Edmark Auto, Inc. et al v. Zurich, Inc. et al
Filing
373
MEMORANDUM DECISION AND ORDER re 347 MOTION for Judgment as a Matter of Law and Rule 59 Motion for New Trial and 350 MOTION to Amend/Correct 324 Judgment. IT IS ORDERED: Defendants' Motion for Judgment as a Matter of Law and Rul e 59 Motion for a New Trial (Dkt. 347 ) is DENIED. Plaintiffs' Motion to Amend/Correct the Judgment (Dkt. 350 ) is GRANTED. The Court will issue a separate judgment awarding pre-judgment interest in the sum of $141,150.57 for Edmark and $85,764.93 for Chalfant against Defendants, and post-judgment interest pursuant to 28 U.S.C. § 1961, calculated beginning July 10, 2019. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (ckh)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
EDMARK AUTO, INC., an Idaho
corporation; and CHALFANT CORP.,
an Idaho corporation,
Case No. 1:15-cv-00520-BLW
Plaintiffs,
MEMORANDUM DECISION
AND ORDER
v.
ZURICH AMERICAN INSURANCE
COMPANY, a New York corporation;
and UNIVERSAL UNDERWRITERS
SERVICE CORPORATION, a
Delaware corporation,
Defendants.
AND RELATED CROSS-ACTION
INTRODUCTION
There are currently two motions before the Court: Defendants Zurich
American Insurance Company (“Zurich”) and Universal Underwriters Service
Corporation (“Universal”) (collectively, “Insurers”)’s Motion for Judgment as a
Matter of Law and Rule 59 Motion for New Trial (Dkt. 347) and Plaintiffs Edmark
Auto, Inc. (“Edmark”) and Chalfant Corp. (“Chalfant”) (collectively, “Dealers”)’s
MEMORANDUM DECISION AND ORDER - 1
Motion to Amend/Correct the Judgment (Dkt. 350). For the reasons that follow,
Insurers’ Motion for Judgment as a Matter of Law and Rule 59 Motion for New
Trial is DENIED and Dealers’ Motion to Amend/Correct the Judgment is
GRANTED.
LEGAL STANDARD
1. Judgment as a Matter of Law
Federal Rule of Civil Procedure 50 governs a request for judgment as a
matter of law. Under Rule 50(a), a party must first move for judgment as a matter
of law before the case is submitted to the jury and “specify ... the law and facts that
entitle the movant to the judgment.” Fed. R. Civ. P. 50(a)(2). Under Rule 50(b), if
the court denies the pre-verdict motion, “the movant may file a renewed motion for
judgment as a matter of law and may include an alternative or joint request for a
new trial under Rule 59.” Fed. R. Civ. P. 50(b). The failure to make a Rule 50(a)
motion before the case is submitted to the jury forecloses the possibility of the
Court later considering a Rule 50(b) motion. Tortu v. Las Vegas Metropolitan
Police Dep’t., 556 F.3d 1075, 1083 (9th Cir. 2009). Furthermore, “[a] post-trial
motion for judgment can be granted only on grounds advanced in the pre-verdict
motion.” Fed. R. Civ. P. 50(b), advisory committee’s note to 1991 amendment.
A court may grant a Rule 50 motion for judgment as a matter of law only if
“there is no legally sufficient basis for a reasonable jury to find for that party on
MEMORANDUM DECISION AND ORDER - 2
that issue.” Krechman v. County of Riverside, 723 F.3d 1104, 1109 (9th Cir. 2013)
(internal citations omitted). “A jury’s verdict must be upheld if it is supported by
substantial evidence…even if it is also possible to draw a contrary conclusion from
the same evidence.” Wallace v. City of San Diego, 479 F.3d 616, 624 (9th Cir.
2007). “[I]n entertaining a motion for judgment as a matter of law, the court…may
not make credibility determinations or weigh the evidence.” E.E.O.C. v. Go Daddy
Software, Inc., 581 F.3d 951, 961 (quoting Reeves, 530 U.S. at 150). Rather, “[t]he
evidence must be viewed in the light most favorable to the nonmoving party, and
all reasonable inferences must be drawn in favor of that party.” Id.
2. New Trial Pursuant to Rule 59(d)
Rule 59(d) provides that “[n]o later than 28 days after the entry of judgment,
the court, on its own, may order a new trial for any reason that would justify
granting one on a party’s motion.” A trial court has not only the right but “indeed
the duty…to weigh the evidence as he [or she] saw it…and to set aside the verdict
of the jury, even though supported by substantial evidence, where, in his [or her]
conscientious opinion, the verdict is contrary to the clear weight of the evidence, or
is based upon evidence which is false, or to prevent, in the sound discretion of the
trial judge, a miscarriage of justice.” Moist Cold Refrigerator Co. v. Lou Johnson
Co., 249 F.2d 246, 256 (9th Cir. 1957).
MEMORANDUM DECISION AND ORDER - 3
“Although a court need not consider the evidence in a manner that favors
the prevailing party and it may grant a new trial even if there is some evidence in
support of the prior decision, it should not grant a new trial unless it more than
simply disagree[s] with the verdict.” Gates v. Boyle, No. CV 05-59-M-DWM,
2007 WL 9710298, at *1 (D. Mont. Mar. 15, 2007) (Molloy, J.) (internal quotation
omitted). “[A] decent respect for the collective wisdom of the jury, and for the
function entrusted to it in our system, certainly suggests that in most cases the
judge should accept the findings of the jury, regardless of his own doubts in the
matter.” Landes Const. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1371 (9th
Cir. 1987) (citation omitted). “Nonetheless, a new trial is appropriate where the
court has a firm conviction of the jury’s error and an attendant miscarriage of
justice.” Gates, 2007 WL 9710298, at *1 (internal quotations omitted). Unlike a
Rule 50 motion, under Rule 59 the trial court may assess the credibility of the
witnesses. See Kode v. Carlson, 596 F.3d 608, 612 (9th Cir. 2010) (per curiam). A
new trial may also be granted if the Court concludes that a party was prejudiced by
erroneous evidentiary decisions or by some other unfairness in the trial. See
Gilbrook v. City of Westminster, 177 F.3d 839, 858 (9th Cir. 1999).
3. Remittitur
Rule 59 also allows the trial court to “grant a defendant’s motion for a new
trial or conditionally deny the motion, provided the plaintiff accepts a remittitur.”
MEMORANDUM DECISION AND ORDER - 4
J.N. v. Hendrickson, No. 214CV02428DDPPLAX, 2017 WL 2539390, at *3 (C.D.
Cal. June 12, 2017) (citing Fenner v. Dependable Trucking Co., Inc., 716 F.2d
598, 603 (9th Cir. 1983)). The reduced award “must reflect the maximum amount
sustainable by the proof.” Oracle Corp. v. SAP AG, 765 F.3d 1081, 1094 (9th Cir.
2014) (internal quotation and citation omitted). “The plaintiff may choose either to
accept the reduced damage award or to submit to a new trial.” Hendrickson, 2017
WL 2539390, at *3. Broadly, remittitur is appropriate when the damages are
“grossly excessive or monstrous, clearly not supported by the evidence, or only
based on speculation or guesswork.” Los Angeles Memorial Coliseum Comm’n v.
Nat’l Football League, 791 F.2d 1356, 1360 (9th Cir. 1986).
ANALYSIS
Defendants move for judgment as a matter of law under Rule 50(b), for a
new trial under Rule 59, or alternatively, for remittitur. Under Rule 50, Defendants
ask the Court for judgment as a matter of law on Plaintiffs’ breach of fiduciary
duty, fraud (in all its variations), and unfair business practices claims. Defendants
further request that the Court vacate the jury’s award of punitive damages. In the
alternative, Defendants ask the Court for a new trial on the Dealers’ breach-ofcontract claim, or remittitur on the jury’s compensatory and punitive damages
awards.
