Dijo, Inc. v. Hilton Hotels Corp.

United States Court of Appeals
Fifth Circuit
F I L E D
Revised December 10, 2003
November 20, 2003
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
__________________________

No. 03-60010
__________________________

DIJO, INC.

Plaintiff-Appellee,

versus

HILTON HOTELS CORP., PARK PLACE ENTERTAINMENT CORP.; THE GRAND
CASINO, INC.; BL DEVELOPMENT CORP.; and BL RESORTS I L.L.C.

Defendants-Appellants.

___________________________________________________

Appeal from the United States District Court
for the Northern District of Mississippi
___________________________________________________

Before JOLLY and WIENER, Circuit Judges, and WALTER, District
Judge.*

WIENER, Circuit Judge:

After a trial in which the jury found for the Plaintiff-

Appellee DIJO, Inc. and awarded it $8 million in damages, the

Defendants-Appellants appeal, alleging numerous errors that

purportedly occurred in the district court. For the reasons

explained below, we affirm the judgment on the jury’s finding of

liability but remand for a new trial on the issue of damages.

*
District Judge for the Western District of Louisiana,
sitting by designation.
 I. BACKGROUND FACTS

DIJO, Inc. (“DIJO”) is a two-person company formed by Jo

Bursley, a mortgage broker involved with developing hotel

properties, and Jay Turner, a veteran developer of large, complex

commercial real estate ventures. The Defendants are Grand Casinos,

Inc. (“Grand”), two subsidiaries, BL Development Corp. and BL

Resorts I, L.L.C. (“BLR”), Hilton Hotels, Corp. (“Hilton”) and Park

Place Entertainment (“Park Place”).

Early in June, 1998, Grand’s subsidiary, BLR, granted a forty-

nine year ground lease (the “Lease”) to DIJO covering land near

Grand’s casino in Tunica, Mississippi (the “property”). DIJO

leased the property from BLR for the purpose of developing and

constructing a Comfort Suites Hotel (the “Project” or “the hotel”)

whose guests would primarily be Grand’s casino patrons. The Lease

provided that DIJO would pay rent based primarily on the hotel’s

gross receipts.

Less than one month after the Lease was executed, Grand and

Hilton announced that, effective December 31, 1998, Grand’s non-

Indian gaming interests and Hilton’s gaming interests would be

contributed to a newly-formed corporate entity, Park Place, which

would be owned by Grand and Hilton. This transaction was the

product of confidential discussions between the companies which had

commenced as early as fall 1997. Even so, Hilton did not learn of

the Lease until after the Park Place formation was announced.

2
Shortly after that announcement, putative executives of the soon-

to-be-formed Park Place began reviewing Grand’s capital

expenditures and decided that they were not interested in having

DIJO’s hotel on the property. As a result, Grand offered to

purchase DIJO’s interest in the Lease.

In initiating buyout negotiations with DIJO, Grand professed

to be “ready, willing and able to proceed” with the deal, but

nevertheless advised DIJO that the Project was no longer in Park

Place’s “best interest.” Consequently, Grand wanted to reach an

agreement with DIJO to cancel the Lease and asked DIJO for a buyout

figure. While discussions of the potential buyout were proceeding,

the Project was placed on “hold.” After DIJO submitted an offer to

sell its interest in the Lease for $1.15 million, however, Grand

apparently reversed course, informing DIJO that proceeding with the

Project as originally planned would be in Grand’s best interest.

Grand advised DIJO that Grand would “issue an amendment to the

lease to allow for the additional time to commence construction” as

a consequence of the delay caused by the intervening buyout

discussions.

According to DIJO, though, irreparable damage had already been

done. DIJO notified Grand that Grand’s conduct “cast a cloud over

the project making it unsalvageable.” DIJO asserted further that

Grand’s “adverse positions” constituted a breach of the Lease,

jeopardizing the Project and causing DIJO substantial damage. The

3
parties’ subsequent negotiations failed, and this litigation

followed. The district court entered judgment on the basis of the

jury’s verdict, and the Defendants timely filed their notice of

appeal.

II. ANALYSIS

A. STANDARDS OF REVIEW

The Defendants argue that the district court wrongly denied

their motions for summary judgment, directed verdict, and new

trial. In effect, they appeal the district court’s denial of

judgment as a matter of law. As such a challenge contests the

sufficiency of the evidence to support the jury’s verdict, we

exercise de novo review.1 The Defendants also appeal several

evidentiary rulings. A district court’s evidentiary ruling will

not be reversed absent a clear abuse of discretion.2 Our

application of these standards is explained more fully below.

