Opinion
Civil No. 4-95-739 (DWF/RLE).
February 27, 2001.
Robert R. Weinstine, Esq., Charles J. Schoenwetter, Esq., and Thomas H. Boyd, Esq., Winthrop Weinstine, Minneapolis, Minnesota, appeared on behalf of Plaintiffs.
Michael T. Nilan, Esq., David H. Wright, Esq., and Brian N. Johnson, Esq., Halleland, Lewis, Nilan, Sipkins Johnson, Minneapolis, Minnesota, appeared on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on January 25, 2001, pursuant to Defendant's Motion to Bifurcate the Trial and Plaintiffs' Motion to Revise Judgment. With the Court's permission, the parties submitted memoranda with respect to Plaintiffs' motion subsequent to the January 25, 2001, hearing. The Court, having considered all arguments, submissions of the parties, and being otherwise duly advised in the premises, now issues its decision with respect to both motions. For the reasons stated, Defendant's motion is granted, and Plaintiffs' motion is denied. The Court finds bifurcation to be appropriate in this case and orders that it be tried in two phases before a single jury consistent with the provisions of this
Background
The parties have been engaged in litigation since 1994. In August 2000, the Eighth Circuit reversed in part the holding of Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 34 F. Supp.2d 738 (D.Minn. 1999), such that only one of Plaintiffs' claims remains. See Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 223 F.3d 873 (8th Cir. 2000). The remaining claim now before this Court alleges a breach of warranty of future performance. The parties dispute, among other things, however, whether a warranty of future performance even existed.
In brief, Plaintiff Marvin is a custom window and door manufacturer, and Defendant PPG is, in relevant part, a producer of glass, primers, coatings, and wood preservatives. The parties had a longstanding relationship in which Marvin purchased glass and paint from PPG. Consistent with the common millwork industry practice, Marvin also treated its products with pentachlorophenol ("penta"), a preservative intended to increase water repellence and to prevent the development of wood decay. In 1985, however, Marvin began purchasing from PPG an alternative wood preservative called PILT. Marvin continued to use PILT until 1988. Marvin alleges that PILT resulted in the premature wood rot and deterioration in the frames of doors and windows sold from 1985 through 1988 for which Marvin then supplied necessary repairs and replacements.
While the parties dispute various issues of breach, causation, and damages, the factual dispute relevant to this motion relates to whether a warranty for future performance of PILT was ever made by the Defendant to Plaintiffs and then incorporated into the agreement to purchase PILT. Plaintiffs contend that Robert Panchot, PPG's director of sales, made representations to the two top management officials of Marvin, upon which they relied, maintaining that PILT would perform better than penta over time. Panchot's representations consist of two statements made while outside of Jake Marvin's home in the presence of both Jake and his father, Bill Marvin. First, Plaintiffs allege that Mr. Panchot maintained that PILT would "outlast" penta. Second, Plaintiffs allege that Panchot maintained that PILT would outlast the windows that Bill Marvin had had in his home for 26 years. In addition to these two representations, the parties dispute the extent of relevant context evidence necessary to determine whether the warranty existed.
Discussion
1. Bifurcation
a. Standard of Review
Under Fed.R.Civ.P. 42(b), a trial court is granted discretion in determining whether bifurcation of a trial is appropriate. The rule states that:
The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim, cross-claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims, or issues, always preserving inviolate the right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United States.
Fed.R.Civ.P. 42(b). "In exercising discretion, district courts should consider the preservation of constitutional rights, clarity, judicial economy, the likelihood of inconsistent results and possibilities for confusion." O'Dell v. Hercules, Inc., 904 F.2d 1194, 1202 (8th Cir. 1990) (citing Koch Fuels, Inc. v. Cargo of 13,000 Barrels of No. 2 Oil, 704 F.2d 1038, 1042 (8th Cir. 1983)); see also Wright Miller, 9 Federal Practice and Procedure 2d § 2388. A court should resort to bifurcation "only in the exercise of informed discretion when the court believes the separation will achieve the purposes of the rule." Wright Miller, 9 Federal Practice and Procedure 2d § 2388, at 474.
