United Brake Systems, Inc. v. American Environmental Protection, Inc.

UNITED BRAKE SYSTEMS, INC., dba )
MIDLAND GRAU HEAVY DUTY )
SERVICE CENTER, ECHLIN, INC., )
BRAKE SYSTEMS, INC. and FRICTION )
MATERIALS, INC., )
)
Plaintiffs/Appellees, ) Appeal No.
) 01-A-01-9610-CH-00448
v. )
) Davidson Chancery
AMERICAN ENVIRONMENTAL ) No. 94-2864-III
PROTECTION, INC., )
)
Defendant/Appellant, )
)
FILED
and )
) April 23, 1997
LEE BARR, )
) Cecil W. Crowson
Defendant/Appellee. ) Appellate Court Clerk

COURT OF APPEALS OF TENNESSEE

MIDDLE SECTION AT NASHVILLE

APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE ROBERT S. BRANDT, CHANCELLOR

PHILIP M. KIRKPATRICK
JOHN E. ANDERSON
Stewart, Estes & Donnell
SunTrust Center
424 Church Street, 14th Floor
Nashville, Tennessee 37219-2392
ATTORNEYS FOR PLAINTIFFS/APPELLEES

JOE F. GILLESPIE, JR.
6408-A Clarksville Highway
Joelton, Tennessee 37080
ATTORNEY FOR DEFENDANT/APPELLEE
LEE BARR

JOSEPH L. LACKEY, JR.
Lackey, Rodgers, Price & Snedeker
1230 First American Center
Nashville, Tennessee 37238-1230
ATTORNEYS FOR DEFENDANT/APPELLANT
AMERICAN ENVIRONMENTAL PROTECTION, INC.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

SAMUEL L. LEWIS, JUDGE
 OPINION

This is an appeal by defendant/appellant, American Environmental Protection,
Inc. (“AEP”), from a jury verdict rendered in the Davidson County Chancery Court.
The jury determined AEP was liable to plaintiff/appellee, United Brake Systems, Inc.
(“UBS”)1, for misrepresentation, conversion, and unfair competition. In addition , the
court directed a verdict against AEP on UBS's breach of contract claim. The jury
awarded UBS $130,892.00, court costs, attorney's fees, and $100,000.00 in punitive
damages. The jury also determined AEP was liable to defendant/appellee, Lee Barr,
for misrepresentation and awarded him $25,000.00 plus legal fees. The facts out of
which this matter arose are as follows.

I. Facts and Procedural History

UBS maintained a facility in Nashville where it stocked brake linings, brake
shoes with linings, and other brake hardware. The facility nearly burned down on 13
July 1994. There were 57,040 brake linings stored in the facility at the time of the
fire. The inventory included Gray-rock and BT branded brake linings and 815 lined
brake shoes all of which were ready to sell.2 There was substantial damage to the
building and the contents as a result of the fire and the firefighting efforts. The
damage to the brake linings was so severe UBS's research and development staff
determined the brake linings did not meet UBS's quality levels.3

Following the fire, UBS began obtaining bids for the demolition of the facility
and the removal of debris. UBS contacted AEP about such a bid. Bill Halliburton
of UBS spoke with Don Turner of AEP about a contract. Halliburton stated an
essential requirement of the contract was that AEP take the brake linings to a landfill.

1
There were three o ther plaintiffs in this case: Echlin, Inc., Friction M aterials, Inc. and Bra ke Systems,
Inc. Echlin, Inc. owns the other plaintiffs.

2
UBS utilizes valuable trademarks. Those trademarks are “Gray-rock” and “BT.” The registered owner of
the BT tradem ark is Friction Materials, Inc., and the registered owner of Gray-rock is Brake Systems, Inc. The
brand name of the lining is printed on the underside of the brake lining. UB S has expended substantial sums over the
years to prom ote their tradema rk. No co mpany other than UBS can utilize the Gray-rock and B T trademarks.

3
Exposure to fire, water, and smoke diminishes the integrity and quality of the brake linings. Once the
water soaks into the linings, they must be placed in an oven at 350 degrees Fahrenheit for twenty-four hours. The
use of wet linings can result in “rust jacking.” This occurs when moisture is transferred from the block to the metal
and rust develops. A wet lining can come loose and result in brake failure.

