Haynes Trane Service Agency, Inc. v. American Standard, Inc.

FILED
United States Court of Appeals
Tenth Circuit

July 6, 2009
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff,

and

FREDERICK M. HAYNES,

Plaintiff - Appellant,

v. No. 07-1440
AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,

____________________

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff - Appellant,

FREDERICK M. HAYNES,

Plaintiff,

v. No. 07-1441

AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,
___________________

FREDERICK M. HAYNES,

Plaintiff - Appellant,

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff,

v. No. 08-1100

AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,

___________________

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff - Appellant,

FREDERICK M. HAYNES,

Plaintiff,

v. No. 08-1102

AMERICAN STANDARD, INC.,
d/b/a THE TRANE COMPANY,

Defendant - Appellee.

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 ORDER

Before HARTZ, TYMKOVICH and HOLMES, Circuit Judges.

These matters are before us on the Petition for Rehearing En Banc of

Appellants Haynes Trane Service Agency, Inc. and Frederick M. Haynes. We

also have a response from American Standard, Inc.

Upon the panel’s consideration of both pleadings, the petition for rehearing

is GRANTED for the limited purpose of revising and adding a paragraph in the

Economic-Loss Rule section of our Opinion, on pages 29 to 34. The Opinion

filed on April 7, 2009, is vacated and the attached revised Opinion is substituted

in its place.

The petition and response were also circulated to all of the judges on the

court who are in regular active service. As no judge called for a poll, the request

for en banc consideration of these appeals is denied.

Entered for the Court,

ELISABETH A. SHUMAKER, Clerk

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 PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff,

and

FREDERICK M. HAYNES,

Plaintiff - Appellant,

v. No. 07-1440
AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,

____________________

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff - Appellant,

FREDERICK M. HAYNES,

Plaintiff,

v. No. 07-1441

AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,
___________________

FREDERICK M. HAYNES,

Plaintiff - Appellant,

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff,

v. No. 08-1100

AMERICAN STANDARD, INC.,
d/b/a The Trane Company,

Defendant - Appellee,

___________________

HAYNES TRANE SERVICE
AGENCY, INC.,

Plaintiff - Appellant,

FREDERICK M. HAYNES,

Plaintiff,

v. No. 08-1102

AMERICAN STANDARD, INC.,
d/b/a THE TRANE COMPANY,

Defendant - Appellee.

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 APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 1:95-CV-01700-RPM)

Marcy G. Glenn, Holland & Hart LLP, Denver, Colorado, (Christopher A.
Crisman, Holland & Hart LLP; J. Lawrence Hamil and Charles B. Hecht,
Hamil/Hecht LLP, Denver, Colorado, with her on the briefs) for Plaintiffs -
Appellants,

Daniel M. Reilly (Larry S. Pozner, Sean Connelly, Kent C. Modesitt, and Clare
Pennington, with him on the brief), of Reilly Pozner & Connelly LLP, Denver,
Colorado, for Defendant - Appellee.

Before HARTZ, TYMKOVICH, and HOLMES, Circuit Judges.

HARTZ, Circuit Judge.

This is the second appeal in litigation between Plaintiffs/counterdefendants

Frederick M. Haynes (Mr. Haynes) and Haynes Trane Service Agency

(HaynesTSA) and Defendant/counterclaimant American Standard d/b/a Trane

(Trane). For almost four decades Mr. Haynes operated a Denver-based franchise

of Trane, a manufacturer of heating, ventilation, and air conditioning (HVAC)

products. After receiving his franchise, Mr. Haynes formed HaynesTSA, which

initially functioned as a service wing of his operations. HaynesTSA later entered

into a separate agreement with Trane to distribute certain HVAC products. The

disputes arose when HaynesTSA cheated Trane by abusing a rebate program

under which Trane would reduce the price it charged retailers, such as

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HaynesTSA, to enable them to meet the retail prices of products sold by their

competitors. Trane terminated its distributorship agreement with HaynesTSA

and, shortly thereafter, terminated Mr. Haynes’s franchise. Mr. Haynes and

HaynesTSA brought suit in the United States District Court for the District of

Colorado. Trane counterclaimed.

An initial jury trial and appeal, see Haynes Trane Serv. Agency, Inc. v. Am.

Standard, Inc., 51 F. App’x 786 (10th Cir. 2002) (Haynes I), whittled the case

down to the following claims: (1) Mr. Haynes’s claim that Trane, despite

language in the franchise agreement permitting it to terminate the franchise at

will, could terminate only for good cause (which it lacked) because statements

and conduct by Trane had either (a) modified the agreement to require good cause

or (b) equitably estopped Trane from denying that the agreement required good

cause; (2) claims by both Mr. Haynes and HaynesTSA that Trane breached

fiduciary duties; and (3) Trane’s counterclaims against HaynesTSA (a) for fraud

based on its abuse of the rebate program and (b) for unjust enrichment and an

accounting arising out of HaynesTSA’s allegedly fraudulent acts. 1

Before the second trial the district court ruled that Trane’s unjust-

enrichment claim added nothing to its fraud claim; that its accounting claim was

1
Trane also brought a breach-of-fiduciary-duty claim against Mr. Haynes,
alleging that he set up “‘dummy contractor transactions’” to collect undeserved
commissions on Trane products. Aplts. App. Vol. I at 240. The district court
granted judgment as a matter of law against this claim at the close of evidence at
the second trial and Trane has not appealed that ruling.

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dependent on Trane’s proving its fraud claim; and that if Trane did prove fraud,

an equitable accounting would be performed because a jury would have difficulty

calculating Trane’s damages. At the close of the Plaintiffs’ case at the second

trial the court granted judgment as a matter of law (JMOL) against the

modification-of-contract claim of Mr. Haynes and the fiduciary-duty claims of

Mr. Haynes and HaynesTSA. The jury then returned verdicts that Mr. Haynes

had established the elements of his equitable-estoppel claim and that Trane had

established its fraud counterclaim. After the jury was discharged, the court ruled

that Mr. Haynes’s misconduct precluded application of an equitable doctrine in

his favor and, despite the jury’s verdict, entered judgment for Trane on

Mr. Haynes’s equitable-estoppel claim. And with respect to Trane’s fraud claim,

the court appointed a special master for an accounting to determine damages.

Before the special master heard any evidence, however, the parties stipulated that

Trane’s damages were $1,770,000.

Mr. Haynes and HaynesTSA appeal. Exercising jurisdiction under

28 U.S.C. § 1291, we affirm in part and reverse in part. Mr. Haynes’s

breach-of-contract claim was properly dismissed because (1) Mr. Haynes

presented insufficient evidence that his franchise agreement had been modified,

and (2) his unclean hands gave the district court authority to deny him an

equitable-estoppel remedy. We reject Mr. Haynes’s argument that our rulings on

the first appeal regarding the sufficiency of his evidence of modification bound

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the district court under the law-of-the-case doctrine, because the evidence he

presented at the second trial was materially inferior to the evidence that we

considered on that appeal. In addition, the district court did not err in dismissing

the fiduciary-duty claims of Mr. Haynes and HaynesTSA, because they failed to

establish the requisites of a fiduciary relationship. Again, the law-of-the-case

doctrine does not assist Mr. Haynes on this claim because the evidence at trial

was materially inferior to the evidence that we considered on the first appeal.

Finally, the district court erred in appointing a special master to calculate Trane’s

damages, because the calculation was not too complicated for a jury. A

recalculation of damages by a jury, however, will also require resolving liability

issues, so we must remand for a full trial of Trane’s fraud claim.

