Underground Vaults & Storage, Inc. v. Cintas Corporation et al

Filing 169

MEMORANDUM AND ORDER granting in part and denying in part 163 Motion for Judgment. Cintas' motion for judgment as a matter of law is granted as to UVS' punitive damages claim and denied as to the remaining claims. Cintas' motion for a new trial is denied. Cintas' motion to alter or amend the judgment is denied as moot. Signed by District Judge Monti L. Belot on 09/08/2014. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

UNDERGROUND VAULTS & STORAGE, INC.,

)
)
Plaintiff,
)
)
v.
)
)
CINTAS CORPORATION, et al.,
)
)
Defendants.
)
________________________________________)

CIVIL ACTION
No.

11-1067-MLB

MEMORANDUM AND ORDER
This case comes before the court on Cintas’ motion for judgment
as a matter of law or, in the alternative, motion for a new trial and
motion to amend the judgment.

(Doc. 163).

briefed and is ripe for decision.

The motion has been fully

(Docs. 166, 168).

Cintas’ motion

is granted in part and denied in part for the reasons herein.
I.

Background1
This case was tried to a jury in late April and early May 2014.

The jury heard testimony from twelve witnesses over seven trial days.
The jury returned a verdict in favor of Underground Vaults & Storage
(UVS) on May 14.

(Doc. 159).

The jury found that UVS and Cintas

formed a joint venture, Cintas breached the joint venture, and Cintas
breached its fiduciary duty to UVS.

The jury awarded compensatory

damages in the amount of $2,892,053 and punitive damages in the amount
of $8,000,000.
Cintas moves for judgment as a matter of law on the basis that
1

This case was originally assigned to Judge John Lungstrum.
Judge Lungstrum ruled on defendants’ motion for summary judgment on
July 22, 2014.
(Doc. 77).
The case was then reassigned to the
undersigned on August 1, 2013.

UVS failed to present legally sufficient evidence upon which the jury
could have found for UVS on all of its claims.

Alternatively, Cintas

moves for a new trial on the basis that the jury’s verdict is
overwhelmingly against the weight of the evidence and that the court
erred in instructing the jury on UVS’ burden of proof.

Finally,

Cintas requests that the court alter or amend the judgment of punitive
damages pursuant to Rule 59(e).
II.

Analysis
A.

Judgment as a Matter of Law

Cintas moves for judgment as a matter of law on the grounds that
UVS failed to present sufficient evidence to establish that 1) a joint
venture existed; 2) Cintas breached the joint venture; 3) Cintas
breached a fiduciary duty; and 4) Cintas acted in a willful or
malicious manner.

A renewed motion for judgment as a matter of law

under Fed. R. Civ. P. 50 “may be granted only when, without weighing
the credibility of the evidence, there can be but one reasonable
conclusion as to the proper judgment.”

See Aerotech Res., Inc. v.

Dodson Aviation, Inc., 191 F. Supp.2d 1209, 1212–13 (D. Kan. 2002)
(quoting Jackson v. City of Albuquerque, 890 F.2d 225, 230 (10th Cir.
1989)). Judgment as a matter of law is appropriate “only if the proof
is all one way or so overwhelmingly preponderant in favor of the
movant as to permit no other rational conclusion.”

Id. (quoting J.I.

Case Credit Corp. v. Crites, 851 F.2d 309, 311 (10th Cir. 1988)). “In
determining whether the grant of a motion for judgment n.o.v. is
appropriate,

the

court

must

view

the

evidence

and

indulge

all

inferences in favor of the party opposing the motion and cannot weigh
the evidence, consider the credibility of witnesses or substitute its
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judgment for that of the jury.”
1.

Id.