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He explained to Turner UBS did not want the damaged brake linings containing the
Grey-rock and BT trademarks to get into the marketplace. Turner told Halliburton
AEP would take the brake linings to an approved landfill. AEP and UBS entered into
a contract on 21 July 1994. AEP prepared the contract which stated, in part, as
follows: “All salvage rights to all items within the footprint of the demolished
building are granted to [AEP] WITH THE EXCEPTION OF ANY AND ALL
BRAKE LININGS WHICH SHALL BE PROPERLY DISPOSED OF AT AN
APPROVED LANDFILL.”

After entering into the contract, Halliburton met with Turner and Terry
Reeves, also of AEP, at the UBS facility. Reeves asked about the importance of
hauling the brake linings to an approved landfill. Once again, Halliburton explained
UBS’s concerns over products liability exposure and recognition of the registered
trademarks. Reeves guaranteed Halliburton the linings would go to the landfill.

On Saturday morning, 23 July 1994, Halliburton and two other UBS
employees removed 5,600 brake linings from the building. According to Halliburton
and a comprehensive inventory control system, there were 57,040 brake linings in the
building on the date of the fire. Thus, there were 51,440 linings inside the facility
when Halliburton left on Saturday. When Halliburton went to the premises on
Monday, 25 July 1994, it was evident that most of the contents of the facility had
been removed.

On that same Saturday, Reeves contacted Lee Barr and presented him with a
deal. Reeves told Barr he could have a forklift, parts, and a compressor in exchange
for Barr's grade-all. Reeves also told Barr he could take the brake linings as long as
he did not sell them in Nashville.

Thereafter, Barr's employees began hauling off materials including the brake
linings. According to Barr’s testimony, he hauled off 2,000 boxes of linings with
approximately twenty-six linings in each box.4 Barr testified Reeves and Bobby

4
In his deposition, Barr testified there were twenty-six linings in each box. At trial, he claimed he had not
stated there we re twenty-six linings pe r box and that mo st of the boxes were small. W hen co nfronted with his
deposition testimony, Barr claimed he did not know if the deposition statement was true or not but that some of the
box es were small.

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Hargrove, an AEP employee, were present at the facility and saw Barr's employees
loading the brake linings onto his truck. In addition, he stated Reeves allowed an
AEP employee to help Barr load the brake linings. On Sunday, 24 July 1994,
Hargrove left and told Barr to “lock the gate.” When Barr had finished, he locked the
gate and left. Barr later sold some of the brake linings in Indiana to Tim Gedeck,
Mike Hannowsky, and Russell’s Trailer Sales.

After AEP completed the cleanup, Scott Howell of Circle City Friction, a
competitor of UBS contacted Halliburton. Howell informed Halliburton that a Tim
Gedeck had approached Howell and offered to sell him what appeared to be UBS
brake linings in burnt boxes. After his conversation with Howell, Halliburton was
concerned the inferior, unapproved brake linings had gotten into the marketplace.
Halliburton contacted Gedeck in Indianapolis. Gedeck advised Halliburton he had
some UBS material which he intended to sell. Halliburton told him the linings were
unapproved and were not to be sold. Gedeck advised Halliburton he was going to sell
them anyway. Halliburton then contacted Reeves and informed him the brake linings
from the UBS fire scene had appeared in the Indianapolis area and were being offered
for sale. Reeves insisted Halliburton was mistaken because AEP had taken the brake
linings to the landfill. Halliburton then contacted UBS’s legal department who
retained counsel in Indianapolis and in Nashville in order to recover the linings as
quickly as possible.

UBS filed the instant suit on 21 September 1994. UBS alleged AEP was liable
to UBS for misrepresentation, breach of contract, conversion, and violating the
Lanham Act. UBS also alleged Barr was liable for violating the Lanham Act. AEP
filed an answer, a cross-complaint, and a counter-complaint. AEP denied any
wrongdoing and claimed it never authorized Barr to remove the brake linings from
the facility. It alleged Barr was liable for breach of contract and for violating the
Lanham Act. Finally, AEP alleged it performed all the terms of the contract between
it and UBS and UBS breached the contract when it refused to pay AEP. Barr
responded and claimed AEP had authorized him to take the linings. In addition, he
alleged AEP was liable to him for fraud.

