Windsor Craft Sales, LLC v. VICEM Yat Sanayi ve Ticaret AS et al
Filing
227
ORDER granting in part and denying in part 211 Motion to Amend Judgment for Award of Attorneys Fees, Costs, Disbursement and Prejudment Interest; denying 216 Motion for Judgment as a Matter of Law and in the Alternative for a Rule 59 Motion for a New Trial (Written Opinion). Signed by Judge Ann D. Montgomery on 8/30/2012. (GS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Windsor Craft Sales, LLC, and Crosby Yacht
Yard Inc.,
Plaintiffs,
MEMORANDUM OPINION
AND ORDER
Civil No. 10-297 ADM/JJG
v.
VICEM Yat Sanayi ve Ticaret AS, and Vicem
Yachts, Inc.,
Defendants.
_____________________________________________________________________________
Geoffrey P. Jarpe, Esq., and Aimee D. Dayhoff, Esq., Winthrop & Weinstine, PA, Minneapolis,
MN, on behalf of Plaintiffs Windsor Craft Sales, LLC, and Crosby Yacht Yard Inc.
Kerry L. Bundy, Esq., Christopher J.L. Diedrich, Esq., Matthew B. Kilby, Esq., Michael F.
Cockson, Esq., and Jeffrey P. Justman, Esq., Faegre Baker Daniels LLP, Minneapolis, MN, on
behalf of Defendants VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.
_____________________________________________________________________________
I. INTRODUCTION
This matter is before the undersigned United States District Judge for a ruling on
Plaintiffs Windsor Craft Sales, LLC (“Windsor Sales”) and Crosby Yacht Yard Inc.’s
(“Crosby”) Motion to Amend Judgment for Award of Attorneys’ Fees, Costs, Disbursements
and Prejudgment Interest [Docket No. 211] (“Motion to Amend”), as well as Defendants
VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.’s (collectively “Vicem”) Rule 50(b)
Renewed Motion for Judgment as a Matter of Law and in the Alternative Rule 59 Motion for a
New Trial [Docket No. 216] (“Motion for JML”). For the reasons set forth below, Plaintiffs’
motion is granted in part and denied in part, and Defendants’ motion is denied.
II. BACKGROUND
Plaintiffs’ Complaint [Docket No. 1] was filed on February 1, 2010. This Court denied
Defendants’ Motion to Dismiss in its October 13, 2010 Order [Docket No. 53], and it denied in
part Plaintiffs’ Motion for Summary Judgment [Docket No. 96] in its February 28, 2012 Order
[Docket No. 112]. Claims of breach of express warranty and revocation of acceptance
remained for trial.
The trial commenced on May 7, 2012, and concluded with a verdict on May 17, 2012.
The trial had an international flavor — the jury heard testimony from seventeen witnesses,
three of whom came from Turkey and required a Turkish interpreter. Ninety-five exhibits
were admitted for jury consideration. The jury found for Plaintiffs on the revocation claim,
awarding damages totaling $9,997,607.19. See Special Verdict Form [Docket No. 205].
Judgment was entered on May 21, 2012. Judgment [Docket No. 207]. Plaintiff filed its
Motion to Amend on June 15, 2012, and Defendants filed their Motion for JML on June 18,
2012.
III. DISCUSSION
A. Defendants’ Motion for JML
In their motion, Defendants contend they are entitled to judgment as a matter of law
pursuant to Rule 50(b) because the remedy the jury awarded was barred by the Uniform
Commercial Code (“UCC”) and because the Court erred in failing to enforce certain
contractual limitations on remedies. Defendants also argue that, even if the Court were to
dismiss its motion for judgment as a matter of law, the Court should reduce the damages
verdict or grant a new trial due to errors in evidentiary rulings and jury instructions. These
arguments are analyzed in turn below.
1. Judgment as a Matter of Law
Rule 50(b) of the Federal Rules of Civil Procedure governs renewed motions for
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judgment as a matter of law. Under Rule 50, the court may allow judgment on the verdict,
order a new trial, or direct the entry of judgment as a matter of law. Fed. R. Civ. P. 50(b)(1–3).
The standard of review for granting a Rule 50(b) motion is whether sufficient evidence exists
to support the jury verdict. A motion for judgment as a matter of law should only be granted
when “all the evidence points one way and is susceptible of no reasonable inferences
sustaining the position of the nonmoving party.” Washburn v. Kan. City Life Ins. Co., 831
F.2d 1404, 1407 (8th Cir. 1987) (citation omitted). In deciding a motion for judgment as a
matter of law, the court must view the evidence in the light most favorable to the party who
prevailed before the jury, making all reasonable inferences in that party’s favor. Id. (citation
omitted). It is not the place of the court to substitute its own judgment for that of the trier of
fact. Ryther v. KARE 11, 864 F. Supp. 1510, 1519 (D. Minn. 1994) (citing Nelson v.