In order for a trial to be bifurcated such that particular issues are tried during each phase of the trial, a Court must find the issues to be "clearly separable." O'Dell, 904 F.2d at 1202 (citing Beeck v. Aquaslide `N' Dive Corp., 562 F.2d 537 (8th Cir. 1977)). For issues to be clearly separable, factual determinations should be unique to each phase of the trial and not require reexamination by a second jury or the same jury during a later phase of the trial. The issue of separability was considered by the Supreme Court in the context of whether a new trial could be ordered and limited to issues in a case not already determined in a previous trial. See Gasoline Products Co. v. Champlin Refining Co., 283 U.S. 494 (1931). The Gasoline Products Court held that: "Where the practice permits a partial new trial, it may not properly be resorted to unless it clearly appears that the issue to be retried is so distinct and separable from the others that trial of it alone may be had without injustice." Id. at 500.
While bifurcation is more commonly applied to the separate issues of liability and damages, numerous courts, including those within this Circuit, have appropriately exercised their discretion to apply bifurcation under alternative circumstances. See, e.g., Rolscreen Co. v. Pella Products of St. Louis, Inc., 64 F.3d 1202, 1207 (8th Cir. 1995) (separating issues of whether termination of distribution agreement occurred and whether party qualified as franchisee under state law); O'Dell v. Hercules, Inc., 904 F.2d 1194, 1202 (8th Cir. 1990) (liability and causation); Beeck v. Aquaslide `N' Dive Corp., 562 F.2d 537 (8th Cir. 1977) (whether defendant had manufactured product involved in product liability suit); Robinson v. Sheriff of Cook County, 167 F.3d 1155, 1156-57 (7th Cir. 1999) (whether putative class representative's job application had been rejected for compelling business reasons); Hydrite Chem. Co. v. Calumet Lubricants Co., 47 F.3d 887-89 (7th Cir. 1995) (breach of warranty); North Central Airlines, Inc. v. Continental Oil Co., 574 F.2d 582, 587 n. 12 (D.C. Cir. 1978) (interpretation of "critical" contract term). Thus, it is incumbent upon the Court to determine whether the existence of a warranty of future performance is clearly separable from the other issues in this case, such that concerns of prejudice, efficiency, and constitutionality are fully allayed.
b. Issues
i. Separability
The parties dispute the separability of the issue of whether a warranty of future performance exists in this case. The dispute, however, focuses primarily on the extent to which "context evidence" is necessary to establish whether or not the warranty existed. Plaintiffs contend that it will be necessary to present extensive context evidence relating to: (1) the longstanding relationship between the parties, (2) Marvin's expectations of an effective preservative, (3) PPG's course of dealing with other products supplied to Marvin, (4) the historical performance of penta-based products, and (5) the nature of Marvin's reliance on the alleged warranty. Plaintiffs further contend that such context evidence will also be essential to establish the other elements of its claim and thus, there would be extensive factual overlap between both phases of trial precluding a finding for bifurcation. Defendant, on the other hand, argues that the Eighth Circuit clearly limited the issue to whether or not the two particular representations made by Mr. Panchot ever occurred and, if so, whether any such warranty became part of the bargain between the parties. Defendant maintains that the number of witnesses and documents necessary to establish these issues is limited and any overlap with evidence necessary to prove other issues in the case is minimal.
In its decision in Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 223 F.3d 873 (8th Cir. 2000), the Eighth Circuit clearly identified the two statements at issue as the only statements, on the record before it, potentially creating a warranty of future performance. Id. at 879-81. The Eighth Circuit rested its finding on the fact that both statements specifically referred to a future time. Id. at 880. All other statements and representations asserting that PILT was a "better" product than penta "besides being unenforceable puffery [are] also merely [descriptions] of the present qualities of the good. Thus, any action for breach of a warranty based on these representations is long expired." Id. (citations omitted).