MEMORANDUM DECISION AND ORDER - 5
1. Fiduciary Duty
a. Waiver
Under Rule 50(a)(2), a pre-verdict motion for judgment as a matter of law
must “specify…the law and facts that entitle the movant to the judgment.” And,
“[b]ecause it is a renewed motion, a proper post-verdict Rule 50(b) motion is
limited to the grounds asserted in the pre-deliberation Rule 50(a) motion. Thus, a
party cannot properly raise arguments in its post-trial motion for judgment as a
matter of law under Rule 50(b) that it did not raise in its pre-verdict Rule 50(a)
motion.” E.E.O.C. v. Go Daddy Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009);
see also Fed. R. Civ. P. 50(b) Adv. Comm. Notes 2006.
The Ninth Circuit strictly construes this limitation. See Freund v. Nycomed
Amersham, 347 F.3d 752, 761 (9th Cir. 2003) (finding the district court erred in
granting Rule 50(b) relief on punitive damages where defendant failed to raise the
argument in its Rule 50(a) motion). In fact, courts generally require sufficiency-ofthe-evidence arguments to be made at the level of a claim’s specific elements or
sub-elements. See id.; accord Gierlinger v. Gleason, 160 F.3d 858 (2d Cir. 1998)
(“The JMOL motion must at least identify the specific element that the defendant
contends is insufficiently supported. A generalized challenge is inadequate.”)
(internal quotations and citations omitted).
MEMORANDUM DECISION AND ORDER - 6
During trial, Defendants properly raised objections to Plaintiffs’ Breach of
Fiduciary Duty claims in their Rule 50(a) motion. Dkt. 298-1 at 13-14. But,
Defendants limited their challenge to whether the parties enjoyed a “fiduciary
relationship.” Id. Defendants did not raise any arguments related to breach or
Idaho’s economic loss doctrine. See id. Defendants now raise these claims in their
renewed motion for judgment as a matter of law under Rule 50(b). Dkt. 347-1 at
19-22. Because Defendants failed to raise these issues in their Rule 50(a) motion,
they are barred from raising them for the first time now. Therefore, the Court will
consider only whether there was sufficient evidence to find, as a matter of Idaho
law, that a fiduciary duty existed between Plaintiffs and Defendants to support a
claim for breach of fiduciary duty.
b. Fiduciary Duty
The Court concludes there was sufficient evidence to support its earlier
finding that a fiduciary relationship existed between Plaintiffs and Defendants. See
Dkt. 335 at 165, Tr. at 1817:2-5. Accordingly, the Court will deny Defendants’
Rule 50(b) motion on these grounds.
As Defendants correctly note at the outset of their argument, business
relationships do not automatically create fiduciary duties. Dkt. 347-1 at 10. Idaho
law establishes that “no fiduciary duty ordinarily arises between parties to an arm’s
length business transaction,” but this does not end the Court’s analysis. City of
MEMORANDUM DECISION AND ORDER - 7
Meridian v. Petra Inc., 154 Idaho 425, 441 (2013) (internal citations omitted). But,
“[g]enerally speaking, where one party is ‘under a duty to act or to give advice for
the benefit of the other upon a matter within the scope of the relation,’ a fiduciary
relationship exists.” Id. (internal citations omitted).
Instead of stopping at the fact the parties were in a contractual relationship,
the Court looks to whether, as part of that relationship, “the one reposing the trust
has foundation for his belief that the one giving advice or presenting arguments is
acting not in his own behalf, but in the interests of the other party.” Petra, 154
Idaho at 442; Doe v. Boy Scouts of Am., 159 Idaho 103, 109 (2015). “Examples of
relationships from which the law will impose fiduciary obligations on the parties
include when the parties are: members of the same family, partners, attorney and
client, executor and beneficiary of an estate, principal and agent, insurer and
insured, or close friends.” Doe, 159 Idaho at 109. Therefore, to determine the
sufficiency of the evidence supporting a finding that a fiduciary duty existed, the
Court will assess whether the parties’ relationship was similar to those
relationships described in Doe and Petra.
Here, the evidence presented at trial established that the parties had formed
something more than an arm’s length business relationship, and that Defendants
owed Plaintiffs a fiduciary duty under Idaho law. At trial, the Court relied upon
two factors to find that Defendants owed Dealers a fiduciary duty, or “agreed to
MEMORANDUM DECISION AND ORDER - 8
put the other business’s interests above its own,” at least with respect to
management of the Dealers’ Dedicated Refund Account (“DDRA”) funds
described in the several contracts 1 between the two sides: first, that Dealers gave
funds to Insurers to manage in Dealers’ best interest, and second, that Insurers
enjoyed a relationship of trust and confidence with Dealers, because they
possessed more technical information about how to manage an insurance fund like
the one at issue here. Trial Tr. 1817-1818. Because the evidence at trial bore out
this pretrial determination, the Court reaffirms here that Defendants owed Plaintiffs
a fiduciary duty.
First, Plaintiffs presented significant evidence at trial that they gave funds to
Defendants to manage in Plaintiffs’ best interest. This foundation of the fiduciary
relationship comes from vehicle service contracts providing that Dealers pay
Insurers $80 for every long-term insurance contract they sold to customers, which
Insurers would hold and manage in a fund to cover Dealers’ future liability for
those contracts. Trial Tr. 159:15-18. The Insurers’ representatives confirmed the
structure of this relationship. Id. 444:12-15, 1070:14-1071:3. And, Plaintiffs put on
evidence that the Defendants guaranteed the account would bear interest, Trial Tr.
631:11-631:17, and that the interest would redound to Dealers’ benefit. Dkt. 302,
1
There were several of contracts at issue in this case. For the sake of clarity, when the Court
refer to “contracts,” it is referring to the parties’ vehicle service contracts and their addenda at
the heart of the matter (Exs. 1-4, 6, 7, 507, 1001).
MEMORANDUM DECISION AND ORDER - 9
29:17-31:4. The evidence at trial also showed Insurers had an obligation to report
to Dealers about the health of the funds, and to “monitor” and “manage” the funds
to ensure they would cover future insurance liabilities. Trial Tr. 1381:17-20,
1382:23-1383:21. It was Insurers’ “responsibility to advise that there needed to be
a modification in the per-contract fee” to make sure the Dealers were covered on
the long-term insurance contracts. Id. 1070:16-19.
Second, Plaintiffs put on significant evidence of the parties’ special
relationship and Insurers’ expertise, which further strengthens the finding that a
fiduciary relationship existed. For example, Jim Chalfant testified that “the dealer’s
obligation would be to pay an $80 fee for every contract that we would sell; and
for that, Universal Underwriters would protect us against future liability of a
chargeback” Id. 159: 15-18; see also 1070:14-1071:3 (Insurers responsible for
“set[ting] the fees”). The evidence also shows Dealers relied on Insurers to manage
the funds. Id. Insurers held themselves out as experts in this area to Dealers. Ex.
670; 493:6-493:9. Evidence of the parties’ special relationship and Insurers’
expertise was legion, and the Court will not recount it all here. See, e.g., Ex. 519
(describing advice and legal compliance duties for Edmark’s benefit). The bulk of
the evidence at trial that Insurers managed the funds generated for long-term
insurance contracts, held themselves out as experts in the area, and Dealers’ relied
MEMORANDUM DECISION AND ORDER - 10
on that expertise, overwhelmingly supports the finding that a fiduciary relationship
existed between the two sides.
Because there was more than sufficient evidence for a reasonable factfinder
to conclude that a fiduciary relationship existed, the Court denies Defendants’
motion on these grounds.
2. Fraud
Defendants also move for judgment as a matter of law, or for a new trial, on
Plaintiffs’ various fraud claims. The jury found in Dealers’ favor on all three
(inducement, misrepresentation, and concealment), and found that each one
independently supported the $1.5 million verdict for Chalfant, and the $2.5 million
verdict for Edmark. See Dkts. 321, 322. Defendants argue that Plaintiffs failed to
prove their fraud claims because they did not establish the two prerequisites for
fraud in Idaho law: (1) justifiable reliance and (2) actionable injury. As discussed
in detail below, the record evidence supports the jury’s verdict on these elements.
