Navistar, Inc. v. Dutchmaid Logistics, Inc.

[Cite as Navistar, Inc. v. Dutchmaid Logistics, Inc., 2021-Ohio-1425.]

COURT OF APPEALS
LICKING COUNTY, OHIO
FIFTH APPELLATE DISTRICT

NAVISTAR, INC. JUDGES:
Hon. Craig R. Baldwin, P.J.
Defendant-Appellant Hon. William B. Hoffman, J.
Hon. Earle E. Wise, Jr., J.
-vs-
Case No. 2020 CA 00003
DUTCHMAID LOGISTICS, INC.

Plaintiff-Appellee O P I N IO N

CHARACTER OF PROCEEDINGS: Appeal from the Licking County Court of
Common Pleas, Case No. 15CV0129

JUDGMENT: Affirmed

DATE OF JUDGMENT ENTRY: April 22, 2021

APPEARANCES:

For Defendant-Appellant For Plaintiff-Appellee

ROMAN MARTINEZ MARK KITRICK
SHANNON GRAMMEL SEAN HARRIS
Latham & Watkins, LLP Kitrick, Lewis & Harris Co., LPA
555 Eleventh Street, NW, Suite #1000 515 East Main Street, Suite #515
Washington, DC 20004-1304 Columbus, OH 43215-5398

KEVIN M. JAKOPCHEK CLAY MILLER
Latham & Watkins, LLP LAWRENCE R. LASSITER
330 N. Wabash, Suite #2800 Miller Weisbrod, LLP
Chicago, IL 60622 12750 Merit Drive, Suite #1100
Dallas, TX 75251
Licking County, Case No. 2020 CA 00003 2

For Defendant-Appellant For Defendant-Appellant

JESSICA Z. BARGER TIMOTHY C. AMMER
NATASHA N. TAYLOR LINDSAY M. UPTON
Wright Close & Barger, LLP Montgomery Jonson, LLP
One Riverway, Suite #2200 600 Vine Street, Suite #2650
Houston, TX 77056 Cincinnati, OH 45202
Licking County, Case No. 2020 CA 00003 3

Hoffman, J.
{¶1} Defendant-appellant Navistar, Inc. (“Navistar”) appeals the July 29, 2019

Final Judgment entered by the Licking County Court of Common Pleas, memorializing

the jury’s verdict in favor of plaintiff-appellee Dutchmaid Logistics, Inc. (“Dutchmaid”) on

Dutchmaid’s fraud claim and the jury’s award of compensatory and punitive damages.

STATEMENT OF THE FACTS AND CASE

{¶2} Dutchmaid is a logistics company and the owner and operator of a

commercial trucking fleet which is engaged in the business of hauling dry and refrigerated

commodities across 48 states. Navistar manufacturers heavy-duty commercial trucks

and diesel engines. Prior to 2008, Dutchmaid primarily operated CAT and Cummins-

powered trucks. Between 2008, and 2009, Dutchmaid purchased nine Navistar trucks

equipped with Navistar’s first generation MaxxForce engines (“MaxxForce 1 trucks”) and

six Navistar trucks equipped with Cummins engines.

{¶3} The MaxxForce 1 trucks began experiencing significant mechanical issues

after being driven approximately 100,000 miles. After the MaxxForce 1 trucks reached

the 125,000 mile mark, the mechanical issues increased substantially, most often due to

the failure of the Exhaust Gas Recirculation (“EGR”) cooler. The EGR cooler is part of

the EGR system which pumps engine exhaust back into the engine in order to lower

emissions. All of Dutchmaid’s MaxxForce 1 trucks lost their EGR coolers. Due to the

ongoing issues, Dutchmaid moved the MaxxForce 1 trucks to its local fleet which hauled

shorter distances. Dutchmaid also contemplated retiring the MaxxForce 1 trucks earlier

than the company normally retires the trucks in its fleet.

{¶4} In late 2010, Dutchmaid began the process of purchasing additional trucks

for its fleet. Navistar’s sales representative, John Lasson, and his team met with Sam
Licking County, Case No. 2020 CA 00003 4

Burrer, Dutchmaid’s General Manager, to discuss the purchase of Navistar’s second

generation MaxxForce trucks (“MaxxForce 2 trucks”), which were designed to meet the

EPA’s 2010 lower emissions standards. Burrer informed Lasson Navistar would have to

convince Dutchmaid the issues it had experienced with the MaxxForce 1 trucks were

resolved and corrected before Dutchmaid would consider purchasing MaxxForce

powered trucks again.

{¶5} After extensive discussions, visits to Navistar’s manufacturing plant, and

repeated assurances of the reliability of and the testing conducted on the MaxxForce 2

trucks, Dutchmaid purchased twenty MaxxForce 2 trucks between 2011, and 2012. Over

the three years during which Dutchmaid owned and operated the MaxxForce 2 trucks,

the vehicles were in the shop for warranted repairs on more than 100 separate occasions.

The problems necessitating the repairs included EGR system failures.

{¶6} On February 11, 2015, Dutchmaid filed a complaint against Navistar,

asserting, inter alia, claims of breach of express warranty and fraud by nondisclosure.

{¶7} At trial, Burrer testified regarding Dutchmaid’s ongoing issues with the

MaxxForce 1 trucks, the need to purchase new trucks, and how and why Dutchmaid

ultimately decided to purchase the MaxxForce 2 trucks. Burrer explained, in 2010, the

EPA established new standards for emissions and Dutchmaid had to purchase new trucks

for its fleet. In January, 2011, Dutchmaid began to run three test trucks: a Freightliner

truck with a Cummins engine, a Freightliner truck with a Detroit Diesel engine, and a

MaxxForce 2 truck. Dutchmaid wanted to be assured Navistar had conducted sufficient

field testing on the MaxxForce 2 trucks. Burrer noted, “[W]e want to see lots of trucks
Licking County, Case No. 2020 CA 00003 5

with lots of miles and in real-world environments.” Trial Transcript, Vol. III at p. 747.

Burrer added running one test truck would not tell him enough about reliability.

{¶8} The Freightliner trucks were equipped with the newly developed Selective

Catalytic Reduction (“SCR”) system to meet the EPA’s lower emission standards.