I. BACKGROUND

A. The Parties’ Relationships

The second trial lasted 16 days. To put our analysis in context, we

summarize here the essential evidence at that trial. Additional evidence will be

addressed in our discussion of specific issues.

Mr. Haynes’s relationship with Trane began in 1958 when he took a sales

position at Trane’s Boston franchise. Over the course of the next decade he took

on increasing responsibility and in 1967 his efforts were rewarded with an offer to

run Trane’s Denver franchise. The franchise agreement was for an

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“indeterminate” length, and provided that it could be “terminated by either party

upon 30 days notice to the other.” Aplts. App. Vol. XII at 5388.

Mr. Haynes formed HaynesTSA soon after he received the franchise.

Initially HaynesTSA was a service wing of Mr. Haynes’s operations. Its role

expanded in 1990, however, when it entered into an agreement with Trane to

distribute Trane’s unitary HVAC products, smaller units for residential and

light-commercial applications. Although the initial agreement was for a term of

five and one-half months, it was renewed on a yearly basis the following five

years in substantially the same form. Either party could terminate the agreement

at will upon proper notice.

Central to this case is a flexible pricing program that Trane developed

through a series of policy statements or “Sales Plan[s]” provided to its

distributors. The program helped Trane distributors compete for business. Thus,

although the program was not set forth in HaynesTSA’s contract with Trane,

HaynesTSA had good reason to participate.

The program worked as follows: If a distributor risked being underbid by

its competition, it could request a lowered price quote from Trane. If the request

was granted, the distributor could then sell the product at a reduced price and

“claim back” (that is, seek from Trane) a portion of the reduction. Id. Vol. XIII

at 5984. As a precaution against error or fraud, distributors were required to

accompany claimbacks with the invoice number for the sale and retain a copy of

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the invoice for two years, thereby enabling Trane to determine whether a

distributor ultimately sold the unit for the stated price. If a discrepancy was

discovered before Trane credited a claimback, Trane adjusted the claimback; but

even after a claimback was credited, Trane reserved the right to recover the

“amount of credit improperly claimed.” Id. Vol. XIII at 5988.

Although Mr. Haynes was president of HaynesTSA, he had little experience

in the unitary-products market and therefore hired Willard Forward to manage

that company’s distributorship venture. Forward and his subordinates gamed the

claimback program in a number of ways. Denice Louder, a billing administrator

at HaynesTSA, testified that at Forward’s behest she routinely submitted

claimbacks that stated a price quote below the actual price at which HaynesTSA

sold the item. She also testified that HaynesTSA submitted some claimbacks for

nonexistent projects and others for units that had been secretly sold to Trane

salesmen (claimbacks were available only for units sold to final customers). All

told, Louder testified that “nearly every one” of the claimbacks that she submitted

to Trane contained “something that wasn’t completely right.” Id. Vol. XI at 4983.

Periodically, Trane would request random invoices from HaynesTSA to

determine whether the amount HaynesTSA billed a customer matched the price

stated in a claimback. When there was a mismatch, Louder would recreate or

alter the customer invoice so that it comported with the claimback documents

previously submitted to Trane. But HaynesTSA was not able to conceal the fraud

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completely. HaynesTSA’s unusually high claimback rate (that is, the percentage

of units for which it sought a claimback) led Trane to conduct an on-site audit of

its books in 1995. Trane’s auditor would ultimately visit HaynesTSA’s offices on

three occasions—March 6, April 3–5, and April 17–18—and discover significant

discrepancies between HaynesTSA’s claimback submissions and its customer

invoices.

During the weeks between the announcement of the audit in mid- or late-

February and the arrival of Trane’s auditor on March 6, HaynesTSA employees

engaged in a concerted, though ultimately unsuccessful, effort to replace customer

invoices with fraudulent invoices that matched the representations supporting the

claimbacks. This effort came to the attention of Mr. Haynes when two

employees, Denice Louder and Vicki Graves, told him that invoices were being

retyped to give to Trane’s auditors and that employees were, in effect, “covering

our tracks.” Id. Vol. VI at 2479. Mr. Haynes asked HaynesTSA’s chief financial

officer, Steven Moss, to investigate the matter. Moss reported back to

Mr. Haynes that invoices were indeed being recreated for the claimback audit.

Mr. Haynes, however, did not inform Trane of the coverup, despite several

opportunities to do so. He said nothing to Trane’s auditor on March 6. On

March 17 a former HaynesTSA employee informed Trane that HaynesTSA was

generating false claimback documentation. Trane officials flew to Denver and

confronted Mr. Haynes with that accusation on March 21. During the meeting

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Mr. Haynes adamantly denied that HaynesTSA kept “two sets of books,” Id.

Vol. V at 2265, again neglecting to mention that fake invoices had been typed for

the audit.

During the continuation of the audit in April, the extent of HaynesTSA’s

abuse of the claimback program became apparent. Extrapolating from the limited

sample of claimbacks reviewed, the auditor estimated that HaynesTSA had

collected $852,000 in undeserved claimbacks. Trane also confirmed that

HaynesTSA had attempted to conceal discrepancies by altering and recreating

invoices. When Trane confronted Mr. Haynes with its findings, he asked for the

auditor’s report so that he could investigate its accuracy; he did not confess his

awareness of the coverup effort.

On June 6 Trane terminated HaynesTSA’s distributorship agreement.

Shortly thereafter it gave Mr. Haynes notice that it would terminate his franchise

in 30 days (the length of notice required by the franchise agreement). When it

terminated the franchise agreement, Trane suspected that Mr. Haynes was aware

of the claimback abuses. That suspicion would be confirmed during the second

trial when Mr. Haynes testified that he had been aware before the March 6 audit

that HaynesTSA employees were recreating invoices to give to Trane’s auditors.

B. Procedural History

The first trial and appeal in this case are relevant to this appeal insofar as

our rulings on the first appeal established the law of the case, which the district

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court was presumptively obliged to follow on remand. That law of the case must

be addressed in our discussion of three issues on appeal. But we postpone our

summary of the earlier proceedings until our discussions of the law-of-the-case

issues. For now, we summarize only the proceedings after remand.

Mr. Haynes’s primary allegation at the second trial was that Trane breached

his franchise agreement by terminating it without good cause. According to

Mr. Haynes, good cause was lacking because any abuse of the claimback program

or subsequent coverup occurred at HaynesTSA, not at his franchise. Although the

franchise agreement stated that it was terminable at will after 30-days’ notice,

Mr. Haynes contended that it had been modified by Trane’s consistent pattern of

terminating franchises only for cause. Alternatively, he alleged that various

representations by Trane induced him to rely on a good-cause requirement, which,

under principles of equitable estoppel, Trane could not deny. Trane defended on

the grounds that the franchise agreement had not been modified and that it had

made no representations that could support an equitable-estoppel claim. It also

asserted that Mr. Haynes’s unclean hands made it improper to apply equitable

estoppel for his benefit.

In addition, both Mr. Haynes and HaynesTSA asserted that Trane had

breached fiduciary duties arising from a confidential relationship. They alleged

that while Trane had made gestures to induce their trust, it was in fact scheming

to cut out middlemen and assume control of their operations. In their view, Trane

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had used HaynesTSA’s erroneous claimbacks as an excuse to carry out this

underhanded policy. Trane denied that it had any fiduciary relationship with

either Plaintiff.

