United States District Court, N.D. Iowa, Cedar Rapids Division
December 27, 2016
BVS, INC., Plaintiff/Counterclaim Defendant,
CREDIT UNION EXECUTIVES SOCIETY, INC., Defendant/Counterclaim Plaintiff.
ORDER DENYING MOTION FOR NEW TRIAL
STUART SCOLES CHIEF MAGISTRATE JUDGE NORTHERN DISTRICT OF
matter comes before the Court on the Motion for New Trial
(docket number 73) filed by Plaintiff BVS, Inc. on December
15, 2016, and the Resistance (docket number 78) filed by
defendant Credit Union Executives Society, Inc.
("CUES") on December 26. Pursuant to Local Rule
7.c, the motion will be decided without oral argument.
an Iowa corporation which focuses on helping financial
institutions enhance their customer service, employee
satisfaction, and profitability through training and
technology. CUES is a Wisconsin corporation focusing on
leadership development for management-level employees at
credit unions. On May 31, 2011, BVS and CUES executed a
Master Agreement and related Addendum. Pursuant to the
Agreement, CUES afforded BVS access to its marketing vehicles
and membership. In consideration, BVS paid CUES a
6, 2015, BVS sued CUES, claiming CUES had failed to provide
BVS with the marketing opportunities required by the
Agreement. CUES filed a counterclaim, asserting BVS breached
the Agreement by failing to pay the required commissions.
Following a five-day trial, the jury found for CUES.
instant motion, BVS seeks a new trial on two grounds: First,
BVS argues die Court erred in granting CUES' RULE 50(a)
motion for judgment as a matter of law on BVS' claim of
fraud in the inducement. Second, BVS argues the Court erred
in granting CUES' motion in limine, precluding
BVS from introducing evidence of "benefit of the
Rule of Civil Procedure 59(a)(1)(A) authorizes the Court to
grant a new trial on all or some of die issues "for any
reason for which a new trial has heretofore been granted in
an action at law in federal court." In White v.
Pence, 961 F.2d 776 (8th Cir. 1992), the Court discussed
at length the standard to be applied by the trial court in
considering a motion for new trial. "[T]he standard is
simply one as to whether a miscarriage of justice has
occurred." Id. at 778. See also Murphy v.
Missouri Dept. of Corrections, 506 F.3d 1111, 1116 (8th
Cir. 2007) ("The grant of a motion for new trial is
appropriate only if 'die verdict is against the weight of
the evidence and allowing it to stand would result in a
miscarriage of justice.'"); Beckman v. Mayo
Found., 804 F.2d 435, 439 (8di Cir. 1986) ("The
district court can only disturb a jury verdict to prevent a
miscarriage of justice.").
Measure of Damages
argues die Court erred in a pretrial ruling and in a trial
ruling, thereby requiring a new trial. In a pretrial motion
in limine, CUES asked die Court to prohibit BVS from
offering evidence regarding alleged "benefit of die
bargain" damages. As detailed in the Court's Ruling
(docket number 58) on the motion in limine, BVS
filed this action on July 6, 2015. Throughout the pendency of
this action, BVS consistently described its damages as
"recovering all royalties paid to CUES." BVS
approximated the damages at $1 million. As recently as May
2016, BVS' attorney refused to produce BVS' financial
information, arguing it was irrelevant because "BVS'
damages claim constitutes recovering the royalties it paid to
CUES." It was not until September 9, 2016 - just 80 days
prior to trial, and after the deadline for completing
discovery had expired - that BVS served CUES with a
supplemental Rule 26 initial disclosure, stating that BVS
intended to seek damages for "lost expectations/benefit
of the bargain: $4, 787, 510.51."
discussed in my Ruling on CUES* motion in limine,
FEDERAL Rule of Civil Procedure 26(a)(1)(A)(iii) requires a
party to disclose "a computation of each category of
damages claimed by the disclosing party, " and further
requires the party to make available documents or other
materials bearing on those damages. Furthermore, Rule
26(e)(1)(A) requires a party to supplement its disclosure
"in a timely manner." If a party fails to provide
information as required by Rule 26(a) or (e), then it is
prohibited from using the information at trial "unless
the failure was substantially justified or is harmless."
See Fed. R. Civ. P. 37(c)(1).
concluded BVS' failure to supplement its damages claim
until 80 days prior to trial, and well after the deadline for
discovery had expired, was neither substantially justified
nor harmless. This case had been pending for more than a year
- and a similar case was brought the previous year - before
BVS alerted CUES that it intended to seek nearly $5 million
in alleged lost profits. By that time, it was too late for
CUES to conduct appropriate discovery (which had previously
been refused by BVS) or retain a necessary expert witness.
Because BVS' new theory of damages was not disclosed in a
timely manner, I concluded it could not advance that measure
of damages at trial. For all of the reasons set forth in my
previous ruling, I decline the opportunity to reverse myself
note parenthetically that the error, if any, in refusing to
allow BVS to offer benefit of the bargain damages is
harmless. That is, the jury found for CUES on the breach of
contract dispute and, therefore, never reached
BVS' alleged damages. In other words, BVS could not
recover benefit of the bargain damages in any event, even if
they could be proved, because the jury found CUES had not
breached the contract.