Boatmen’s Bancshares, Inc., 26 F.3d 796, 803 (8th Cir. 1994)).
a. UCC & Privity
As a preliminary matter, Defendants renew their arguments that Florida law, not
Minnesota law, should apply to this contractual dispute, and that Defendants and Plaintiffs are
not in contractual privity. This Court has previously determined that Plaintiffs and Defendants
are in privity and that Minnesota law applies. See Oct. 13, 2010 Order 10 (“The Court
concludes that an adequate legal connection exists between Windsor Sales and Defendants to
establish privity of contract.”); Feb. 28, 2012 Order 7 (“[] Minnesota law applies . . . [and]
privity has been established here.”). Additionally, the evidence presented at trial supported the
Court’s prior finding of contractual privity. Minnesota law is the applicable law in this dispute
because the Vicem Agreement expressly states that Minnesota law governs, and because
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Minnesota law — the law of the forum state — honors such agreements. Feb. 28, 2012 Order
7–8; see generally Cockson Decl. [Docket No. 38] Ex. A (“Vicem Agreement”). The finding
of privity is premised on the Vicem Agreement’s express contemplation that Windsor Craft
Yachts, LLC (“Windsor Yachts”) would delegate to subcontractors such as Windsor Sales and
that the contract would benefit third parties such as Crosby. Id.; see also Peterson v.
Parviainen, 219 N.W. 180, 183 (Minn. 1928) (Stone, J., concurring) (“Privity of contract arises
from the agreement which vests certain rights and imposes obligations from which privity
results. So, with respect either to a party or a beneficiary, the first thing to determine is what
rights he has under the contract, and, the presence of right being determined, privity
necessarily follows.”). Therefore, this Court reaffirms its prior rulings on privity and
applicable law, and finds no error either in the state law applied or the finding of privity
between the parties.
Defendants also argue that, although the UCC permits a buyer to revoke acceptance of
goods from a seller, it does not allow a buyer to revoke acceptance from a manufacturer.
Minnesota law permits revocation of a “commercial unit whose nonconformity substantially
impairs its value to the buyer” when the acceptance was based “on the reasonable assumption
that its nonconformity would be cured and its has not been seasonably cured,” or “without
discovery of such nonconformity if the acceptance was reasonably induced either by the
difficulty of discovery before acceptance or by the seller’s assurances.” Minn. Stat. §§ 336.2608(1)(a–b). Moreover, Minnesota law permits a buyer to recover against a manufacturer. See
Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349, 357–58 (Minn. 1977). In Durfee, the
plaintiff purchased an automobile from a distributor through a local dealer, and the court found
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that even where the purchaser had “no direct contractual relationship” with the distributor, “the
buyer [was] entitled to look to the warrantor for relief.” Id. at 357. The Durfee court
concluded that “[t]he lack of privity between the parties does not relieve [the distributor] of
liability.” Id. at 358. The factual context of this case is even more clear than Durfee, because
here the two parties are in contractual privity. As previously ruled, Plaintiffs bought goods
from Vicem and were therefore entitled to revoke acceptance when those nonconforming
goods substantially impaired the value to them.
b. Contractual Limitations on Remedies
Defendants reiterate in their motion that the remedies available to Windsor Sales are
contractually limited. Defendants highlight that the Windsor Agreement between Windsor
Yachts and Windsor Sales states in pertinent part that “In the event [Windsor Sales] rejects,
repudiates or revokes acceptance of any of the Products, in whole or in part, [Windsor Yachts]
shall have the right to have the Products repaired or replaced at its election.” Bundy Decl.
[Docket No. 106] Ex. 10 (“Windsor Agreement”) ¶ 11(a). Defendants also state that the
limited warranty contained in Addendum C to the Vicem Agreement applies to Plaintiffs,
providing that the “sole and exclusive remedy under this warranty . . . is the repair or
replacement . . . of defects in materials or workmanship covered by this limited warranty, and
does not include” damages specifically disclaimed and excluded from this warranty. Cockson
Decl. Ex. A. Addendum C (“Limited Warranty”) ¶ 5.
Addendum C does not constrain Plaintiffs’ right to recovery, however, because it was
solely intended as a limitation on the first use purchaser’s right to recovery. The Limited
Warranty was to be furnished “through [Windsor Yachts] to the first use purchaser,” Vicem
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Agreement ¶ 12 (emphasis added), and it was valid for 5 years “from the date of delivery to the
original retail owner,” Addendum C ¶ 1 (emphasis added). Further, the Vicem Agreement
specifically noted that the limited warranty provision “shall not, and is not intended to, limit or
decrease in any way the indemnification obligations set forth in Paragraph 20 of this
Agreement.” Vicem Agreement ¶ 12. Because Plaintiffs are neither first use purchasers nor
retail owners, the Limited Warranty in Addendum C does not limit their remedy to repair or
replacement.
Additionally, while non-party Windsor Yachts may have had “the right to have the
[revoked] Products repaired or replaced at its election,” Windsor Agreement ¶ 11(a), the
Vicem Agreement expressly permits Plaintiffs to recover from Defendants. See Vicem
Agreement ¶ 20 (“[Vicem] shall indemnify and . . . promptly reimburse the Indemnified Parties
for . . . property damage, or any other damages (including consequential damages, recall
expenses, and lost profit) . . . [or] any defect or alleged defect in the Products . . . [or]
[Vicem’s] breach of any express or implied warranty.”). Because Plaintiffs are in privity with
Defendants, Defendants are liable to them for the breach of an express warranty.