Joint Venture

With respect to the formation and breach of the joint venture,
the court instructed the jury as follows:
UVS claims that Cintas and UVS formed a joint
venture/partnership.
A joint venture is an association of two or more
corporations to carry out a single business enterprise for
profit. A joint venture is legally similar to a
partnership.
A joint venture can exist only by the
agreement of the parties, and such an agreement may be
found in the mutual acts and conduct of the parties.
In deciding whether UVS and Cintas formed a joint
venture/partnership, you may consider any of the following
shown by the evidence:
(1) The joint ownership and control of property;
(2) The sharing of expenses, profits and losses, and
having and exercising some voice in determining the
division of the net earnings;
(3) A community of control over and active
participation in the management and direction of the
business enterprise;
(4) The intention of the parties, express or implied;
and
(5) The fixing of salaries by joint agreement.
No single one of these acts is controlling in the
determination of whether a joint venture exists.
(Doc. 156, Inst. No. 4).2
UVS claims that Cintas
venture/partnership agreement.

breached

the

joint

To prevail on its claim for breach of the joint
venture/partnership agreement, UVS must prove:
(1) UVS performed its obligations under the joint
venture/partnership agreement or was willing to perform in
compliance with the terms of the joint venture/partnership
2

The elements are taken from the PIK instruction on joint
venture. PIK 4th 107.26. Those elements are derived from the Kansas
Supreme Court’s decision in Modern Air Conditioning, Inc. v.
Cinderella Homes, Inc., 226 Kan. 70, 596 P.2d 816 (1979).
-3-

agreement;
(2) Cintas breached the joint venture/partnership
agreement; and
(3) UVS sustained damages as a result of the breach.
UVS has the burden of proving both the formation
and the breach of the joint venture/partnership by a
preponderance of the evidence.
A party who must prove
something by a preponderance of the evidence must persuade
you that its claims are more probably true than not true.
To prove that something is more likely true than
not true does not necessarily mean by the greater number of
witnesses, or the length of the presentation of testimony,
but rather by the greater weight of the evidence, taken
together--that is, that evidence upon any question or issue
which convinces you most strongly of its truthfulness. If
the evidence on an issue is equally balanced, then the
party having the burden to establish that issue must fail.
(Doc. 156, Inst. No. 6).
Burden of Proof
Cintas argues that the court erred in instructing the jury that
UVS had the burden to prove the formation of the joint venture
preponderance of the evidence.

by a

Cintas contends that Kansas law

requires UVS to prove its claim by clear and convincing evidence.
Cintas raised this same argument on summary judgment. Judge Lungstrum
ruled as follows:
The parties dispute whether UVS must establish the
existence of the joint venture by clear and convincing
evidence. Cintas cites to statements that the existence of
a fiduciary relationship must be established by clear and
convincing evidence under Kansas law. See, e.g., Rajala v.
Allied Corp., 919 F.2d 610, 615-16 (10th Cir. 1990).
In neither Terra Ventures nor Meyer, however, did the Tenth
Circuit apply such a standard in determining whether there
was sufficient evidence of the existence of a joint
venture. Nor did the Kansas Supreme Court apply such a
standard in Modern Air Conditioning, even though it did
apply the standard in considering punitive damages later in
the opinion. See 226 Kan. at 79. Thus, the Court is not
persuaded that the Kansas Supreme Court would require that
the existence of a joint venture be established by clear
and convincing evidence.
-4-

(Doc. 77 at 10, n. 1).
At trial, Cintas objected to the burden of proof and submitted
an instruction setting forth the heightened standard but did not cite
to any new authority.

The court denied Cintas’ proposed instruction,

citing Judge Lungstrum’s order.

In its renewed motion for judgment,

Cintas again cites the same authority in support of its position that
the burden of proof is the heightened clear and convincing standard.
The court is not persuaded.

As reasoned by Judge Lungstrum, the most

recent Kansas Supreme Court and Tenth Circuit decisions do not utilize
a heightened burden of proof in establishing a joint venture.

See

Meyer v. Christie, 634 F.3d 1152, 1158-59 (10th Cir. 2011); Terra
Venture, Inc. v. JDN Real Estate-Overland Park, L.P., 443 F.3d 1240,
1245-46 (10th Cir. 2006); Modern Air Conditioning, Inc. v. Cinderella
Homes, Inc., 226 Kan. 70 (1979).

Therefore, the court did not err in

instructing the jury that UVS had the burden to establish the
existence of a joint venture by a preponderance of the evidence.
Agreement to Share Profits
Cintas contends that judgment as a matter of law on UVS’ breach
of joint venture claim is warranted because UVS failed to introduce
evidence that the parties agreed to share profits, a factor which
Cintas argues is essential to the existence of a joint venture.

