Call v. State Industries

UNITED STATES COURT OF APPEALS
Tenth Circuit
Byron White United States Courthouse
1823 Stout Street
Denver, Colorado 80257
(303) 844-3157
Patrick J. Fisher, Jr. Elisabeth A. Shumaker
Clerk Chief Deputy Clerk

August 2, 2000

TO: ALL RECIPIENTS OF THE ORDER AND JUDGMENT

RE: 99-8046, Call, et al. v. State Industries
Filed on July 24, 2000

The order and judgment contains a typographical error on page two, first
sentence of the decision. The reference to “Afton, Colorado” is corrected to read
“Afton, Wyoming.” The first sentence should now read:

On a cold December night in Afton, Wyoming, the Calls’ home and
virtually everything in it burned to the ground.

Please make the correction to your copy of the order and judgment.

Sincerely,

Patrick Fisher, Clerk of Court

By: Keith Nelson
Deputy Clerk
 F I L E D
United States Court of Appeals
Tenth Circuit

JUL 24 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
TENTH CIRCUIT Clerk

DEE CALL and DIANE CALL;
STATE FARM FIRE AND
CASUALTY COMPANY, an Illinois
corporation; STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY, an Illinois corporation,
No. 99-8046
(D.C. No. 98-CV-120-D)
Plaintiffs-Appellees,
(District of Wyoming)
v.

STATE INDUSTRIES, a Tennessee
corporation,

Defendant-Appellant.

ORDER AND JUDGMENT *

Before SEYMOUR, KELLY and LUCERO, Circuit Judges.

State Industries appeals from a jury verdict finding that a hot water heater it

had manufactured was defective and caused a fire that destroyed Dee and Diane

Call’s home. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm.

*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
 I

On a cold December night in Afton, Wyoming, the Calls’ home and

virtually everything in it burned to the ground. The Calls and their insurers, State

Farm Fire and Casualty Company and State Farm Mutual Automobile Insurance

Company (collectively “State Farm”), exercising their right of subrogation,

brought an action in federal court against State Industries alleging that a design

defect in an electric water heater manufactured by the defendant and installed in

the Calls’ home caused the fire. 1
Plaintiffs presented evidence that a combination

of high temperatures and excessive moisture caused high-resistance heating of the

hot water heater’s internal wiring, which in turn ignited surrounding material in

the heater and eventually the structure of the house. Additional evidence

supported the theory that the high-resistance heating was made possible by the use

of substandard wiring in the heater. State Industries agreed the fire originated in

the area of the hot water heater and was electrical, but presented evidence in

support of its theory that structural wiring was the cause.

The jury found in favor of plaintiffs and awarded $473,000 in damages.

The district court denied State Industries’s post-trial motions for judgment as a

matter of law, an amended judgment, and a new trial. This appeal followed.

Plaintiffs also alleged negligence and breach of the warranty of
1

merchantability but subsequently dropped those claims.

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 II

State Industries raises six arguments on appeal: (1) the district court

improperly failed to instruct the jury on comparative fault; (2) plaintiffs’ evidence

on damages was inadmissible and insufficient; (3) plaintiffs’ experts were not

properly qualified and their opinions were unreliable ; (4) the district court

improperly admitted evidence of other incidents of heater defects; (5) the district

court improperly admitted evidence of remedial design modifications; and (6) the

evidence was insufficient to establish that a defect in the heater caused the fire.

A

In general, we review for abuse of discretion the district court’s decision

not to submit a comparative fault instruction to the jury. See United States v.

McIntosh , 124 F.3d 1330, 1337 (10th Cir. 1997). “A defendant is entitled to an

instruction on his theory of the case if the instruction is a correct statement of the

law and if he has offered sufficient evidence for the jury to find in his favor.” Id.

(citing United States v. Swallow , 109 F.3d 656, 658 (10th Cir. 1997)) (further

citation omitted). In a diversity case, “we look to the state law to determine the

basic elements of the legal theories asserted, and then to the evidence to see if it

supports the granting of the instruction.” Perlmutter v. United States Gypsum

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Co. , 4 F.3d 864, 872 (10th Cir. 1993). 2
The parties agree that Wyo. Stat. Ann.