Defendants argue that Plaintiffs adopted prior inconsistent positions, and therefore they
are bound by these “judicial admissions.” While admissions made in a pleading “are in the
nature of judicial admissions binding upon the parties,” Fox Sports Net N., L.L.C. v. Minn.
Twins P’ship, 319 F.3d 329, 335 n.4 (8th Cir. 2003), Plaintiffs are not bound by the provisions
of Addendum C simply because they mentioned its limited warranty in their Amended
Complaint. See Am. Compl. [Docket No. 29] ¶ 13. The mere mention of a limited warranty in
the Amended Complaint does not suggest that Plaintiffs intended to be bound by such a
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warranty — in fact, the very text from Addendum C which is quoted in the Amended
Complaint confirms this. Id. (“[S]tructual parts, components of the hull, . . . will be free from
defects in material and workmanship for a period of five (5) years from the date of delivery to
the original retail owner (the ‘Owner’).”). Plaintiffs never purported to be the original retail
owners, so the Addendum C language cannot be viewed as a binding factual admission
limiting their remedy. Moreover, Plaintiffs have consistently sought damages for lost profits,
consequential damages, and rescission or revocation, damages which belie the argument that
Plaintiffs intended the Limited Warranty to apply to them.
2. Reduction of Damages
Defendants also argue that Plaintiffs’ jury verdict should be reduced by $575,306.19,
because the Crosby boat purchase price and related financing charges should not have been
considered by the jury. Fundamentally, Defendants’ request for a reduction in damages raises
practical concerns. Because the jury did not itemize damages in its Verdict Form, this Court is
unable to determine with precision how the jury arrived the amount of $9,997,607.19. The
Special Verdict Form merely asked the jury to answer “[w]hat amount of money will fairly and
adequately compensate Windsor for damages for Windsor’s revocation claim?” Id. No. 4. To
have required an itemization of damages would have impossibly expanded the length of the
Special Verdict Form and would have required the jury to individually award damages for each
of the twenty-six yachts as well as to itemize damages for a complicated array of expenses
including financing fees, inspection costs, receipt and transportation expenses, costs for the
care and custody of the yachts once revoked, any reasonable charges or expenses connected
with minimizing loss, and any consequential damages. In the final charge conference, neither
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party objected to the cumulated damage question rather than itemization of damages in this
Special Verdict Form question. The jury’s answer, therefore, may or may not include the
amount by which Defendants seek to reduce the award. Additionally, the jury did not award
Plaintiffs all the damages they sought, and it is unclear which items the jury reduced. This
Court is unable to reduce the damages here without impermissibly speculating on the jury’s
rationale. See, e.g., Aquila, Inc. v. C.W. Mining, 545 F.3d 1258, 1265 (10th Cir. 2008) (“[The
district court] was simply unable to reduce Aquila’s damages without resorting to
(impermissible) speculation . . . .”).
Further, the particular damages Defendants seek to excise from the jury verdict are not
inappropriate damages. Defendants contend that Crosby’s yacht – Hull 25 – should not have
been included in the jury verdict, because Crosby sold the boat to Windsor Sales. This
argument fails. As Defendants aver, the UCC precludes a buyer from rejecting goods it has
accepted “with knowledge of a nonconformity,” Minn. Stat. § 336.2-607, subd. 2, and
Minnesota law has long recognized this. See Inland Prods. Corp. v. Donovan, Inc., 62 N.W.2d
211, 216 (Minn. 1954) (precluding rejection when a purchaser of farm cultivators accepted
modified versions from the seller). Windsor Sales’ purchase of the yacht from Crosby, both of
whom are named parties, does not preclude either party from seeking to reject or revoke
acceptance of the yachts from Defendants. In fact, acceptance of Hull 25 had already been
revoked prior to the transfer of Hull 25 between Plaintiffs. Compare Am. Compl. ¶ 44 (noting
that Plaintiffs revoked the acceptance of the yachts on January 6, 2010) with May 2, 2012
Letter [Docket No. 169] (stating that Crosby sold yacht back to Windsor Sales in January
2012). Given Plaintiffs’ privity with Defendants, this revocation was valid, and so simply
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transferring the yacht between two co-plaintiffs in an ongoing lawsuit does not extinguish the
rights of Plaintiffs to persist in their revocation claim against Defendants regarding Hull 25.
Additionally, Defendants aver that the jury inappropriately awarded $184,506.19, the
amount Windsor Sales paid Crosby to cover financing costs associated with Hull 25. Again,
whether the jury actually awarded these costs within its damages award is impossible to
discern, as the Special Verdict Form did not require the jury to specify the items of damages.
