Friedman v. Tim Mccandless Inc

606 F.3d 494

FRIEDMAN & FRIEDMAN, LTD., an Illinois Corporation; Jeanne Enders; Arie S. Friedman; Gail Tuler Friedman; Eugene F. Friedman, Plaintiffs-Appellees/Cross-Appellants,v. TIM McCANDLESS, INC., an Iowa Corporation; Paul Roloff, Defendants-Appellants/Cross-Appellees,Swieter Aircraft Services, Inc; Irwin Swieter; Richard Baxter, Defendants,State of Iowa ex rel. Civil Reparations Trust Fund, Intervenor-Appellee.

Nos. 08-2976, 08-3128.

United States Court of Appeals Eighth Circuit.

Submitted: Oct. 20, 2009.

Filed: May 25, 2010.

Max E. Kirk, argued, Waterloo, IA, for appellant.

Eugene F. Friedman, argued, Gail Tuler Friedman, on the brief, Chicago, IL, for appellee.

Richard Eugene Mull, AAG, Ames, IA, for Intervenor-Appellee, State of Iowa.

Before WOLLMAN, MURPHY and BYE, Circuit Judges.

MURPHY, Circuit Judge.

Friedman & Friedman, Ltd.¹ (Friedman) brought this action against Tim McCandless, Inc. (McCandless) which sold it an airplane which allegedly failed to comport with the contract and with the representations by the seller and its sales manager Paul Roloff.² A jury returned a verdict in Friedman's favor, finding that McCandless had breached the contract and that McCandless and Roloff had fraudulently misrepresented the plane's condition. McCandless appeals on the ground that the district court refused to instruct the jury on Friedman's duty to provide timely notice of the plane's alleged nonconformity with the contract. We reverse and remand for a new trial.

I.

We view the facts in the light most favorable to Friedman because the jury ruled in its favor. Wilson v. City of Des Moines, 442 F.3d 637, 639 (8th Cir.2006). In May 2002, the law firm of Friedman & Friedman, Ltd. purchased a 1981 Cessna Model P210 airplane from the aircraft dealer Tim McCandless, Inc. Each side produced a document which was claimed to be the purchase contract: a letter agreement, which was produced by Friedman, and an aircraft purchase agreement by McCandless. Both documents required the plane to be airworthy and certified as such. The letter agreement produced by Friedman made no warranty disclaimers and required the plane to be delivered complete with the promised components and accessories. The aircraft purchase agreement, on the other hand, offered the plane as is and made no representations about components or accessories.

Before the plane was delivered, Livingston Aviation, Inc. inspected it and found it “unairworthy.” Shortly thereafter, repairs were performed by defendant Swieter Aircraft Services, Inc. McCandless then delivered the plane to Friedman on May 15, 2002. About two months later, on July 12, 2002, Friedman called McCandless's attorney to report that the plane was not airworthy. Counsel asked Friedman to provide a list of the plane's defects, but no further communications took place for nearly ten months. Then on May 8, 2003 Friedman sent a list of repairs needed and work completed, along with a demand for payment. McCandless rejected the demand.

Friedman first sued in Illinois state court, but that action was dismissed for lack of jurisdiction. It then filed this diversity case in federal district court, charging that McCandless had both breached the letter agreement and, in concert with its sales manager Roloff, fraudulently misrepresented that the plane was (1) airworthy and certified as such, (2) safe for flight, and (3) complete with the promised components and accessories. McCandless responded with its own action in Iowa state court which was subsequently removed to the federal district court where the cases were consolidated with the parties' consent.

In addition to Friedman's breach of contract and fraudulent misrepresentation claims, the consolidated action included claims and counterclaims which were dismissed before the case was submitted to the jury. Immediately before trial the court dismissed the following by consent: Friedman's claims for promissory estoppel and intentional infliction of emotional distress; Friedman's claims against defendant Richard Baxter; and McCandless's counterclaims for breach of contract, fraud, and abuse of process. After the close of Friedman's case in chief, the defendants successfully moved for directed verdicts on Friedman's claims for conversion, violation of the Illinois Consumer Fraud and Deceptive Practices Act, and civil conspiracy to commit fraud and breach of contract.