In

support of its argument, Cintas cites to Nature’s Share, Inc. v.
Kutter Products, Inc., 752 F. Supp. 371, 383 (D. Kan. 1990) and Sw.
Nat’l Bank of Wichita v. ATG Const. Mgmt., Inc., 241 Kan. 257 (1987).
In Nature’s Share, Judge Crow held that an agreement to share profits
is essential to a joint venture, citing to a 1939 Kansas Supreme Court
decision.

See Yeager v. Graham, 150 Kan. 411, 419 (1939).
-5-

In Sw.

Nat’l Bank, the Kansas Supreme Court held that the plaintiff did not
establish a joint venture after a review of all of the Modern Air
Conditioning factors.

The decision does not discuss the factors in

isolation or hold that one factor is determinative.
Since those decisions, the Tenth Circuit has decided both Meyer
and Terra Ventures.
forth

in

the

Both decisions hold that the five factors set

Kansas

Supreme

Court’s

decision

of

Modern

Air

Conditioning are “not exclusive or outcome-determinative.” Meyer, 634
F.3d at 1158.

The jury was instructed that “no single one of these

acts is controlling in the determination of whether a joint venture
exits.” PIK 4th 107.26. This instruction is in accordance with Tenth
Circuit and Kansas law.
Therefore, the lack of an agreement to share profits does not
defeat UVS’ joint venture claim.
Sufficiency of the Evidence
Finally, Cintas spends a significant amount of time restating the
factors and applying its view of the evidence to persuade the court
that UVS failed to present sufficient evidence to establish the
formation and breach of a joint venture.

The court is not persuaded.

Over the course of the trial, the jury heard evidence from several
witnesses concerning the parties’ joint efforts to successfully win
the Boeing document storage contract.

The court will briefly discuss

the factors the jury was instructed to consider and UVS’ evidence
presented to the jury.
The first factor is joint ownership and control of property.
Cintas argues that the parties did not jointly own or control any
property.

While there was no joint ownership of property, UVS did
-6-

present evidence that the parties agreed to jointly control the
documents during the transition stage.

Moreover, both UVS and Cintas

were to have access to the documents while in storage at UVS’
facilities.
The second factor is the sharing of expenses, profits and losses.
The jury did not hear any evidence on this factor.

As discussed

above, the absence of evidence of an agreement to share profits and
expenses does not defeat UVS’ claim.
The

third

participation
enterprise.

factor
in

the

is

community

management

and

of

control

direction

over
of

and

the

active

business

Cintas argues that there was no evidence on this factor

because Boeing and Cintas were the only parties to the contract and
Cintas bore all the risk.

As pointed out by UVS, the purpose of the

joint venture was to jointly place a successful bid on the storage of
Boeing’s engineering documents.

At trial, there was significant

evidence establishing that UVS and Cintas worked together on the bid
proposal.

Meyer, 634 F.3d at 1159 (evidence of consultation on

aspects of the project establishes a community of control). Moreover,
a submission to Boeing set forth the various services which would by
provided to Boeing by both Cintas and UVS.

(Doc. 166, exh. 22).

The fourth factor is the intention of the parties. Cintas argues
that

“the

evidence

conclusively

established

that

both

parties

contemplated operating as separate and distinct entities.” (Doc. 163
at 21). While there was evidence in the unsigned lease agreement that
UVS

was

considered

a

subcontractor,

there

was

also

significant

evidence that Cintas repeatedly referred to UVS as its “partner.”
Moreover, responses to Boeing’s bid request state that Cintas and UVS
-7-

were “team[ing] together” to create a solution and Cintas and UVS were
“delivering a Best of Breed solution.”

(Doc. 166, exh. 22).

The fifth factor is the fixing of salaries by joint agreement.
There was no evidence that there was a joint agreement to fix
salaries.

The jury was instructed to consider all five factors and

the lack of evidence of this factor, is not outcome-determinative.
Meyer, 634 F.3d at 1158.
After a brief review of the evidence, the court finds that UVS
submitted substantial evidence of three of the five factors that were
considered by the jury.

Although Cintas asserted throughout trial

that UVS was a subcontractor and not a partner in a joint venture, the
jury’s verdict demonstrated that it believed the testimony and theory
of UVS’ witnesses.

