Downs v. Homax Oil Sales, Inc.

421 P.3d 518

Robert W. DOWNS, Appellant (Defendant),

v.HOMAX OIL SALES, INC., a Wyoming corporation, Appellee (Plaintiff).

S-17-0224

Supreme Court of Wyoming.

June 27, 2018

Representing Appellant: James R. Belcher, Darin B. Scheer and Blake A. Klinkner of Crowley Fleck PLLP, Casper, Wyoming. Argument by Mr. Belcher.

Representing Appellee: Frank R. Chapman and Patrick J. Lewallen of Chapmen Valdez & Lansing, Casper Wyoming. Argument by Mr. Chapman.

Before BURKE, C.J., and DAVIS, FOX, KAUTZ, JJ., and RUMPKE, DJ.

KAUTZ, Justice.

[¶1] Appellee Homax Oil Sales, Inc. filed suit against Appellant Robert W. Downs, claiming he and his daughter had improperly interfered with Homax’s business relationship with RKI Exploration & Production. After a bench trial, the district court granted judgment in favor of Homax.

[¶2] On appeal, Mr. Downs claims the district court abused its discretion by allowing Homax to present damages evidence that was not properly disclosed during discovery and improperly awarded damages to Homax. We conclude Homax violated its duty under W.R.C.P. 26 to provide its computation of damages and the documents supporting its damages claim to Mr. Downs, and the district court abused its discretion by admitting Homax’s damages evidence at trial. We also conclude the district court’s finding on damages was clearly erroneous. Consequently, we reverse the district court’s judgment in favor of Homax and direct that judgment be entered in favor of Mr. Downs on Homax’s claims.

ISSUES

[¶3] Although the parties present several issues related to the district court’s damages award, the following issues are dispositive:

1. Whether the district court abused its discretion by admitting Homax’s damages evidence at trial.

2. Whether the district court’s damages award was supported by the evidence.

FACTS

[¶4] Mr. Downs owns a ranch in Converse County, Wyoming, which is the site of oil and gas development activities. Mr. Downs’ daughter, Amanda Horr, works on the ranch. RKI had oil and gas operations on the Downs Ranch and entered into a surface use agreement with Mr. Downs. RKI contracted with landman, Adam Hughes, to act as its liaison with landowners, including Mr. Downs.

[¶5] Homax sells refined petroleum products such as gasoline, diesel and lubricants. Prior to the events in question, Homax delivered petroleum products to RKI’s operations on the Downs Ranch approximately three times per week. RKI and Homax did not, however, have an agreement that required RKI to continue to purchase petroleum products from Homax.

[¶6] On March 23, 2015, a Homax fuel truck drove on a private road within the Downs Ranch, without permission or other authority to do so. Ms. Horr was in Casper, Wyoming, that day, so Mr. Downs told her to go to Homax’s office and give it a bill for trespassing on Downs Ranch. Ms. Horr purchased an invoice book, filled out a trespass bill for $1,500, and went to Homax’s office to present the bill. Darin Homer, the president of Homax, refused to pay the bill. According to Mr. Homer, Ms. Horr stated that his refusal would affect Homax’s business with RKI.

[¶7] After leaving Homax’s office, Ms. Horr called Mr. Hughes and told him that she had been treated rudely by Mr. Homer. Mr. Hughes informed RKI representatives of Ms. Horr’s report. Later that day, RKI terminated its business relationship with Homax.

[¶8] Homax filed suit against Mr. Downs, claiming improper interference with Homax’s business relationship with RKI. It sought damages for "lost business, punitive damages, attorney’s fees, and further relief as the Court deems just and proper, including pre and post judgment interest incurred in the prosecution of this action." Mr. Downs counterclaimed for trespass. The district court’s order on the pretrial conference set out deadlines for witness and exhibit lists.

[¶9] During the discovery period, Homax produced to Mr. Downs a one-page document purportedly setting out its damages. The document was a simple two-line accounting spreadsheet showing Homax’s monthly gross revenue from RKI, with totals of $2,162,542.31 for 2014 and $307,615.21 for 2015. Homax’s witness list designated Mr. Homer, Darla Homer, and Peggy Bagner as witnesses on damages, but Homax called only Mr. Homer to testify at trial about its damages. Homax’s witness designation provided the following information about Mr. Homer’s proposed testimony on damages:

Mr. Homer has been the President/CEO of Homax Oil Sales, Inc. for 13 years and is involved in all aspects and knowledge of the company. Mr. Homer will testify concerning all facts and allegations made in the Complaint, and all facts concerning the damages Homax Oil Sales has incurred as a result of the actions of Defendant in this matter.

...

... Mr. Homer will testify that Homax has had no business dealings with RKI after RKI terminated its business with Homax.

