Sunday, May 6, 2012

Scrappy Scrappers

Rathe Salvage, Inc. v. R. Brown & Sons, Inc., 2012 VT 18

Once upon a time, there was a jury trial.  Two kingdoms, Hauler and Yard, were engaged in a fierce battle because the King of Yard felt that the King of Hauler had cheated the Kingdom of Yard out of its fair proceeds of their mutual endeavor: scrap haulin’. When the smoke cleared, the jury said “Yea, verily, Hauler has committed breach of contract, common law fraud, breach of the implied covenant of good faith and fair dealing, and consumer fraud.”  The trial court, at Hauler’s request, overturned the jury’s finding of consumer fraud.

Okay, okay, so it really wasn’t all that feudal or regal.  Insert “companies” for “kingdoms” and “principal” for “king” and you have the modern version, but let’s not toss out such fun imagery over technical objections.

The Kingdom of Hauler appealed, arguing (1) insufficient evidence; (2) improper argument; and (3) faulty exclusion of lie-detector test results.  The Kingdom of Yard cross-appealed the judgment for Hauler on the consumer fraud claim.  The SCOV responds with a resounding “Nay.  Thy judgment of the court of trials shall be affirmed.”  Or something like that.    

Historically, the two Kingdoms engaged in selling junked chariots for parts and scrap.  Yard would identify the chariots to be sold; Hauler would transport them to the far-off land of Montreal, and pay Yard at a predetermined price per ton.   Yard relied on hand-scribed weigh slips presented by Hauler to figure the tons for which their price per ton was due.

In late 2003, Yard terminated this arrangement and contracted with another chariot-hauling kingdom.   While the chariot loads were similar, the new kingdom reported significantly higher weights.  When confronted, the King of Hauler offered several reasons why the replacement kingdom’s loads were heavier, but Yard inferred from the difference that Hauler had been submitting fraudulent weigh slips.  Yard sued for breach of contract, fraud, and consumer fraud, the last claim based on the allegation that Yard was a consumer of Hauler’s services.

This is the parties’ second visit to the SCOV.  The first visit ended with reversal of a default judgment.  When Hauler couldn’t produce the Montreal Kingdom’s parchment, the trial court sanctioned Hauler, entering default judgment for Yard.  But because Hauler had no real control over Montreal’s records, the SCOV sent the case back for trial.   

Before that trial, Hauler filed a motion to allow testimony from a polygraph expert on the results of a polygraph examination of Robert Brown, Hauler’s King.  The trial court denied this motion, finding that the testimony was inadmissible per se, and refused to have a Daubert hearing (a hearing to determine whether an expert’s testimony is sufficiently scientific to be presented to the jury).   

The jury heard evidence about discrepancies in the weights of the chariot loads as reported and paid and the actual loads.  One of Hauler’s knights testified that the loads as delivered weighed more than reported.   The jury also heard from a neighboring steel miller, who testified that Hauler’s reported loads were as a rule “light.”  Finally, the jury heard that hauler directed the Montreal Kingdom, with whom it enjoyed a close working relationship, not to disclose its parchment.

At closing argument, Yard highlighted that Hauler and its counsel had visited the Montreal Kingdom in preparation for the trial, yet failed to retrieve the Montreal Kingdom’s weigh slips for Hauler’s scrap deliveries from Yard.  Hauler’s counsel objected that the argument was not in evidence, but the trial court declined to give a curative instruction.

The jury ruled for Yard on all claims at issue in this appeal, and Hauler renewed its motion for judgment as a matter of law.  The trial court ruled for Hauler on the consumer fraud claim only, reasoning that Yard did not pay Hauler for “services” and so Yard was not a “consumer” as defined in Vermont’s consumer fraud act.

Hauler’s first contention on appeal is that the evidence was insufficient to support the common law fraud verdict.  But the standard on review is deferential to the prevailing party.  The verdict stands if any evidence fairly and reasonably supports it.  In this case, the SCOV concludes that the verdict is supported. 