More importantly, Minnesota law permits the recovery of financing costs which result from the
seller’s breach. Jacobs v. Rosemount Dodge-Winnebago S., 310 N.W.2d 71, 77 (Minn. 1981)
(permitting recovery of incidental damages such as loan payments, insurance, and licensing
after seller’s breach because buyer has a duty after rejection to hold the goods with reasonable
care until returned to the seller). Defendants cite Int’l Fin. Servs. v. Franz, 515 N.W.2d 379
(Minn. Ct. App. 1994) aff’d in relevant part by 534 N.W.2d 261, 270, for the proposition that
financing costs not incurred incident to the breach are unrecoverable in a breach of warranty
claim. Franz, however, was concerned only with a breach of warranty claim where the sole
remedy was the difference in value between the expected good and the received good. In such
a circumstance, the Franz court reasoned, financing costs would have been incurred regardless
of whether the warranty was breached and so, as a result, the financing costs were not
recoverable. Franz, 515 N.W.2d at 387–88. In this case, though, the financing costs were
incurred at least partially as a result of the breach, and therefore are recoverable under
Minnesota law. Therefore, even if the jury did include an award of $184,506.19 as recovery of
financing costs, these damages are recoverable and will not be reduced from Plaintiffs’ verdict.
3. New Trial
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Defendants alternatively request that this Court grant a new trial pursuant to Rule 59 of
the Federal Rules of Civil Procedure. Defendants contend they are entitled to a new trial first
because the jury instructions and special verdict form inaccurately stated the law and second
because the Court improperly excluded evidence of Windsor Yachts’ bankruptcy.
The decision whether to grant a new trial under Federal Rule of Civil Procedure 59(a) is
committed to the discretion of the district court. Pulla v. Amoco Oil Co., 72 F.3d 648, 656 (8th
Cir. 1995). “A new trial is required only when necessary to avoid a miscarriage of justice.”
Gearin v. Wal-Mart Stores, Inc., 53 F.3d 216, 219 (8th Cir. 1994) (citation omitted). “While
the standard for granting a new trial is less stringent than for judgment as a matter of law, a
new trial shall be granted only to prevent injustice or when the verdict strongly conflicts with
the great weight of evidence.” Maxwell v. J. Baker, Inc., 160 F.R.D. 580, 581 (D. Minn.
1995). Similar to the standard for granting judgment as a matter of law, a court reviewing a
motion for a new trial is “not free to reweigh the evidence and set aside the jury verdict merely
because the jury could have drawn different inferences or conclusions or because judges feel
that other results are more reasonable.” Fireman's Fund Ins. Co. v. Aalco Wrecking Co., 466
F.2d 179, 186 (8th Cir. 1972) (quoting Tennant v. Peoria & Pekin Union Ry., 321 U.S. 29, 35
(1944)).
a. Incorrect Jury Instructions1
Defendant argues that the jury instructions were clearly erroneous. A new trial may be
ordered if the court erred in instructing the jury on the applicable law. T.H.S. Northstar
1
The transcript has not yet been made available on CM/ECF, and the Court is unable to
recollect which precise issues were preserved by objection. Therefore, the standard to apply to
an error cannot be determined at this time.
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Assocs. v. W.R. Grace & Co.-Conn., 860 F. Supp. 640, 650 (D. Minn. 1994), vacated on other
grounds, 66 F.3d 173 (8th Cir. 1995). A district court, however, has considerable discretion in
framing instructions and “need not give every proposed instruction as long as the court
adequately presents the law and the issues to the jury.” Fleming v. Harris, 39 F.3d 905, 907
(8th Cir. 1994). Moreover, the instructions are to be considered “in their entirety [to]
determine whether, when read as a whole, the charge fairly and adequately submits the issues
to the jury.” Laubach v. Otis Elevator Co., 37 F.3d 427, 429 (8th Cir. 1994). “A single
erroneous instruction will not necessarily require reversal.” Id.
Defendants argue that the jury instructions on causation and the absence of an
instruction regarding the contractual limitations on remedies were clearly erroneous. The
contractual limitations are included in Addendum C of the Limited Warranty. See Addendum
C ¶¶ 1–7. As discussed in Part III(A)(1)(b), Addendum C is a limited warranty for first-use
purchasers. Neither of the Plaintiffs was an original retail owner, so the contractual limitations
in Addendum C do not apply. Therefore, for these reasons, the absence of a jury instruction on
the contractual limitations included in Addendum C is not erroneous, and the jury instructions
fairly and adequately presented the law to the jury.
Defendants argue that the jury instructions on revocation, as well as the Special Verdict
Form question on that issue, were flawed. Specifically, Defendants argue that the jury
instructions did not require the jury to find causation in order to revoke acceptance. As
written, the Special Verdict Form question on revocation asks, “Did Windsor revoke
acceptance before any substantial change in the yachts was caused by something other than the
defects?” Special Verdict Form No. 3. The corresponding jury instruction, Jury Instruction
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No. 23, states that revocation of acceptance must occur “before any substantial change in the
condition of the yachts which is not caused by their own defects.” Jury Instructions at 25. The
Jury Instruction and the Special Verdict Form accurately stated the law of revocation in
Minnesota. Indeed, the language of the Jury Instruction mirrors the text of the Minnesota
statute on revocation, Minnesota Statute § 336.2-608. Accordingly, the Jury Instruction and
Special Verdict Form question on revocation appropriately presented the law to the jury and
therefore do not warrant a new trial.