Based on the evidence offered at trial, and

viewing the evidence in UVS’ favor, the court cannot find as a matter
of law that the evidence was overwhelmingly preponderant in favor of
Cintas.

Therefore, Cintas’ motion for judgment as a matter of law on

the issue of the formation of a joint venture is denied.
Breach of Joint Venture
Cintas contends that even if the evidence could support a
formation of a joint venture, UVS failed to present legally sufficient
evidence that UVS was willing to perform under the terms of the joint
venture because UVS sought to impose additional terms.

UVS, however,

presented evidence that its pricing differences were worked by late
October 2010.

Based on the verdict returned by the jury, the jury

rejected Cintas’ view of the evidence and found UVS was willing to
perform.

Viewing the evidence in UVS’ favor, the court cannot find

as a matter of law that the evidence is “overwhelmingly preponderant
-8-

in favor of the movant as to permit no other rational conclusion.”
Crites, 851 F.2d at 311.
Therefore, Cintas’ motion for a judgment as a matter of law on
UVS’ claim for breach of the joint venture is denied.
2.

Breach of Fiduciary Duty

Cintas moves for judgment as a matter of law on UVS’ claim for
breach of fiduciary duty because UVS failed to establish that Cintas
breached any of the limited fiduciary duties that Kansas law imposes
on a partner in a joint venture, citing to K.S.A. 56a-404, a statute
contained in the Kansas Partnership Act.3

Section 56a-404(a) states

that the “only fiduciary duties a partner owes to the partnership and
the other partners are the duty of loyalty and the duty of care set
forth in subsections (b) and (c).”
duties in a partnership.

The statue goes on to list the

Cintas contends that these are the only

duties it had to UVS because the Kansas Supreme Court has held that
“the rights and liabilities of joint ventures are governed practically
3

The court did not submit Cintas’ proposed instruction to the
jury. The proposed instruction set forth the limited fiduciary duties
of partners under the Kansas Partnership Act. (Doc. 141 at 11).
The court instructed the jury as follows with respect to UVS’
claim of breach of fiduciary duty:
A fiduciary has the duty to act in good faith and
loyalty to advance the interests of the party placing
confidence in it.
To prove its claim for breach of fiduciary duties, UVS
has the burden of proving each of the following elements by
a preponderance of the evidence:
(1) Cintas violated its duty of loyalty to UVS by
denying UVS’ participation in the Boeing project; and
(2) UVS sustained damages.
(Doc. 156, Inst. No. 7).
-9-

by the same rules that govern partners.” Modern Air Conditioning, 226
Kan. at 75. While the courts may utilize the same “rules” that govern
partners to determine rights and liabilities of joint ventures, there
is no authority to support a finding that the statutes enacted under
the Kansas Partnership Act apply to joint ventures.
Therefore, the court properly instructed the jury on UVS’ claim
for breach of fiduciary duty. Cintas’ motion for judgment as a matter
of law is denied.
3.

Punitive Damages

Cintas contends that UVS’ claim for punitive damages fails as a
matter of law because 1) the offending conduct constituting the breach
of joint venture and breach of fiduciary duty is the same, 2) UVS does
not have additional damages, and 3) there was insufficient evidence
of willful or malicious conduct.
Kansas law precludes an award of punitive damages on an action
for breach of contract unless a plaintiff has alleged an independent
tort which results in additional injury.

See Osgood v. State Farm

Mut. Auto. Ins. Co., 848 F.2d 141, 144 (10th Cir. 1988); Farrell v.
Gen. Motors Corp., 249 Kan. 231, 247 (1991); Hess v. Jarboe, 201 Kan.
705, 709 (1968).

In this case, the jury found that Cintas breached

its fiduciary duty to act in good faith. See Modern Air Conditioning,
226 Kan. at 79 (breach of fiduciary duty is an independent tort on
which punitive damages may be found); see also Doc. 77 at 26-27.

The

question then is whether there was evidence at trial of an additional
injury to UVS, beyond the breach of the joint venture, “flowing from
[the] independent tort.”

Osgood v. State Farm Mut. Auto. Ins. Co.,

848 F.2d 141, 144 (10th Cir. 1988).
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UVS contends that it did suffer injury “above and beyond the
anticipated profits that it lost.”