In its discussion of this claim, the Eighth Circuit also noted additional issues that would likely arise if a warranty of future performance were to be established; however, it explicitly discussed them as distinct from the issue of the warranty's existence. Id. at 881. The two issues noted by the court are: (1) the length or time products treated with penta will last and thus, the term of the purported warranty, and (2) when Marvin knew or should have known of the alleged breach for purposes of evaluating the timeliness of their claims. Id.
While the Court finds that some context evidence may be relevant to determining whether the alleged representations were ever made, it is not persuaded by Plaintiffs' hyperbolic presentation of the extent of the context evidence necessary to prove the warranty's existence. Plaintiffs' argument blurs the issues of the term of the purported warranty and the date of breach with whether the warranty existed. While the three issues are clearly related to each other, such a characterization conflicts with the Eighth Circuit's evaluation of the issues as distinct. Upon review of the record, the Court is confident that there is limited evidence that will be necessary to determine the existence of a warranty and that overlap with other issues in the case is minimal.
Moreover, the fact that certain context evidence may also be presented to establish other issues in the case, during both phases of trial, does not trouble the Court nor preclude its decision to bifurcate. In nearly every case, a particular piece of evidence could be helpful to prove more than one material fact. A party may continually refer to and a trier of fact may repeatedly consider certain evidence, whether in the form of testimony or exhibits, in order to resolve more than one issue in a case. While a trier of fact may find evidence unpersuasive or immaterial on one issue, the same evidence could be necessary for its determination of another issue. It is the consideration and determination of a single issue during both phases of trial that is what a court must protect against. Nonetheless, the overlap of evidence to be presented at both phases is minimal, given the nature of the issues and their consideration by a single jury.
The Court finds the issues of whether a warranty of future performance existed and, if so, whether it was incorporated into an agreement between the parties to be clearly separable from the remaining issues in the case. If and until the Court decides otherwise, the parties shall be precluded from presenting evidence or argument on the following issues during the first phase of trial: (1) the definition of the warranty's terms, (2) whether the warranty was breached, (3) when Marvin knew or should have known of the alleged breach and thus, whether their claim was timely, (4) causation, and (5) the existence and amount of damages. The Court anticipates that the parties will present: (1) testimonial evidence as to whether Mr. Panchot's representations were made, and (2) testimonial and documentary evidence as to whether such representations became part of the agreement between the parties. The Court is prepared to allow relevant context evidence during the first phase of trial to establish the alleged warranty's existence while also prohibiting argument on the same evidence with respect to other issues in the case to be tried during the second phase. To the limited extent that is necessary, the Court will allow certain relevant evidence to be admitted during both phases of trial. As explained above, the Court anticipates that such evidence will be limited because of the distinct nature of the issues in dispute and the fact that the evidence and issues are being considered by the same jury.
For purposes of determining whether a warranty of future performance existed, the Court finds it only necessary to define the term of the alleged warranty as "the lifetime of penta, plus." Such a characterization of the term sufficiently refers to the future, rendering it unnecessary to present evidence to translate this term into a number of years. Evidence and argument relating to the translation of the term into years will be relevant to issues such as timeliness. However, such issues will be relegated to the second phase of trial, further limiting the evidentiary overlap between phases.
ii. Constitutional Concerns
The constitutional concern implicated by bifurcation is the potential compromise of a party's right to a jury trial under the Seventh Amendment. If the issues to be tried during two phases of a trial are not clearly separable, then there is the unacceptable risk that the jury at each phase will consider the same evidence differently and yield inconsistent results. Given the distinct nature of the issue to be determined during the first phase and the lack of overlap of material factual determinations to be made during both phases, the Court finds that there is no substantial risk that two juries would deliver inconsistent results. The only apparent basis upon which one could argue that two juries will consider the case differently is to maintain that the jury for the second phase, should there be one, would likely doubt the finding of the first. This argument could be made, however, in any bifurcated trial involving two juries, thus, rendering the discretion afforded under Rule 42(b) to be ineffectual. While not necessary, a court could insure against such a risk and allay the parties' concerns on this issue by empaneling one jury to preside over both phases of trial. The Court will do so in this case. To the extent that it is necessary, if at all, the Court will exercise its discretion to schedule the two phases of trial to best accommodate the circumstances of all involved, including the Court and the parties, but especially, the jurors. The decision of this Court contemplates a short recess of not more than five trial days between the two phases of the trial. Moreover, the Court will establish a trial-ready date that will take into account any additional discovery to be completed, with or without the assistance of Magistrate Judge Raymond L. Erickson.