Defendants also argue that the Court’s jury instruction on causation was incorrect. Jury
Instruction No. 28 provides in pertinent part: “The breach has to be the direct cause of the
damage. A ‘direct cause’ is a cause that had a substantial part in bringing about the damage.
The breach of warranty was a direct cause of damages if it was a substantial factor in the
occurrence of the damage.” Jury Instructions at 30. The last two sentences are drawn verbatim
from the Minnesota Jury Instruction Guide. See Minn. Practice - Minn. Jury Instruction
Guides (Civil), at CIVJIG 27.10 (5th ed. 2011); Minnesota Practice - Minn. Jury Instruction
Guides (Civil), at CIVJIG 27.10 (4th ed. 1999). The first sentence comes directly from several
Minnesota Supreme Court cases. See Franz, 534 N.W.2d at 266; Peterson v. Bendix Home
Sys., Inc., 318 N.W.2d 50, 52–53 (Minn. 1982); Heil v. Std. Chem. Mfg. Co., 223 N.W.2d 37,
41–42 (Minn. 1974).
Defendants argue that the Heil court specifically rejected a nearly identical instruction
for failing to include significant elements of proximate, or direct, causation. Contrary to
Defendants’ assertion, the Heil court required a new trial because “causation should at least
have been mentioned . . . in its instructions to the jury” and the district court failed to include a
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“more definite requirement of an affirmative finding under the special verdict that the breach
of warranty proximately caused plaintiff’s damages.” Heil, 223 N.W.2d at 43.
Furthermore,
the causation instruction the Heil court provided the jury was “that the defendant would not be
liable for any losses which were not the direct result of any failure of the defendant’s product,
but rather were the result of some failure on the part of the plaintiff to use this care and
diligence.” Id. For these reasons, the Heil court concluded that the entire verdict may have
been based upon speculation and therefore required a new trial. Id. The instructions and
special verdict language in Heil stand in stark contrast to those provided the jury in this case.
The jury instruction on causation and special verdict question on this issue fairly and
adequately presented the law to the jury, and no new trial is warranted on this basis.
b. Evidentiary Exclusion
Defendants’ contentions that evidentiary rulings require a new trial are unavailing.
Trial courts have “broad discretion in determining the relevancy and admissibility of
evidence.” United States v. Watson, 650 F.3d 1084, 1089 (8th Cir. 2011) (citation omitted).
These evidentiary rulings were decided throughout the course of the trial and the Court rests on
its rulings and rationale as set forth in the court transcript. In summary, the evidence relating
to Windsor Yacht’s and Genmar’s bankruptcy proceedings which Defendants argue should
have been admitted into evidence was excludable under Federal Rules of Evidence 401 and
403. Evidence regarding these bankruptcy proceedings was not relevant, and any asserted
probative value of such evidence was substantially outweighed by the prejudice and confusion
its introduction would have caused the jury. Significantly, neither Genmar nor Windsor
Yachts was a party to this lawsuit. Accordingly, the Court affirms its evidentiary ruling and
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will not grant a new trial on this basis.
B. Plaintiffs’ Motion to Amend
Plaintiffs now move to amend the Judgment to include an award of attorneys’ fees,
costs, disbursements, and prejudgment interest, as well as to require Defendants to take
possession and ownership of the twenty-six yachts which were the subject matter of the trial.
These issues are analyzed below.
1. Attorneys’ Fees and Costs
Plaintiffs allege that the Vicem Agreement provides for their recovery of attorneys’
fees. Defendants conversely argue that they are not in contractual privity with Plaintiffs, and
therefore Plaintiffs cannot recover attorneys’ fees under the Vicem Agreement. In Minnesota,
attorneys’ fees are generally not recoverable in litigation unless a specific contract or statute
permits their recovery. Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d 79, 87
(Minn. 2004); Barr/Nelson, Inc. v. Tonto’s, Inc., 336 N.W.2d 46, 53 (Minn. 1983).
Plaintiffs do not rely on any statutory provision permitting recovery of attorneys’ fees,
but instead rely on the contractual language of the Vicem Agreement. That agreement
expressly states that the prevailing party is entitled to recover reasonable costs, expenses, and
attorneys’ fees “[i]n connection with any court action or arbitration brought pursuant to any
claim arising out of or in connection with this Agreement or the relationship between the
parties . . . .” Vicem Agreement ¶ 26. Defendants do not argue that Plaintiffs are not the
prevailing party. Because Plaintiffs and Defendants are in contractual privity, Plaintiffs are
entitled to attorneys’ fees as the prevailing party.
Even more specifically, the Vicem Agreement expressly states that Defendants
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shall indemnify and hold harmless the Distributor, its parent and subsidiary
companies, and their respective officers, directors, employees, successors,
subcontractors, licensees, assigns, and customers . . . for, any and all claims,
losses, costs, damages, demands, actions, judgments, penalties, fines, and
liabilities of any kind (including attorneys’ fees) . . . arising out of . . . damage
(including consequential damages, recall expenses, and lost profit), which may
identifiably and proximately arise from or be identifiably and proximately
connected with, in whole or in part ., . . the Manufacturer’s breach of any express
or implied warranty.