B. LIABILITY

Two of DIJO’s liability claims went to trial. One was DIJO’s

claim for breach of contract asserted against all Defendants except

Hilton. The essence of this claim is that, through the

circumstances surrounding the buyout offer and the ambiguous

1
Coffel v. Stryker Corp., 284 F.3d 625, 630 (5th Cir. 2002).
2
Doddy v. Oxy USA, Inc., 101 F.3d 448, 459 (5th Cir. 1996).

4
decision to put the Project on hold,3 the Defendants made it

impossible for DIJO to perform under the Lease. Therefore, DIJO

asserted that —— despite their ostensible willingness to carry on

with the Project —— the non-Hilton Defendants effectively

repudiated the Lease through their conduct.

Second, DIJO brought a claim against Hilton for tortious

interference with the Lease. DIJO charged that Hilton induced

Grand to breach the Lease because Hilton did not want a

competitor’s hotel near the Tunica casino in which Hilton had an

interest.

On appeal, the Defendants challenge the sufficiency of

evidence supporting the verdict against them on DIJO’s claim for

breach of contract. The Defendants also complain that the district

court should not have allowed the jury to consider DIJO’s tortious

interference claim against Hilton. Because the jury returned a

general verdict for DIJO, however, it is impossible to tell whether

the jury found for DIJO on one or both of its causes of action. We

must, therefore, analyze each liability theory to determine whether

it is sustained by the evidence and is legally sound.4

1. Breach of Contract Claim: Sufficiency of the Evidence

3
The parties disputed precisely what it meant that the
Project was put on “hold.” DIJO argued that putting the Project
“on hold” was tantamount to cancelling the Project completely. The
Defendants contended, on the other hand, that only the deadlines in
the Project timetable were abated pending buyout negotiations.
4
Nowell By and Through Nowell v. Universal Elec. Co., 792
F.2d 1310, 1312 (5th Cir. 1986).

5
 As the Defendants properly preserved their legal challenges to

the sufficiency of the evidence to support the jury’s verdict, we

exercise de novo review of the district court’s denial of judgment

as a matter of law.5 We can enter judgment as a matter of law for

the Defendants only if the facts and inferences point so strongly

and overwhelmingly in the Defendants’ favor that no reasonable

jurors could have found for DIJO.6

As noted earlier, DIJO’s breach of contract theory —— and the

way that it was submitted to the jury7 —— was that the Defendants

breached the Lease by preventing DIJO’s performance. DIJO

maintained that the Defendants’ confusing conduct made it

impossible for DIJO to resume performance after buyout negotiations

failed.8 The Defendants respond that BLR’s offer to buy DIJO’s

interest in the Lease did not breach the Project agreement. The

5
Coffel, 284 F.3d at 630.
6
See id.
7
The jury instruction on breach of contract stated: “Unless
you find that these Defendants refused or made it impossible for
DIJO, Inc. to construct and manage a Comfort Inn hotel in Tunica,
Mississippi, then you must find for these Defendants as to the
Plaintiff’s claim for breach of contract.”
8
Although few cases exemplify this type of breach of contract
claim, Mississippi law appears to permit it. See, e.g., Bolling v.
Red Snapper Sauce Co., 53 So. 394, 394-95 (Miss. 1910) (recognizing
that where a plaintiff failed to perform because of the defendant’s
breach, the plaintiff could recover damages caused by the
defendant’s breach); Gravette v. Golden Saw Mill Trust, 154 So.
274, 275 (Miss. 1934) (letting the jury decide whether a totality
of circumstances could support an inference that the defendant
breached its contract and intended to prevent the plaintiff from
ever performing).

6
Defendants also represent that, at all times, they stood ready,

willing and able to perform; but that, by accepting BLR’s

invitation to discuss a buyout, DIJO agreed to put the Lease

deadlines on hold. Finally, the Defendants argue that when buyout

negotiations ceased, it was DIJO, not the Defendants, who refused

to perform.

The jury apparently did not find the Defendants’ version of

the story credible. After reviewing the trial record, we find

that, even if the evidence supporting liability was thin, it

certainly was not so lacking as to entitle the Defendants to

judgment as a matter of law.9 Furthermore, we are loath to

overturn a jury’s determination when, as here, a contract claim is

submitted to the jury under a theory requiring the fact-finder to

examine the totality of the circumstances surrounding a defendant’s

actions.