Defendants also make several arguments specific to each of the specific fraud
claims. Because these arguments are likewise without merit the Court will deny
Defendants’ motion on these bases.
a. Justifiable Reliance
Defendants first argue that Plaintiffs’ fraud claims are deficient because they
failed to put on evidence that the Dealers justifiably relied on statements or
MEMORANDUM DECISION AND ORDER - 11
omissions by the Insurers. One of the elements of a fraud claim under Idaho law is
“justifiable reliance” on the part of the claimant. Gray v. Tri-Way Const. Servs.,
Inc., 147 Idaho 378, 386 (2009). Insurers argue that Dealers’ reliance was not
justifiable because it was based on a subjective understanding of imprecise contract
language. Dkt. 347-1 at 22-23. As they did at trial, Defendants again seek safe
harbor in the Court’s pretrial holding that the contract was “was ambiguous and
subject to reasonable conflicting readings.” Dkt. 91 at 13. Defendants argue this
must mean Plaintiffs’ reliance on contract language could not have been
reasonable. Dkt. 347-1 at 23. But trial offered Defendants their opportunity to
present their interpretation of the contract, and the argument that they were at least
reasonable in their misinterpretation of the language; the jury heard this argument
and rejected it. The Court will not overturn the jury’s determination.
The Court declines to upend the jury’s finding because there was significant
evidence of justifiable reliance presented at trial. For example, the jury heard that
had Insurers disclosed their lack of administration of the No Chargeback Program,
Dealers would have “terminated the relationship and gone to another provider.”
Trial Tr. 204:15-204:20; 235:21-235:22. Likewise, Jim Chalfant testified that
Dealers were not shopping their F&I provider in reliance on the existence of the
No Chargeback Program. Id. 205:18-206:9. John Chalfant testified to the same. See
e.g., id. 1210:22-1211:10; 1227:20 (testifying that Insurers’ representations about
MEMORANDUM DECISION AND ORDER - 12
the supposed value of the No Chargeback Program “was the glue that kept the
relationship together”). In short, Insurers’ argument fails because it is simply
reasserts the rejected proposition that the Court preliminarily finding the contract
“ambiguous” somehow bars Dealers’ non-contract claims. See Dkt. 145 at 7-8.
Plaintiffs presented a host of evidence to the jury that supported its finding that the
Dealers justifiably relied on Insurers’ account management and their promises of
“no chargebacks.” As a result, the Court finds that the jury’s findings on Plaintiffs’
fraud claims were supported by the evidence.
b. Actionable Injury
Defendants also argue Plaintiffs failed to establish another prerequisite for
fraud in Idaho—actionable injury. The Idaho Supreme Court has clearly stated that
“resultant injury” is an element of state-law fraud claims. Gray, 147 Idaho at 386.
Insurers argue that “Dealers failed to put on any evidence of any damages arising
from the alleged fraud.” Dkt. 347-1 at 18. For support they cite Bryant Motors, Inc.
American States Insurance Cos., where an Idaho Court of Appeals found that “to
show a loss suffered as a consequence of [Defendant]’s false statement, [Plaintiff]
was required to demonstrate that it suffered harm beyond the fact of non-payment”
under the terms of the parties’ contract. 800 P.2d 683, 686-87 (Idaho Ct. App.
1990); see also April Beguesse, Inc. v. Rammell, 328 P.3d 480, 490 (Idaho 2014)
MEMORANDUM DECISION AND ORDER - 13
(citing Bryant). Following the logic of Bryant, if Plaintiffs failed to show harm
beyond direct contractual losses, fraud would not lie.
At trial, Plaintiffs presented the jury with sufficient evidence of harm to
make out a fraud claim. Relevant here, either a plaintiff’s loss or the wrongdoer’s
unjust profits are evidence of harm sufficient to support a jury’s verdict on fraud.
See Jordan v. Hunter, 865 P.2d 990, 999 (Idaho Ct. App. 1993) (reversing the
district court’s granting of a directed verdict motion because proof of “unjust
profits” to the defendant was sufficient to prove “damage” element of fraud).
Dealers put on substantial evidence that Insurers’ wrongdoing allowed them to
reap significant profits during the life of the DDRA contracts. Trial Tr. 1549:231551:20. That fact alone is sufficient to support the harm element of the Dealer’s
fraud claim.
The record also contains competent evidence that Dealers would have been
better off switching their business to one of Insurers’ direct competitors. For
example, Dave Edmark testified that since switching Edmark Auto’s business to a
competitor—JM&A—the dealership has been better off economically, and that
most of Edmark Auto’s “key metrics have improved.” Id. 1298:5-19, 20; 1299:11;
1302:18-1303:5 (describing that the dealership’s VSC business is “far more
profitable with JM&A than with Zurich”). John Chalfant also testified that Ally
Financial submitted a competitive bid for Edmark Auto’s F&I business in 2011,
MEMORANDUM DECISION AND ORDER - 14
only to be denied because of the repeated representations from Insurers that
Edmark Auto would continue to have “zero liability after 90 days on a
chargeback.” Id. 1212:8-1213:8. Jim Chalfant’s testimony was the same. Id. 212:418.
As to Chalfant Corp., John Chalfant testified that the switch from Insurers to
JM&A “improved [Chalfant Corp.’s] F&I performance.” Id. 1220:6-9. He also
testified that instead of giving Chalfant Corp.’s money to Insurers to invest for
Insurers’ own benefit, Chalfant Corp. is now placing funds to cover VSC
chargebacks in an account that bears “3 to 4 percent a year.” Id. 1220:16-19.
As indicated above, Plaintiffs submitted significant evidence to the jury that
both Edmark Auto and Chalfant Corp would have been better off with one of
Insurers’ competitors during the life of their contracts, and that Defendants made
significant profits from their contracts with Dealers over this period. Since both
types of evidence gave the jury grounds to infer that Plaintiffs had suffered injuries
as a result of the Defendants’ fraudulent behavior, Plaintiffs satisfied the
“actionable injury” element of fraud.
c. Fraud by Concealment
Fraud by concealment may be established if one is silent although he has a
duty to speak. Tusch Enters. v. Coffin, 740 P.2d 1022, 1027 (Idaho 1987). A duty
to speak arises if there is a fiduciary relationship, which the Court held existed here
MEMORANDUM DECISION AND ORDER - 15
in the Insurers’ “administering the No Chargeback Program.” Dkt. 319, Instr. 25;
see also infra § 1(b). Plaintiffs put on evidence that, starting in 1996, Insurers
failed to disclose material information relating to their administration of that
program. See, e.g. Trial Tr. 204:24- 205:8; see also Exs. 501 (describing effort to
“avoid scrutiny”), 524 (instructing not to share program balance spreadsheet), 543
(planning to not bring up subject of the program while proposal process ongoing).
Because Plaintiffs met the evidentiary prerequisites for bringing a fraud by
concealment claim under Idaho law, the Court finds the jury had reasonable
grounds to make its finding on Plaintiffs’ claim.
i. Jury Instruction 25
Because the Court found there was sufficient evidence to support the finding
that Dealers owed Insurers a fiduciary duty, it will proceed to address Defendants
argument that there was “confusion created by Instructions 22 and 25.” Dkt. 347-1
at 29. Defendants believe these instructions were both legally deficient and
confusing, which should entitle them to a new trial on Plaintiffs’ fraud claims.
Because the Court finds there was no error in its Instructions 22 and 25, it will
deny Defendants’ Rule 59 motion for a new trial on this basis.
First, Defendants argue Instruction 25 was legally insufficient because it did
not describe for the jury the scope of the previously-identified fiduciary duty as
required by Idaho law. But Idaho law does not require such an instruction.