Vicem Agreement ¶ 20. The indemnification provision also applies to damages arising out of
“Manufacturer’s breach of the Agreement.” Id. The provision continues, stating that the
“Manufacturer agrees to pay the Distributor for any and all expenditures made in connection
with such Claims, including without limitation in-house and outside legal counsel fees and
expenses . . . .” Id. This broad indemnification provision, therefore, explicitly envisions the
Manufacturer — Vicem — paying damages including attorneys’ fees not only to the
Distributor, Windsor Yachts, but also to subcontractors or subsidiaries such as Plaintiffs.
Minnesota law has long honored such contractual agreements to pay attorneys’ fees. See, e.g.,
Griswold v. Taylor, 8 Minn. 342 (Gil. 301) (1863) (allowing the recovery of attorneys’ fees as
provided under contract); Bolander v. Bolander, 703 N.W.2d 529, 555 (Minn. Ct. App. 2005)
(affirming district court’s award of attorneys’ fees pursuant to the parties’ contractual
provision). Plaintiffs are contractually entitled to reasonable attorneys’ fees here.
Defendants persist in contending that the evidence presented at trial failed to establish
that Defendants were in contractual privity with Plaintiffs. The evidence is to the contrary.
The testimony at trial established that Plaintiffs consistently communicated directly with
Defendants, that Windsor Sales purchased yachts directly from Defendants, that Plaintiffs
sought repairs directly from Defendants, and that Defendants and Plaintiffs were performing as
15
parties under the Vicem Agreement. As stated by this Court’s previous rulings, privity of
contract has been established here. See Section III(A)(1)(a).
Defendants, however, urge the Court to consider a case where a court found a lack of
privity and as a result denied attorneys’ fees. Defendants cite Frey v. Grumbine’s RV, Civ.
No. 1:10-CV-1457, 2010 WL 4718750, at *7 & n.3 (M.D. Pa. Nov. 15, 2010), a case involving
a retail purchaser attempting to sue, among others, the manufacturer of a recreational vehicle.
The Pennsylvania court determined that the end user was not in contractual privity with the
manufacturer, and on that basis denied attorneys’ fees. Id. Here, however, Plaintiffs were
specifically included in the Vicem Agreement, the Limited Warranty designed for the end user
did not apply to them, and the attorneys’ fee provision in the Vicem Agreement contractually
entitles them to attorneys’ fees. Therefore, this case is distinguishable from Frey and requires
a different outcome.
Defendants also argue that reading the attorneys’ fee provision broadly would lead to
absurd results and unlimited liability. Although Defendants raise the specter of unending
litigation brought by unnamed and unknown plaintiffs, Defendants’ purported fears are not
supported by the plain language of the contract. While the attorneys’ fee provision is very
broad, it expressly lists the parties which could potentially launch a suit: “[S]ubsidiary
companies, and their respective officers, directors, employees, successors, subcontractors,
licensees, assigns, and customers.” Vicem Agreement ¶ 20. While a “contract must not be
construed so as to lead to a harsh and absurd result,” Alliant Energy, Inc. v. Neb. Pub. Power
Dist., No. 00-2139, 2001 WL 1640132, at *3 (D. Minn. Oct. 18, 2001), the plain reading of
this unambiguous language specifically limits the parties which may recover attorneys’ fees.
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a. Reasonableness of Attorneys’ Fees
A court has substantial discretion in determining the reasonableness of attorneys’ fees.
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); Jarrett v. ERC Props., Inc., 211 F.3d 1078,
1084–85 (8th Cir. 2000). The amount of reasonable attorneys’ fees must be determined based
on the facts of each case. Hensley, 461 U.S. at 429; Milner v. Farmers Ins. Exch., 748 N.W.2d
608, 620–21 (Minn. 2008) (stating that Minnesota law determines the reasonableness of
attorneys’ fees according to the Hensley lodestar approach). The initial inquiry for
determining the amount of a reasonable fee is to identify the “lodestar,” the number of hours
reasonably expended on the litigation multiplied by the reasonable hourly rate. Hensley, 461
U.S. at 433. The “most important factor in determining what is a reasonable fee is the
magnitude of the plaintiff’s success in the case as a whole.” Jenkins by Jenkins v. Missouri,
127 F.3d 709, 716 (8th Cir. 1997); see also Westendorp v. Indep. Sch. Dist. No. 273, 131 F.
Supp. 2d 1121, 1125 (D. Minn. 2000) (same). Other factors courts consider in determining
reasonableness of fees include:
(1) the time and labor required; (2) the novelty or difficulty of the issues; (3) the
skill required of the attorney to properly perform legal services; (4) preclusion of
other employment due to acceptance of the case; (5) the attorney's customary
fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by
the client or circumstances; (8) the experience, reputation, and ability of the
attorney; (9) the undesirability of the case; (10) the nature and length of the
professional relationship with the client; and (11) awards in similar cases.
Westendorp, 131 F. Supp. 2d at 1125 (citing Zoll v. E. Allamakee Cmty. Sch. Dist., 588 F.2d
246, 252 n.11 (8th Cir. 1978)).