Navistar continued to rely solely on the EGR system. During discussions with

Freightliner, Burrer learned the EGR-only emissions system used in the MaxxForce 2

trucks pumped even more hot exhaust gases through the engines, resulting in excessive

heat which could lead to EGR cooler cracking. Burrer expressed his concerns about this

potential problem to Lasson, asking, “[W]hat are you guys doing to convince me that

you’ve got this problem resolved, that it’s going to be good from here forward?” Tr. at 749-

750.

{¶9} Although the MaxxForce 2 test truck satisfied Dutchmaid’s questions about

fuel economy, the overall reliability of the MaxxForce 2 trucks remained a major concern

for Dutchmaid. Between January and June, 2011, Lasson and his team visited

Dutchmaid and Burer at least a half-dozen times and, each time, Burer raised concerns

about reliability of the MaxxForce 2 trucks. Burrer “always talked to them about testing,”

explaining: “To me, that’s the most important thing you can to do. And – and I mean field

testing. For me, I think that’s most critical. Some guys may disagree with it, but I think

field testing is absolutely critical in that they run a lot of miles and they have two to three

years, at least, of testing.” Tr. at 754. Navistar repeatedly told Dutchmaid and Burrer it

had field tested multiple trucks over the course of two to three years and some of the

trucks had achieved 200-300 thousand test miles.
Licking County, Case No. 2020 CA 00003 6

{¶10} At every meeting, Burrer also asked Navistar if the issues with the EGR

coolers had been resolved. Each time, Navistar informed Burrer the EGR system had

been reengineered, redesigned, and, as a result, the EGR cooler was more robust.

Navistar indicated the EGR cooler would last the life of the truck’s engine and the engine

would be reliable for over a million miles. Anthony Greszler, Dutchmaid’s expert witness,

testified the standard engine life for trucks of this kind is 1.2 million miles.

{¶11} Burrer traveled to Navistar’s Alabama manufacturing plant. Navistar

engineers gave Burrer a tour of the plant, showed him a disassembled engine, and

engaged in discussions with him regarding the testing conducted on and improvements

made to the MaxxForce 2 engines. Navistar’s repeated assurance the EGR system

issues had been resolved was the main factor which convinced Dutchmaid to purchase

the MaxxForce 2 trucks. Tr. Vol. IV at 1089. According to Burrer, Dutchmaid would not

have purchased the trucks if Navistar had disclosed the information it had. Id. at 1092-

1093.

{¶12} Burrer described the problems Dutchmaid had with the new MaxxForce 2

trucks. The MaxxForce 2 trucks were down for repairs 1,288 days during the time

Dutchmaid operated the vehicles. This downtime resulted in lost profits of $298,271. In

2013, the MaxxForce 2 trucks achieved, on average, 13,000 less miles per truck than

Dutchmaid’s non-MaxxForce engine powered trucks. In 2014, the MaxxForce 2 trucks

achieved, on average, 19,000 less miles per truck. After only 3 ½ years, Dutchmaid

traded the MaxxForce 2 trucks out early because of the disruption to the company’s

operations. Based upon industry resale data, Dutchmaid’s early and unexpected disposal

of the Maxxforce 2 trucks resulted in a loss of $35,825/truck.
Licking County, Case No. 2020 CA 00003 7

{¶13} Gerald Billinghurst, a sales representative for Truck Sales & Service1,

arranged Burrer’s visit to the Navistar factory and traveled to Alabama with him.

Billinghurst was well aware of the problems Dutchmaid was having with the MaxxForce 1

trucks. Billinghurst explained the biggest issue Dutchmaid had with the MaxxForce 1

trucks was reliability and the purpose of the trip to Alabama was for Burrer to gain

confidence in the MaxxForce 2 engines. Over the course of the business relationship

between Dutchmaid and Truck Sales & Services, Burrer and at least two other Dutchmaid

employees expressed to Billinghurst their displeasure with the performance of the

MaxxForce 1 trucks and the ongoing issues with the EGR coolers. Billinghurst was also

aware Dutchmaid had concerns about buying new trucks equipped with MaxxForce 2

engines. He was present at a number of meetings with Burrer and different Navistar

representatives. During the visit to Navistar’s Alabama factory, Billinghurst heard

Navistar representatives tell Burrer the issues Dutchmaid experienced with the EGR

cooler and EGR system had been resolved.

{¶14} Billinghurst testified regarding his personal experience with the breakdowns

of the MaxxForce 1 trucks. He described the downtime as “Not good. And to the point

of terrible in some instances because they were down for two weeks to a month, in some

instances.” Tr. Vol. IV at 1128. Billinghurst recalled the trucks spent “a lot of time” in their

shop. Truck Sales & Service “worked guys overtime to keep this fleet going because of

the issues that were out there that we knew about.” Id. Billinghurst added, “There was a

part shortage because of the demand for...certain parts that were breaking.” Id. Truck

Sales & Service also experienced issues getting the trucks into the shop. Billinghurst

1Dutchmaid purchased the trucks in its fleet, including the Maxx Force 1 and MaxxForce 2 trucks, from
Truck Sales & Service.
Licking County, Case No. 2020 CA 00003 8

explained, “There were other customers’ trucks, other MaxxForces in the parking lot that

needed repairs also. And we ran into that with…dealerships across the state.” Id. at

1129. It was not uncommon for Dutchmaid to have multiple trucks down at the same time.

{¶15} While conversations were ongoing between Dutchmaid and Navistar

relative to Dutchmaid purchasing MaxxForce 2 trucks, Navistar, at its highest corporate

levels, was aware of the issues with the MaxxForce 2 engines. Jim Hebe, Navistar’s Vice

President of North American Sales and former CEO of Freightliner, indicated Navistar

“did a very bad job testing this truck [MaxxForce 2] before launch.” Playback of Video

Deposition of James Hebe Tr. at 2631. Hebe described the testing of the MaxxForce 2

engines as “not typical,” less than the usual three-year cycle. Hebe disputed the

testimony of Navistar representatives who stated Navistar had more than 4.5 million miles

of field testing on the final engine before the trucks went to market. Id. at 2634. In the

final testing, issues remained with the EGR cooler, the EGR valve, and the bellows valve

in the EGR system. Id. at 2637. In June or July, 2010, Navistar engineers advised Hebe

the trucks were not ready to launch. Id. at 2638. Hebe opined Navistar “didn’t test the

final product in its final form in a manner that would have been consistent with normal

industry practice.” Id. at 2643.