AEP and Barr moved for a directed verdict on UBS's Lanham Act claims at

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the conclusion of UBS’s proof and at the conclusion of all the proof. The chancellor
denied the motions. At the close of all the proof, UBS moved for a directed verdict
on its breach of contract claim. The court granted UBS’s motion and also directed
a verdict against AEP on its breach of contract claim against UBS. The remainder of
the case went to the jury. The jury made the following findings: 1) UBS established
by a preponderance of the evidence that AEP was liable for misrepresentation,
conversion, and unfair competition; 2) UBS did not establish by a preponderance of
the evidence that Barr was liable for conversion and unfair competition; 3) AEP did
not establish by a preponderance of the evidence that Barr was liable for breach of
contract; and 4) Barr established by a preponderance of the evidence that AEP was
liable for misrepresentation. The jury then awarded UBS $130,892.00 damages
which included attorney's fees, and court costs and awarded Barr $25,000.00 plus
attorney fees. Finally, the jury determined AEP's actions entitled UBS to punitive
damages. After a separate hearing, the jury awarded UBS $100,000.00 in punitive
damages.

AEP moved to set aside the verdict and to grant AEP a new trial or a remittitur
after the court entered its final judgment in accordance with the jury verdict. UBS
filed a motion requesting discretionary costs and a motion to declare the case an
exceptional case so the court could award it attorney's fees under the Lanham Act.
Thereafter, the court awarded UBS $3,141.75 in discretionary costs, declared the case
was exceptional under the Lanham Act, and denied AEP's motions for a new trial.
AEP filed a notice of appeal on 24 May 1996.

II. Directed Verdicts

When reviewing a decision on a motion for directed verdict, this court’s
standard of review is the same as the standard used by the trial court in passing upon
the motion. Underwood v. HCA Health Servs. of Tenn., Inc., 892 S.W.2d 423, 425
(Tenn. App. 1994). Courts reviewing a motion for directed verdict may not weigh the
evidence or evaluate the credibility of witnesses. Id.
In ruling on the motion, the court must take the strongest legitimate
view of the evidence in favor of the non-moving party. In other words,
the court must remove any conflict in the evidence by construing it in
the light most favorable to the non-movant and discarding all

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 countervailing evidence. The court may grant the motion only if, after
assessing the evidence according to the foregoing standards, it
determines that reasonable minds could not differ as to the conclusions
to be drawn from the evidence. If there is any doubt as to the proper
conclusions to be drawn from the evidence, the motion must be denied.
Eaton v. McLain, 891 S.W.2d 587, 590 (Tenn. 1994) (citations omitted).

A. Whether the court erred in not directing a verdict in favor of AEP
as to UBS’s cause of action under the Lanham Act, 15 U.S.C. §§
1114(1), 1125.

Congress’s intent when enacting the Lanham Act was “to regulate commerce
within the control of Congress by making actionable the deceptive and misleading use
of marks in such commerce [and] to protect persons engaged in such commerce
against unfair competition.” 15 U.S.C. §1127 (1988 & Supp. 1992). The Lanham
Act provides in pertinent part as follows:
(1) Any person who, on or in connection with any goods or services,
or any container for goods, uses in commerce any word, term, name,
symbol, or device, or any combination thereof, or any false description
of origin, false or misleading description of fact, or false or misleading
representation of fact, which -
(A) is likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such
person with another person, or as to the origin, sponsorship, or
approval of his or her goods, services, or commercial activities by
another person, or
(B) in commercial advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or her
or another person’s goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or
she is or is likely to be damaged by such act.
Id. §1125(a)(1) (Supp. 1992). Section 1114 of the Lanham Act provides:
(1) Any person who shall, without the consent of the registrant -
(a) use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark in connection with the sale,
offering for sale, distribution, or advertising of any goods or
services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or
....
shall be liable in a civil action by the registrant for the remedies
hereinafter provided.
Id. § 1114(1) (1988 & Supp. 1992).

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 AEP insists the provisions of the Lanham Act did not apply to the facts of this
case because everybody knew the linings were salvaged from a fire in Nashville.
AEP relies on Alfred Dunhill Ltd. v. Interstate Cigar Co., 499 F.2d 232 (2d Cir.
1974), for the proposition that the sale of salvaged materials does not violate the
Lanham Act. The facts of Dunhill, however, are distinguishable from the facts of this
case. In Dunhill, the lawful owner of the goods at issue voluntarily permitted the
insurance company to salvage and sell the goods. Id. at 234. In this case, UBS took
all the necessary steps in their contract with AEP to ensure that it conveyed no
salvage rights in the linings to AEP and that none of the linings would ever be sold
as salvage or otherwise. AEP's claim the fact that the purchasers understood the
linings were salvaged from a Nashville fire in no way negates the application of the
Lanham Act because the goods were not salvage.