MEMORANDUM DECISION AND ORDER - 16
Defendants cite a South Dakota case for the principle that the “scope” of a
fiduciary duty to disclose is a matter of law the Court must determine. Dkt. 347-1
at 30, citing High Plains Genetics Research, Inc. v. J K Mill- Iron Ranch, 535
N.W.2d 839, 842 (S.D. 1995). The Idaho Supreme Court, however, has simply
held that there is a duty to disclose where “there is a fiduciary or other similar
relationship of trust and confidence.” Humphries v. Becker, 159 Idaho 728, 736,
(2016). The Court found a fiduciary duty existed and instructed the jury on the
existence of that duty as required by Idaho law. The Court therefore does not find
its instruction was in error.
Second, Defendants argue that Instruction 25 confused the jury because it
failed to describe the scope of the fiduciary duty. But as Defendants themselves
point out, the Court instructed the jury that the fiduciary duty amounted to
“administering the No Chargeback Program described in the 1996 DDRA
Addendums and subsequent agreements,” and later, “regarding the administration
of the DDRA Accounts.” Dkt. 319, Instr. No. 25. These are both definitions of the
scope of Defendants’ duty, phrased slightly differently. The Court clearly
instructed the jury to determine whether Defendants had failed to disclose
information as required by their status as fiduciaries within the scope of the
relationships created by the DDRA accounts, as discussed repeatedly with the jury.
See, e.g., Trial Tr. 1862:13-18. Therefore, even if Defendants are correct that Idaho
MEMORANDUM DECISION AND ORDER - 17
law requires a court to instruct the jury on the scope of a fiduciary duty, the Court
did so in Instruction 25. That the Court referred to the “administration” of the
contracts at issue in slightly differently terms did not make the instruction
confusing.
Finally, Defendants argue the Court improperly bolstered Plaintiffs’ view of
the evidence in its instructions – specifically in Instruction 25. Defendants argue
the Court's use of capital letters to describe the “No Chargeback Program” and the
reference to “DDRA Accounts” improperly suggested a conclusion to the jurors
that the contracts at issue required segregated accounts. Dkt. 347-1 at 32.
Defendants also argue that the phrase “I have found” and “as a matter of law”
highlighted the fact that the Court was on Dealers’ side of the issue.” Dkt. 347-1 at
32. Neither argument has any merit. To begin with, it was Defendants who asked
the Court to make the fiduciary duty finding; a ruling that one existed “as a matter
of law” was the result of that request and accurately described the Court’s ruling.
Likewise, the Court finds that the record speaks clearly—through testimony from
witnesses on both sides—that the parties both referred to their contractual
relationship as a “no chargeback” agreement, and that the contract itself referred to
a “Dealer’s Designated Refund [or “DDRA”] Account.” Dkt. 72-2, at 4. Instructing
the jury using these terms did not suggest any bias, or imply an outcome in the
matter. Therefore, the Court will deny Defendants’ motion on this basis as well
MEMORANDUM DECISION AND ORDER - 18
d. Fraud by Inducement
Defendants also argue they are entitled to judgment under Rule 50 on
Plaintiffs’ fraud by inducement claim because there was no evidence that
Defendants made misrepresentations or omissions with respect to non-DDRA
contracts between the parties. Dkt. 347-1 at 32. Specifically, Insurers point to
several deals where Dealers “accepted full responsibility for their own chargebacks
in the contracts.” Id. Defendants argue there was no evidence that dealers relied on
false information or lack of information when entering into these ancillary
contracts, a necessary component of an inducement claim. But Plaintiffs only need
to put on evidence that they entered into further contracts in reliance on earlier
omissions and misrepresentations, not that those omissions or misrepresentations
pertain to the terms of the new contract. Here, Plaintiffs presented evidence to
show that the Dealers entered into non-DDRA Program contracts (e.g., a
“maintenance plan contract,” Ex. 609), relying on the Defendants’ earlier
statements that the DDRA program was healthy and profitable. See, e.g. Trial Tr.
442:20-21. This is sufficient evidence for a reasonable juror to conclude the
Dealers entered into these contracts on the basis of fraud. As a result, the Court
will deny Defendants’ Rule 50 motion on Plaintiffs’ fraud by inducement claim.
e. Fraud by Misrepresentation
MEMORANDUM DECISION AND ORDER - 19
To prove fraud by misrepresentation in Idaho, a Plaintiff must establish that
the Defendant made a false statement, and “the speaker's knowledge of the
statement’s ‘falsity or ignorance of its truth.’” Jenkins v. Boise Cascade Corp., 108
P.3d 380, 386 (Idaho 2005). Insurers challenge the jury’s fraud by
misrepresentation verdict, arguing there was insufficient evidence presented at trial
to support: (1) that Defendants made a false statement (Dkt. 347-1 at 19-20); and
(2) the speaker’s knowledge of the statement’s falsity or ignorance of its truth
(Dkt. 347-1 at 20-21). Because the record supports the jury’s determination that
Defendants made false statements, and that the speakers were at least “ignorant of
[the statement]’s truth,” the Court will deny Defendants’ motion on these grounds.
i. False Statements
The evidence supports the jury’s finding that Insurers never implemented the
“no chargeback” arrangement and never undertook their obligations to protect
Dealers from future liabilities for long-term insurance contracts. And later in the
relationship, when there was concern that Dealers might move to a different VSC
partner, Insurers misrepresented facts surrounding the DDRA account. In 2009, for
example, account executives for Zurich, Sam D’Arc and Roland Heubach,
misrepresented that Dealers were protected from future liabilities, stating the no
chargeback program would work “exactly how it sounds . . . after 90 days there
would be no liability to the dealer if a customer asked for a refund on a warranty.”
MEMORANDUM DECISION AND ORDER - 20
Trial Tr. 1205:25-1206:25. And in 2011, when Edmark Auto was considering a
competitive pitch from Ally Financial, Mr. D’Arc again represented that the No
Chargeback Program would result in Dealerships having “zero liability after 90
days on a chargeback.” Id. 1211:14- 1213:8. The next year Mr. D’Arc would
emphasize again that “ZURICH PAYS BOTH DEALER PROFIT AND ZURICH
REFUND. Edmark doesn’t bear any expense to the cancellation.” Ex. 616
(capitalization in original). These specific statements, that “there was zero liability
after 90 days” came from multiple of Insurers’ representatives during the long
relationship between Insurers and Dealers. 1227:10-20.
The jury, therefore, heard evidence to suggest Insurers made repeated false
statements about the “no chargeback” program. In fact, the program was not a
valuable program; the funds were being used for Insurers’ benefit, and the Insurer
had not undertaken the needed steps to protect Dealers from future liabilities.
Moreover, the statements falsely represented Insurers’ position at the termination
of the Program in May of 2015 that Dealers owed the Insured for a deficit.
Compare Ex. 616 (“Edmark doesn’t bear any expense to the cancellation”) with
Ex. 591 (“Zurich fully reserves its right to pursue the deficit balance in the
account.”). Viewing the evidence in the light most favorable to Dealers, there was
substantial evidence from which the jury could conclude false statements were
made.
MEMORANDUM DECISION AND ORDER - 21
ii. Knowledge of Falsity or Ignorance of Truth
The jury also heard substantial evidence that Insurers knew these statements
were false or, at least, were ignorant of the truth when the statements were made.
See Samuel v. Helpworth, Nungester & Lezamiz, Inc., 996 P.2d 303, 308 (Idaho
2000) (element satisfied by either knowledge of falsity or ignorance of the truth).
Here, the jury could reasonably conclude Insurers knew they had not put the
promised No Chargeback Program in place, were using the $80 fees for their
benefit, and that, owing to their failings, Dealers were not protected from liability.