Trane countered with a fraud claim against HaynesTSA, alleging that

HaynesTSA had knowingly submitted false claimback requests and schemed to

cover up its efforts. Trane also raised claims against both Plaintiffs for unjust

enrichment and an accounting, specifying in the pretrial order that these equitable

matters could be addressed by the district court at an “appropriate time.” Id. Vol.

I at 241. In response to these counterclaims, the Plaintiffs contended that Trane’s

fraud claim was precluded by the economic-loss rule (which bars certain tort

claims for economic loss arising out of a contractual relationship) and that

Trane’s equitable claims for unjust enrichment and an accounting were not

maintainable because fraud damages would provide Trane with an “‘adequate

remedy at law.’” Id. at 242.

Mr. Haynes and HaynesTSA did not prevail on any of their claims at trial.

At the close of evidence the district court granted JMOL against Mr. Haynes’s

modification-of-contract claim. On his equitable-estoppel claim the jury found

that he had established the elements of equitable estoppel and that Trane had

terminated Mr. Haynes’s franchise agreement without good cause. But the court

nevertheless granted judgment to Trane on this claim, reasoning that

Mr. Haynes’s failure to inform Trane of the claimback coverup made it improper

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to apply an equitable doctrine in his favor. As with Mr. Haynes’s contract-

modification claim, the district court disposed of the Plaintiffs’ fiduciary-duty

claims by granting JMOL against them at the close of evidence.

Trane prevailed only on its fraud claim. During a pretrial hearing the

district court had ruled that Trane’s unjust-enrichment and accounting claims

were not viable as freestanding equitable claims. At the same time, the court

concluded that Trane lacked an adequate remedy at law for fraud because having

a jury review individual claimbacks to calculate damages would unduly prolong

proceedings. Accordingly, the court construed Trane’s accounting claim as

merely seeking a remedy for fraud, ruling that if Trane prevailed on its fraud

claim at trial, an equitable accounting would be performed to calculate its

damages. The court rejected HaynesTSA’s economic-loss-rule argument during

the same hearing. The jury then found that HaynesTSA had “followed a pattern

or practice of fraudulent conduct in submitting” claimbacks. Id. Vol. II at

682–84. Over HaynesTSA’s objection, the court appointed a special master for

an accounting “of the amount of damages Trane sustained.” Id. Vol. III at 980.

But the special master never had occasion to calculate Trane’s damages. After

HaynesTSA reserved the right to appeal the special master’s appointment, the

parties stipulated that Trane’s fraud damages were $1,770,000. The district court

adopted the parties’ damages stipulation and awarded Trane an additional

$2,982,763.47 in prejudgment interest and costs.

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 Mr. Haynes and HaynesTSA appeal, presenting the following issues: (1)

whether the district court violated the law of the case determined in the first

appeal by granting JMOL against Mr. Haynes’s modification-based contract

claim; (2) whether the court exceeded its equitable authority and contravened the

jury’s verdict by refusing to grant equitable-estoppel relief to Mr. Haynes; (3)

whether the court violated the law of the case by granting JMOL against the

Plaintiffs’ fiduciary-duty claims; (4) whether Trane’s fraud claim is barred by the

economic-loss rule; and (5) whether the jury should have been permitted to

determine Trane’s damages. We affirm the district court’s resolution of all issues

but the last.

II. DISCUSSION

A. Mr. Haynes’s Breach-of-Contract Claim

1. Modification

Mr. Haynes contends that his franchise agreement with Trane, which

permits either party to terminate at will on 30-days’ notice, was modified by

Trane’s statements and conduct so that Trane was required to have good cause

before it could terminate the agreement. At the second trial the district court

granted JMOL on this claim at the close of the evidence.

Mr. Haynes’s sole contention on appeal with respect to his modification-of-

contract claim is that the district court’s grant of JMOL on this claim violated the

law of the case by defying this court’s holding on the first appeal that he had

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presented sufficient evidence to support a verdict in his favor on the claim. To

assess that contention we first address the merits of the district court’s decision.

It will then be clear why Mr. Haynes’s law-of-the-case argument fails.

JMOL can be properly granted when “a party has been fully heard on an

issue during a jury trial” and has failed to present a “legally sufficient evidentiary

basis [for the jury] to find” in its favor. Fed. R. Civ. P. 50(a)(1). In considering

whether JMOL is warranted, a district court must draw all reasonable inferences

in support of the nonmoving party. See McInnis v. Fairfield Cmtys., Inc., 458

F.3d 1129, 1136 (10th Cir. 2006). We review a district court’s grant of JMOL de

novo. See id.

The parties assume that Wisconsin law governs Mr. Haynes’s franchise

agreement and, in particular, whether that agreement was modified to require

good cause for termination. We thus proceed from the same assumption. See

Grynberg v. Total, S.A., 538 F.3d 1336, 1346 (10th Cir. 2008) (adopting parties’

assumption of applicable law). Under Wisconsin law a contract can be modified

by the conduct of the contracting parties but only when the acts are “unequivocal

in their character.” Nelson v. Farmers Mut. Auto. Ins. Co., 90 N.W.2d 123, 134

(Wis. 1958) (internal quotation marks omitted); accord Carnes Co. v. Stone Creek

Mech., Inc., 412 F.3d 845, 853 (7th Cir. 2005) (applying Wisconsin law). “Acts

which are ambiguous in their character, and which are consistent either with the

continued existence of the original contract, or with modification thereof, are not

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sufficient to establish a modification.” Nelson, 90 N.W.2d at 134 (internal

quotation marks omitted).

Thus, to prevail on his modification claim, Mr. Haynes had to show that

Trane acted in a way that was unequivocally inconsistent with enforcing the

franchise agreement as it was written, that is, as an agreement that could be

terminated without cause. Mr. Haynes did not meet this burden. At best, the

evidence presented by Mr. Haynes showed that Trane had consistently provided

cause when terminating franchises in the past. In particular, Mr. Haynes testified

that he had never heard of a franchise being terminated without cause and that,

when discussing terminations, Trane had “always emphasized a cause.” Aplts.

App. Vol. V at 2047. Likewise, Trane official Don O’Keefe testified that every

franchise termination of which he was aware had been “with cause.” Id. Vol. VI

at 2615. But a pattern of terminating with cause is not unequivocally inconsistent

with retention of the power to terminate without cause. Trane could properly

reserve the extraordinary power to terminate without cause even though it had

never had occasion to exercise that power. The Wisconsin Supreme Court has

recognized that prior failure to exercise a contractual right is not unequivocally

inconsistent with enforcing that right. See Presser v. Siesel Constr. Co., 119

N.W.2d 405, 408–09 (Wis. 1963) (failure to request construction of contractually

required barricade not an unequivocal act that would support a contractual

modification).

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 Mr. Haynes attempts to overcome these legal principles with a law-of-the-

case argument. He correctly points out that in Haynes I we held that the district

court had erred in granting JMOL against the same contract-modification claim.

Haynes I, 51 F. App’x at 793–94. According to Mr. Haynes, our decision in

Haynes I mandated that his modification claim go to the jury on remand. We

disagree.

The law-of-the-case doctrine generally “dictates that prior judicial

decisions on rules of law govern the same issues in subsequent phases of the same

case.” Been v. O.K. Indus., Inc., 495 F.3d 1217, 1224 (10th Cir. 2007). The

doctrine is not, however, an “inexorable command”; our precedents recognize

several exceptions to its operation. Wessel v. City of Albuquerque, 463 F.3d

1138, 1143 (10th Cir. 2006) (internal quotation marks omitted). We have said,

for example, that a judicial determination is not the law of the case in later

proceedings involving “substantially different” evidence. Id. (internal quotation

marks omitted). That exception applies here. Mr. Haynes presented substantially

weaker evidence of a contractual modification in the second trial.