Plaintiffs calculate the lodestar amount at approximately $1,399,000 in attorneys’ fees
for 4,391 hours spent litigating the contractual claim, and they seek over $471,000 in necessary
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costs and disbursements. This was complex litigation involving international businesses,
sophisticated clients, and zealous attorney advocacy on both sides. In the two-and-a-half years
since the initial filing of the Complaint in February 2010, Plaintiffs successfully defended
against a motion to dismiss, extensively argued a summary judgment motion, and engaged in
numerous protracted discovery disputes.
Having reviewed the records submitted in support of Plaintiffs’ attorneys’ fee request,
the Court finds that the number of hours claimed is excessive. Foremost, although Plaintiffs
succeeded on their preferred remedy of revocation, it was not an unalloyed victory — the
approximately $10 million they recovered was significantly less than the amount they sought
to recover, $17.2 million at the time of trial. See Pls.’ Statement of the Case [Docket No. 121]
10. Additionally, the hours billed for various stages of this litigation appear overstated. For
example, the approximately 400 hours Plaintiffs billed solely for their summary judgment
motion — a motion which was ultimately denied — appear unreasonable, given the discrete
nature of the defined contractual issues of this case. See Jarpe Decl. [Docket No. 214] Ex. 5B.
Also, the more than 240 hours Plaintiffs billed in responding to Defendants’ eight motions in
limine, despite their success in opposing the majority of them, seem disproportionate to the
relatively brief memoranda and oral arguments devoted to these motions. Id. Further, the
approximately 350 hours billed for the trial is overstated, including at least twenty-eight hours
simply “[w]ait[ing] for verdict at courthouse.” Id. at 59. From the records provided, the
number of hours reasonably spent on a case of this stature should have been 3,900, and the
Court reduces Plaintiffs’ billed hours commensurately.
The fees Plaintiffs request will also be reduced to reflect a reasonable hourly rate that is
18
in keeping with the prevailing market rate in the relevant legal community for similar services
provided by lawyers of comparable skill, experience, and reputation. Blum v. Stenson, 465
U.S. 886, 895 n.11 (1984). The relevant legal community for this determination is the forum in
which the case has been litigated. Fish v. St. Cloud State Univ., 295 F.3d 849, 851 (8th Cir.
2002). A court may rely on its own knowledge of the prevailing market rates in arriving at its
determination of a reasonable hourly rate. Warnock v. Archer, 397 F.3d 1024, 1027 (8th Cir.
2005). The rates charged by Plaintiffs’ lawyers are in keeping with the reasonable hourly rates
in Minneapolis, see Jarpe Decl. ¶ 5 (ranging from hourly rates of $300 to $495 for partners and
from $215 to $285 for associates), but the allocation of two-thirds of the hours to law firm
shareholders rather than to less experienced attorneys has resulted in an unnecessarily high
attorneys’ fees request. This was complex litigation conducted by skilled attorneys from wellrespected firms, and neither party spared expense or shied away from motion practice,
discovery disputes, or voluminous briefing. Had lower-paid associates billed even forty
percent of the hours on this case, though, the partners’ share would have been reduced to about
a third of the total billables, with the paralegal accounting for the remainder. The Court finds
such a division of labor reasonable and the resulting average hourly rate more in keeping with
the market rate. The appropriate award under the prevailing local rate given the nature and
duration of the case, as well as the time and labor reasonably required, is $1,100,000, rather
than the nearly $1,400,000 sought by Plaintiffs.
b. Costs and Disbursements
In addressing the costs and disbursements, the Court has reviewed the invoices and
awards the costs and disbursements claimed by Plaintiffs, finding them reasonably incurred in
19
the litigation of this multi-national, cross-country, document-intensive case. The majority of
these costs are for expert witnesses, travel, photocopies, legal research, depositions, and
transcripts, all reasonable costs charged to a client in a case of this caliber.
Defendants cite Fair Isaac Corp. v. Experian Info. Solutions Inc., 711 F. Supp. 2d 991
(D. Minn. 2010), for the proposition that this Court should not award costs and disbursements
“incurred in the ordinary cost of litigating the trial, such as the costs of preparing their expert
reports or paying for translation or court reporting service,” Defs.’ Mem. in Opp’n to Pls.’
Mot. to Amend [Docket No. 221] 8 n.4. Fair Isaac was a much different situation. In Fair
Isaac, this Court reduced electronic discovery and contract attorney fees expended for a
marginal legal theory accorded scant attention by any party and which was dismissed at the
summary judgment stage. 711 F. Supp. 2d. at 1009. Here, the claims of revocation and breach
of warranty litigated by Plaintiffs both went to the jury, both received equal attention and
briefing, and it is not clear which costs, if any, would have been expended on one of the legal
theories to the exclusion of the other. Therefore, because the Vicem Agreement clearly
provides that the prevailing party is entitled to “all costs and expenses,” and because these
costs and disbursements are reasonable and connected to this matter, the Court awards
Plaintiffs the amount requested, $473,933.77.