{¶16} Dennis Mooney, who was the Senior Vice President of Product

Development at the time of trial, testified he was involved in all aspects of engine

engineering, including the testing and validation of the engines. Playback of Video

Deposition of Dennis Mooney Tr. at 2656. In a December, 2012 email to Navistar CEO

Troy Clarke, Mooney expressed “[s]ome thoughts on our current quality.” Id. at 2691.

His intention was to provide Clarke with his “opinion of the background of what got us to
Licking County, Case No. 2020 CA 00003 9

where we were,” i.e., all the warranty expense Navistar was incurring on the MaxxForce

2 trucks. Id. at 2694. In the email, Mooney noted, “[t]he entire auto and heavy-duty truck

industry standard is 48 months for a new – new engine/emission system development. *

* * When I got here in January of 2010, we were still finalizing DV design2 six months

before start of production. We had no time to validate and get miles on trucks.” Id. at

2692. Mooney acknowledged the “field test trucks were essentially engineering

development trucks,” not validation trucks. Id. Navistar was changing hardware “weekly

as we were finding and trying to fix problems, many of which were infant mortality

problems.”3 Id.

{¶17} During his trial testimony, Mooney explained he “learned a couple of things

since [he] wrote the e-mail” and he discovered the engine had been in production three

years prior to 2010. Id. at 2735-2736. Mooney stated the testing conducted on the

MaxxForce 2 trucks was not compressed into a six-month period. Id. at 2741. Mooney

added the majority of the testing on the engine and its components had been going on

for several years. Id. at 2741-2742.

{¶18} Shane Spencer, Navistar’s corporate representative, acknowledged when

the MaxxForce 2 trucks were launched in 2010, the EGR cooler had a life of 225,000

miles. Spencer explained this information would not have been disclosed to Dutchmaid

or other potential buyers unless specifically asked because it is not industry practice to

talk about the life of a particular component in an engine. Tr. Vol. III at 498. Navistar

launched the MaxxForce 2 based upon the overall reliability of the engine. Id. at 493.

2 “DV” stands for design validation or verification.

3 Infant mortality refers to low mileage trucks.
Licking County, Case No. 2020 CA 00003 10

When questioned about why Navistar never disclosed the issue with the EGR cooler,

Spencer repeatedly explained Navistar had completed its test plan and “we were meeting

our reliability goals at the engine level.” Id. at 509. Navistar made over a dozen design

changes or quality improvements to the EGR cooler between the launch and Dutchmaid

placing its first order of MaxxForce 2 trucks in July, 2011. Id. at 535- 536. Spencer

explained changes and improvements are continuously rolled out over time with any

component. Id. at 536.

{¶19} In an earnings call with investors after the first quarter of 2012, Jack Allen,

Navistar’s COO, indicated “an unusually high frequency of repair on a couple of significant

components,” to wit: the EGR cooler and the EGR valves, were the biggest warranty cost

drivers. Id. at 685; Playback of Jack Allen Video Deposition Tr. at 2809. In a March 5,

2012 email, Mark Reiter, Navistar’s Vice President of Product Support, recognized the

EGR coolers, EGR valves, and EGR bellows were “significant contributing factors” to the

$112 million in warranty costs, but cautioned Navistar needed “to be very careful of the

analyst day messaging.” Tr. at 1918-1920. Reiter was unaware of any disclosures made

to Dutchmaid admitting Navistar’s warranty issues were related to EGR coolers and EGR

valves. At trial, Reiter conceded the EGR coolers and EGR valves were the two biggest

drivers of Navistar’s warranty costs. Tr. at 1927.

{¶20} After hearing all the evidence and deliberating, the jury found in favor of

Dutchmaid on its fraudulent nondisclosure claim, and in favor of Navistar on Dutchmaid’s

breach of warranty claim. The jury awarded Dutchmaid compensatory damages in the

amount of $75,000, for lost profits and $200,000, for diminished value. The jury also
Licking County, Case No. 2020 CA 00003 11

awarded punitive damages in the amount of $1,025,000, finding Navistar committed

aggravated or egregious fraud. The trial court journalized the verdict on July 29, 2019.

{¶21} It is from this judgment Navistar appeals, raising the following assignments

of error:

I. THE TRIAL COURT ERRED BY FAILING TO GRANT JUDGMENT

TO NAVISTAR ON DUTCHMAID’S FRAUDULENT NONDISCLOSURE

CLAIM BECAUSE DUTCHMAID “FAILED TO ESTABLISH DAMAGES

[FOR THE ALLEGED FRAUD] SEPARATE FROM THOSE IT ARGUED

WERE ATTRIBUTABLE” TO NAVISTAR’S ALLEGED BREACH OF

WARRANTY. TEXTRON FIN. CORP. V. NATIONWIDE MUT. INS. CO.,

115 OHIO APP. 3D 137, 153 (9TH DIST. 1996).

II. THE TRIAL COURT ERRED BY FAILING TO GRANT

JUDGMENT TO NAVISTAR ON DUTCHMAID’S FRAUDULENT

NONDISCLOSURE CLAIM BECAUSE THAT CLAIM IS BARRED BY THE

EXPRESS DISCLAIMERS THE PARTIES AGREED TO IN THE LIMITED

WARRANTY. SEE GALMISH V. CICCHINI, 90 OHIO ST. 3D 22, 27-29

(2000); GOODYEAR TIRE & RUBBER CO. V. CHILES POWER SUPPLY,

INC., 7 F. SUPP. 2D 954, 962-63 (N.D. OHIO 1998).

III. THE TRIAL COURT ERRED BY MISINSTRUCTING THE JURY

ON THE BURDEN OF PROOF FOR DUTCHMAID’S FRAUDULENT

NONDISCLOSURE CLAIM, SEE CRAWFORD V. STAN, 2012-OHIO-

3624, PARAS. 20, 23 (5TH DIST.); RAPPORT V. KOCHOVSKI, 185 OHIO
Licking County, Case No. 2020 CA 00003 12

APP. 3D 309, 313-15 (5TH DIST. 2009), AND BY FAILING TO INSTRUCT

THE JURY AS TO THE LEGAL SIGNIFICANCE OF THE PARTIES’

EXPRESS DISCLAIMERS.