The Seventh Amendment states:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.
U.S. Const. amend. VII.
iii. Prejudice
If bifurcation of a trial would result in unfair prejudice to either party, then it would be an abuse of discretion for a court to do so. Fed.R.Civ.P. 42(b). Prejudice to either party without bifurcation, however, must also be considered by the court. Id. Consideration of prejudice and bifurcation commonly arises where evidence of the nature and extent of damage could unfairly invoke the sympathies of the trier of fact, thereby impacting the determination of liability. Wright Miller, 9 Federal Practice and Procedure 2d § 2388, at 479 and § 2390. See, e.g., O'Dell, 904 F.2d at 1201-02 (noting bifurcation of liability and damages to be appropriate exercise of discretion while affirming bifurcation on other grounds); Northern Star Co. v. Archer Daniels Midland, 1993 WL 285942 (D.Minn. July 16, 1993) (granting bifurcation of liability and damages). Such cases are appropriately suited for bifurcation so that the emotion and concern of a jury with respect to damages is not manipulated to or does not inadvertently affect its determination of other distinct and integral issues of the case.
Plaintiffs maintain that they will be irreparably prejudiced if bifurcation occurs because of the potential delay between stages as proposed by the Defendant. In addition, Plaintiffs dispute the alleged prejudice that a single trial could cause to the Defendant. Defendant maintains, however, that, without bifurcation, the Plaintiffs will likely infuse all issues of the case with argument "that the interests of its customers, the economic health of the Marvin company, and the fate of the town of Warroad, Minnesota, all depend on the outcome of this case." Defendant bases this contention primarily on Plaintiffs' recent plea to the Minnesota legislature with respect to legislation on the doctrine of economic loss. Indeed, Plaintiffs' counsel reiterated such pleas at the hearing before this Court. The Court does not find any potential prejudice to the Plaintiffs. In fact, such an argument perplexes the Court, given the Plaintiffs' offer to delay the trial for several months apparently in response to Defendant's concern about time to review recently and some yet-to-be-provided documents. The Court does find, however, that bifurcation would protect the Defendant from unfair prejudice. The extent of the damages based upon the assertions of the Plaintiffs is potentially enormous, and this alone creates potential for great prejudice against the Defendant. When coupled with the distinct possibility that a jury's sympathies for a local and family-owned business could be invoked, the potential prejudice to Defendant is even more profound. Thus, the Court finds that bifurcation is an appropriate means to avoid unfair prejudice.
iv. Judicial Efficiency The parties' arguments on the efficiency of bifurcation in this case reflect their respective positions on the separability of the issues. Given the Court's finding that the issues to be tried during each phase of trial are clearly separable, it follows that bifurcation in this case will promote judicial efficiency. The Court rejects Plaintiffs' contention that a decision for bifurcation is necessarily based on an unfair presumption that Defendant will succeed on this issue. Rather, the Court finds it profoundly efficient to clearly delineate issues and related evidence so that unfair prejudice and numerous complex issues contingent upon the issues separated here do not make a complicated case all the more so. Given that all elements of the remaining claim are contingent upon the existence of a warranty, it would be patently inefficient to require a jury to consider extensive evidence of issues such as breach, causation, and damages without first determining whether the pivotal warranty exists. See Wright Miller, 9 Federal Practice and Procedure 2d § 2388, at 476 (discussing the application of bifurcation when dispositive issue exists). The Court's decision to bifurcate is further supported by interests of efficiency.
v. Conclusion
Pursuant to the provisions of this Memorandum Opinion and Order, the Court finds bifurcation to be appropriate in this case and orders that it be tried in two phases before a single jury. Having fully considered the concerns of constitutionality, efficiency, and prejudice implicated by the instant case, the Court's exercise of discretion is based on its analysis of these factors in their entirety, no one factor driving the outcome of this motion. The Court recommends that the parties use this order to guide their presentation of evidence on the issues to be tried during each phase, recognizing that the Court will make evidentiary rulings as needed throughout both phases of trial.