The jury heard evidence that Insurers’ employees knew Dealers were not protected
from future liability, and that certain dealerships were in deficit positions and were
being funded by fees from other dealerships. See, e.g. Trial Tr. 471:4-10, 646:10647:20, 648:1-11, 672:7- 673:4, 1078:5-17. Further, the jury heard that Insurers
knew or were at least ignorant of the truth of the representations made to Dealers.
The evidence showed that in 2009 Insurers knew that the No Chargeback Program
was not in place and Dealers were exposed to liability, but sent a short letter
agreement to sign up Chalfant Corp. and additional Edmark dealerships in order to
“avoid scrutiny.” Trial Tr. 451:10-452:5; Ex. 501 at 6. The jury could reasonably
conclude from this evidence that Insurers knew the promised No Chargeback
Program was not in place, and that Dealers were not being protected from future
MEMORANDUM DECISION AND ORDER - 22
liabilities. Therefore, the Court finds there was sufficient evidence for the jury to
find this second element of fraud by misrepresentation.
3. Unfair Business Practices
Defendants further argue they are entitled to judgment as a matter of law, or
in the alternative a new trial, on Plaintiffs’ unfair business practices claim. Insurers
argue that the Court should enter judgment as a matter of law on these claims
because (1) Dealers are not “consumers” under the Idaho Consumer Protection Act
(“ICPA”), and (2) Idaho Code § 48-608 does not permit disgorgement; they
alternatively request a new trial because Jury Instruction 24 was erroneous. Dkt.
347-1 at 25-27. The first two arguments are procedurally barred because Insurers
did not raise them in their Rule 50(a) motion. Freund, 347 F.3d at 761.
Insurers also assert, for the first time, that the Court erred in giving
Instruction No. 24, contending it failed to require “conscious wrongdoing,” and
“clear and convincing evidence.” Dkt. 347-1 at 25-27. As Insurers failed to raise
either objection pre-verdict, see Trial Tr. 1836:17-1837:8, the objections are
reviewed solely for plain error. Hunter, 652 F.3d at 1230.
There was no plain error in Instruction 24. First, the Court appropriately
instructed the jury that it must find “Universal/Zurich knew, or in the exercise of
due care should have known, that it was engaging in acts or practices which were
misleading, false, or deceptive to Dealer.” Dkt. 319 at Instr. 24. This is consistent
MEMORANDUM DECISION AND ORDER - 23
with the state-of-mind standard in Idaho Code § 48-603—“where a person knows,
or in the exercise of due care should know.” The Instruction accurately captured
this rule of law, and was therefore not plain error.
Second, the “preponderance of the evidence” standard the Court referenced
in its Jury Instructions is correct. In civil cases generally, the quantum of proof
required is a preponderance. In re Exxon Valdez, 270 F.3d 1215, 1232 (9th Cir.
2001); see also Herman & MacLean v. Huddleston, 459 U.S. 375, 387 (1983).
Insurers offer no authority to support a heightened burden. See Dkt. 347-1 at 34.
Where a party presents no authority for a higher standard, a court doesn’t abuse its
discretion by instructing on the preponderance-of-evidence standard. In re Exxon
Valdez, 270 F.3d at 1232. Moreover, given the jury’s findings of Insurers’
“conscious wrongdoing” under the clear and convincing evidence standard applied
to the fraud claims, it appears the jury would have reached the same conclusion on
the Unfair Business Practice claim, even if the higher burden had been applied.
See Mockler v. Multnomah Cnty., 140 F.3d 808, 812-14 (9th Cir.1998) (instruction
applying incorrect burden of proof held harmless when evidence supported
verdict). Defendants’ motion for judgment as a matter of law or for a new trial on
Plaintiffs’ Unfair Business Practices Claim is therefore denied. 2
2
During the course of trial, the Court indicated it would treat the jury’s verdict on Plaintiffs’
unfair business practices claim as “advisory only.” Trial Tr. 1832:8-14. Because the Court finds
the jury properly determined Defendants had violated Idaho’s unfair business practices statute in
(Continued)
MEMORANDUM DECISION AND ORDER - 24
4. Remittitur
In the alternative, Defendants argue they are entitled to remittitur on the
jury’s compensatory damages award because it was the product of “unabashed
speculation” and is not supported by the evidence. Dkt. 347-1 at 35. At issue are
the $750,000 the jury awarded Edmark and the $250,000 awarded to Chalfant. Dkt.
321, at 5. For the reasons that follow, the Court will deny Defendants’ motion for
remittitur or a new trial on compensatory damages.
The jury’s award “must be upheld unless the amount is clearly not supported
by the evidence and is grossly excessive, monstrous, or shocking to the
conscience.” Gilchrist v. Jim Slemons Imp., Inc., 803 F.2d 1488, 1501 (9th Cir.
1986). And where there are damages, difficulty in determining amounts does not
bar recovery. Griffith v. Clear Lakes Trout Co., 152 P.3d 604, 612 (Idaho 2007).
Prospective loss is inherently uncertain; wrongdoers bear the risk of uncertainty.
Smith v. Mitton, 104 P.3d 367, 374 (Idaho 2004). “‘[T]he jury may make a just and
reasonable estimate of the damages based upon relevant data[.]’” Id. The Court
need not engage in forensic recalculation of the jury’s award, only determine
whether it is “supported by substantial evidence.” See Community House, Inc. v.
City of Boise, 2014 WL 345630, at *12 (D. Idaho Jan. 30, 2014) (denying
their relationship with Plaintiffs, the Court adopts the jury’s verdict in full, including the finding
that the unfair business practices claim completely supports the restitutionary verdicts. See Dkts.
321, 322.
MEMORANDUM DECISION AND ORDER - 25
remittitur when witness testified service provided was worth $1.15 million, and
jury awarded $1 million). In considering the motion for remittitur, the Court must
view the evidence in the light most favorable to the non-moving party. See Fenner
v. Dependable Trucking Co., 716 F.2d 598, 603 (9th Cir.1983).
In seeking remittitur on the jury’s compensatory damages award, Insurers
argue that the only substantive evidence Dealers placed before the jury about
current or future liability on “vehicle service contract chargebacks” was the
testimony Dennis Reinstein provided regarding Exhibit 1231. See Trial Tr.
1546:14-1548:9. That evidence showed that Edmark had paid $359,545 in
chargebacks as of May 31, 2018, and that Chalfant had paid $152,069 in
chargebacks as of August 31, 2018. Id. 1548:7-8. But Plaintiffs put on other
significant evidence that could have led the jury to their ultimate award. For
example, Plaintiffs presented Exhibit 657, a live Excel spreadsheet showing,
contract-by-contract, chargebacks paid, dealer gross profit, and cancellation date.
That Exhibit reflects $402,806.59 in chargebacks paid after May 15, 2015, for
Edmark and $251,343.70 for Chalfant. The jury could sort Exhibit 657 to doublecheck these numbers. Zurich’s 30(b)(6) representative Ms. Ingham demonstrated
sorting and identified the highlighted columns reflecting chargebacks. Trial Tr.
1148:3-1149:22, 1152:7-14. Further testimony from Jim Chalfant and Dave
Edmark described losses of “about $550,000” for Chalfant and potential
MEMORANDUM DECISION AND ORDER - 26
chargebacks outstanding as of March 2015 of about $1 million for Edmark Auto.
Id. 286:11-286:14; 1287:23-1288:3. John Chalfant added that Chalfant Corp. had
paid $181,115 in chargebacks since program termination. Id. 1220:20-1221:1.
Plaintiffs’ expert Christopher Money added that Edmark and Chalfant had paid
“almost 598,000 dollars” since cancellation of the program. Id. 1699:12-20.
Defendants also argue that Plaintiffs failed to present evidence that they
would suffer any future liabilities as a result of the breach of contract. But Dealers
did provide the jury with a method for estimating future liability. Jim Chalfant
testified the amount of chargebacks, as a percentage of VSC gross profit, “run[s]
roughly somewhere around 10 percent[.]” Id. 375:3-375:8. Dave Edmark agreed
that chargebacks come in “remarkably regularly.” Id. 1231:2-1231:22. Exhibit 626
showed the jury Dealers’ average dealer markup, or gross profit, per VSC by year.