Fraud in the Inducement
parties' Agreement provided that "CUES will make
available, at no cost, space in its various marketing
vehicles for promotion of the Products in accordance with
CUES and BVS overall marketing strategies for the
Products." The Agreement does not define "make
available, " "space, " or "marketing
vehicles." The Agreement was primarily drafted by
BVS' president and sole shareholder, Roy Karon. Karon
testified, however, that he was persuaded by a CUES employee,
Dennis Porter, to use "vague" language in order to
promote "flexibility." At trial, Karon testified
the contract required CUES to provide BVS with
"unfettered access" to CUES' conferences and
publications. Specifically, BVS argued that CUES breached the
contract by failing to place BVS1 ads on the back inside
cover of CUES* magazine, and by not allowing Karon to speak
in prime times at select conferences.
conclusion of BVS' evidence, CUES moved for judgment as a
matter of law pursuant to Federal Rule of Civil Procedure
50(a). The Court may grant judgment against a party on a
claim if it "finds that a reasonable jury would not have
a legally sufficient evidentiary basis to find for the party
on that issue." Id. That is, in ruling on a
motion for judgment as a matter of law, the Court must
determine "whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is
so one sided that one party must prevail as a matter of
law." Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 251-52 (1986). The Court must view the evidence in the
light most favorable to the nonmoving party and "must
not engage in a weighing or evaluation of the evidence or
consider questions of credibility." Kinserlow v. CMI
Corp., 217 F.3d 1021, 1025 (8th Cir. 2000) (quoting
Smith v. World Ins. Co., 38 F.3d 1456, 1460 (8th
Cir. 1994)). However, "the nonmoving party is only
entitled to the benefit of reasonable inferences."
Id. at 1026. "A 'reasonable inference is
one which may be drawn from the evidence without resort to
speculation. When the record contains no proof beyond
speculation to support the verdict, judgment as a matter of
law is appropriate.'" Id. (quoting
Fought v. Hayes Wheels Int'l, Inc., 101 F.3d
1275, 1277 (8th Cir. 1996)).
Agreement executed by the parties contains an integration
clause. Generally, "[w]hen an agreement is deemed fully
integrated, the parol evidence rule prevents the receipt of
any extrinsic evidence to contradict (or even supplement) the
terms of the written agreement." Whalen v.
Connelly, 545 N.W.2d 284, 290 (Iowa 1996). However, it
is the function of the fact finder "to ascertain the
true intent and meaning of the parties to the contract as
revealed by the language used there." Tamm, Inc. v.
Pildis, 249 N.W.2d 823, 832 (Iowa 1976). Accordingly, as
the jury was instructed, "evidence may be offered for
the purpose of interpreting and giving meaning to the terms
of the contract." The jury was told that "as an aid
to interpreting the contract, evidence is admissible which
sheds light on the situation of the parties, prior
negotiations, attendant circumstances, and the objects the
parties were striving to attain."
BVS was permitted to offer evidence in support of its claim
that the parties intended the contract language to include
"unfettered access" to CUES' publications and
conferences. The jury apparently concluded BVS had failed to
meet its burden in that regard. The meaning which BVS urged
the jury to attribute to the contract language is identical
to the representations which Dennis Porter allegedly made in
fraudulently inducing Roy Karon to sign the contract. In
Whalen, the Court held that a claim of fraudulent
inducement will not lie if the alleged representations are
included in the integrated agreement.
[A]ll of the alleged representations involved matters that
were specifically addressed in the integrated written
partnership agreements and corresponding letter agreements.
Although we have allowed fraudulent inducement claims to
proceed despite an integration clause in a contract, we have
done so only with regard to misrepresentations concerning
facts or circumstances not included in the written contract.
Whalen, 545 N.W.2d at 294. Here, the representations
allegedly made by Porter were, according to BVS, within the
meaning of the language contained in the contract.
as a matter of law, BVS cannot recover on a claim of fraud in
the inducement when the alleged promises were incorporated in
event, the Court believes that BVS' claim of fraud in the
inducement fails as a factual matter. BVS had the burden of
establishing by clear and convincing evidence: (1)
representation; (2) falsity; (3) materiality; (4) scienter;
(5) intent to deceive; (6) reliance; and (7) resulting injury
and damage. Id. at 294. Even viewing the evidence in
the light most favorable to BVS, the Court finds it failed to
establish by clear and convincing evidence scienter, intent
to deceive, or reliance. BVS is an established business and
Roy Karon is a sophisticated and successful businessman.
Karon was primarily responsible for drafting the agreement,
and the Agreement was reviewed by BVS" attorneys before
it was executed. Furthermore, there is no evidence that
Dennis Porter, or CUES, had any intent to deceive Karon or
BVS. To the contrary, all of the evidence suggested that
Porter was an enthusiastic supporter of the relationship
between BVS and Cues. Accordingly, I decline the opportunity
to reverse my decision on CUES' Rule 50(a) motion.
reasons set forth above, the Motion for New Trial (docket
number 73) filed by BVS, Inc. is DENIED.
 BVS previously filed a similar action
in June 2014, which was removed to this Court in July 2014.
See BVS, Inc. v. Credit Union Executive Society,
Inc., No. 1:14-cv-00091-LRR(N.D. Iowa). BVS dismissed
that action in December 2014, apparently believing a
settlement had been reached.