AEP's second argument is that UBS was not entitled to monetary damages
because the Lanham Act requires a plaintiff to prove actual confusion to receive
monetary damages and UBS failed to make such a showing. Assuming actual
confusion is a necessary element, it is the opinion of this court that UBS satisfied its
burden. To explain, AEP argues “everybody that had any contact with this product
knew that it was salvage from a fire or auction in Nashville.” Because the linings
were not salvage, a person who believed the linings were salvage would have been
actually confused. In addition, the record established Gedeck and Hannowsky were
actually confused as to other aspects of the transaction. They believed the linings
were quality products and did not know UBS had deemed the linings unfit for sale
and had contracted with AEP to take them to a landfill. Second, they believed Barr
properly obtained the brake linings and had the authority to sell them. To the
contrary, Barr could not have had any title to the linings because AEP did not have
any title. As explained by the trial court, the contract, as a matter of law, clearly
stated AEP had no salvage rights whatsoever to the linings.5 As a converter, AEP

5
In its memorandum opinion, the trial court wrote:
The defendant AEP puts forth several reasons why this case should not be held an
exceptional one. First, AEP is still under the mistaken impression that the goods it traded were
salvaged goods. It continues to refer to the brake shoes and brake linings sold by Lee Barr as
salvage, citing that “[o]bviously there was no confusion that these were salvaged products . . . .”
Def. Reply Brief p.2. T he brake shoes and linings were not salvage. T hey were specifically
designated to be properly disposed of in an approved landfill in the contract between AEP and
[UBS]. The plaintiff's research department decided that these products were unfit for use and not
salvageable. Therefore, the products were not ap proved for sale, even as salvaged goods.

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obtained no title to the linings and could not have transferred any title to Barr.
Goodwin v. Taenzer, 122 Tenn. 101, 119 S.W. 1133 (1909); McDaniel v. Adams, 11
S.W. 939, 940, 87 Tenn. 756, 757-58 (1889). The fact that Gedeck and Hannowsky
believed they received quality products and Barr had authority to sell the linings was
actual confusion.

It is the opinion of this court that the chancery court did not err in failing to
direct a verdict in favor of AEP. There was sufficient evidence in the record such that
jurors could reasonably infer actual confusion. Given such evidence, it would have
been error for the court to have directed a verdict in AEP's favor.

B. Whether the court erred in directing a verdict in favor of UBS and
against AEP on the breach of contract claims.

Taking the strongest legitimate view of the evidence in favor of AEP, the non-
moving party, there were three different breaches of the contract between UBS and
AEP. UBS breached the contract by interfering with AEP’s exclusive control of the
facility and by failing to compensate AEP for its services. AEP breached the contract
when it failed to take all the linings to a landfill.

“[T]here can be no recovery for damages on the theory of breach of contract
by the party who himself breached the contract.” Santa Barbara Capital Corp. v.
World Christian Radio Found., Inc., 491 S.W.2d 852, 857 (Tenn. App. 1972). “A
party who has materially breached a contract is not entitled to damages stemming
from the other party’s later material breach of the same contract. Thus, in cases
where both parties have not fully performed, it is necessary for the courts to
determine which party is chargeable with the first uncured material breach.”
McClain v. Kimbrough Const. Co., 806 S.W.2d 194, 199 (Tenn. App. 1990) . The
determination of whether a breach is material requires consideration of the following
factors:
(a) the extent to which the injured party will be deprived of the
benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to
perform will suffer forfeiture;

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 (d) the likelihood that the party failing to perform or to offer to
perform will cure his failure, taking account of all the circumstances
including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform
or to offer to perform comports with standards of good faith and fair
dealing.
Id. (quoting Restatement (Second) of Contracts § 241 (1979)).

After applying the law to the facts, it is the opinion of this court that the trial
court did not err. To explain, the breach resulting from UBS’s failure to provide AEP
with exclusive control of the facility was not material. There was no evidence that
UBS’s actions deprived AEP of the benefits it reasonably expected to receive. In
addition, there was no evidence that UBS acted in any manner other than in good
faith. UBS’s failure to pay and AEP’s failure to dump the linings in a landfill were
both uncured and material breaches. AEP’s breach, however, occurred prior to
UBS’s. Thus, it follows that the trial court properly granted a directed verdict in
favor of UBS and against AEP because AEP could not recover for breach of contract
based on conduct occurring after having materially breached the contract itself.