By 2014, this average was about $1200 per contract. Id. As Mr. Jenkins explained,
VSC future liability estimates are based on dealership contract sale and
cancellation data, (562:15- 563:18, 635:7-15), further supporting Jim Chalfant’s
testimony that future liability could be estimated using Dealers’ data. See Exs. 650,
654, 657. And future liability will continue for about five years. Id. 286:9-18.
There were about 6,500 active Edmark and Chalfant VSCs when Insurers
terminated the program in May 2015, and an estimated 2,000 to 3,000 VSCs active
as of trial. 294:20-295:1. Chalfant had 531 active VSCs as of trial. 1221:2-8.
MEMORANDUM DECISION AND ORDER - 27
Exhibit 654 reflects 4,951 active VSCs. All this evidence was presented to the jury,
and could have been reasonably included in their ultimate calculation.
The Dealers present numerous plausible methods for the jury to have
reached its compensatory damages award, which is not grossly excessive,
monstrous, or shocking to the conscience. For example, the jury could have
awarded Chalfant $250,000 by starting with Exhibit 657, which shows
$251,343.70 as the total chargeback payments for Chalfant, and making a small
adjustment downward. It could have awarded Edmark $750,000 by starting with
Edmark’s testimony that as of March 2015, exposure for chargebacks was around
$1 million, and adjusting to reflect Insurers’ payments until May 15, 2015. It also
could have relied on Exhibit 657 for chargeback totals Edmark and Chalfant paid
and then added future liability by multiplying the number of remaining active
contracts by 10% average gross dealer profit and adjusting downward. The Court is
satisfied that the jury was armed with the information to reach their compensatory
damages awards, and to do so reasonably. Therefore, Defendants’ motion for
remittitur on these damages is denied.
5. Disgorgement
a. Availability of Disgorgement Remedy Under Idaho Code § 48-608
Defendants first argue that the Court should vacate the jury’s disgorgement
remedy for violation of Idaho’s unfair business practices statute, I.C. § 48-608,
MEMORANDUM DECISION AND ORDER - 28
because that statute only allows for restitution, not disgorgement. Under that
section, an aggrieved party may “seek restitution,” or “any other appropriate relief
which the court in its discretion may deem just and necessary.” Idaho Code § 48608(1). Defendants cite Third Circuit and California case law for the proposition
that, they believe, separates disgorgement from restitution. Dkt. 347-1 at 34. But
precedent controlling on this Court has held otherwise. Kokesh v. S.E.C., 137 S.Ct.
1635, 1640 (2017) (describing disgorgement as “a form of ‘[r]estitution measured
by the defendant’s wrongful gain’”); see also U.S. Commodity Futures Trading
Comm'n v. Crombie, 914 F.3d 1208, 1216 (9th Cir. 2019)(“Restitution is a remedy
designed to prevent a defendant from unjustly enriching himself at another’s
expense.”). The Restatement also includes disgorgement as a potential
restitutionary remedy. Rest. (3d) of Restitution § 51, cmt. a (2011) (“Restitution
measured by the defendant’s wrongful gain is frequently called ‘disgorgement.’”).
Because the Supreme Court, the Ninth Circuit, and, persuasively, the Restatement,
all agree that disgorgement falls within the realm of potential “restitution”
remedies, the Court likewise finds it is available under Idaho Code § 48-608,
which allows a plaintiff to “seek restitution” for a defendant’s unfair business
practices.
MEMORANDUM DECISION AND ORDER - 29
b. Whether Evidence Supports Disgorgement Remedy
Defendants also argue that the evidence does not support an award of
disgorgement. Dkt. 347-1 at 37. Dealers sought disgorgement on their claims for
breach of fiduciary duty, unfair business practices, and fraud. The jury found in
Dealers’ favor on all three, and awarded $1.5 million in damages to Chalfant, and
$2.5 million to Edmark. Dkt. 321. The jury further found that each of the claims
independently supported the award of damages. Dkt. 322. Defendants argue that
because disgorgement required proof of conscious wrongdoing and causation, and
“the record does not support either showing,” the Court should vacate the jury’s
disgorgement award.
First, the Court instructed the jury that conscious wrongdoing is an element
Dealers had to prove to support a disgorgement award for their three fraud claims.
Dkt. 319 at 29, 30, 32. And the Court stated the standard in its instruction:
“‘Conscious wrongdoing’ is either (a) acting with knowledge of the underlying
wrong, or (b) acting despite a known risk that the action violates the rights of
Dealers.”)(quoting Rest. (3d) of Restitution § 51(3)). 3 Defendants argue that while
there may have been evidence of “bad math,” see, e.g. Trial Tr. 448:20-449:4, and
“internal discussions about when and how to communicate these issues to
3
Conscious wrongdoing is not a prerequisite for disgorgement damages for a breach of fiduciary
duty, (Rest. (3d) of Restitution § 51(4), cmt. a.), or unfair business practices.
MEMORANDUM DECISION AND ORDER - 30
Dealers”, e.g., Exs. 524, 543 624, these fall short of the kind of conscious
wrongdoing required for disgorgement.
But Dealers put on enough evidence at trial for the jury to conclude that
Insurers had acted with conscious wrongdoing. First, starting in 1996, Insurers
failed to implement or administer the promised No Chargeback Program. Trial Tr.
1388:5-20. Second, they concealed that wrongdoing for 19 years. See id. Third,
since at least 2009, Insurers made material misrepresentations and signed Dealers
on to new contracts knowing that the No Chargeback Program was not in place.
The jury found this behavior constituted “conscious wrongdoing,” as reflected by
their verdict against Insurers on the Dealers’ three fraud claims.
Moreover, the jury could reasonably conclude these were conscious
decisions given how central they were to the parties’ contractual relationship.
Insurers made these choices despite a known risk that the choices violated Dealers’
rights. See e.g., Trial Tr. 711:3-7, 443:22-444:15, 606:20-607:16, 1070:14- 1071:3
(Insurers’ admissions they were responsible to manage for future liability).
Plaintiffs’ expert Mr. Anderson further testified that “it didn’t appear [Insurers]
were actually trying to meet the objective” of the Program “which is to have the
right amount of money there for future liabilities at any point in time.” Id. 1387:912. That failure began in 1996, and Insurers continually failed to make Dealers
aware of their failure to comply. Id. 204:24-205:8. The jury also considered
MEMORANDUM DECISION AND ORDER - 31
evidence of Insurers’ misrepresentations. For example, Mr. D’Arc reviewed a copy
of the DDRA Addendum and had a “specific understanding” of the program. Id.
1624:8-24. With that understanding, Mr. D’Arc repeatedly stated Dealers faced
zero liability from VSC cancellations for chargebacks after 90 days. Id. 1205:251206:25; see also Ex. 501 (effort to “avoid scrutiny”). Mr. D’Arc also made
written statements that were false given that Insurers were not acting for Dealers’
benefit. Ex. 616. 4 In all, the jury heard significant evidence that could support its
finding that Defendants were well aware of their failure to abide by the contract.
Because there was sufficient evidence to support the jury’s determination, the
Defendants’ motion will be denied on these grounds.
6. Proof of Restitution Amount
In addition to compensatory damages, the jury awarded significant
restitution damages to Plaintiffs based on the profits Defendants earned as a result
of their wrongful conduct. The Court instructed the jury that “Dealers have the
burden of producing evidence permitting at least a reasonable approximation of the
amount of the wrongful gain. The risk of uncertainty in calculating net profit is
assigned to Universal/Zurich.” Dkt 319 at 39. As described in further detail above,
4
The Defendants also resuscitate their argument that the ambiguity of the contract somehow
immunizes them from “conscious wrongdoing.” But a properly-instructed jury found in favor of
Plaintiffs on all counts, essentially punishing Defendants for their interpretation of the contract
they themselves drafted.