§ 1-1-109 establishes the elements of comparative fault. That section provides

that the court must reduce the award of damages “in proportion to the percentage

of fault attributed to the claimant,” Wyo. Stat. Ann. § 1-1-109(d), and defines

fault to include “acts or omissions, determined to be a proximate cause of death or

injury to person or property, that are in any measure negligent, or that subject an

actor to strict tort or strict products liability, and includes breach of warranty,

assumption of risk and misuse or alteration of a product,” Wyo. Stat. Ann. § 1-1-

109(a)(iv).

Thus, we analyze whether the district court abused its discretion in

concluding that there was insufficient evidence that the Calls were at fault.

“There must be more than a mere scintilla of evidence to support an instruction.

Sufficient competent evidence is required.” Perlmutter , 4 F.3d at 872 (quoting

Farrell v. Klein Tools, Inc. , 866 F.2d 1294, 1297 (10th Cir. 1989)). Moreover,

“[t]he evidence justifying the instruction must be more than speculation or

conjecture.” Id. (citing Brownlow v. Aman , 740 F.2d 1476, 1490 (10th Cir.

1984)). State Industries argues that the following evidence presented to the jury

2
In light of our well-established standard of review, there is no merit to
State Industries’s argument that the district court’s refusal to give the comparative
fault instruction was equivalent to granting sua sponte a directed verdict in favor
of plaintiffs and therefore should be subject to a less deferential standard of
review.

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could support a finding that the Calls were at fault: They improperly installed the

heater, creating the leak that, under the plaintiffs’ theory, compromised the

wiring; they failed to have the heater serviced even though the thermostat was not

working properly, preventing the discovery of the compromised wires; and they

left a cover off the heater, permitting the fire in the heater to escape and ignite the

house. After carefully reviewing the trial transcript, we conclude State Industries

fails to meet the high threshold of demonstrating the district court abused its

discretion in declining to submit the requested comparative fault instruction.

B

On the issue of damages, State Industries appears to argue both that the

evidence concerning damages was improperly admitted and that it was

insufficient to support the jury’s award. State Industries first objected to the

damages award in its motion for an amended judgment or new trial. “While state

law governs a party’s substantive entitlement to damages in a diversity case like

this, it is well-established that federal law governs the grant or denial of a

new-trial motion in diversity cases, and, at least in this Circuit, governs the

determination whether evidence is sufficient to support a verdict.” Morrison

Knudsen Corp. v. Fireman’s Fund Ins. Co., 175 F.3d 1221, 1259 n.47 (10th Cir.

1999) (citations omitted). Under federal law, we review for abuse of discretion

the district court’s disposition of a motion for an amended judgment or new trial

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on the basis of an excessive verdict. See Hynes v. Energy West, Inc., 211 F.3d

1193, 1206 (10th Cir. 2000). In order to establish an abuse of discretion, State

Industries

carries the heavy burden of demonstrating that the verdict was
clearly, decidedly, or overwhelmingly against the weight of the
evidence. . . . [A]bsent an award so excessive or inadequate as to
shock the judicial conscience and to raise an irresistible inference
that passion, prejudice, corruption or other improper cause invaded
the trial, the jury’s determination of the fact is considered inviolate.

Id. (quoting Campbell v. Bartlett, 975 F.2d 1569, 1577 (10th Cir. 1992) (further

citation omitted)). 3

Federal law also governs the admissibility of evidence in diversity cases in

federal court, see Romine v. Parman, 831 F.2d 944, 944 (10th Cir. 1987)

(citations omitted), and neither party cites to authority indicating that general rule

is inapplicable in the instant case. We review for abuse of discretion the district

court’s admission of evidence concerning damages. See Robinson v. Missouri

Pac. R.R. Co., 16 F.3d 1083, 1086 (10th Cir. 1994).