IV. THE TRIAL COURT ERRED BY FAILING TO GRANT

NAVISTAR A NEW TRIAL ON DUTCHMAID’S PUNITIVE DAMAGES

BECAUSE THE JURY’S FINDING ON PUNITIVE DAMAGES CANNOT BE

SUSTAINED. SEE LOGSDON V. GRAHAM FORD CO., 54 OHIO ST. 2D

336, 339-40 (1978).

I

{¶22} In its first assignment of error, Navistar maintains the trial court erred in

failing to grant judgment in favor of Navistar on Dutchmaid’s fraudulent nondisclosure

claim. Specifically, Navistar argues, because Dutchmaid sought “the exact same

damages for Navistar’s alleged fraud as it also sought for Navistar’s alleged breach of

warranty,” the fraudulent nondisclosure claim fails as a matter of law. Brief of Appellant

at 11.

{¶23} Navistar relies upon Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115

Ohio App.3d 137, 684 N.E.2d 1261 (1996), in support of its position. Therein, the Ninth

District Court of Appeals stated:

In Ohio, a breach of contract does not create a tort claim. (Citation

omitted). Generally, “the existence of a contract action * * * excludes the

opportunity to present the same case as a tort claim.” Id. (Citation omitted).
Licking County, Case No. 2020 CA 00003 13

A tort claim based upon the same actions as those upon which a claim of

contract breach is based will exist independently of the contract action only

if the breaching party also breaches a duty owed separately from that

created by the contract, that is, a duty owed even if no contract existed.

(Citation omitted). * * * In addition to containing a duty independent of that

created by contract, an action arising out of contract which is also based

upon tortious conduct must include actual damages attributable to the

wrongful acts of the alleged tortfeasor which are in addition to those

attributable to the breach of the contract. (Citations omitted). Id. at 151.

{¶24} Navistar focuses on the second requirement, i.e., “actual damages

attributable to the wrongful acts of the alleged tortfeasor which are in addition to those

attributable to the breach of the contract.” Navistar explains the additional damages rule

“distinguishes between contract and fraud claims by focusing on the nature of the claimed

injury.” Brief of Appellant at 13. Navistar submits, because “Dutchmaid asserted the exact

same damages under its warranty and fraud theories – lost profits and diminished value

– and submitted the exact same damages to the jury for each theory of liability:

$1,248,851.00,” Dutchmaid “thus ‘failed to establish damages separate from those it

argued were attributable’ to Navistar’s alleged breach of warranty, and its fraud claim

fails.” Id.

{¶25} Navistar cites a number of federal cases interpreting applicable state law in

support of its position the additional damages requirement “invalidates” Dutchmaid’s fraud

claim. Id. These cases address the economic loss doctrine. In Ohio, “[t]he economic-
Licking County, Case No. 2020 CA 00003 14

loss rule generally prevents recovery in tort of damages for purely economic loss.”

Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 2005-Ohio-5409,

835 N.E.2d 701, ¶ 6. “This rule stems from the recognition of a balance between tort law,

designed to redress losses suffered by breach of a duty imposed by law to protect societal

interests, and contract law, which holds that ‘parties to a commercial transaction should

remain free to govern their own affairs’.” Id., quoting Chemtrol Adhesives, Inc. v. Am.

Mfrs. Mut. Ins. Co., 42 Ohio St.3d 40, 42, 537 N.E.2d 624 (1989).

{¶26} This Court recently addressed the application of the economic loss rule to

a fraud claim in Windsor Medical Center, Inc. v. Time Warner Cable, Inc., 5th Dist. Stark

No. 2020CA00085, 2021-Ohio-158. In that case, Windsor Medical, a skilled nursing and

senior living center, brought an action against Time Warner Cable, nka Spectrum, which

provided the facility’s telephone, internet, and cable service. Id. at ¶2. Windsor Medical

sought damages for fraud and violations of Ohio’s Deceptive Trade Practices Act. Id. at

¶4. The jury found in favor of Windsor Medical on the fraud claim, and awarded

compensatory and punitive damages. Id. at ¶19. The jury found in favor of Spectrum on

Windsor Medical's claim for deceptive trade practices. Id. Spectrum filed a motion for

judgment notwithstanding the verdict, which the trial court denied. Id. at ¶20.

{¶27} On appeal, Spectrum argued the economic loss rule barred Windsor

Medical’s fraud claim as such claim sounded in contract. Id. at ¶24. We disagreed,

finding:

There are exceptions, however, to the application of the economic

loss rule to bar recovery in tort of purely economic loss. A plaintiff may
Licking County, Case No. 2020 CA 00003 15

pursue such a tort claim if it is “based exclusively upon [a] discrete,

preexisting duty in tort and not upon any terms of a contract or rights

accompanying privity.” Corporex, supra at ¶ 9. These types of exempt

claims may include negligent misrepresentation, breach of fiduciary duty,

fraud, and conversion. Potts v. Safeco Ins. Co., 5th Dist. No. 2009 CA 0083,

2010-Ohio-2042, 2010 WL 1839738, ¶ 21; Morgan v. Mikhail, 10th Dist. No.

08AP-87, 2008-Ohio-4598, 2008 WL 4174063, ¶ 69.

Therefore, a tort claim can proceed where “the facts of the case show

an intentional tort committed independently, but in connection with a breach

of contract * * *.” Burns v. Prudential Securities, Inc., 167 Ohio App.3d 809,

2006-Ohio-3550, 857 N.E.2d 621, ¶ 99. Accordingly, where a tort claim

alleges a duty was breached independent of the contract, the economic loss

rule does not apply. See, Campbell v. Krupp, 195 Ohio App.3d 573, 2011-

Ohio-2694, 961 N.E.2d 205, ¶ 16 (6th Dist.) See also, Eysoldt v. ProScan

Imaging, 194 Ohio App.3d 630, 2011-Ohio-2359, 957 N.E.2d 780, ¶21 (1st

Dist.) (finding the economic loss rule does not apply to intentional torts, as

they are breaches of duties beyond those created by contract). Where the

tort claim alleges a breach of an independent duty, it must also allege

damages that are separate and distinct from the breach of contract.

