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BVS, Inc v. Credit Union Executives Society, Inc.

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.



         This 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.

         I. BACKGROUND

         BVS is 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 royalty/commission.

         On July 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.


         In its 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 bargain" damages.

         Federal 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.").

         A. Measure of Damages

          BVS 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.[1] 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."

         As I 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).

         I 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 now.

         I also 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.

         B. Fraud in ...

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