3
On occasion, this Court has stated that a jury’s damages award must be
affirmed “unless it is clearly erroneous or there is no evidence to support the
award.” Sanjuan v. IBP, Inc., 160 F.3d 1291, 1299 (10th Cir. 1998) (quoting
Brown v. Presbyterian Healthcare Servs., 101 F.3d 1324, 1330 (10th Cir. 1996));
see also Vining v. Enterprise Fin. Group, Inc., 148 F.3d 1206, 1216 (10th Cir.
1998) (setting forth both standards). Even if there is a substantive difference
between that standard of review and the standard set forth in the body of this
opinion, under either standard the outcome in this case would be the same.

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 State Industries attacks the admissibility and sufficiency of the evidence

concerning the value of the Calls’ home and the personal property in the home.

Under the governing substantive law of Wyoming, see Morrison Knudsen Corp.,

175 F.3d at 1259 n.47, the measure of property damage generally is “the fair

market value of the property or, in the case of goods having no ascertainable

market value, the actual economic value to the owner,” Broyles v. Broyles, 711

P.2d 1119, 1124 (Wyo. 1985) (citing Shikany v. Salt Creek Transp. Co., 45 P.2d

645 (Wyo. 1935)) (further citations omitted). Thus, a plaintiff is not entitled to

recover for “sentimental or fanciful value.” Id. (citing Shikany, 45 P.2d at 645).

“The burden of proving the value of lost property rests on the party seeking

recovery . . . .” Id. (citing Ely v. Kirk, 707 P.2d 706 (Wyo. 1985); Shikany, 45

P.2d at 645). “Damages must be proven with a reasonable degree of certainty so

that the fact-finder, in turn, can determine the amount with a measurable degree

of certainty. Exact certainty of the amount of damages need not be proven, but

remote, conjectural or speculative damages are not allowed.” Reposa v. Buhler,

770 P.2d 235, 238 (Wyo. 1989) (citations omitted). Ultimately, “[v]aluation of

property is a question of fact, and there is no universal standard for such a

determination.” O’s Gold Seed Co. v. United Agri-Products Fin. Servs., Inc.,

761 P.2d 673, 676 (Wyo. 1988).

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 Evidence concerning the fair market value of the Calls’ home was brought

in through the testimony of Dee Call. He testified that he is involved in the

construction business, has built and sold several homes, stays informed about the

real estate market in the Afton area, and has personal knowledge of the

characteristics and value of two comparable homes on the market in the Afton

area. Without citation to legal authority, State Industries contends Dee Call was

unqualified to express an opinion as to the market value of his destroyed home

and failed to provide an adequate foundation for his opinion. We disagree. As

the owner of the home and one familiar with the local residential real estate

market, Dee Call was qualified to testify as to the home’s value. See Malloy v.

Monahan, 73 F.3d 1012, 1016 (10th Cir. 1996). Moreover, evidence concerning

the value of two comparable homes provided an adequate foundation for his

opinion. Cf. United States v. Sowards, 370 F.2d 87, 92 (10th Cir. 1966) (stating

that an owner’s opinion as to value “must have a rational foundation” (citations

omitted)). We conclude the evidence presented was both properly admitted and

sufficient to establish to a reasonable degree of certainty the fair market value of

the Calls’ home. 4

4
State Industries also contends plaintiffs failed to disclose prior to trial
their computation of fair market value based on the two comparable homes as
required by local rule. Because the record on appeal does not contain the pre-trial
disclosures, we cannot and will not address that claim. See Deines v. Vermeer
Mfg. Co., 969 F.2d 977, 979-80 (10th Cir. 1992).

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 With regard to the value of personal property destroyed in the fire, State

Industries’s arguments on appeal, once again made without citation to legal

authority, are focused exclusively on an inventory list prepared by Diane Call for

State Farm. 5 State Industries contends the estimated values on the inventory list

are based on replacement cost and include sentimental value. Specifically, it

points out some of the values were entered in the “replacement cost” column and

not the “actual cash value” column and singles out the price attached to

photograph albums as evidence of sentimental value. Our review of the record,

however, reveals that Diane Call testified all her property values represented

market value and did not incorporate sentimental value. We therefore conclude

the district court properly admitted into evidence the inventory list and Diane

Call’s testimony concerning the inventory, leaving the ultimate determination of

credibility to the jury. See United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd.,

