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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION THE SMART MARKETING GROUP, INC., Plaintiff, v. PUBLICATIONS INTERNATIONAL, LTD. Defendant. ) ) ) ) ) ) ) ) )
Case No. 04 C 0146 Judge Joan B. Gottschall
ORDER On February 6, 2009, a jury returned a verdict in favor of the plaintiff, The Smart Marketing Group, Inc. (“SMG”), and awarded damages in the amount of $5,612,500. The defendant, Publications International, Ltd. (“PIL”), has filed a post-trial motion pursuant to Federal Rules of Procedure 50(b) and 59, which, in part, renews its earlier-filed Rule 50(a) motion for judgment as a matter of law. See doc. no. 197 (renewing a request for relief asserted in doc. no. 181). PIL argues that the plaintiff failed: (1) to prove that PIL breached the October Agreement; and (2) to establish damages in accordance with the strictures of the lost profits rule. It asks the court to enter judgment in its favor, vacate or remit the jury’s damage award, or grant a new trial. For the reasons stated below, the motion is denied. Rule 50(b) allows a court, where it finds that a reasonable jury did not have a legally sufficient evidentiary basis for its verdict, to direct the entry of judgment as a matter of law. Fed. R. Civ. P. 50. The court views all evidence in the light most favorable to the prevailing party, without re-weighing evidence or making credibility determinations. Filipovic v. K&R Exp. Sys., Inc., 391 F.3d 859, 863 (7th Cir. 2004). The movant bears the “heavy burden” of
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demonstrating that “no legally sufficient evidentiary basis” existed for the verdict. Maher v. City of Chicago, 547 F.3d 817, 824 (7th Cir. 2008). Rule 59 provides that a court may grant a new trial or amend a judgment. Fed. R. Civ. P. 59. Under Rule 59, the “district court must determine whether the verdict is against the weight of the evidence, the damages are excessive [or insufficient], or if for other reasons the trial was not fair to the moving party.” Shick v. Ill. Dep’t of Human Servs., 307 F.3d 605, 611 (7th Cir. 2002) (internal citations and quotations omitted, alteration in original). “In ruling on a motion for a new trial, unlike a [motion for judgment as a matter of law], the judge may consider the credibility of the witnesses, the weight of the evidence, and anything else which justice requires.” Spanish Action Comm. of Chicago v. City of Chicago, 766 F.2d 315, 321 (7th Cir. 1985). PIL first argues that SMG failed to prove that PIL breached its contract with SMG because SMG failed to disprove that PIL terminated the agreement for a legitimate reason, namely that the “churn rate” was too high. SMG introduced evidence of the agreement between the parties, which included a provision allowing PIL to terminate for cause if “[a]ny of the contract programs that SMG sells experience a churn rate of franchised new car dealers (dealer cancellation or failure to pay) in excess of 10% per month prior to the third month is billed for reasons other than [PIL’s] lack of fulfilling its stated contract responsibilities, or if dealer cancels due to the quality of the [PIL] leads.” Pl.’s Trial Ex. 3. Additionally, SMG introduced evidence regarding the problems that PIL had fulfilling its contractual responsibilities to car dealerships and the dates of its sales of dealer contracts. A reasonable jury could conclude from the evidence presented that the conditions were not met to trigger the less-than crystal clear “churn
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rate” cancellation provision in the contract. Although PIL asserts that it presented evidence that the churn rate was above acceptable levels, the court must assume that the jury concluded otherwise (or concluded that PIL was in part responsible for the churn rate) and defer to any evidentiary weight and credibility determinations that supported that determination. In so doing, the court concludes that the jury had a legally sufficient evidentiary basis for its verdict and PIL’s argument as to the “churn rate” consequently fails under Rule 50(b). Moreover, the court is not persuaded that justice requires any disturbance of the jury’s conclusions. PIL next argues that SMG failed to show that PIL inappropriately exercised its judgment to terminate the agreement based on its disapproval of SMG’s business practices.1 To prevail on this argument under Rule 50(b), PIL must demonstrate that no reasonable jury could have determined from the evidence that PIL acted in an arbitrary and capricious manner that was inconsistent with the reasonable expectations of the parties. It fails to do so. The plaintiff offered evidence and testimony relating to the alleged forgery of a dealer contract, the amount of commission owed at the time the contract was cancelled, and the problems PIL was having meeting its obligations to dealers. Although PIL argues that the process PIL took to terminate SMG demonstrates that it made a reasoned decision, the jury drew a different conclusion and the court will not “substitute its view of the contested evidence for the jury’s.” Zimmerman v. Chicago Bd. of Trade, 360 F.3d 612, 623 (7th Cir. 2004). And again, the court is not persuaded that justice requires any disturbance of the jury’s conclusions. The court now turns to the issue of whether the jury’s award of damages was supported
This argument, in part, implicates the court’s determination, on summary judgment, that the implied duty of good faith and fair dealing applied to PIL’s dealings with SMG and the jury instruction that was based on this determination. The court declines to revisit this legal ruling. 3