In Haynes I we noted three items of testimony that prevented the court from

properly granting JMOL: (1) Mr. Haynes’s testimony that “Trane officials, at

franchisee meetings, communicated Trane’s policy of only terminating franchise

agreements for cause,” 51 F. App’x at 793 (Mr. Haynes had testified that it was

“Trane’s stated policy that they only terminated franchise holders for cause,”

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Aplts. App. Vol. IV at 1545); (2) the testimony of Trane official Don O’Keefe

that “he interpreted franchise agreements to require cause for termination, and

that he had never terminated a franchise agreement without cause,” Haynes I, 51

F. App’x at 793; and (3) the testimony of another Trane official, James Schultz,

“that he was not aware of any time when a franchise agreement was terminated

except for cause,” id.

Thus, the evidence presented at the first trial showed both a pattern of

terminating for cause and, more importantly, a “stated policy” of terminating only

for cause—indeed, one that a Trane official felt was contractually required.

Aplts. App. Vol. IV at 1545; Haynes I, 51 F. App’x at 793. The evidence of a

communicated policy was necessary to our decision in Haynes I, because a policy

of terminating franchises only for cause would be inconsistent with enforcing an

at-will provision. The absence of that evidence at the second trial (for reasons

unknown to us) was a crucial difference. In that circumstance, the district court

was not bound by our previous determination that JMOL was improperly granted

against Mr. Haynes’s modification claim at the first trial.

2. Equitable Estoppel

Mr. Haynes argues next that even if the franchise agreement was not

modified to contain a good-cause requirement, Trane should have been equitably

estopped from denying the requirement. Under Wisconsin law the doctrine of

equitable estoppel has four elements: “(1) action or non-action, (2) on the part of

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one against whom estoppel is asserted, (3) which induces reasonable reliance

thereon by the other, either in action or non-action, and (4) which is to his or her

detriment.” Milas v. Labor Ass’n of Wis., Inc., 571 N.W.2d 656, 660 (Wis. 1997).

The jury found that Mr. Haynes had established the elements of the claim.

Nevertheless, the district court refused to apply the equitable-estoppel doctrine

for Mr. Haynes’s benefit. The court reasoned that Mr. Haynes “did not fairly deal

with Trane” in relation to HaynesTSA’s abuse of the claimback program. Aplts.

App. Vol. III at 1407. It stressed that Mr. Haynes had been told by HaynesTSA

employees that they were retyping invoices in preparation for Trane’s audit yet he

did not relay this information to Trane or its auditors. The court concluded that

such misconduct by Mr. Haynes “must not be rewarded” with a grant of equitable

relief. Id. at 1410. On appeal Mr. Haynes contends that the district court

erroneously denied him the benefits of equitable estoppel. “We review the

district court’s refusal to apply the doctrine of equitable estoppel for abuse of

discretion.” Spaulding v. United Transp. Union, 279 F.3d 901, 911 (10th Cir.

2002). Legal determinations underlying the court’s decision are, however,

reviewed de novo. See Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703,

709 (10th Cir. 2005).

As Mr. Haynes concedes, Wisconsin law permits a court to deny equitable-

estoppel relief despite proof of its four elements. “[O]nce the elements of

equitable estoppel have been established as a matter of law, the decision to

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actually apply the doctrine to provide relief is a matter of discretion.” Nugent v.

Slaght, 638 N.W.2d 594, 602 (Wis. Ct. App. 2001). In exercising its discretion, a

“court must . . . take into consideration any other evidence and facts respecting

the equities of the parties.” Id. (internal quotation marks omitted); see Meyer v.

Reif, 258 N.W. 391, 394 (Wis. 1935) (equity “‘has always preserved the elements

of flexibility and expansiveness’” (quoting 1 Pomeroy, Equity Jurisprudence,

§ 111)); Mulder v. Mittelstadt, 352 N.W.2d 223, 229 (Wis. Ct. App. 1984) (same).

One factor considered by courts is whether the party requesting the

equitable-estoppel remedy has engaged in substantial relevant misconduct. See

Wis. Patients Comp. Fund v. St. Mary’s Hosp. of Milwaukee, 561 N.W.2d 797,

805 (Wis. Ct. App. 1997). This concern flows from the general principle that

“only . . . parties with clean hands” can invoke equitable relief. Id. (internal

quotation marks omitted). Of course, a litigant’s unrelated misconduct may not

be used to deny him an equitable remedy. See Huntzicker v. Crocker, 115 N.W.

340, 342 (Wis. 1908) (“Equity does not demand that its suitors shall have led

blameless and pure lives.”). To preclude relief, rather, the misconduct must be

“connected with the matter in litigation” and have “in some measure affected the

equitable relations subsisting between the two parties.” Id. (internal quotation

marks omitted).

Against this backdrop, we conclude that the district court did not abuse its

discretion in denying Mr. Haynes the benefit of equitable estoppel on the basis of

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his unclean hands. Mr. Haynes sought an equitable decree that he was entitled to

keep his franchise. His fitness as a franchisee is directly related to the relief he

sought. By failing to inform Trane that his employees had been retyping invoices

in preparation for the claimback audit, Mr. Haynes demonstrated his

untrustworthiness as a franchisee, much less a business associate. It was not an

abuse of discretion to deny equitable relief when the evidence of his misconduct

established that he was unworthy of being a franchisee. Cf. McKennon v.

Nashville Banner Publ’g Co., 513 U.S. 352, 360–61 (1995) (unclean-hands

doctrine not applicable to restrict relief under statute establishing important

national policy against discrimination).

On appeal Mr. Haynes argues that the district court’s decision to apply the

unclean-hands doctrine against him nevertheless rested on several legal errors.

He argues first that his misconduct should not have been considered because the

decision to apply or deny equitable estoppel must be based on “the equities of

only those facts triggering the estoppel doctrine, i.e., the defendant’s conduct

inducing the plaintiff’s detrimental reliance, and the resultant harm to the

plaintiff.” Aplt. Br. at 29. Because Mr. Haynes’s alleged failure to disclose

HaynesTSA’s claimback abuse was not conduct establishing one of equitable

estoppel’s elements, Mr. Haynes concludes that the court was not free to consider

it in denying him equitable relief.

-21-
 To begin with, we doubt the coherence of the legal rule proffered by

Mr. Haynes. It is hard to imagine how parties invoking equitable estoppel could

engage in misconduct that also established an element of equitable estoppel, such

as reasonable reliance. In any event, Mr. Haynes has not cited a case that

expresses or supports his proposed rule. He relies almost exclusively on a string

of cases in which unclean hands was not an issue. See N. Crossarm, Inc. v. Chem.

Specialties, Inc., 332 F. Supp.2d 1181, 1192–93 (W.D. Wis. 2004); Affordable

Erecting, Inc. v. Neosho Trompler, Inc., 715 N.W.2d 620, 628–630 (Wis. 2006);

Milas, 571 N.W.2d at 660–62; Nugent v. Slaght, No. 02-3387, 2003 WL

22143306, at *1–2 (Wis. Ct. App. Sept. 18, 2003); Gonzalez v. Teskey, 465

N.W.2d 525, 530 (Wis. Ct. App. 1990).

The only other case he cites applies the general rule that only misconduct

related to the “‘matter in litigation’” warrants application of the unclean-hands

doctrine. Fields Found., Ltd. v. Christensen, 309 N.W.2d 125, 136 (Wis. Ct. App.