Strategy Group for Media, Inc. v. Lowden, 5th Dist. Delaware No. 12 CAE

03 0016, 2013-Ohio-1330, 2013 WL 1343614, ¶ 30. Id. at ¶ 27-28
Licking County, Case No. 2020 CA 00003 16

{¶28} In accordance with our decision in Windsor Medical, we find the economic

loss rule does not apply to bar Dutchmaid’s fraud claim. Navistar breached duties which

were independent of those which arose through the warranty. Navistar, through its

representatives, purposely failed to disclose material information about the EGR cooler

system on the MaxxForce 2 trucks despite Dutchmaid’s inquiries. These nondisclosures

occurred prior to Dutchmaid’s purchase of any MaxxForce 2 trucks.

{¶29} We also reject Navistar’s assertion Dutchmaid’s fraud claim must fail

because Dutchmaid did not establish damages separate from those it argued were

attributable to Navistar’s alleged breach of warranty. The United States Court of Appeals

for the Sixth Circuit addressed this identical argument in Regal Cinemas, Inc. v. W & M

Props., 90 Fed. App'x 824 (6th Cir. 2004). The facts relevant to the matter before us are

as follows: Regal Cinemas brought an action for fraud and breach of contract against W

& M Properties, a developer, arising out of a real estate transaction under which W & M

Properties was to build a theater at a shopping center developed and owned by W & M

Properties in Macedonia, Ohio. Id. at *827. At the conclusion of the trial, the jury found

for Regal Cinemas on its fraud claim, and in favor of W & M Properties on Regal Cinema’s

breach of contract claim. Id. On appeal, W & M Properties argued it was entitled to

judgment as a matter of law because Regal Cinemas failed to establish two elements of

fraud under Ohio law: justifiable reliance and resulting damages. Id. at *826.

{¶30} W & M Properties argued, inter alia, Regal Cinemas “was required to

present evidence of damages separate from the damages that it claimed to have suffered

due to the breach of the lease claim that the jury rejected.” Id. at *831. The Sixth Circuit

found, because the jury did not find a breach of contract, “there is no concern that the
Licking County, Case No. 2020 CA 00003 17

fraud damages duplicate the damages resulting from a breach.” Id. W & M Properties

also sought to apply the proposition set forth in Textron, supra, “[a] party cannot recover

under theories of both fraud and negligence based upon the same course of conduct.” Id.

at *832. The Sixth Circuit refused to do so, explaining:

Regal has not asked us to turn a mere breach of contract into a tort

claim: rather, the fraud claim relates to distinct acts, especially since the jury

found that there was no breach of contract in this case. Defendants'

argument that, every time a party claims both breach of contract and fraud,

the party cannot recover fraud damages that duplicate the damages that it

claimed under breach of contract even where it has been determined there

was no breach of contract, is flatly unreasonable. Not only does Ohio law

not support this proposition, but reading it that way would result in a penalty

for arguing in the alternative. Id.

{¶31} We agree with the rationale set forth in Regal Cinemas. In the instant

action, the jury found Navistar did not breach the warranty. Because the jury so found,

we find the damages the jury awarded for fraud were not duplicative of the damages

sought by Dutchmaid on its breach of warranty claim. We further find the fraud and

breach of warranty claims were not based upon the same course of conduct. The fraud

claim was based upon distinct acts - Navistar’s failure to disclose material information to

Dutchmaid, effecting Dutchmaid’s decision to purchase the MaxxForce 2 trucks. Navistar

knew the issues with the EGR cooler system was the primary reason for Dutchmaid’s
Licking County, Case No. 2020 CA 00003 18

hesitancy in purchasing the trucks. The breach of warranty claim was based upon the

limited warranty provided to Dutchmaid subsequent to the purchases.

{¶32} Based upon the foregoing, we find the trial court did not err in failing to grant

judgment to Navistar on Dutchmaid’s fraud claim.

{¶33} Navistar’s first assignment of error is overruled.

II

{¶34} In its second assignment of error, Navistar contends the trial court erred in

failing to grant judgment in favor of Navistar on Dutchmaid’s fraudulent nondisclosure

claim as said claim fails in light of the parties’ express disclaimer. We disagree.

{¶35} The disclaimer incorporated into Navistar’s limited warranty provides, in

pertinent part:

NO WARRANTIES ARE GIVEN BEYOND THOSE DESCRIBED

HEREIN. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,

EXPRESSED OR IMPLIED. THE COMPANY SPECIFICALLY DISCLAIMS

WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A

PARTICULAR PURPOSE, ALL OTHER REPRESENTATIONS TO THE

USER/PURCHASER, AND ALL OTHER OBLIGATIONS OR LIABILITIES.

THE COMPANY FURTHER EXCLUDES LIABILITY FOR INCIDENTAL OR

CONSEQUENTIAL DAMAGES, ON THE PART OF THE COMPANY OR

SELLER. No person is authorized to give any other warranties or to assume

any liabilities on the Company's behalf unless made or assumed in writing

by the Company, and no other person is authorized to give any warranties
Licking County, Case No. 2020 CA 00003 19

or to assume any liabilities on the seller's behalf unless made or assumed

in writing by the seller.

{¶36} Navistar submits Ohio law does not permit a fraud claim to override an

express disclaimer in a contractual agreement based upon two interrelated principles: (1)

a party to a contract may not claim fraud based upon an alleged “promise, the terms of

which are directly contradicted by” the contract. Galmish v. Cicchini, 90 Ohio St.3d 22,

29, 734 N.E.2d 782 (2000); and (2) “[n]o party to a contract can claim [justifiable] reliance

upon any representation which is expressly disclaimed by another party.” Goodyear Tire

& Rubber Co. v. Chiles Power Supply, Inc., 7 F. Supp. 2d 954, 962-963 (N.D. Ohio 1998).4

We shall address each principle in turn.

{¶37} The parol evidence rule states “absent fraud, mistake or other invalidating

cause, the parties’ final written integration of their agreement may not be varied,

contradicted or supplemented by evidence of prior or contemporaneous oral agreements,

or prior written agreements.” Galmish, supra at 27, citing 11 Williston on Contracts (4

Ed.1999) 569–570, Section 33:4.