MEMORANDUM DECISION AND ORDER - 32
“if a tort is of such a nature that the amount of damages may not be proven with
certainty, it is enough if the evidence shows ‘the extent of the damages as a matter
of just and reasonable inference, although the result be only approximate.’”
Community House, 2014 WL 345630, at *13.
Dealers presented substantial evidence of Insurers’ wrongful gain using two
methods, both of which provided a year-by-year profit analysis for the jury’s
review. Because Defendants do not meaningfully challenge either of these
methods, and because each method independently supports a restitution award
exceeding the $4 million verdict, the Court will not recount that calculation method
here. See Dkt. 364 at 41-44 (explaining support for $4m restitution award).
Defendants also argue that Plaintiffs failed to present evidence that would
connect restitution awards to each Plaintiff corporation, and therefore ask for a new
trial on the claims supporting disgorgement. Dkt. 347-1 at 39. Defendants believe
that Plaintiffs “gave the jury zero basis to make a separate disgorgement award to
Chalfant versus Edmark” (Dkt. 347-1 at 39), combining the profits they requested
in closing statements (Trial Tr. 1897:9-10), and presenting only demonstrative
exhibits to substantiate the two plaintiff-corporations’ separate disgorgement
claims (Dkt. 366 at 23-24). They argue this is particularly so because Plaintiffs
only introduced this evidence with demonstrative exhibits that were not admitted
substantively as evidence.
MEMORANDUM DECISION AND ORDER - 33
But Plaintiffs’ expert Dennis Reinstein, who described those demonstratives
for the jury, did the work of “break[ing] these [disgorgement] numbers down by
the Edmark corporation, the Chalfant Corporations.” Trial Tr. 1513 3-4. Exhibits
1223 and 1230, which Mr. Reinstein described in his testimony, provided the jury
with evidence that Insurers’ VSC and non-VSC F&I profit without reinvestment
amounted to $3,283,017 from Edmark and $1,668,902 from Chalfant. Dkt. 364 at
45. Because these amounts support the jury’s disgorgement award, Plaintiffs
carried their burden of putting on evidence that gave the jury a chance to make a
“reasonable approximation” of Defendants’ profits with respect to each individual
Plaintiff corporation.
The Court also finds that it was proper to instruct the jury on both contract
and non-contract damages available to the Plaintiffs. Defendants argue the Dealers
should only be able to collect on one theory of damages—disgorgement or contract
damages—“what Dealers cannot do is collect both.” Dkt. 347-1 at 41 (citing
Gunter v. Murphy’s Lounge, LLC, 105 P.3d 676, 691 (Idaho 2005). But as
Plaintiffs point out, the two measures correspond to different injuries. See Martinez
v. Shinn, 992 F.2d 997, 1001 (9th Cir. 1993) (affirming statutory and actual
damages addressing different harms). Dealers’ contract damages consisted of
chargebacks paid and future liability for paying chargebacks Universal was
obligated by contract to pay. Dkt. 319 at 37. Dealers’ non-contract claims address a
MEMORANDUM DECISION AND ORDER - 34
distinct injury: due to Insurers’ conduct, Dealers sold Insurers’ products for 19
years, generating profits for Insurers and foregoing better opportunities. See, e.g.,
Ex. 1026; Trial Tr. 828:14-829:7. Unlike in Gunter, here there was evidence of
distinct harms and no indication that the jury’s special verdict attempted to
compensate Dealers twice for the same harm. Further, a breaching fiduciary must
pay plaintiff’s losses and defendant’s wrongful gain. See Rockefeller, 39 P.3d at
586 (plaintiff entitled to lost profits and broker’s commissions). Therefore, because
the jury’s award was supported by the evidence and pointed to two distinct harms,
I will deny Defendants’ motion for a new trial on the availability, or extent, of
disgorgement damages.
7. Punitive Damages
Finally, Defendants challenge the jury’s award of punitive damages. Dkt.
347-1 at 42. Under § 6-1604 of the Idaho Code, a party is not entitled to punitive
damages unless that party can prove, “by clear and convincing evidence,” that the
other party has engaged in “oppressive, fraudulent, malicious or outrageous
conduct.” The Court so instructed the jury. Dkt. 319, Inst. 31. In reviewing a jury’s
punitive damages award, a court determines not whether it “would have awarded
punitive damages, but instead whether the jury could have awarded punitive
damages.” Gunter, 105 P.3d at 689. Whether punitive damages are awarded, and
MEMORANDUM DECISION AND ORDER - 35
how much, are jury questions. Cheney v. Palos Verdes Corp., 665 P.2d 661, 668
(Idaho 1983).
Defendants argue there was insufficient evidence of “outrageous conduct” or
“malice,” and no evidence that a managing agent of Zurich or Universal engaged
in or ratified such conduct. Defendants further argue the punitive damages award is
untethered from the actual damages in violation of I.C. § 6-1604(3). For the
reasons that follow, the Court will uphold the jury’s award of punitive damages in
full.
a. Evidence of Outrageous Conduct
Defendants first argue that Plaintiffs failed to introduce sufficient evidence
of “outrageous” conduct for the jury to appropriately award punitive damages.
Defendants argue that Plaintiffs’ expert Robert Anderson was not qualified to offer
opinions on the reasonableness of their behavior, and that his testimony should be
rejected because of ambiguous language in the No Chargeback Agreement. Dkt.
347-1 at 34-36. The Court found that Anderson’s “forty years of experience in the
insurance industry . . . make him well qualified to testify as an expert in this
matter,” and that his experience “‘direct[ing] and negotiat[ing] a variety of
specialty insurance programs’ for major casualty underwriters is particularly
relevant in this case, given Insurers’ insistence that the arrangement between the
Parties was an atypical bespoke agreement.” Dkt. 249 at 18. The jury was entitled
MEMORANDUM DECISION AND ORDER - 36
to give Anderson’s opinion that Insurers engaged in an extreme deviation from the
standards of care the weight it deemed appropriate. See Sabo v. Fiskars Brands,
Inc., 2014 WL 4365319, at *3 (D. Idaho Sept. 2, 2014) (weight and credibility of
an expert’s opinion is a jury question). As to Defendants’ second argument,
whatever ambiguities existed in the contract did not undermine Mr. Anderson’s
testimony that when one entity holds funds for the purpose of paying future
liabilities of another, certain standards of care apply, and that Defendants violated
those standards. Trial Tr. 1382:23-1383:21. Through Plaintiffs’ expert Robert
Anderson’s testimony, the jury was presented with sufficient evidence to find that
Defendants’ behavior was “outrageous” to warrant punitive damages.
b. High-Level Participation or Ratification
Plaintiffs also presented substantial evidence that the “outrageous” conduct
was ratified by Defendants’ high-level employees. As the parties both agree, “a
principal is liable for punitive damages based upon the acts of his agents only in
which the principal participated or which he authorized or ratified.” Griff, Inc. v.
Curry Bean Co., Inc., 63 P.3d 441, 447 (Idaho 2003). “[A] wooden application of
this rule, which we reject, would effectively insulate all corporations from punitive
damage liability, for a corporation can act only through its agents.” Boise Dodge,
Inc. v. Clark, 453 P.2d 551, 554 (Idaho 1969). Thus, “a principal may be liable for
punitive damages for the acts of its agent upon ‘a clear showing that the agent had
MEMORANDUM DECISION AND ORDER - 37
managerial status or that the principal ordered or ratified the acts in question.’”
Hatrock v. Edward D. Jones & Co., 750 F.2d 767, 771 (9th Cir. 1984) (applying
Idaho law).