On February 23, 2001, Defendant submitted a Notice of Motion and Motion to Strike Marvin's Reply Brief, arguing that Marvin's Motion to Revise Judgment should have been filed pursuant to Local Rule 7.1(a) for Non-Dispositive Motions. Because Rule 7.1(a) does not provide for a reply brief from the moving party, a party would have to seek leave of the Court to do so. Local Rule 7.1(f). In the alternative to striking Plaintiffs' reply, Defendant requests the acceptance of a surreply brief. The Court denies Defendant's motion and declines acceptance of the surreply. Up to this point, the Court has not taken nor has been requested to take any position as to the characterization of Plaintiffs' motion. Moreover, Plaintiffs have not sought formal permission from the Court to file a reply brief. However, the briefing schedule for Plaintiffs' motion was decided by the parties in the courtroom during the hearing on summary judgment. A reply brief was included in the discussion, and the schedule was agreed upon by the parties. While the Court agrees with Defendant that the Local Rules should be enforced consistently for purposes of fairness and efficiency, it also values the cooperation and fair-dealing of parties throughout the litigation process. Even if the Court were to consider the arguments in Defendant's surreply, the outcome of Plaintiffs' motion would remain the same.
Under Fed.R.Civ.P. 54(b), a judgment dismissing certain claims of a party is "subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of the parties. Pursuant to this rule and an alleged change in applicable law, Plaintiffs have moved the Court to revive their claims under certain Minnesota consumer protection statutes which were previously dismissed by Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 34 F. Supp.2d 738 (D.Minn. 1999), affirmed in part and reversed in part on other grounds by, Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 223 F.3d 873 (8th Cir. 2000). The Court declines to do so.
Plaintiffs' claims were originally brought under Minn. Stat. §§ 325D.09, et seq., 325F.67, and 325F.68, et seq.
In general, a court is required to follow the law as it has been determined in a case when considering issues that arise thereafter. Upon remand, a district court is bound by the legal determinations made by the appellate court. United States v. Bartsh, 69 F.3d 864, 866 (8th Cir. 1995). An exception to this general precept is when intervening legal authority "clearly demonstrates the law of the case is wrong." Morris v. American Nat'l Can Corp., 988 F.2d 50, 52 (8th Cir. 1993).
Plaintiffs contend that the recent Minnesota Supreme Court decision in Group Health Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2 (Minn. 2001), represents such a change in the law upon which Judge Ann D. Montgomery dismissed their consumer fraud claims. The Court disagrees. Relying on Church of the Nativity of Our Lord v. WatPro, Inc., 491 N.W.2d 1, 7-8 (Minn. 1992), Judge Montgomery found that Marvin lacked proper standing under the consumer protection statutes because it qualified as a sophisticated merchant, rather than a lay "consumer." Marvin Lumber, 34 F. Supp.2d at 755. Marvin subsequently sought a rehearing before the Eighth Circuit claiming that a new decision by the Minnesota Supreme Court, Ly v. Nystrom, 615 N.W.2d 302 (Minn. 2000), changed the legal landscape so significantly that their consumer protection claims should be reinstated. Ly found that a transaction in which the plaintiff bought a restaurant to sell restaurant services and not to merely resell the business qualified as a consumer transaction rather than a commercial transaction, rendering the plaintiff a consumer protected under the relevant statutes. Id. The Ly court noted the plaintiff's inexperience in purchases of such real estate, his lack of formal education, and English not being his primary language as factors rendering him a consumer, especially in comparison to the "veteran of the restaurant business" defendant. Id. at 305, 309. The Eighth Circuit denied Marvin's motion for rehearing. Marvin Lumber and Cedar Co. v. PPG Indus., Inc., 232 F.3d 977 (8th Cir. 2000).