(Doc. 166 at 21).

The alleged

injury is damage to its reputation due to Cintas’ representation to
Boeing that UVS was “gouging Cintas.” UVS also contends that the late
disclosure of Cintas’ decision to store the documents at its Denver
location caused UVS to expend resources in preparing storage bays.
UVS, however, does not cite to any evidence introduced at trial to
support its position.4

The court does not recall any evidence that

UVS’ reputation was damaged by Cintas.

While there was evidence that

UVS was preparing the bays for the Boeing documents, there was no
specific evidence of an additional monetary loss as a result of
Cintas’ breach of its fiduciary duty, i.e. different and distinct from
the damages incurred as a result of the breach of the joint venture.
Moreover, UVS did not request a jury instruction identifying the
alleged

breach

of

fiduciary

duty,

i.e.

defamation

and/or

late

disclosure, and any damages which flowed from the breach.

The

instruction concerning breach of fiduciary duty, to which UVS did not
object, specifically stated that the breach occurred when Cintas
“violated its duty of loyalty to UVS by denying UVS’ participation in
the Boeing project.”

Jury Inst. No. 7.

Cintas’ actions in denying

UVS participation in the Boeing contract is the same conduct which
resulted in a breach of the joint venture.
this conclusion.

The jury verdict supports

The jury awarded compensatory damages in the amount

4

UVS cites to joint exhibit 192 to support its position that
its reputation was impugned. The exhibits show costs related to the
storage of Boeing documents at UVS’ facility. They do not contain
disparaging statements concerning UVS. Moreover, UVS fails to cite
to any testimony by a witness that these exhibits, which were
presented to Boeing, caused damage to UVS’ reputation.
-11-

of $2,892,053.

This amount is the exact figure introduced into

evidence by UVS’ expert representing the amount of lost profits to UVS
over a period of ten years.

(Exh. 505).

Therefore, the court finds

that the jury did not find additional loss as a result of the breach
of fiduciary duty.

See Cornwell v. Jespersen, 238 Kan. 110, 121

(1985) (“All injury to the plaintiffs flowed directly from the breach
of the defendants' contractual duty to fill the holes, restore the
surface and pay damages. Their failure to do so—even if intentional
or

unjustified—was

not

an

independent

tort

causing

additional

injury.”)(emphasis in original).
Because UVS did not introduce evidence to establish an additional
injury beyond lost profits and the jury did not award any damages
above and beyond lost profits, an award of punitive damages in this
case is not allowed under Kansas law.

See Osgood, 848 F.2d at 145

(punitive damages are not allowed in a breach of contract action when
no additional sum of damages on the independent tort is claimed);
Cornwell, 238 Kan. at 121; Hess v. Jarboe, 201 Kan. 705, 708-709
(1968) (in an action for a breach of partnership agreement, the
plaintiff must establish injuries from the independent wrongful act
in order to recover punitive damages.)
Cintas’ motion for judgment as a matter of law on UVS’ punitive
damages claim is granted.
B.

Motion for a New Trial

Alternatively, Cintas moves for a new trial on the basis that the
jury’s verdict is “clearly, decidedly, and overwhelmingly against the
weight of the evidence” and because the court erred in instructing the
jury on the proper burden of proof.
-12-

(Doc. 163 at 27).

As discussed

supra, there was sufficient evidence to establish the existence of a
joint venture and the subsequent breach. The court does not find that
the verdict is against the weight of the evidence. The court has also
determined that the burden of proof instruction was correct.
Therefore, Cintas’ motion for a new trial is denied.5
III. Conclusion
Cintas’ motion for judgment as a matter of law is granted as to
UVS’ punitive damages claim and denied as to the remaining claims.
Cintas’ motion for a new trial is denied.

Cintas’ motion to alter or

amend the judgment is denied as moot.
No motions for reconsideration will be considered.

IT IS SO ORDERED.
Dated this

8th

day of September 2014, at Wichita, Kansas.
s/ Monti Belot
Monti L. Belot
UNITED STATES DISTRICT JUDGE

5

Cintas’ motion to alter or amend the judgment is denied as

moot.
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