Here, the facts and inferences do not point so strongly and

overwhelmingly in the Defendants’ favor that no reasonable jury

could find for DIJO. We therefore affirm the jury’s liability

verdict on DIJO’s breach of contract claim against the non-Hilton

Defendants.

2. Tortious Interference Claim Against Hilton10

9
See Coffel, 284 F.3d at 630.
10
Although DIJO’s tortious interference claim was advanced
against Hilton only, all of the Defendants appealed its submission
to the jury, presumably because of our rule that, in cases alleging
multiple theories of liability, a general verdict will be upheld

7
 In their challenge to the jury’s being allowed to consider

DIJO’s state law tortious interference claim,11 the Defendants

effectively raise two legal arguments,12 neither of which has merit.

a. Did the district court apply the wrong
intent standard?

The Defendants first argue that they were entitled to a Rule

50 judgment on the tortious interference claim. Some Mississippi

cases addressing tortious interference with contract have used the

term “malice” to describe the intent element of this cause of

action. For example, in Cenac v. Murry,13 the Mississippi Supreme

Court stated that “[a]n action for interference with contract will

ordinarily lie when a defendant maliciously interferes with a valid

and enforceable contract, thereby causing one party not to perform

and resulting in injury to the other contracting party.”14 In

only if each of the several theories is sustained. See Nowell, 792
F.2d at 1312.
11
The district court granted the Defendants’ Rule 50 motion
on DIJO’s claim of tortious interference with business relations,
but let DIJO proceed on its claim of tortious interference with
contract.
12
In passing, the Defendants also contend that they are
entitled to judgment as a matter of law on DIJO’s tortious
interference claim “since no cause of action may lie for an
unbreached contract.” Because we hold that the Defendants are not
entitled to judgment as a matter of law on DIJO’s breach of
contract claim, see discussion supra Part II.B.1, the Defendants’
sufficiency of evidence contention vis-à-vis the tortious
interference claim fails by necessity.
13
609 So.2d 1257 (Miss. 1992).
14
Id. at 1268 (emphasis added).

8
ruling on the Defendants’ Rule 50 motion, here, the district court

concluded that Hilton’s actions rose to the level of “recklessness”

or “cold indifference.” The Defendants seize upon this terminology

in asserting that the district court applied the wrong standard to

govern the element of intent.

The Defendants misconstrue the meaning of “malice,” which, in

this context, is simply “the intentional doing of a harmful act

without justification or excuse.”15 The Mississippi Supreme Court

has clarified that “[m]aliciousness does not necessarily mean

actual malice or ill will, but the intentional doing of a wrongful

act without legal or social justification.”16 Thus, the district

court’s holding that Hilton’s actions were reckless as a matter of

law can support DIJO’s tortious interference claim.17

b. Did the district court submit
contradictory instructions to the jury?

The Defendants’ second appellate point concerning the tortious

interference claim is that, because it was impossible for Hilton to

15
MacKenzie v. Chrysler Corp., 607 F.2d 1162, 1165 (5th Cir.
1979) (quoting Mid-Continent Tel. Corp. v. Home Tel. Co., 319 F.
Supp. 1176, 1200 (N.D. Miss. 1970)).
16
Cranford v. Shelton, 378 So.2d 652, 655 (Miss. 1980)
(quoting Ramando v. Pure Oil Co., 48 A.2d 156, 160 (Pa. Super.
1946)). See also Cockerham v. Kerr-McGee Chem. Corp., 23 F.3d 101,
105-06 (5th Cir. 1994).
17
See Mid-Continent Tel. Corp., 319 F. Supp. at 1200 (finding
that, under Mississippi law, “recklessly and deliberately” inducing
a party to breach an agreement may constitute tortious interference
with contract).

9
interfere with its own contract,18 “[a]llowing the jury to consider

both instructions violates basic principles of law and constituted

reversible error.” The Defendants are simply wrong. The jury

instructions were clear that DIJO’s tortious interference claim was

only against Hilton and that DIJO’s breach of contract claim was

only against the other defendants.

Finding no reversible error with the jury’s verdict on

liability, we now turn to the damages issues.

C. DAMAGES

The Defendants raise several issues on appeal regarding the

jury’s $8 million damages award. For the reasons explained below,

we hold that the trial court erroneously admitted opinion testimony

from Kerry Skinner, one of DIJO’s lay witnesses on lost future

profits; and that, because we find that Skinner’s improperly-

admitted testimony affected the Defendants’ substantial rights, the

jury’s damage award cannot stand. We, therefore, vacate that award

and remand for a new trial on damages only.