{¶38} The principal purpose of the parol evidence rule is to protect the integrity of

written contracts. Id., citing Ed Schory & Sons, Inc. v. Soc. Natl. Bank (1996), 75 Ohio

St.3d 433, 440, 662 N.E.2d 1074, 1080. “By prohibiting evidence of parol agreements,

the rule seeks to ensure the stability, predictability, and enforceability of finalized written

instruments.” Id. “It reflects and implements the legal preference, if not the talismanic

legal primacy, historically given to writings. It effectuates a presumption that a subsequent

4 The word “justifiable” was inserted by Navistar and replaced the word “such”.
Licking County, Case No. 2020 CA 00003 20

written contract is of a higher nature than earlier statements, negotiations, or oral

agreements by deeming those earlier expressions to be merged into or superseded by

the written document.” Id. at 27-28, citing 11 Williston on Contracts, supra, at 541–548,

Section 33:1 (Footnotes omitted in original).

{¶39} However, “a party may produce evidence of a contemporaneous oral

agreement when that agreement was made in order to induce the party into entering the

written contract.” Stormont v. Tenn–River Trading Co., Inc., 10th Dist. Franklin No.

94APG08–1272, *3 (Apr. 27, 1995), citing Walters v. First National Bank of Newark

(1982), 69 Ohio St.2d 677, 681. There is a distinct difference between prohibiting prior

or contemporaneous agreements to vary the terms of a written contract versus prohibiting

prior or contemporaneous statements to induce a party into entering into the contract.

{¶40} Burrer testified Dutchmaid would not have purchased MaxxForce 2 trucks

had it known Navistar had not conducted adequate field testing, the EGR system issues

were still unresolved, and the EGR cooler would not last the life of the truck’s engine.

Because Navistar’s representations to the contrary and nondisclosures induced

Dutchmaid to purchase the MaxxForce 2 trucks, we find the evidence as to these

nondisclosures is not prohibited by the parol evidence rule.

{¶41} In addition to its contention Ohio law does not permit a fraud claim to

override an express disclaimer under the parol evidence rule, Navistar also argues a party

to a contract cannot claim reliance upon any representation which is expressly

disclaimed. Navistar cites two cases from the United States District Court for the Northern

District of Ohio, Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., supra, and

Keller Logistics, Inc. v. Navistar, Inc., 2020 WL 4597283, in support.
Licking County, Case No. 2020 CA 00003 21

{¶42} We find Goodyear to be factually distinguishable. Therein, Chiles Power

Supply dba Heatway Systems (“Heatway”), a manufacturer of hydronic radiant heating

systems, entered into negotiations with Goodyear for the supply of Entran II rubber hoses.

Id. at 956. After approximately one year of negotiations, the parties reached an

agreement, which included a set of ten performance specifications for any Entran II

supplied by Goodyear as well as the warranty which would apply to thereto. Id. at 957.

The warranty included not only a limited disclaimer of liability, but also a full disclaimer of

reliance in its standard terms and conditions. Id. at 963. The warranty disclaimed most

liability, expressly stating “[o]ther than those specifically set forth herein, there are no

warranties which extend beyond the description of the products on the face hereof, either

express or implied.” Id.

{¶43} Goodyear filed a complaint against Heatway, seeking, inter alia, a

declaration its express disclaimers limited the extent to which it could be held accountable

for any problem arising from the Entran II hose. Id. at 961. The U.S. District Court

granted summary judgment in favor of Goodyear, finding the terms of the disclaimers

gave Heatway fair warning as to the reliability of any representation external to the terms.

Id. at 963. The Goodyear Court concluded a reasonable jury could not find Heatway

acted reasonably in relying upon any such representation. Id.

{¶44} Unlike the parties in Goodyear, the parties herein did not negotiate the

terms of the warranty. The boilerplate language of the disclaimer incorporated into the

limited warranty was drafted exclusively by Navistar. Dutchmaid did not have any

bargaining power in this regard. Further, we find the terms of the disclaimer did not give

Dutchmaid “fair warning” as to the reliability of Navistar’s nondisclosures. The fraud
Licking County, Case No. 2020 CA 00003 22

alleged by Dutchmaid was based upon Navistar’s fraudulent concealment of material

information. We hold a party cannot disclaim its fraudulent concealment of material

information by incorporating boilerplate warranty language.

{¶45} Reviewing Keller Logistics, supra, we find a similar fact pattern to the instant

action. Keller purchased thirty Navistar manufactured trucks from Defiance Truck Sales

& Service in April 2011. Id. at *1. In July 2012, Keller leased another thirty-five Navistar

manufactured trucks from GE CF Trust. Id. Navistar issued limited warranties, which

state Navistar will “repair and replace” any covered components if necessary due to

defective materials or workmanship. Id. “Not long after delivery, the trucks’ EGR systems

and related components began malfunctioning, resulting in repeated repairs.” Id. Keller

subsequently filed a complaint against Navistar in the United States District Court for the

Northern District of Ohio, alleging, inter alia, fraud. Id. The fraud claims were based upon

“’numerous misrepresentations [Navistar made] about the [t]rucks’ in the months leading

up to the two transactions.” Id. at *2.

{¶46} In granting summary judgment in favor of Navistar, the Keller Court found

Keller could not demonstrate Navistar owed a duty independent of the contract and Keller

did not suffer any damages attributable only to the tortious conduct. Id. The Keller Court,

relying on Goodyear, supra, also found the warranty language of the disclaimer precluded

the fraud claims. Id.

{¶47} Although we recognize the warranty language is identical in Keller and the

matter sub judice, we, nonetheless, find Keller to be distinguishable. The fraud claims

asserted by Keller were based upon Navistar’s misrepresentations. In the instant action,

Dutchmaid’s fraud claim was based, in large part, upon Navistar’s concealment of
Licking County, Case No. 2020 CA 00003 23

material information, information Navistar knew was critical to Dutchmaid’s ultimate

decision to purchase the MaxxForce 2 trucks. We find the warranty language of the

disclaimer did not preclude Dutchmaid’s fraud by nondisclosure claim. We further note

there was no specific reference to the engine or EGR system in the warranty disclaimer.

{¶48} In a footnote, Navistar lists several Ohio cases: Benko v. Smyk, 11th Dist.

Lake No. 2013–L–133, 2015-Ohio-1062; Snider-Cannata Interests, LLC v. Ruper, 8th Dist.