1981) (quoting Huntzicker, 115 N.W. at 342)). The question in Fields was

whether the misconduct of a medical-center official prevented the center from

enforcing against its medical director a covenant not to compete. Id. The official

had improperly held himself out as a physician and had deceived the Internal

Revenue Service by representing the clinic as a nonprofit organization entitled to

tax-exempt status. Id. But the court concluded that these misdeeds were

insufficiently related to the controversy because they evidently did not prompt the

-22-
medical director to leave the center and seek competing work. See id. To the

contrary, the director attempted to negotiate a new employment contract with the

center for several months after becoming aware of the misconduct. Id. The case

before us is readily distinguishable because Trane never exhibited lack of concern

about Mr. Haynes’s failure to disclose his knowledge of the claimback coverup; it

had no occasion to do so because it did not know of the failure when it terminated

his franchise. Unlike misconduct acquiesced in, Mr. Haynes’s dishonesty bears

directly on the “equitable relations subsisting between the two parties.”

Huntzicker, 115 N.W. at 342.

Mr. Haynes also argues that by holding him responsible for HaynesTSA’s

alleged abuse of the claimback program, the district court failed to honor

HaynesTSA’s distinct legal status. This argument mischaracterizes the basis of

the district court’s decision. In refusing to apply equitable estoppel, the court

focused not on what HaynesTSA did, but rather on Mr. Haynes’s personal failure

to play straight with Trane during its investigation. His wearing a HaynesTSA

hat did not immunize him from the consequences of his own dishonesty.

Mr. Haynes’s reply brief on appeal appears to raise another argument

against the application of the unclean-hands doctrine against him. He suggests

that this equitable doctrine applies only to freestanding equitable claims—such as

promissory estoppel—not to an equitable doctrine applied in the context of a legal

claim (as equitable estoppel is applied to his breach-of-contract claim). But he

-23-
cites no supporting authority, nor does he account for the lengthy discussion in

Nugent regarding judicial discretion in applying the doctrine of equitable

estoppel. See 638 N.W.2d at 602–03. In any event, we need not pursue the issue

further because we do not ordinarily “review arguments raised for the first time in

a reply brief.” Ferry v. Gonzales, 457 F.3d 1117, 1129 (10th Cir. 2006). 2

Finally, Mr. Haynes argues that the district court’s unclean-hands

determination conflicted with the jury’s finding that Trane lacked good cause to

terminate his franchise. That finding, contends Mr. Haynes, implies that the jury

found that he had not engaged in wrongful conduct. Thus, the district court’s

determination that Mr. Haynes acted reprehensibly (that is, that his hands were

unclean) contradicted the jury verdict and thereby violated his right to a jury trial.

We disagree.

True, the Seventh Amendment prevents district courts from applying

equitable doctrines on the basis of factual predicates rejected, explicitly or

implicitly, by a jury verdict. See Bartee v. Michelin N. Am., Inc., 374 F.3d 906,

912–13 (10th Cir. 2004). If a jury resolves a factual issue, the court “may not

ignore that determination” in fashioning equitable relief or applying an equitable

2
Because we affirm the district court’s application of the unclean-hands
doctrine against Mr. Haynes under Wisconsin law (which Mr. Haynes would have
us apply), we need not address Trane’s arguments resting on federal law and,
more generally, express no view on whether federal courts sitting in diversity
should apply state or federal equity principles. See generally John T. Cross, The
Erie Doctrine in Equity, 60 La. L. Rev. 173, 222–24 (1999).

-24-
doctrine. Ag Servs. of Am., Inc. v. Nielsen, 231 F.3d 726, 732 (10th Cir. 2000).

But that is not the situation here. Indeed, the district court’s unclean-hands

determination rested on facts that the jury would not have had occasion to

consider in its good-cause deliberations. In pertinent part, the court instructed the

jury on good cause as follows:

[Y]ou must also determine whether good cause existed when the
Trane Company terminated the franchise agreement. . . . Good cause
is defined as a fair and honest cause or reason determined in good
faith on the part of the person exercising the authority to terminate.
Good cause requires an exercise of good faith based upon reasonable,
just, and fair grounds. Reasons that are pretextual or based on
improper motive do not constitute good cause. In determining
whether the Trane Company had good cause for termination, you
may consider whether the Trane Company’s decision followed an
investigation of facts that was appropriate under the circumstances.

Aplts. App. Vol. X at 4631. This instruction makes good cause turn on what

Trane’s reason was when it terminated Mr. Haynes’s franchise. The jury would

not have considered what Trane did not know at the time of termination, such as

Mr. Haynes’s awareness that fraudulent invoices were being typed for Trane’s

audit. But it was this awareness that, according to the district court, dirtied his

hands and required denial of equitable relief. Accordingly, the district court’s

unclean-hands determination rested on “findings not precluded by the [jury’s]

verdict.” Ag Servs., 231 F.3d at 734. Mr. Haynes’s Seventh Amendment

argument fails.

B. Plaintiffs’ Fiduciary-Duty Claims

-25-
 Mr. Haynes and HaynesTSA have alleged that Trane breached fiduciary

duties arising from a confidential relationship. They claim that Trane assumed

fiduciary duties by inducing their trust, and breached those duties by maneuvering

to squeeze, and ultimately seize control of, their operations. The district court

granted JMOL against these claims at the close of evidence, and the Plaintiffs

contend that in doing so it violated the law of the case established on the first

appeal. As with Mr. Haynes’s contract-modification claim, we consider the

merits of the claim before addressing the law of the case. Our review is de novo.

See McInnis, 458 F.3d at 1136.

Because the parties assume that Trane’s fiduciary obligations (if any) were

controlled by Colorado law, we assume the same. See Grynberg, 538 F.3d at

1346. Under that law, to prevail on a fiduciary-duty claim based on a confidential

relationship, the Plaintiffs had to show that (1) they reposed trust in Trane; (2)

doing so was justified or was “invited, ostensibly accepted, or acquiesced in” by

Trane; (3) Trane “assumed a primary duty to represent [their] interest[s] in the

subject of the transaction”; (4) “the duty that arose by reason of the confidential

relationship extended to the subject matter” of their claims; and (5) they were

damaged by the violation of that duty. Equitex, Inc. v. Ungar, 60 P.3d 746, 752

(Colo. Ct. App. 2002) (internal quotation marks omitted).

We need not analyze the final four elements, for the Plaintiffs’ evidence

failed to satisfy the first. As the Plaintiffs stress, Mr. Haynes’s testimony could

-26-
support the second element: He stated, for instance, that Trane management had

told franchisees that they “should trust the Trane company,” and that they were in

a “partnership type of relationship.” Aplts. App. Vol. V at 2202. He also

testified that Trane officials stated that “Philosophically, we strive to view and

treat our distributors as a partner first, a customer second, and a friend third.” Id.

at 2205. But the Plaintiffs had to show more to establish the first element; they

had to show that they actually reposed trust in Trane. See Equitex, 60 P.3d at

752. They presented no evidence, however, that they trusted Trane.

Indeed, Mr. Haynes’s testimony demonstrated that his relationship with

Trane was, if anything, one of deepening mistrust. He explained that as early as

1975 he and other franchisees had formed an association of franchisees in

response to adverse Trane policies. According to Mr. Haynes, strong

disagreements arose in the 1980s when Trane limited the profits franchisees could

draw from the sale of non-Trane products before sharing with Trane. Mr. Haynes

explained that franchisees generally “felt very, very strongly that there was no

reason for Trane to participate in third party transactions,” Aplts. App. Vol. V at

2098, and that he personally viewed this and other Trane conduct as an incursion

on the managerial autonomy secured by his franchise agreement. Moreover,

Mr. Haynes was not concerned merely with Trane’s managerial overreaching;

there was a graver threat. Mr. Haynes testified that in 1985 Trane unveiled its

long-term plan to acquire its independent franchises. In sum, the evidence

-27-
showed that the Plaintiffs were on their guard in their dealings with Trane. With

no evidence of their reposed trust, there simply was not a “legally sufficient

evidentiary basis to find” in the Plaintiffs’ favor. Fed. R. Civ. P. 50(a)(1). No

fiduciary relationship existed.