The Defendants contend that the trial court abused its

discretion in admitting non-expert opinion testimony from Kerry

Skinner (the representative of DIJO’s potential lender) and Jay

Turner (DIJO’s vice president) about the future profits DIJO lost

as a consequence of the Project’s termination. It is well-

established that a district court’s evidentiary rulings are

18
See Ham Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454,
462 (5th Cir. 1995).

10
entitled to substantial deference and are not subject to reversal

on appeal absent a clear abuse of discretion.19 We address each

witness in turn.

1. Kerry Skinner

Skinner is a financial consultant with advanced degrees in

economics and extensive experience in real estate finance. During

the relevant period, he served as DIJO’s primary contact at ORIX

USA Corporation (“ORIX”), a commercial lender which was planning to

provide DIJO’s construction loan for the hotel. Skinner testified

that, based on projected earnings of $1 million per year, the value

of the Project to DIJO was $8,000,007 —— not, strictly speaking,

that the lost profits were $8 million.20 More to the point,

Skinner’s testimony revealed that he had little significant actual

knowledge about DIJO and its operations. Thus, argue the

Defendants, Skinner’s lay opinion testimony about DIJO’s financial

loss should have been excluded.

Federal Rule of Evidence 701 was amended in 2000 to prohibit

lay witnesses from offering opinions based on “scientific technical

or other specialized knowledge within the scope of Rule 702.”21 We

have previously recognized that “the amendment did not place any

19
Doddy, 101 F.3d at 459.
20
The district court allowed Skinner to proffer this testimony
over the Defendants’ objection to Skinner “offering testimony as to
what th[e] hotel could generate.”
21
Texas A&M Research Found. v. Magna Transp., Inc., 338 F.3d
394, 403 n.12 (5th Cir. 2003).

11
restrictions on the preamendment practice of allowing business

owners or officers to testify based on particularized knowledge

derived from their position.”22 Nevertheless, it has always been

the rule that lay opinion testimony may be elicited only if it is

based on the witness’s first-hand knowledge or observations.23 This

foundational requirement helps to eliminate the risk that a party

will circumvent the reliability requirements set forth in Federal

Rule of Evidence 702 by adducing expert testimony in lay witnesses’

clothing.24

Based on his own admissions on the stand, Skinner simply did

not have the requisite first-hand, personal knowledge about DIJO

and the Project necessary to qualify as a Rule 701 opinion witness.

His opinion about what the Project “could” generate was based on

preliminary income figures and other information that he had

received from Bursley. Skinner performed his own appraisal, but

nothing in the record indicates that this was based on his own

independent knowledge or observations.

It is telling that DIJO responds to this not with evidence of

Skinner’s involvement with DIJO or the Project, but only by

22
Id. (emphasis added) (citing Tampa Bay Shipbuilding & Repair
Co. v. Cedar Shipping Co., 320 F.3d 1213, 1222-23 (11th Cir.
2003)).
23
FED. R. EVID. 701 advisory committee’s note to 1972 proposed
rules. See also United States v. Rea, 958 F.2d 1206, 1215 (2d Cir.
1992).
24
See FED. R. EVID. 701 advisory committee’s note to 2000
amendments.

12
emphasizing Skinner’s substantial business experience. DIJO states

that, for approximately twenty years, Skinner has been involved in

commercial real estate financing, including work on hotel projects.

Such generic industry experience does not pass Rule 701 scrutiny.

DIJO never attempted to qualify Skinner as an expert; and a lay

witness who was never employed by or directly involved in a

business is unlikely to have the type of first-hand knowledge

necessary to provide reliable forecasts of furture lost profits.

The further removed a layman is from a company’s day-to-day

operations, the less likely it is that his opinion testimony will

be admissible under Rule 701.25

DIJO cites only two cases in which an individual who was not

a current or former employee, officer, or director of a business

was permitted to provide lay opinion testimony about the company’s

lost profits, neither of which helps DIJO. In In re Merritt Logan,

Inc.,26 the plaintiff company’s principal shareholder, Logan, was

permitted to testify about the company’s lost profits.27 The facts

recited in that opinion demonstrate that Logan was not a passive,

outside shareholder; he was intimately involved with the

25
Compare Mississippi Chem. Corp. v. Dresser-Rand Co., 287
F.3d 359, 373-74 (5th Cir. 2002); Securitron Magnalock Corp. v.
Schnabolk, 65 F.3d 256, 265 (2d Cir. 1995); State Office Sys., Inc.
v. Olivetti Corp. of Am., 762 F.2d 843, 846 (10th Cir. 1985).
26
901 F.2d 349 (3d Cir. 1990).
27
Id. at 360.