Mr. Homer will testify to the damages in the loss of 2.15 million dollars in revenue in 2014, $306 [t]housand dollars in revenue in early 2015, the [sic] resulting in 2014 Gross Profit damages of $345,279 [and] 2015 Gross Profit damages of $83,573.00 at the time of termination. Mr. Homer shall testify to the computations, the accounting systems, and all associated computations of damages, including the future.

Mr. Homer shall testify to all the aspects of the attempts to mitigate the damage to Homax Oil Sales, Inc., along with the damage to RKI’s successor Devon Energy and their unwillingness to allow Homax Oil Sales[ ] to provide fuel to locations on Down[s’] property, as before.

[¶10] Mr. Downs filed two motions challenging Homax’s damages evidence—a motion for summary judgment based, in part, upon lack of evidence of lost profit damages and a motion in limine for exclusion of damages evidence because Homax failed to comply with the disclosure requirements of Rule 26. After a hearing, the district court denied Mr. Downs’ motions.

[¶11] A bench trial was set to begin January 3, 2017. The week before trial, Homax’s counsel filed its third amended exhibit list, indicating that Plaintiff’s Exhibit 4 was the same one-page document showing its 2014 and 2015 revenue from sales to RKI that had previously been disclosed. Homax provided copies of its exhibits on a CD, and the copy of Exhibit 4 on the CD only contained the previously disclosed single page. On the first day of the scheduled trial, January 3, 2017, Homax’s attorney gave Mr. Downs’ attorney a folder with its trial exhibits and asked her to stipulate to their admission. In the paper copy, Exhibit 4 contained three pages, although Homax did not amend its exhibit list to reflect the added pages. Apparently without knowing about the additional pages in Exhibit 4, Mr. Downs’ attorney stipulated to the admission of Homax’s exhibits contained in the folder, including the expanded Exhibit 4. Because Mr. Hughes did not appear pursuant to his subpoena, the trial proceedings were continued until February 14, 2017.

[¶12] During Mr. Homer’s testimony at trial, defense counsel realized that Plaintiff’s Exhibit 4 contained three pages. The first page was the same revenue information for 2014 and 2015 previously provided by Homax. The two additional pages, one for 2014 and one for 2015, were each titled "Customer Inquiry" and listed RKI as the customer. The pages contained tables showing, for each month, "Sales," "Costs of Sales," "Profit %," "Profit $," "Cash Recvd," and "No. Invcs."

[¶13] Plaintiff’s counsel claimed that he told defense counsel that he had "added a couple in there for foundation on damages." Defense counsel "vehemently" denied that Homax’s counsel had informed her that he had added pages to the stipulated exhibits.

[¶14] Mr. Downs’ attorney objected to admission of the extra pages and Mr. Homer’s testimony about the information contained in those pages. The district court allowed Mr. Homer to testify about all three pages in Exhibit 4 because defense counsel had stipulated to the exhibit, although she was apparently unaware of the additional pages. Mr. Homer testified that Exhibit 4 showed "gross revenue" and "gross profit" from RKI for each month in 2014 and 2015. Homax’s counsel then questioned Mr. Homer about Homax’s net losses:

Q. So have you calculated your losses, financial losses, from the time you were run off of RKI till [sic] today?

A. Yes, I have.

Q. And what is that amount?

A. It’s $330,000 of net income.

According to Mr. Homer, the $330,000 figure represented lost net profits of $132,000 for 2015, $176,000 for 2016, and $22,000 for the beginning of 2017. He estimated future net profit losses from losing RKI’s business at $176,000 per year.

[¶15] Defense counsel objected to Mr. Homer’s testimony about net profits or income because only gross profit was disclosed in Mr. Homer’s witness designation and the documents. The district court overruled the objection, concluding Mr. Homax’s witness designation was sufficiently broad to include his testimony about net income.

[¶16] On cross examination, Mr. Homer explained that Homax’s gross profit from sales to RKI in 2014 and 2015 was shown on pages two and three of Exhibit 4 and gross profit was calculated by deducting the "costs of goods" from total sales. He also stated that gross profit differs from net profit. To calculate net profit, Mr. Homer testified that "all associated expenses" had to be deducted from gross profit. He testified that he had not produced a list of "all associated expenses" to the defense because he was "never asked for it." Mr. Homer identified what he believed to be "associated expenses" as wages, utilities, truck expenses, advertising, bank charges, cash over short, credit card fees, insurance, laundry and uniform expenses, lease expense, office expense, and payroll tax expense.

[¶17] When asked about the specific expenses incurred by Homax for its business with RKI, Mr. Homer admitted that he did not have that information. Instead, he explained that he had calculated Homax’s net profit by applying "a gross profit to net...