2. Prejudgment Interest
In Minnesota, prejudgment interest on liquidated or sum-certain claims can be awarded
from the date the claims first arose. ICC Leasing Corp. v. Midwestern Mach. Co., 257 N.W.2d
551, 556 (Minn. 1977) (citation omitted) (“[W]here a claim is unliquidated but is readily
ascertainable by computation or by reference to generally recognized objective standards of
20
measurement, interest should be allowed the same as for a liquidated claim.”). Where the
damages are not liquidated and not readily ascertainable, Minnesota law requires that
prejudgment “interest on pecuniary damages shall be computed . . . from the time of the
commencement of the action or a demand for arbitration, or the time of a written notice of
claim, whichever occurs first. . . .” Minn. Stat. § 549.09, subd. 1(b); see also Simeone v. First
Bank Nat’l Ass’n, 73 F.3d 184, 191 (8th Cir. 1996) (quoting Lienhard v. State, 431 N.W.2d
861, 865 (Minn. 1988)) (stating that Minn. Stat. § 549.09 permits prejudgment interest
“irrespective of a defendant’s ability to ascertain the amount of damages for which [it] might
be held liable”). The statute clearly dictates that the prevailing party “shall receive interest” on
any award, with few limited exceptions. Minn. Stat. § 549.09, subd. 1(b). When judgments
are over $50,000, the interest rate is ten percent each year until paid. Minn. Stat. § 549.09,
subd. 1(c)(2).
Although Plaintiffs cite law regarding prejudgment interest on liquidated or sum-certain
claims, they apparently concede that the ultimate damages amount was not certain and that
therefore Minnesota Statute § 549.09 should apply. The amount of damages was not readily
ascertainable in this case, the parties continuously disputed the calculation of damages, and
therefore prejudgment interest cannot be calculated prior to the commencement of the action.
See, e.g., Potter v. Hartzell Propeller, Inc., 189 N.W.2d 499, 504 (Minn. 1971) (holding
damages not readily ascertainable from date of loss because of the parties’ dispute as to the
calculation of damages). Under Minnesota Statute § 549.09, then, the interest on Plaintiffs’
damages will be computed from the time of the filing of the Complaint on February 21, 2010,
21
at the rate of ten percent each year until the judgment is paid, totaling $2,525,422.97 to date.6
Defendants argue that if Plaintiffs are awarded prejudgment interest under Minnesota
Statute § 549.09, they should not be allowed to recover such interest on disallowed items such
as financing fees. Minnesota law does not allow prejudgment interest to be awarded on any
“portion of any verdict, award, or report which is founded upon interest, or costs . . . .” Minn.
Stat. § 549.09, subd. 1(b)(5). The jury verdict in this case, however, does not detail what
damages the jury awarded. Question No. 4 on the Special Verdict Form asked jurors to
determine “What amount of money will fairly and adequately compensate Windsor for
damages for Windsor’s revocation claim?” In determining the amount of compensation, the
jurors were instructed that they could consider consequential and incidental damages in
addition to the “purchase price paid for the yachts.” Jury Instructions at 28, 32–33.
Accordingly, it is not possible to divine — as Defendants attempt to do — whether the jury
included in its award financing costs and interest, which would not accrue prejudgment
interest, or items such as transportation, care, and custody costs, which would. Therefore, the
exclusion is inapplicable here, and the prejudgment interest is calculated on the entire jury
award from the commencement of the action.
3. Require Revocation
6
YEAR
AMOUNT
RATE
DAYS
TOTAL
2010
$9, 997,607.19
10%
314
$860,068.13
2011
$9, 997,607.19
10%
365
$999,760.72
2012
$9, 997,607.19
10%
243
$665,594.12
GRAND TOTAL =
$2,525,422.97
22
Finally, Plaintiffs request this Court to require Defendants to take possession and
ownership over the twenty-six yachts of which the jury found Plaintiffs had successfully
revoked acceptance. Defendants do “not object to amending the judgment to reflect that
Vicem will take possession and ownership” of the yachts “at the time they pay the amount of
the judgment.” Defs.’ Mem. in Opp’n to Pls.’ Mot. to Amend 11. Therefore, this Court orders
that the Judgment be amended to require Defendants to take possession and ownership of the
twenty-six yachts at the time the Judgment is paid.
IV. ORDER
Based upon the foregoing, and all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.
Defendants VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.’s
Rule 50(b) Renewed Motion for Judgment as a Matter of Law and in the
Alternative Rule 59 Motion for a New Trial [Docket No. 216] is
DENIED; and
2.
Plaintiffs Windsor Craft Sales, LLC, and Crosby Yacht Yard Inc.’s
Motion to Amend Judgment for Award of Attorneys’ Fees, Costs,
Disbursements and Prejudgment Interest [Docket No. 211] is DENIED
in part and GRANTED in part.
3.
Defendants VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.’s
are ORDERED to pay Plaintiffs Windsor Craft Sales, LLC, and Crosby
Yacht Yard Inc. as follows:
a.
Costs and disbursements in the amount of $473,933.77.
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b.
4.
Attorneys’ fees in the amount of $1,100,000.00.
Defendants VICEM Yat Sanayi ve Ticaret AS and Vicem Yachts, Inc.’s
are ORDERED to pay prejudgment interest in the amount of
$2,525,422.97 to date.
5.
Defendants are ORDERED to take possession and ownership of the
yachts at issue at the time the Judgment is paid.
LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: August 30, 2012
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