The Plaintiffs contend, however, that the law-of-the-case doctrine requires

that we reverse the district court’s rejection of their fiduciary-duty claims. They

point to our holding in Haynes I that the district court erroneously granted

summary judgment against those claims. See 51 F. App’x at 801. According to

the Plaintiffs, that holding precluded JMOL in the second trial. We disagree.

As an initial matter, it is not certain whether a reversal of summary

judgment operates as the law of the case to prevent a later grant of JMOL.

Compare Stagl v. Delta Air Lines, Inc., 117 F.3d 76, 80 (2d Cir. 1997) (rejecting

contention that reversal of summary judgment was law of the case preventing

JMOL on ground that propriety of JMOL “is to be determined by the record that

is made [after remand], not by the law of the case doctrine”), with Kerman v. City

of New York, 374 F.3d 93, 110 (2d Cir. 2004) (law of the case bars JMOL on

evidence previously deemed sufficient to overcome summary judgment). But we

need not resolve that issue here. Even if a ruling on summary judgment can

create the law of the case controlling a later JMOL determination, an exception to

the doctrine applies here. In Haynes I we reversed summary judgment on the

basis of an affidavit by Mr. Haynes. See 51 F. App’x at 801. In that affidavit he

-28-
stated that, based on the parties’ long-standing relationship and a number of

assurances made by Trane, he “did trust Trane.” Aplts. App. Vol. I at 155G.

This statement satisfied the first element of the fiduciary-duty claims. But, as

noted above, his testimony at the second trial omitted this assertion. The district

court did not depart from any legal principle established in Haynes I by ruling at

the second trial that the Plaintiffs had not made out their fiduciary-duty claims.

Thus, the law-of-the-case doctrine did not bar entry of JMOL. See Wessel, 463

F.3d at 1143.

C. Trane’s Fraud Counterclaim

We now turn to Trane’s fraud counterclaim against HaynesTSA. Trane

alleged that HaynesTSA knowingly submitted false claimbacks and schemed to

cover up those erroneous submissions by creating phony invoices. The jury

entered a special verdict that HaynesTSA had “followed a pattern or practice of

fraudulent conduct in submitting claims for payment under the price assistance

program.” Aplts. App. Vol. II at 684. HaynesTSA contends on appeal that

Trane’s fraud counterclaim is barred by Colorado’s economic-loss rule. It also

contends that the district court erred in appointing a special master to calculate

Trane’s fraud damages. We disagree with the first contention but agree with the

second.

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 1. Economic-Loss Rule

Whether the economic-loss rule operates to bar Trane’s fraud counterclaim

“is an issue of law that we review de novo.” Level 3 Commc’ns, LLC v. Liebert

Corp., 535 F.3d 1146, 1162 (10th Cir. 2008) (internal quotation marks omitted).

Again we apply Colorado law because the parties’ arguments presume that it

governs this claim. See Grynberg, 538 F.3d at 1346.

Colorado’s economic-loss rule has been formulated as follows: “[A] party

suffering only economic loss from the breach of an express or implied contractual

duty may not assert a tort claim for such a breach absent an independent duty of

care under tort law.” Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1264

(Colo. 2000). The rule does not bar damages claims for “physical harm to

persons or property.” Id. The Colorado Supreme Court has explained that by

limiting the tort liability of contracting parties, the rule aims to “maintain the

boundary between contract law and tort law.” Id. at 1259.

In some other jurisdictions the economic-loss rule focuses on the damages

alleged and whether those damages can be sufficiently linked to performance (or

nonperformance) under a contract. See Cooper Power Sys., Inc. v. Union Carbide

Chems. & Plastics Co., Inc., 123 F.3d 675, 680–82 (7th Cir. 1997) (applying

Wisconsin law); Hoseline, Inc. v. U.S.A. Diversified Prods., Inc., 40 F.3d 1198,

1199–2000 (11th Cir. 1994) (applying Florida law). But the applicability of

Colorado’s rule turns on the nature of the duty allegedly breached, not the nature

-30-
of alleged damages. See Town of Alma 10 P.3d at 1262–63; see also id. at 1262

n.8 (stating that Colorado’s rule would be more aptly named the “independent

duty rule” (internal quotation marks omitted)). Even if a claim asserting only

economic loss could be framed as a breach of contract, it is not barred by

Colorado’s economic-loss rule if it rests on an “independent duty of care under

tort law.” Id. at 1264.

Under Colorado law, for a duty to be “independent” of a contract, and thus

actionable in tort notwithstanding the economic-loss rule, two conditions must be

met. First, the duty must arise from a source other than the relevant contract. Id.,

10 P.3d at 1263 (mentioning fiduciary duties and certain common-law tort

doctrines as examples). Second, the duty must not be a duty also imposed by the

contract. See BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66, 74 (Colo. 2004);

Grynberg v. Agri Tech, Inc., 10 P.3d 1267, 1270 (Colo. 2000). That is, even if

the duty would be imposed in the absence of a contract, it is not independent of a

contract that “memorialize[s]” it. BRW, 99 P.3d at 74.

Trane correctly contends that tort law imposed a duty on HaynesTSA to

abstain from fraud. See Town of Alma, 10 P.3d at 1263 (observing that a

“common law fraud claim is based on violation of a duty independent of

contract”). We do not understand HaynesTSA to argue otherwise. Rather, the

thrust of HaynesTSA’s economic-loss argument is that its alleged scheme

regarding claimbacks breached express contractual duties. The alleged duty

-31-
under tort law, it asserts, was memorialized in its distributorship agreement with

Trane, which required it to submit accurate claimbacks and granted Trane a right

to recover any amount “improperly claimed.” Aplts. App. Vol. VIII at 5988.

HaynesTSA contends that Trane’s fraud counterclaim boils down to an allegation

that these contractual duties were breached.

Trane responds that the economic-loss rule cannot bar a tort claim for

intentional fraud. But we need not reach that issue. HaynesTSA’s economic-

loss-rule argument fails in any event because the tort duty alleged by Trane is not

duplicated in Trane’s contract with HaynesTSA. HaynesTSA’s distributorship

agreements, including the 1995 agreement that was terminated, say nothing about

claimbacks. Trane’s claimback policy is not contained in the contract between

Trane and HaynesTSA but solely in the “Sales Plan[s]” that Trane provided its

distributors to describe Trane’s practices regarding claimbacks. Id. at 5983-6014.

One could make a reasonable argument that the claimback policy became a

contract between Trane and HaynesTSA. Indeed, Trane’s counterclaim against

HaynesTSA alleged that there was such a contract regarding claimbacks and that

HaynesTSA had breached it. But that issue has been resolved otherwise in this

case. At the close of evidence at the first trial, the district court expressed doubt

regarding the viability of the contract counterclaim and pressed Trane’s counsel

to specify “what provision in the distributor agreement [was] breached.” Id.