Cuyahoga No. 93401, 2010-Ohio-1927; and Abbott v. Loss Realty Group, 6th Dist. Lucas

No. L–05–1107, 2005-Ohio-5876, to further support its assertion there can be no

justifiable reliance because of a disclaimer. These cases involved real estate transactions

and do not provide guidance in the matter before this Court.

{¶49} We now address Navistar argument the contractual disclaimer conclusively

bars Dutchmaid’s fraudulent nondisclosure claim. Navistar contends because the

“allegedly misleading partial disclosures here were not reflected in the Limited Warranty

or in any other written agreement between the parties” and were “inherently inconsistent

with the disclaimer,” Dutchmaid’s reliance on such statements was not justifiable. Brief

of Appellant at 23-24.

{¶50} “[T]he presence of a disclaimer does not necessarily shield a defendant

from liability or mean that a plaintiff will not be able to demonstrate justifiable reliance.”

Northpoint Properties v. Charter One Bank, 8th Dist. Cuyahoga No. 94020, 2011-Ohio-

2512, 2011 WL 2112666, ¶ 63. “Courts have long held that general disclaimers of

accuracy do not shield sellers who knowingly make false statements.” In re Natl. Century

Fin. Ent., Inc., Invest. Litigation, 541 F.Supp.2d 986, 1005 (S.D.Ohio 2007).
Licking County, Case No. 2020 CA 00003 24

{¶51} Dutchmaid asked questions and Navistar knowingly provided false

answers. We find a party cannot escape liability for his own deliberate misrepresentations

and/or omissions by inserting boilerplate disclaimers into a limited warranty. See, Milman

v. Box Hill Systems Corp., 72 F.Supp.2d 220, 231 (S.D.N.Y.1999) (“[N]o degree of

cautionary language will protect material misrepresentations or omissions where

defendants knew their statements were false when made.”).

{¶52} Alternatively, Navistar claims, even if Dutchmaid’s fraud claim is not barred

as a matter of law, the claim still fails as Dutchmaid did not present sufficient evidence of

justifiable reliance. As set forth in our Statement of the Facts and Case, supra we find

there was ample evidence from which the jury could find Dutchmaid’s reliance on

Navistar’s statements was justified.

{¶53} Navistar’s second assignment of error is overruled.

III

{¶54} In its third assignment of error, Navistar asserts the trial court erred in failing

to properly instruct the jury First, Navistar submits the trial court failed to instruct the jury

on the correct burden of proof for a fraudulent nondisclosure claim. Next, Navistar claims

the trial court erred in rejecting its proposed instructions regarding the legal import of the

parties’ express disclaimers.

{¶55} The determination of whether to give a jury instruction is a matter left to the

sound discretion of the trial court. A trial court is obligated to provide jury instructions

which correctly and completely state the law. Cromer v. Children's Hospital Med. Ctr. of

Akron, 142 Ohio St.3d 257, 2015-Ohio-229, 29 N.E.3d 921. The jury instructions also

must be warranted by the evidence presented in the case. Estate of Hall v. Akron Gen.
Licking County, Case No. 2020 CA 00003 25

Med. Ctr., 125 Ohio St.3d 300, 2010-Ohio-1041, 927 N.E.2d 1112. The question of

whether a jury instruction is legally correct and factually warranted is subject to de novo

review. Id. An inadequate instruction which misleads the jury constitutes reversible error.

Marshall v. Gibson, 19 Ohio St.3d 10, 482 N.E.2d 583 (1985). Our standard of review

when it is claimed improper jury instructions were given is to consider the jury charge as

a whole and determine whether the charge misled the jury in a manner affecting the

complaining party's substantial rights. Lowder v. Domingo, 5th Dist. Stark No.

2016CA00043, 2017-Ohio-1241, 2017 WL 1231724.

{¶56} The trial court instructed the jury, “Dutchmaid must prove by the greater

weight of the evidence each of the . . . elements” of fraud by nondisclosure. Navistar

objected, arguing Dutchmaid had to prove its fraud claims by clear and convincing

evidence.

{¶57} In support of its position, Navistar cites numerous cases from this District in

which we found fraud must be established by clear and convincing evidence. Upon

review, we find, in the majority of those cases, the plaintiff was seeking an equitable

remedy. “A party seeking an equitable remedy, such as declaratory judgment,

reformation or rescission of a contract, must prove a fraud claim with clear and convincing

evidence, while a party seeking a monetary remedy must prove fraud by the

preponderance of the evidence.” Andrew v. Power Marketing Direct, Inc., 10th Dist. No.

11AP-603, 2012-Ohio-4371, 978 N.E.2d 974, ¶ 47, citing Household Finance Corp. v.

Altenberg, 5 Ohio St.2d 190, syllabus, 214 N.E.2d 667 (1966).

{¶58} In the instant action, Dutchmaid did not seek equitable reformation or

rescission of a contract, but rather compensatory and punitive damages resulting from
Licking County, Case No. 2020 CA 00003 26

Navistar’s fraudulent nondisclosures. Preponderance of the evidence thus was the

required standard of proof, and the trial court did not err in so instructing the jury.

{¶59} Assuming, arguendo, the trial court erroneously instructed the jury on the

burden of proof, we find such error to be harmless. The trial court properly instructed the

jury, in order to award punitive damages, they must find Dutchmaid proved, by clear and

convincing evidence, Navistar acted with malice, aggravated or egregious fraud,

oppression, or insult. The jury awarded punitive damages; therefore, the jury necessarily

found, by clear and convincing evidence, Navistar acted with malice, aggravated or

egregious fraud, oppression, or insult. Because the trial court correctly instructed the jury

with respect to punitive damages and the jury found clear and convincing evidence to

award punitive damages, we find any error in the trial court’s erroneous jury instruction

as to the burden of proof for fraud did not affect the substantial rights of Navistar and was

harmless.

{¶60} Within this assignment of error, Navistar also argues the trial court erred in

failing to instruct the jury regarding the legal import of the parties’ express disclaimer. For

the reasons set forth in our analysis of Navistar’s second assignment of error, supra, we

find no error in the trial court’s decision not to give the requested instructions.

{¶61} Navistar’s third assignment of error is overruled.

IV.