Although McCandless did not plead an affirmative defense to the breach of contract claim in its federal court answer to Friedman's complaint, the final pretrial order issued by the district court expressly provided that one of the issues at trial would be its defense that Friedman was barred from recovering on the contract for failing to provide timely notice of the plane's nonconformity. After the close of evidence, McCandless offered jury instructions on a buyer's duty under Iowa law to provide the seller with timely notice of nonconforming goods. The district court declined to give the requested instructions, however. It overruled McCandless's objection on the ground that the proposed instructions “would comment on the evidence and would potentially modify the purported contracts,” but it allowed the parties to discuss their views about the contractual terms in their closing arguments.

The magistrate judge submitted the case to the jury using a verdict form with six questions:

1. Did Plaintiff prove by the greater weight or preponderance of the evidence its claim for breach of contract against Tim McCandless, Inc.?

2. Did Plaintiff prove by a preponderance of clear, satisfactory, and convincing evidence its claim for fraudulent misrepresentation against Defendants?

3. State the amount of damages Plaintiff sustained as a proximate result of Defendants' breach of contract or fraudulent misrepresentation.

4. Do you find by a preponderance of clear, convincing, and satisfactory evidence that the conduct of Defendants constituted willful and wanton disregard for the rights or safety of another?

5. What amount of punitive damages, if any, do you award?

6. Was the conduct of Defendants directed specifically at Plaintiff?

The jury was instructed to answer yes or no to questions 1, 2, 4, and 6. It answered “yes” to questions 1, 2, and 4. Question 3 called for “the amount of damages Plaintiff sustained as a proximate result of Defendants' breach of contract or fraudulent misrepresentation.” (emphasis added). The jury's answer was $26,468.36. It also awarded $50,000.00 in punitive damages in response to question 5 and answered the final question “no.”

McCandless and Roloff appeal from the judgment and from the denial of their motion for a new trial or for amendment of the judgment. McCandless contends that a new trial is required because the district court abused its discretion by excluding its requested jury instructions on the timely notice of nonconformity defense to the breach of contract claim. It also argues, in concert with Roloff, that a new trial is required because two of the jury findings with respect to fraudulent misrepresentation were irreconcilably inconsistent. Friedman cross appeals from the denial of its bill of costs for failure to comply with local rules.

II.

A.

Friedman argues that McCandless waived its affirmative defense on the contract claim by failing to plead in its answer that Friedman had not provided timely notice of the plane's alleged nonconformity.³ McCandless admits that an affirmative defense not raised in the defendant's responsive pleadings is generally forfeited Sayre v. Musicland Group, Inc., 850 F.2d 350, 354 (8th Cir.1988), but it argues that inclusion of the defense in the court's final pretrial order as one of the issues to be tried preserved the issue for trial.

The final pretrial conference and order “measure[ ] the dimensions of the lawsuit,” including the issues to be tried. United States v. 84,615 in United States Currency, 379 F.3d 496, 499 (8th Cir.2004) (internal quotation marks and citation omitted). The final pretrial conference is critical for “promoting efficiency and conserving judicial resources by identifying the real issues prior to trial, thereby saving time and expense for everyone.” Fed.R.Civ.P. 16 Advisory Committee Note (1983 Amendment to subdivision (c)). As a result, “the agreements and stipulations made at [the] final conference will control the trial.” Id. (1983 Amendment to subdivision (d)). The issues identified at the final pretrial conference and the agreements and stipulations made there are incorporated into the final pretrial order, which thereafter “controls the course of the action.” Fed.R.Civ.P. 16(d).

Indeed, because “[its] purpose is to guide the course of the litigation,” Fed.R.Civ.P. 16 Advisory Committee Note (1983 Amendment to subdivision (e)), the final pretrial order supersedes the pleadings 84,615 in United States Currency, 379 F.3d at 499. Thus, an issue identified in the pretrial order is properly within the scope of the trial even though it was not included in the original pleadings. For example, in American Surety Co. of N.Y. v. Williford, 243 F.2d 494 (8th Cir.1957), we concluded that the district court did not err by ruling upon the existence of an unpled oral contract precisely because the pretrial order specified that the existence of that contract was an issue to be determined at trial. Id. at 496.

An unpled affirmative defense identified in the pretrial order is no exception to the rule that issues identified in the pretrial order supersede the pleadings. See 84,615 in United States Currency, 379 F.3d at 499. Its absence from the original pleadings therefore does not work a forfeiture of the right to assert the defense at trial. See also Vaughn v. King, 167 F.3d 347, 352 (7th Cir.1999) (concluding that unpled affirmative defense was preserved by inclusion in pretrial order); Management Investors v. United Mine Workers, 610 F.2d 384, 390 n. 17 (6th Cir.1979) (rejecting as “clearly meritless” contention that...