Vol. IV at 1586. Trane’s counsel responded that the claimback policy was

-32-
incorporated into the distributorship agreement by a provision granting Trane the

right to “alter sales and distribution policies.” Id. Vol. XIII at 5574. The court

was not persuaded and granted judgment against Trane on the contract

counterclaim. The basis of the ruling was the absence of a contract governing

claimbacks; the court did not reach the issue of whether the purported contract

was breached. That ruling went unchallenged on the first appeal (HaynesTSA did

not even argue the economic-loss doctrine in support of the district court’s

dismissal of the fraud counterclaim) and the issue did not arise at the second trial.

“A legal decision made at one stage of litigation, unchallenged in a subsequent

appeal when the opportunity to do so existed, becomes the law of the case for

future stages of the same litigation, and the parties are deemed to have waived the

right to challenge that decision at a later time.” Concrete Works of Colo., Inc. v.

City & County of Denver, 321 F.3d 950, 992 (10th Cir. 2003) (brackets and

internal quotation marks omitted). Accordingly, it is settled that Trane’s

claimback policies were not the subject of a contract between Trane and

HaynesTSA. The premise of HaynesTSA’s economic-loss argument therefore

disappears. See BRW, 99 P.3d at 74 (economic-loss rule bars claims alleging

breach of contractually memorialized duties).

We recognize that the law-of-the-case doctrine is “prudential, not

jurisdictional,” calling “for the exercise of an appellate court’s sound discretion.”

Kessler v. Nat’l Enters., Inc., 203 F.3d 1058, 1059 (8th Cir. 2000). And courts

-33-
exercise “a degree of leniency in applying [this] rule to issues that could have

been raised by appellees on previous appeals,” Crocker v. Piedmont Aviation,

Inc., 49 F.3d 735, 741 (D.C. Cir. 1995) (emphasis added), because we do not

ordinarily require appellees to raise every possible ground for affirmance in their

appellate briefs, see id. at 740–41; Eichorn v. AT&T Corp., 484 F.3d 644, 657–58

(3d Cir. 2007). But the rule has properly been applied to appellees in some cases.

See, e.g., Kessler, 203 F.3d at 1059–60; Schering Corp. v. Ill. Antibiotics Co., 89

F.3d 357, 358–59 (7th Cir. 1996). This is such a case. After the district court

ruled on October 20, 1999, that no contract governed claimbacks, HaynesTSA

waited until September 12, 2005, almost six years later and barely two months

before the second trial, to raise a defense based on the economic-loss rule. For

the district court to rule in HaynesTSA’s favor on this defense would have been

inconsistent with the court’s dismissal of Trane’s breach-of-contract claim based

on alleged claimback violations. In our view, it would be unfair to Trane to

foreclose its fraud claim by applying the economic-loss rule unless its contract

claim were revived. We think the better course is to leave the posture of the case

as both parties accepted it for six years—with Trane’s complaint for claimback

abuse arising as a fraud claim, not a contract claim. Thus, we are not presented

with a circumstance in which the law-of-the-case doctrine should be applied with

leniency to the former appellee.

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 We hold that Colorado’s economic-loss rule poses no bar to Trane’s fraud

counterclaim.

2. Right to a Jury on Damages

HaynesTSA’s final argument is that the district court erred in not having

the jury determine Trane’s fraud damages. Our opinion in Haynes I held that

“this case is one where the accounts are so complicated that an equitable

accounting [of damages] may be warranted.” 51 F. App’x at 800. We added,

however, that an equitable remedy—such as an accounting—is not proper if there

is an adequate remedy at law. Id. Therefore, we instructed the district court to

make findings on remand regarding whether computing damages would be too

complicated for a jury. Id.

On remand the district court found as follows: “[R]equir[ing] the jury to go

through the detail of what each one of these claim-back things meant in terms of

damages would prolong the trial unduly, and that makes it an inadequate legal

remedy.” Aplts. App. Vol. IV at 1712–13. On this basis, and over HaynesTSA’s

objection, the district court appointed a special master to determine Trane’s

damages. Although the parties ultimately stipulated to a damages figure of

$1,770,000, HaynesTSA reserved the right to challenge the underlying

appointment of a special master and, more generally, the court’s decision to take

damages away from the jury. HaynesTSA now raises those challenges on appeal.

We agree that the determination of damages was a matter for the jury.

-35-
 The Seventh Amendment to the United States Constitution “preserves to

litigants the right to a jury trial in suits at common law.” Ross v. Bernhard, 396

U.S. 531, 533 (1970). A fraud claim seeking only damages is an action at law to

which the right to a jury inheres. See Curriden v. Middleton, 232 U.S. 633, 636

(1914); 9 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal

Practice and Procedure § 2311, at 150 (3d ed. 2008); 8 James Wm. Moore et al.,

Moore’s Federal Practice § 38.30[1][e][ii], at 38-71 (3d ed. 2008). In an action at

law, parties are “entitled . . . to have a jury properly determine the question of

liability and the extent of the injury by an assessment of damages.” Dimick v.

Schiedt, 293 U.S. 474, 486 (1935); accord Feltner v. Columbia Pictures

Television, Inc., 523 U.S. 340, 353 (1998). This final proposition is subject to a

narrow exception. An accounting is proper when there exists no “adequate

remedy at law.” Dairy Queen, Inc. v. Wood, 369 U.S. 469, 478 (1962).

Accordingly, damages can be taken from the jury and an equitable accounting

performed when the “accounts between the parties are of such a complicated

nature that only a court of equity can satisfactorily unravel them.” Id. (internal

quotation marks omitted).

In Dairy Queen the Court explained that modern procedural tools—such as

the appointment of special masters to assist the jury with difficult matters—make

it a “rare case” when computational complexities will render a legal remedy

inadequate. Id. at 478; see id. at 480–81 (Harlan, J., concurring) (noting that jury

-36-
can also be assisted by “proper instructions from the court”). In Dairy Queen

itself the Court reversed the district court’s decision to strike a jury-trial demand.

Id. at 479. The respondent in Dairy Queen sought monetary damages arising

from trademark infringement and a contractual breach. Id. at 476–77. Although

the complaint had been “cast in terms of an ‘accounting,’” the petitioner

requested a jury trial. Id. at 477. The district court denied that request on the

ground that the action was “purely equitable” or, alternatively, that any legal

issues raised were “incidental to the equitable issues.” Id. at 470 (internal

quotation marks omitted). The Supreme Court disagreed, holding that the action

was legal in nature and that “the constitutional right to trial by jury cannot be

made to depend upon the choice of words used in the pleadings.” Id. at 477–78.

Moreover, the Court ruled that the parties’ accounts were not sufficiently

complicated to require an accounting. Id. at 478–79. Determining damages

would require “a look into petitioner’s business records.” Id. at 479. But that

task, the court concluded, could be performed by a jury. Id.

Although Dairy Queen did not eradicate the equitable-accounting remedy in

actions at law, it is widely acknowledged that its analysis severely limited the

circumstances in which it would be available. See generally Charles Alan Wright,

supra § 2310, at 148 (noting that after Dairy Queen, “federal courts consistently

have refused to accept [the need for an accounting] as a ground for the denial of a

jury trial demand”); James Wm. Moore, supra § 38.30[1][e][ii], at 38-71

-37-
(“[E]ven when there is some measure of complexity, a jury trial will be required

if a legal remedy is sought.”); see also Bruce v. Bohanon, 436 F.2d 733, 737

(10th Cir. 1970) (Holloway, J., concurring) (assessment of damages arising from

wrongful appropriation of confidential information not sufficiently complicated to

warrant an accounting). Trane has not cited to us a single case decided after

Dairy Queen in which equitable accounting was employed to calculate damages

from fraud.