The evidence of ratification showed Kathy Ingham, Vice President and Head
of F&I Profit Center, Ex. 549; Duke Ziegelmeier, Vice President, Ex. 525; Todd
Kaminski, Vice President, Sales and Distribution, Ex. 582; and Troy Linafelter,
F&I Executive were all in a position and had the knowledge to have ratified the
wrongful conduct as required by Idaho law. “A principal ratifies the transaction
only when it adopts the benefits of the unauthorized transaction with knowledge of
all material facts.” Gilmore v. Bonner Cnty. Sch. Dist. No. 82, 971 P.2d 323,327
(Idaho 1999). Plaintiffs put on evidence that Ms. Ingham knew the program did
nothing to protect Dealers from future liability, even though that was the purpose
of the program and Insurers’ responsibility. See, e.g., Trial Tr. 445:19- 446:18. The
jury also heard evidence that she, Mr. Ziegelmeier and Mr. Kaminski all ratified
the September 2014 reinsurance proposal to Edmark, which included hiding
information about the DDRA accounts from Edmark in order to keep its business.
Id. 489:17-490:13, 496:25-497:15 1280:9-1281:15. Concerned about losing
Dealers’ business, which amounted to $2,732,176 in F&I premiums in 2014 alone,
Mr. Kaminski approved withholding information on the negative balance of the
program. Exs. 589, 588, 582, 1061. This, along with evidence of how Defendants’
MEMORANDUM DECISION AND ORDER - 38
principals failed to fulfill their obligations to Dealers during the life of the parties’
contracts suffices to support the jury’s award of punitive damages against the
Defendants.
c. Reasonableness of Punitive Damages Amount
Finally, Defendants challenge the reasonableness of the amount of the
punitive damages award. Idaho Code § 6-1604(3) states, “[n]o judgment for
punitive damages shall exceed the greater of two hundred fifty thousand dollars
($250,000) or an amount which is three (3) times the compensatory damages
contained in such judgment.” Here, the cap would be $3,250,000 x 3 = $9,750,000
for Edmark and $1,750,000 x 3 = $5,250,000 for Chalfant. See Dkt. 324. Because
The jury awarded $3,000,000 to each plaintiff, amounts well below the statutory
cap, the Court finds the amounts reasonable under Idaho law, and that a reduction
is unnecessary.
8. Pre-and Post-Judgment Interest
The Plaintiffs have also moved to amend the judgment to include prejudgment and post-judgment interest. Dkt. 350. The parties do not dispute that
post-judgment interest is mandatory, and shall be due pursuant to 28 U.S.C. § 1961
beginning July 10, 2019. See Dkts. 350-1 at 6, 361 at 2. Defendants challenge
Plaintiffs’ request for pre-judgment interest, however, on the grounds that (1) it is
based on undisclosed expert testimony that conflicts with the evidence presented at
MEMORANDUM DECISION AND ORDER - 39
trial and requires speculation about the verdict, and (2) Idaho law does not allow
pre-judgment interest for disputed damages not capable of pre-trial determination.
Dkt. 361. For the reasons that follow, Plaintiffs’ motion is granted.
Defendants first argue pre-judgment interest is not justified because
Plaintiffs used “undisclosed expert testimony” to arrive at their calculation of
contract damages. To enumerate pre-judgment interest, Plaintiffs called upon an
accountant—Michael Huter—to analyze Trial Exhibit 657’s final tab, called “VSC
Split Out,” which lists contract detail, including which dealership sold the contract,
the date cancellation was processed, and the amount of the chargeback on the
cancelled contract. 5 See generally Dkt. 349. Defendants argue Mr. Huter’s analysis
“lacks foundation under Federal Rule of Evidence 703” and was “not timely
disclosed.” Dkt. 361 at 3. But Mr. Huter is not a trial expert whose opinions are
subject to the expert disclosure rules of Rule 26. See Fed. R. Civ. P. 26(a)(2). And
though they may be tedious, Mr. Huter’s calculation of contract-related damages is
simple addition, which does not require specific foundation under Rule 703. See,
e.g., United States v. Hamaker, 455 F.3d 1316, 1331-32 (11th Cir. 2006)
(conclusions based on simple arithmetic calculations not expert testimony). The
5
Mr. Huter’s also analyzed Trial Exhibit 2037, which identifies the chargebacks Defendants paid
unintentionally, which can in turn be identified by contract number in Trial Exhibit 657 and were
excluded from the analysis of pre-judgment interest.
MEMORANDUM DECISION AND ORDER - 40
Court will not strike Mr. Huter’s declaration on these bases, nor deny Plaintiffs’
motion because they hired a third party to calculate pre-judgment interest.
Defendants also argue the motion should be denied because Plaintiffs’
calculations do not match up with the jury’s verdict at trial. For contract damages,
the jury awarded Edmark $750,000, and Chalfant $250,000. Dkt. 321. The parties
agree that these damages correspond to both the chargebacks Plaintiffs paid out of
pocket since May 15, 2015, and future liability for chargebacks on vehicle service
contracts that are still outstanding. Dkts. 350-1 at 2, 361 at 5. Although the jury
Verdict Form did not separate out elements of contract damages, one is
ascertainable (chargebacks already paid), while the other is not (future chargeback
liability). Because Plaintiffs seek pre-judgment interest on this ascertainable
portion, and because that amount is readily apparent from the record, Defendants
argument lacks merit.
Idaho law guides the Court’s hand in calculating pre-judgment interest.
Idaho Code § 28-22-104 “provides for the award of pre-judgment interest on
“‘[m]oney after the same becomes due.’” Doolittle By and Through Doolittle v.
Meridian Joint Sch. Dist. No. 2, 919 P.2d 334, 343 (Idaho 1996) (citing Idaho
Code § 28-22-104(2)). The applicable interest rate is 12%, not compounded. Idaho
Code § 28-22-104(2); Doolittle, 919 P.2d at 343 (holding compounding of interest
erroneous). And pre-judgment interest should be awarded if the amount of liability
MEMORANDUM DECISION AND ORDER - 41
is liquidated or was capable of ascertainment by a mere mathematical calculation.
Doolittle, 919 P.2d at 343. Here, there is no dispute over the amount of damages
attributable to chargebacks already paid, which comes from an exhibit prepared by
Defendants that tracks chargebacks Edmark and Chalfant have paid since program
termination, with each respective cancellation processing date. Ex. 657. Each
chargeback “came due” for purposes of pre-judgment interest when the respective
contract’s cancellation was processed. Id. And calculating 12% simple interest
from the respective cancellation processing date of each chargeback until entry of
judgment results in a total of $141,150.57 in pre-judgment interest for Edmark and
$85,764.93 in pre-judgment interest for Chalfant. See Huter Decl., ¶ 2. Because
Defendants do not dispute the accuracy of Exhibit 657, or the method by which
Mr. Huter calculated the interest from these chargebacks, the Court finds the
amounts “ascertainable by mere mathematical process,” and appropriately derived
from the evidence presented at trial.
For the foregoing reasons, the Court finds pre-judgment interest is merited in
the amounts of $141,150.57 for Edmark and $85,764.93 for Chalfant. The Court,
therefore, grants Plaintiffs’ motion to amend the judgment and will enter a separate
judgment to reflect these additional awards.
MEMORANDUM DECISION AND ORDER - 42
ORDER
IT IS ORDERED:
1. Defendants’ Motion for Judgment as a Matter of Law and Rule 59 Motion
for a New Trial (Dkt. 347) is DENIED.
2. Plaintiffs’ Motion to Amend/Correct the Judgment (Dkt. 350) is
GRANTED. The Court will issue a separate judgment awarding prejudgment interest in the sum of $141,150.57 for Edmark and $85,764.93 for
Chalfant against Defendants, and post-judgment interest pursuant to 28
U.S.C. § 1961, calculated beginning July 10, 2019.
DATED: January 9, 2020
_________________________
B. Lynn Winmill
U.S. District Court Judge
MEMORANDUM DECISION AND ORDER - 43
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