210 F.3d 1207, 1230 (10th Cir. 2000) (“It is within the virtually exclusive

purview of the jury to evaluate credibility and fix damages.” (citation omitted));

cf. Weathers v. State, 652 P.2d 970, 973-74 (Wyo. 1982) (“[A]n owner can

5
State Industries does not challenge the values on the inventory sheet that
were provided by Dee Call. Moreover, although State Industries contends certain
amendments made to the inventory by Diane Call were not disclosed until the day
of her testimony, it did not object to the admission of the inventory sheet on that
basis and therefore did not properly preserve the issue for appeal. See United
States v. Mendoza-Salgado, 964 F.2d 993, 1008 (10th Cir. 1992).

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testify as to his opinion of market value without having a particular expertise; the

weight given to such testimony is left to the jury.”). Furthermore, based on that

evidence a jury could determine to a measurable degree of certainty the value of

the personal property destroyed in the fire.

Finally, the jury award is not grossly excessive, given that it was less than

the amount of damages supported by the evidence.

C

Federal Rule of Evidence 702 imposes on a district court a gatekeeping

obligation to “ensure that any and all scientific testimony or evidence admitted is

not only relevant, but reliable.” Daubert v. Merrell Dow Pharmaceuticals, Inc. ,

509 U.S. 570, 589 (1993). The Supreme Court has made clear that “where

[expert] testimony’s factual basis, data, principles, methods, or their application

are called sufficiently into question . . . the trial judge must determine whether the

testimony has ‘a reliable basis in the knowledge and experience of [the relevant]

discipline.’” Kumho Tire Co. v. Carmichael , 526 U.S. 137, 149 (1999) (quoting

Daubert , 509 U.S. at 592). The trial judge has broad discretion “to determine

reliability in light of the particular facts and circumstances of the particular case.”

Id. at 158; see also United States v. Charley , 189 F.3d 1251, 1266 (10th Cir.

1999), cert. denied , 120 S. Ct. 842 (2000). That broad discretion applies both in

“deciding how to assess an expert’s reliability, including what procedures to

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utilize in making that assessment, as well as in making the ultimate determination

of reliability.” United States v. Velarde , No. 99-2297, 2000 WL 710494, at *4

(10th Cir. June 2, 2000) (citing Kumho Tire , 526 U.S. at 152) (further citation

omitted).

After carefully reviewing the record, we conclude the district court properly

exercised its gatekeeping responsibility under Daubert and Kumho Tire ,

conducting extensive hearings that established the qualifications of plaintiffs’

experts Toby Nelson and George Hodge. The district court likewise properly

exercised its gatekeeping function in determining that the opinions of Hodge and

Nelson were reliable and relevant. 6
Establishing a precise “rate of error” and

demonstrating that the experts’ results were “subjected to peer review and

publication” are not, as State Industries suggests, prerequisites to a finding of

reliability in all instances. See Kumho Tire, 526 U.S. at 150 (emphasizing that

those and other factors discussed in Daubert “do not constitute a ‘definitive

checklist or test’” (quoting Daubert, 509 U.S. 593)); see also Charley, 189 F.3d

at 1261 n.11 (“[The district court’s] evidentiary decisions do not warrant reversal

if it determined, in some apparent manner, that the expert testimony it admitted

was reliable.” (citation omitted)). Moreover, any purported shortcomings of

6
A third expert, Donald Peak, also testified for plaintiffs. State Industries
does not challenge Peak’s qualifications and only challenges the reliability of his
opinions to the extent they are based on the opinions of Hodge and Nelson.

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Hodge or Nelson’s methods and theories were adequately brought out in cross-

examination by defense counsel. We discern no abuse of discretion.

State Industries also contends that Hodge and Nelson testified to theories

that were not properly disclosed in advance of trial, in violation of Fed. R. Civ. P.

26(a) and 37(c)(1). “The determination of whether a Rule 26(a) violation is

justified or harmless is entrusted to the broad discretion of the district court.”

Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co. , 170 F.3d 985, 993

(10th Cir. 1999) (quoting Mid-America Tablewares, Inc. v. Mogi Trading Co. ,

100 F.3d 1353, 1363 (7th Cir.1996)). Appellant’s failure to include in the record

on appeal relevant portions of the experts’ depositions, designations, and reports

substantially limits our ability to assess the merits of this claim. See Deines v.