In this case the district court did not make (and based on the record on

appeal, could not have made) findings establishing that “only a court of equity

[could] satisfactorily unravel” the parties’ accounts. Dairy Queen, 369 U.S. at

478. All the district court found was that having a jury tediously slog through

individual claimbacks would “prolong the trial.” Aplts. App. Vol. IV at 1712.

We can locate no support, however, for the view that a prolonged trial in itself

provides an inadequate remedy at law. In any event, we see no reason why

summaries could not have been used to shorten the proceedings and relieve the

jury from the task of reviewing each individual claimback. See Fed. R. Evid.

1006 (allowing summaries); United States v. Thompson, 518 F.3d 832, 858–59

(10th Cir. 2008) (discussing use of summaries to condense financial data that

otherwise “would have been incomprehensible to the jury”). The right to a jury

trial is not to be lightly denied; and before deeming a remedy at law inadequate,

-38-
we must consider whether techniques are available to assist a jury in completing

difficult tasks. See Dairy Queen, 369 U.S. at 478.

Furthermore, the record developed in the second trial revealed that few, if

any, computational headaches were destined for the jury. Most significantly,

Trane’s expert prepared a report before the second trial that analyzed a sample of

claimbacks. The report divided HaynesTSA’s “unsupported,” or erroneous,

claimbacks into four categories: (1) claimbacks for a greater quantity of items

than were actually sold; (2) claimbacks for items that were sold at a higher price

than originally approved by Trane (sell-ups); (3) claimbacks for items sold to

HaynesTSA personnel; and (4) claimbacks with inadequate or conflicting

documentation. Aplts. App. Vol. II at 897. HaynesTSA’s posttrial submissions

reveal that it had few disagreements with the expert’s report. Indeed, HaynesTSA

stated that a report by its own chief financial officer, Steven Moss, reached

numbers that were “not much different.” Id. Vol. II at 872. What HaynesTSA

principally challenged was whether each of the four identified categories of

unsupported claimbacks represented fraudulent claims.

True, in Haynes I we remarked that an equitable accounting “may” be

proper in this case. 51 F. App’x at 800. But the record developed on remand

made plain otherwise. Although its error was understandable, the district court

should not have appointed a special master for an equitable accounting. The

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Seventh Amendment entitled HaynesTSA to a jury determination of Trane’s fraud

damages.

We now turn to the remedy for the Seventh Amendment violation. Retrial

to some extent is obviously necessary. The question is whether retrial of the

fraud counterclaim can properly be limited to the issue of damages. The general

rule is that a retrial may be limited to an issue only if the issue is “so distinct and

separable from the others that a trial of it alone may be had without injustice.”

Gasoline Prods. Co. v. Champlin Ref. Co., 283 U.S. 494, 500 (1931); see

Morrison Knudsen Corp. v. Fireman’s Fund Ins. Co., 175 F.3d 1221, 1256 (10th

Cir. 1999). If “the question of damages . . . is [too] interwoven with that of

liability,” attempting to retry only damages could lead to “confusion and

uncertainty, which would amount to a denial of a fair trial.” Gasoline Prods., 283

U.S. at 500–01.

Here the damages issue cannot be separated from the merits of the liability

claim. The jury found that HaynesTSA had “followed a pattern or practice of

fraudulent conduct in submitting claims for payment under the price assistance

program.” Aplts. App. Vol. II at 684. But that finding does not distinguish

among the four categories of erroneous claimbacks identified by Trane’s expert:

(1) quantity discrepancies; (2) sell-ups; (3) intracompany sales; and (4)

inadequate documentation. HaynesTSA’s counsel made distinct arguments to the

jury regarding why the claimbacks in each category were not fraudulent. For

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example, he contended that claimbacks lacking adequate documentation were the

product of human error, not fraud. And sell-ups and intracompany sales, he said,

were not fraudulent because Trane encouraged the former and openly permitted

the latter.

The jury’s “pattern or practice” verdict does not reveal whether it credited

some of these arguments but not others. The jury could have rationally concluded

that HaynesTSA followed a fraudulent practice with respect to sell-ups but that

the other categories of claimback error did not rest on fraud. Or, alternatively,

the jury could have found that claimbacks merely lacking adequate documentation

were not the product of fraud, but that all other claimback errors were. In short,

the general verdict in this case does not fix the scope of HaynesTSA’s liability.

A new jury could not calculate Trane’s damages without resolving the specifics of

that liability. See Gasoline Prods., 283 U.S. at 499–500. Accordingly, Trane’s

entire fraud claim, and not simply the question of Trane’s damages, must be

retried.

D. Costs

The district court deemed Trane the prevailing party and assessed

$145,460.01 in costs against Mr. Haynes and HaynesTSA. See Fed. R. Civ. P.

54(d)(1) (prevailing party generally entitled to costs). Because we vacate the

verdict for Trane on its fraud claim against HaynesTSA, we must likewise reverse

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the assessment of costs against HaynesTSA. See Dubbs v. Head Start, Inc., 336

F.3d 1194, 1222 (10th Cir. 2003).

Mr. Haynes contends that costs may not be assessed against him because

each of Trane’s counterclaims against him failed. We review the district court’s

award of costs for abuse of discretion. See Roberts v. Madigan, 921 F.2d 1047,

1058 (10th Cir. 1990). We see no abuse of discretion here. True, Trane did not

prevail on any of its counterclaims against Mr. Haynes. But Mr. Haynes similarly

failed on each of his claims against Trane. A party need not prevail on every

claim and counterclaim to be awarded costs as the prevailing party. See id. In a

case like this in which all claims and counterclaims have failed, costs may be

awarded to the counterclaimant if it “successfully fend[ed] off a large claim . . .

despite failure to prevail on a [smaller] counterclaim.” Scientific Holding Co.,

Ltd. v. Plessey Inc., 510 F.2d 15, 28 (2d Cir. 1974) (comparing damages sought

and trial time spent on the claim and counterclaim); see Roberts, 921 F.2d at 1058

(when both parties prevail on some issues, “the district court’s decision to award

costs to the party that prevailed on the vast majority of issues and on the issues

truly contested at trial [is] not an abuse of discretion”). Trane contends that its

counterclaims against Mr. Haynes sought less in damages and were incidental to

the much larger claims brought by Mr. Haynes. Mr. Haynes has not responded to

these contentions or provided a competing description of the claims and their

comparative mass. Because Mr. Haynes has given us no reason to doubt Trane’s

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characterization of the parties’ claims, we find no abuse of discretion in deeming

Trane a prevailing party vis-à-vis Mr. Haynes and awarding costs.

III. CONCLUSION

We AFFIRM the district court’s grant of judgment as a matter of law on

Mr. Haynes’s contract-modification claim and the fiduciary-duty claims of

Mr. Haynes and HaynesTSA. We also AFFIRM the district court’s decision to

deny Mr. Haynes equitable-estoppel relief. But we REVERSE the district court’s

decision to appoint a special master for an accounting of Trane’s fraud damages

and REMAND for a new trial on Trane’s fraud claim. Finally, we REVERSE the

assessment of costs against HaynesTSA and AFFIRM the assessment of costs

against Mr. Haynes.

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