{¶62} In its final assignment of error, Navistar challenges the jury’s award of

punitive damages, asserting there was no evidence of actual malice or that the fraud was

“intentionally committed with the purpose of causing injury” to Dutchmaid.
Licking County, Case No. 2020 CA 00003 27

{¶63} In cases alleging fraud, in order to be awarded punitive damages, the

plaintiff must establish not only the elements of the tort itself, but must also show either

the fraud is aggravated by the existence of malice or ill, or must demonstrate the

wrongdoing is particularly gross or egregious. Atram v. Star Tool & Die Corp. (1989), 64

Ohio App.3d 388, 391–392, 581 N.E.2d 1110; Mid–America Acceptance Co. v. Lightle

(1989), 63 Ohio App.3d 590, 602, 579 N.E.2d 721. There must be an element of malice,

oppressive conduct, or outrage to sustain such an award. Id.

{¶64} The “actual malice” necessary for purposes of an award of punitive

damages has been defined as (1) that state of mind under which a person's conduct is

characterized by hatred, ill will or a spirit of revenge, or (2) a conscious disregard for the

rights and safety of other persons that has a great probability of causing substantial harm.

Berge v. Columbus Community Cable Access (1999), 136 Ohio App.3d 281, 316, 736

N.E.2d 517, quoting Preston v. Murty (1987), 32 Ohio St.3d 334, 512 N.E.2d 1174,

syllabus; Kemp v. Kemp, 5th Dist. No. 04CA011, 161 Ohio App.3d 671, 2005-Ohio-3120,

831 N.E.2d 1038, ¶ 73.

{¶65} Whether actual malice exists is a question for the trier of fact. Spires v.

Oxford Mining Co., LLC, 7th Dist. Belmont App. No. 17 BE 0002, 2018-Ohio-2769, 116

N.E.3d 717, ¶ 32, citing Buckeye Union Ins. Co. v. New England Ins. Co. (1999), 87 Ohio

St.3d 280, 720 N.E.2d 495; R.C. 2315.21(C)(1). “The same standard of review is

employed to assess the weight of evidence whether the finding is for compensatory

damages or the elements necessary to justify an award of punitive damages.” Id., citing

Bosak v. Kalmer, 7th Dist. Mahoning App. No. 01 CA 18, 2002-Ohio-3463, 2002 WL

1483884, ¶ 36. Factual determinations will not be overturned as long as they are
Licking County, Case No. 2020 CA 00003 28

supported by some competent, credible evidence going to all the essential elements of

the case. Id., citing C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 376

N.E.2d 578, syllabus.

{¶66} Navistar explains the dispute herein “involves two sophisticated commercial

entities, who negotiated and ultimately agreed to a detailed written contract.” Brief of

Appellant at 34.

{¶67} Navistar relies upon Logsdon v. Graham Ford Co. (1978), 54 Ohio St.2d

336, 8 O.O.3d 349, 376 N.E.2d 1333, 1336, in support of its contention Dutchmaid

presented a “bare case” of intentional fraud and, without more, failed to establish actual

malice; therefore, punitive damages were not warranted.

{¶68} In Logsdon, supra, the defendant, a vehicle dealership, was accused of

selling a used garbage packer as a “new unit” to the plaintiff, the owner of a refuse

company, and failing to indicate the correct model year of the packer. Id. at 336. At the

close of the defendant's case, the trial court charged the jury relative to compensatory

and punitive damages. Id. at 337. After deliberating, the jury found in favor of the plaintiff

and awarded compensatory and punitive damages. Id. at 338. The Ohio Supreme Court

reversed:

After studied review of the evidence presented in the trial court, we

are of the opinion that Tucci knowingly concealed from appellee a fact

material to the transaction, viz., that the garbage packer was approximately

one year old, by referring to the new truck and the attached garbage packer

as a ‘new unit,’ and by failing to indicate the model year of the garbage
Licking County, Case No. 2020 CA 00003 29

packer on the retail buyer's order form. However, we conclude that such

actions on the part of appellant's salesman did not evince a malicious,

wanton or gross fraud, and that therefore the trial court erred in giving the

instruction on punitive damages. Id. at 340.

{¶69} We find Logsdon, supra, to be factually distinguishable. The testimony of

Navistar’s witnesses reveals Navistar’s deliberate concealment of the ongoing issues with

the MaxxForce 2 trucks. In June or July, 2010, Hebe, Navistar’s Vice President of North

American Sales, was warned by Navistar engineers the MaxxForce 2 trucks were not

ready to launch. Navistar executives opined Navistar did not conduct adequate testing of

the final product and the testing conducted was not done in a manner consistent with

industry practices. These executives acknowledged their failure to disclose material

information and the efforts they made to conceal such information, including the

significant problems with the MaxxForce 2 trucks, the inadequate testing, and the short

life of the EGR cooler system. Although Navistar’s CEO Troy Clarke and COO Jack Allen

knew the EGR cooler systems had significant problems and were a primary reason for

increased warranty expenses, they concealed this information during an earnings call one

month prior to Dutchmaid’s purchased of the MaxxForce 2 trucks. Internal documents,

including emails, admitted at trial corroborated the testimony.

{¶70} The trial court properly instructed the jury on the standard for the imposition

of punitive damages. A jury is presumed to follow the instructions of the trial court. MCM

Home Builders, LLC v. Sheehan, 5th Dist. Delaware No. 18 CAE 09 0074, 2019-Ohio-

3899, 2019 WL 4724682, ¶ 48 citing Pang v. Minch, 53 Ohio St.3d 186, 187, 559 N.E.2d
Licking County, Case No. 2020 CA 00003 30

1313 (1990), paragraph four of the syllabus. This Court will not invade the province of a

properly instructed jury which reached a reasonable decision based upon the evidence

presented to it. Estate of Baxter v. Grange Mut. Cas. Co., 73 Ohio App.3d 512, 521, 597

N.E.2d 1157 (1992).

{¶71} We conclude the jury reasonably determined Navistar acted with actual

malice which warranted an award of punitive damages. We find there was clear and

convincing evidence to supports the jury's determination Navistar acted with actual malice

and its conduct was, indeed, egregious.

{¶72} Appellant’s fourth assignment of error is overruled.

{¶73} The judgment of the Licking County Court of Common Pleas is affirmed.

By: Hoffman, J.
Baldwin, P.J. and
Wise, Earle, J. concur