Hauler asserts that the verdict is based solely on inference stemming from the Montreal Kingdom’s failure to produce the weight slips, but the SCOV disagrees.  This is because Yard presented testimony from several different drivers and carriers indicating that the weights reported by Hauler to Yard were consistently short of the actual tons hauled.  There was also an issue with Hauler’s weigh parchment.  Hauler’s receipts were handscribed with “American-style” date stamps, while other receipts from the same mill were on printed on mill letterhead with “European-style” date stamps.   

Hauler next argues that when Yard’s counsel remarked during closing argument that Hauler and its counsel went to the Montreal Kingdom and returned with pictures but no weigh parchment, a curative instruction was required.  Essentially, the standard on appeal is whether there was prejudice that warrants a new trial.

The SCOV finds none.  Given Hauler’s admission on cross-examination that he told the mill not to turn over his business records to plaintiff in this case, well, the remark was in bounds.

Regarding whether the argument was open to improper inferences the SCOV defers to the judgment of the trial court, and concludes that there was no abuse of discretion because the remark was not necessarily an accusation of improper conduct by counsel, but a remark on Hauler’s failure to produce the records that would’ve resolved the case.

Hauler also argues that the trial court should have held a so-called Daubert hearing regarding the admissibility of Hauler’s polygraph test.  Daubert, for the uninitiated, refers to this case they make you read in law school.  Basically, the case stands for the we-want-to-keep-junk-science-out-of-the-courtroom concept.  A Daubert hearing is held to determine whether proffered evidence passes the not-junk-science test.   

In this case, the trial court declined to have a Daubert hearing because it concluded that polygraph evidence infringes on the jury’s role in determining credibility and is thus per se inadmissible under V.R.E. 403.  The trial court cited a Texas Federal District Court decision in concluding that the polygraph evidence was inadmissible per se (under F.R.E. 403).

The SCOV affirms the trial court’s ruling but does so on other grounds.  Because it can.  That’s why.  The SCOV notes that “Rule 403 admissibility determinations are usually based on a case-by-case weighing of the evidence’s probative worth against its risk of unfair prejudice, confusion, and the like, and are reviewed for abuse of discretion.”  The SCOV also prefaces its analysis by assuming without deciding the general question of whether polygraph evidence could ever meet the Daubert standard.

Hauler makes what I believe to be a clever argument—it argues that its polygraph evidence shows the witness’s measurable physiological reaction to questions and not the “truth” of his answers.  So, really, it’s indicia of truthfulness and no more.
Unlike me, the SCOV is not so easily impressed and they “find this a distinction without a practical difference.”  Boo.  Only the jury gets to be the “lie detector,” says the SCOV.  No matter which way you slice it’s still a witness commenting on the truthfulness of another witness.   There’s a lot of discussion of polygraph evidence and case law, but I skimmed that for you.   Think of this case if you need to make an argument to introduce polygraph evidence.  And then have yourself a good cry, ‘cause it’s getting excluded. 

In the end, the SCOV holds that “polygraph examination results are redundant to, and an unnecessary influence, on a jury’s responsibility to judge witness credibility or party liability, and that this limited, if not absence of, probative value is substantially outweighed by risks of confusion, delay, and time wasted on collateral issues related to variables in administration of the polygraph.”   Accordingly, no error in not holding a Daubert hearing.    

Yard’s cross-appeal is that the trial court erred when it granted hauler judgment on the consumer-fraud claim.  The SCOV reviews the ruling de novo for any evidence that supports the jury’s verdict (Hauler liable on the consumer-fraud claim), but affirms the trial court’s holding that there is no such evidence.

The parties, as parties will do, make intricate arguments based on the testimony and evidence at trial.  But the SCOV, as did the trial court, finds the problem quite simple: Yard sold scrap.  Hauler bought it.  Yard is not a consumer under the Consumer Fraud Act because Hauler did not provide “services” as required under the Act.  Case closed.  Again, there’re a few pages of discussion, but I’ve skimmed them for you.

And so Yard prevails, but as in any battle, it suffers collateral losses.  You can’t always get paid for the lot, but if you trial sometimes, you just might find, you’ll get paid for the steel.  

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