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by sufficient evidence or if it requires a remittitur or a new trial. In part, PIL re-raises its Daubert objection to SMG’s expert, Martin Birnbaum, to the amendment of Birnbaum’s opinion, and to the testimony of SMG’s principals in regard to various assumptions underlying the lost profits calculations. These objections relate to legal rulings that the court is not persuaded to reconsider. PIL next argues that Birnbaum’s opinions were undermined by its expert, Dillon McDonald. However, under Rule 50(b), it is not the court’s place to question the jury’s decision to weigh one expert’s testimony over another. PIL’s argument does not persuade the court that justice requires any disturbance of the jury’s conclusions. Next, PIL argues that SMG is not entitled to damages as a matter of law because of the “new business rule.” See, e.g., TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 634 (7th Cir. 2007) (stating the general rule in Illinois that “a new business has no right to recover lost profits”). The court reviewed extensive briefing and heard argument on this issue before trial. It acknowledged the general rule and pointed out that this did not mean that “a new business can never prove lost profits.” See Milex Prods., Inc. v. Alra Labs., Inc., 603 N.E.2d 1226, 1237 (Ill. App. Ct. 1992) (noting that evidence of lost profits relating to a new product in an established market was sufficient to render the damages reasonably certain). PIL argues that SMG failed to present sufficient evidence to establish any reasonableness or reliability for its damages theory. In support, PIL cites Mid-America Tablewares, Inc. v. Mogi Trading Co., 100 F.3d 1353 (7th Cir. 1996). Mid-America Tablewares, Inc. discusses Wisconsin contract remedies, not Illinois law. Id. at 1365 (“Under Wisconsin law, a party that has suffered a breach of contract may recover future lost profits if they were within the contemplation of the parties when contracting and if they can be established with reasonable certainty.” (internal citations
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omitted)). However, this jurisdictional distinction is not significant given that both states allow new businesses to recover lost profits as long as they are proven “with the requisite degree of ‘reasonable certainty.’” Id.; see Tri-G, Inc. v. Burke, Bosselman & Weaver, 856 N.E.2d 389, 407 (Ill. 2006) (holding that the issue is whether the plaintiff introduced evidence that “with a fair degree of probability tend[ed] to establish a basis for the assessment of damages for lost profits”). In this case, SMG presented testimony on its principals’ experience in the industry and on sales it made on behalf of PIL during the contractual period. The jury could conclude from this evidence that SMG would have continued to sell contracts to dealers in the future and to earn a profit from those sales. Such a conclusion is sufficient to allow for an award of lost profits. See Mid-America Tablewares, Inc., 100 F.3d at 1367 (noting that the reasonable certainty rule applies to the fact that there were some lost profits, not to the amount of damages). Consequently, PIL is not entitled to judgment as a matter of law on the issue of lost profits. Nor has PIL demonstrated that a reasonable jury had insufficient evidence upon which damages in the sum of $5,612,500 could be awarded. SMG’s expert opined that SMG suffered lost profits of $8,764,670; PIL’s expert opined that the maximum damages would not exceed $373,372. The jury’s calculation does not clearly track either expert’s opinion. Although PIL argues that this “proves” that the award is arbitrary, it could just as easily “prove” that the jury considered the two different expert opinions, critically evaluated the assumptions underlying those opinions, and determined for itself an appropriate measure of damages based on its own conclusions of the sum of money that would put SMG in as good a position as it would have been if PIL had not breached the contract. See Jury Instruction Nos. 18-22 (doc. no. 186). Of course, a determination that a party presented sufficient evidence to withstand a Rule
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50 motion “does not preclude a finding that the jury’s actual verdict was excessive for purposes of Rule 59.” Id. at 1368. The court “may vacate a jury verdict for excessiveness only if it is ‘monstrously excessive’ or if there is ‘no rational connection between the evidence on damages and the verdict[.]” Joan W. v. City of Chicago, 771 F.2d 1020, 1023 (7th Cir. 1985) (quoting Abernathy v. Superior Hardwoods, Inc., 704 F.2d 963, 971 (7th Cir. 1983)). Unfortunately for PIL, Mid-America Tablewares, Inc. is also distinguishable on the issue of the amount of damages. In Mid-America, there was no evidence that any similar product had enjoyed the success envisioned, including from the plaintiff’s own expert. Id. In this case, the plaintiff introduced evidence on the market for leads and on its track record of meeting (and exceeding) sales goals for PIL. Moreover, in Mid-America, the jury’s award largely tracked the opinion of an expert that the Seventh Circuit found to be overly speculative. Id. at 1368. In this case, both parties put forth expert testimony in regard to damages. The court does not find the award “monstrously excessive” and it declines to order a new trial or a remittitur of the damages award. PIL’s motion is denied. ENTER:
_____/s/__________________ JOAN B. GOTTSCHALL United States District Judge DATED: May 28, 2009
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