Vermeer Mfg. Co., 969 F.2d 977, 979-80 (10th Cir. 1992) . To the extent the

record permits review, the district court did not abuse its discretion in finding that

the experts’ opinions were properly disclosed.

D

In order to introduce evidence that other individuals had experienced

problems with hot water heaters manufactured by State Industries, plaintiffs were

required to show “that the circumstances surrounding [the other incidents] were

substantially similar to those involved in the present case.” Ponder v. Warren

Tool Corp. , 834 F.2d 1553, 1560 (10th Cir. 1987) (quoting Karns v. Emerson

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Elec. Co. , 817 F.2d 1452, 1460 (10th Cir. 1987)) (further citations omitted). The

requisite degree of similarity required varies depending on the purpose for which

the evidence of the other incidents is used. See id. Both incidents introduced

through Peak’s testimony involved the same model heater with the same

thermostat problems as experienced by the Calls, and one of those incidents also

involved a fire in the heater. The testimony of similar incidents was used in

support of Peak’s conclusion that the Calls’ heater was capable of causing a fire.

We conclude the circumstances of the two incidents were sufficiently similar to

the circumstances of the instant case in light of the purpose for which they were

used, and therefore the district court did not abuse its discretion when it admitted

that evidence.

E

In diversity actions involving a strict products liability claim, the question

of whether to permit evidence of subsequent remedial measures is governed by

state law. See Wheeler v. John Deere Co. , 862 F.2d 1404, 1410 (10th Cir. 1988);

see also Moe v. Avions Marcel Dassault-Breguet Aviation , 727 F.2d 917, 932

(10th Cir. 1984). 7
Under Wyoming law, evidence of remedial measures is

7
State Industries points out that this Court has on at least one occasion
applied Fed. R. Evid. 407 in a diversity case involving a strict liability claim. See
Hull v. Chevron U.S.A., Inc. , 812 F.2d 584 (10th Cir. 1987). Hull , however, also
involved negligence claims, and it is unclear to which claim the court was
referring when it held the evidence of remedial measures was inadmissible under

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admissible in a strict liability action if the plaintiff also presents “substantial

evidence which proved or tended to prove” the change was undertaken to cure a

defect. Caldwell v. Yamaha Motor Co. , 648 P.2d 519, 525 (Wyo. 1982). Nelson

testified that the subsequent design modifications to the hot water heater

decreased the amount of moisture that could enter the area of the heater

containing the wiring, and therefore significantly reduced the risk of high-

resistance heating. We conclude, in light of that testimony, that the district court

did not err in admitting the evidence of subsequent remedial measures.

F

State Industries’s final argument on appeal is that the evidence introduced

at trial is insufficient to support the jury’s verdict as to defect and causation. We

will not reverse a jury verdict unless, viewing the record in the light most

favorable to the prevailing party, “it is clearly, decidedly, or overwhelmingly

against the weight of the evidence.” Anaeme v. Diagnostek, Inc., 164 F.3d 1275,

1284 (10th Cir. 1999) (internal quotation omitted). In the instant case, the issues

of defect and causation were hotly contested, with evidence presented both to

Rule 407 to prove “culpable conduct.” Id. at 587. In the instant case, by contrast,
plaintiffs abandoned their negligence claims for the purpose of avoiding exclusion
of evidence of subsequent remedial measures. To the extent Hull can be read to
hold that Rule 407 and not state law governs whether a federal court should
exclude evidence of remedial measures in a strict liability case, we are bound by
the contrary rule announced in the earlier case of Moe, 727 F.2d at 932. See
Haynes v. Williams, 88 F.3d 898, 900 n.4 (10th Cir. 1996).

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support and refute plaintiffs’ theory of the case. We decline to substitute our

judgment for that of the jury in resolving such a factual dispute, and conclude

that the verdict is not against the weight of the evidence.

III

The judgment of the district court is AFFIRMED.

ENTERED FOR THE COURT

Carlos F. Lucero
Circuit Judge

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