2d ed. & Supp. 1999) (“[W]hen the trial

court denies a Rule 59 motion based on the claim that the verdict

is against the clear weight of evidence, that determination is

virtually unassailable on appeal.”).

                                    14
       We note that Kaepa has not brought forward any complaint of

the jury charge or verdict form.

       Kaepa has not demonstrated that the district court erred in

refusing to grant it’s motion for a new trial.

III.       Court Costs

       On its cross-appeal, Achilles challenges the district court’s

determination that each party bear its own costs. Despite the fact

that it was unsuccessful on its counterclaims, Achilles contends

that because Kaepa did not prevail on its claims, Achilles was, for

all intents and purposes, the prevailing party under FED. R. CIV. P.

54(d)(1)3, and is therefore entitled to its costs.              We review the

decision to award costs for abuse of discretion.           See Soderstrum v.

Town of Grand Isle, 925 F.2d 135, 141 (5th Cir. 1991).

       We    conclude    that   the   district   court   did   not   abuse    its

discretion in ordering each party to bear its own costs.                     Rule

54(d) directs that “costs other than attorneys’ fees shall be

allowed as of course to the prevailing party unless the court

otherwise directs.”        Under this rule, “the decision to award costs

turns on whether the party, as a practical matter, has prevailed.”

Schwartz v. Folloder, 767 F.2d 125, 130 (5th Cir. 1985).              Achilles

       3
            FED. R. CIV. P. 54(d)(1) provides in relevant part:

               “Except when express provision therefor is made either in a
               statute of the United States or in these rules, costs other
               than attorneys’ fees shall be allowed as of course to the
               prevailing party unless the court otherwise directs.”

                                        15
cites   cases   that    support   the    proposition   that   under   certain

circumstances “successfully avoid[ing] a potentially multi-million

dollar judgment” can amount to “prevailing” for the purpose of

awarding costs.        See O.K. Sand & Gravel, Inc. v. Martin Marietta

Techs., Inc., 36 F.3d 565, 571-72 (7th Cir. 1994); see also

Scientific Holding Co., Ltd. v. Plessey Inc., 510 F.2d 15, 28 (2d

Cir. 1974). Unlike the present case, however, those cases affirmed

the district court’s cost awards.               In other words, under our

deferential standard of review, these reviewing courts simply found

that there was not such a “clear abuse of discretion” as to require

overturning the award.      See In re Nissan Antitrust Litig., 577 F.2d

910, 918 (5th Cir. 1978).         Similarly, this case does not present

such an egregious abuse of discretion that this Court must overturn

its cost award.    Achilles failed to obtain a favorable judgment on

its breach of contract counterclaim.              “A trial judge has wide

discretion with regard to the costs in a case and may order each

party to bear his own costs.”        Hall v. State Farm Fire & Cas. Co.,

937 F.2d 210, 216 (5th Cir. 1991).           Courts of appeals have found no

abuse of discretion by district courts that have ordered each party

to bear its own costs when, as here, the cases end in a “draw.”

See Allen & O’Hara, Inc. v. Barrett Wrecking, Inc., 898 F.2d 512,

517 (7th Cir. 1990) (finding that “[b]oth Barrett and A&O prevailed

in part, and therefore we cannot say that the district court abused

its discretion” in making each party bear its own costs); In re

                                        16
Corrugated Container Antitrust Litig., 756 F.2d 411, 418 (5th Cir.

1985) (“The jury found for the plaintiffs in part and for the

defendants in part. The trial court acted within its discretion in

its assessment of costs.”).        We similarly find that in this case,

in which both Kaepa and Achilles survived each other’s claims, that

the district court did not abuse its discretion in ordering each

side to bear its own costs.

                                  Conclusion

     AFFIRMED.

     Costs   on   this   appeal    adjudged    as   follows:   three-fourths

against Kaepa; one-fourth against Achilles.

                                      17