13
investments and management of the business.28 Thus, the Third

Circuit correctly concluded that Logan could provide lay opinion

testimony, given his personal knowledge of the enterprise.

Likewise, in Teen-Ed, Inc. v. Kimball Int’l, Inc.,29 the Third

Circuit decided that the appellant Teen-Ed’s licenced public

accountant, Zeitz, could provide lost profits opinion testimony.30

Zeitz’s testimony was based on the personal knowledge of Teen-Ed’s

balance sheets, which Zeitz had acquired first-hand as Teen-Ed’s

accountant and bookkeeper. This, the court concluded, qualified

Zeitz as a “witness eligible under Rule 701 to testify to his

opinion of how lost profits could be calculated and to inferences

that he could draw from his perception of Teen-Ed’s books.”31 Logan

and Zeitz —— but not Skinner —— were situated in positions

comparable to in-house employees.

Given Skinner’s total lack of direct and particularized

knowledge about DIJO, this was not a close evidentiary call. We

therefore conclude that the district court abused its discretion

when it allowed Skinner to venture an opinion about DIJO’s lost

profits.

This does not end our inquiry, though, because we reverse

28
See id. at 354-55.
29
620 F.2d 399 (3d Cir. 1980).
30
Id. at 403.
31
Id.

14
judgments for improper evidentiary rulings only when a challenged

ruling affects a party’s substantial rights.32 In the instant

context, however, this requires no great leap: Skinner’s testimony

valued the Project at $8,000,007, and the jury awarded DIJO an even

$8 million in lost future profits. This virtually complete

convergence convinces us that the jury relied almost entirely on

Skinner’s erroneously admitted testimony in reaching its damages

award. Indeed, after Skinner was allowed to testify, DIJO decided

not to call its damages expert, who, based on his written report,

was expected to testify that the Project was only worth

approximately $4.3 million.

Furthermore, nothing else in the record could reasonably

sustain an $8 million lost profits award. DIJO maintains that

Bursey’s testimony —— which at different times projected revenues

of between $700,000 and $1 million per year —— provides independent

support for the $8 million damages award. At oral argument,

though, DIJO’s counsel admitted that Skinner was the only witness

at trial to express an $8 million figure. Not only do we find it

hard to believe that Bursey’s testimony alone could have enabled

the jury to extrapolate an $8 million lost profits calculation, but

we doubt that this evidence satisfies Mississippi’s “reasonable

certainty” standard for calculating lost future profits.33

32
Gabriel v. City of Plano, 202 F.3d 741, 745 (5th Cir. 2000).
33
See Lovett v. E.L. Garner, Inc., 511 So.2d 1346, 1353 (Miss.
1987) (“In calculating loss of future profits, such loss is that of

15
 We, therefore, hold that the improvident admission of

Skinner’s opinion testimony requires vacature of the quantum of the

jury’s damage award and remand for a new trial solely on the issue

of damages.

2. Jay Turner

The Defendants also contend that the district court erred when

it permitted Turner to testify about DIJO’s lost profits. Turner

testified that the proposed hotel would have generated a net income

of $633,000 per year. Based on that projection, he offered his

opinion that the business would have been worth $5.45 million if

sold in its fifth year. Turner was one of DIJO’s two principals,

and his estimates were based on his own involvement in developing

the Project. In light of the foregoing discussion of the

boundaries of Rule 701, we cannot conclude that the district court

abused its discretion in admitting Turner’s lost profits

testimony.34

net profits as opposed to gross profits. To ascertain net profits,
a party must deduct such items as overhead, depreciation, taxes and
inflation. Further, future profits should always be discounted at
an appropriate rate to arrive at present value. And, finally, the
plaintiff must mitigate damages if he is able to do so.”)
(citations omitted).
34
Because we are remanding this matter for a new trial on
damages, we need not decide whether Turner’s testimony, standing
alone, could satisfy Mississippi’s reasonable certainty standard
for the calculation of lost profits. See supra note 33.

16
 III. CONCLUSION

Because we vacate the damages awarded by the jury and remand

for a new trial on damages only, we need not reach the other issues

raised by the Defendants on appeal. In conclusion, we AFFIRM the

district court’s judgment insofar as it reflects the jury’s verdict

of liability. We REVERSE the judgment as to damages, however,

VACATE the jury’s award, and REMAND for a new trial on the issue of

damages only.

AFFIRMED in PART; REVERSED and VACATED in PART; and REMANDED.

17