The Minnesota Supreme Court's decision in Group Health is entirely misread by the Plaintiffs. Group Health involved the certification of two specific questions to the court in a case brought by Health Maintenance Organizations (HMOs) against the tobacco industry. The two questions were: (1) must plaintiffs be purchasers of defendants' products in order to properly plead a claim under Minn. Stat. §§ 325.F67, 325.F69, subd. 1, 325.D13, and 8.31, subd. 3a, and (2) must these private plaintiffs plead and prove individual purchaser reliance on the defendants' statements or conduct in order to be eligible for relief in the form of damages under Minn. Stat. §§ 325.F67, 325.F69, subd. 1, 325.D13, and 8.31, subd. 3a? Group Health, 621 N.W.2d at 2. In response to the first question and relevant to the instant case, the Group Health court held that "the HMOs need not be actual purchasers" in order to seek protection under the consumer protection statutes. Id. at 11.
Plaintiffs would have the Court interpret Group Health to mean that "any party" now has standing to sue under the Minnesota consumer protection statutes. Moreover, they argue that HMOs are sophisticated merchants capable of negotiating higher premiums to account for smoking related illnesses and conditions, and by implication, sophisticated merchants, such as Marvin, are now afforded consumer protection standing. The Court disagrees.
The holding of Group Health is clearly limited to the questions asked and answered which are distinct from the issue here, i.e. whether a merchant-purchaser has standing under the consumer protection statutes. Group Health addresses the issue with respect to non-purchasers. While the Minnesota Supreme Court found standing appropriate for the HMO plaintiffs who could also qualify as merchants, it was their status as non-purchasers that the court and parties found to be relevant and upon which the holding is based. Moreover, the HMO's ability to negotiate its protection against the damages of tobacco is in relation to the insured and not the defendant tobacco industry. In contrast, Marvin is a merchant sophisticated in the purchase of wood preservatives and capable of utilizing its sophistication against the very defendant it now sues. In addition, Marvin is a direct purchaser of the Defendant's product at issue here. The standing conferred to non-purchaser merchants or consumers under Group Health has no application to Marvin, given its status as a sophisticated merchant purchaser. Thus, Group Health does not contradict the previous holdings in this case, finding no standing for Marvin under the Minnesota consumer protection statutes, and thus, provides no basis upon which to revive Plaintiffs' previously dismissed claims.
Given the Court's interpretation of Group Health and its finding of no basis upon which to revise the previous judgment, it is unnecessary for the Court to address the relationship between Plaintiffs' flawed interpretation of the case and the economic loss doctrine.
For the reasons stated, LET IT BE ORDERED THAT:
1. Defendant's Motion for Bifurcation (Doc. No. 540) is GRANTED, until otherwise provided, as follows:
a. The case shall be bifurcated into two phases and tried before a single jury;
b. Phase 1 shall try the issues of the existence of a warranty of future performance and whether it was incorporated into the agreement between the parties;
c. Phase 2 shall try all remaining issues in the case, including, but not limited to: (1) the definition of the warranty's terms, (2) whether the warranty was breached, (3) when Marvin knew or should have known of the alleged breach and thus, whether the claims were timely, (4) causation, and (5) the existence and amount of damages; and
d. The Court will issue evidentiary rulings as necessary to properly limit the scope of evidence presented during both phases of trial;
2. Trial Date. This case is hereby set for trial to commence on or about October 22, 2001;
a. With respect to any discovery issues that remain unresolved, the Court respectfully directs the parties to contact Magistrate Judge Raymond L. Erickson;
3. Plaintiffs' Motion to Revise Judgment (Doc. No. 553) is DENIED; and
4. Defendant's Motion to Strike Marvin's Reply Brief (Doc. No. 557) is DENIED.