AEP also claims the court should not have directed a verdict because it should
have allowed the jury to consider its defense of impossibility of performance. This
claim is without merit. “Impossibility of performance caused by the promisor or by
those in privity with him, or by developments which he could have prevented or
avoided or remedied by appropriate corrective measures, does not exclude him from
liability for his nonperformance of the contract.” Tucker v. Hundley, 452 S.W.2d
658, 660 (Tenn. App. 1969). AEP could have fully preformed the contract and taken
the linings to the landfill. Its agents admitted such. It could have had a representative
present to control the premises and prevent Lee Barr from taking the linings. There
was no impossibility. Any impediment to full performance was of AEP’s own
making. In such a case, impossibility is no defense. The court properly directed a
verdict against AEP.

III. Whether the chancery court erred in not granting AEP a new trial.

AEP claims the court erred in not granting it a new trial for eight different

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reasons. We address each reason separately.

A. There was no proof that AEP violated the Lanham Act.

The proof clearly established AEP violated the Lanham Act. Section 1125(a)
makes any misrepresentation of fact which results in confusion as to affiliation,
connection, association, source, origin, sponsorship or approval actionable. Here, the
evidence established those who purchased the brake linings were not told the
following: 1) UBS determined the brake linings were damaged or inferior; 2) UBS
intended to send the brake linings to a landfill; 3) AEP converted the brake linings
and had no rights whatsoever to them; 4) UBS had taken steps to disassociate itself
with the linings such that the linings were to have been buried in a landfill to assure
quality control; and 5) the product carried no express or implied warranties by the
manufacturer.
A product is not truly “genuine” unless it is manufactured and
distributed under quality controls established by the manufacturer.
The Lanham Trademark Act affords the trademark holder the right to
control the quality of the goods manufactured and sold under its
trademark. “The actual quality of the goods is irrelevant; it is the
control of the quality that a trademark holder is entitled to maintain.”
Shell Oil Co. v. Commercial Petroleum, Inc. 928 F.2d 104, 107 (4th Cir. 1991)
(quoting El Greco Leather Prods. Co. v. Shoe World, 806 F.2d 392, 395 (2d Cir.
1986)). The linings Barr sold were not genuine Grey-rock or BT linings according
to this definition because they were not distributed under UBS’s quality controls. See
id. Therefore, the purchasers were actually confused as to the genuineness as well as
to the origin of the linings.

We are of the opinion UBS proved their claim under the Lanham Act. The
arguments of AEP to the contrary fail. AEP’s actions prevented UBS from
controlling the quality of its goods sold under its trademark and associated UBS with
an unapproved, inferior product. UBS had no desire to have their trademark and
reputation associated with a product AEP was required to take to the landfill. AEP
was responsible for placing unapproved, inferior goods bearing UBS’s trademark and
other indicia of UBS into the stream of commerce. The verdict of the jury regarding
the Lanham Act was in all respects proper given the facts and the law. It was not

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error to deny a new trial to AEP on the Lanham Act issue.

B. The jury’s verdict was inconsistent in that it found AEP had
violated the Lanham Act, but also found Lee Barr had not violated
the Lanham Act.

AEP insists the chancery court should have granted a new trial because the
jury was “obviously confused” on the Lanham Act claim. AEP has failed to cite any
case law for this proposition and did not provide this court with any proof the jury
was confused or did not follow the court’s charge on the Lanham Act claim against
AEP. We have fully discussed the Lanham Act and think it is clear AEP is liable for
its violations of the Lanham Act. We find nothing in this record establishing the jury
was confused.

C. The jury’s initial award in the amount of $130,892.00 dollars and
its award of punitive damages was improper.

The jury awarded UBS compensatory damages, attorney's fees, and punitive
damages. AEP claims the compensatory damage award was improper because the
jury relied solely on the damages proved by UBS for the Lanham Act violation
including attorney's fees. AEP also argues the punitive damages were improper
because they were based on the jury's compensatory award which was based on the
violations of the Lanham Act and the Lanham Act does not provide for punitive
damages. Finally, AEP argues the award of attorney’s fees was improper.

We find no error in the award of damages. As to the compensatory damages,
there is no evidence the jury based its award solely on the Lanham Act violations. At
the close of the trial, the court entered a directed verdict in favor of UBS on its breach
of contract claim against AEP. In addition, the jury determined on the verdict form
that AEP was liable to UBS as a result of AEP's misrepresentation, conversion, and
unfair competition. Thereafter, the jury awarded UBS $130,892.00 plus court costs
and additional attorney's fees. The award was in response to the following question
on the verdict form: “What damages do you award [UBS] against [AEP]?” There is
no reason to believe the jury's award was intended to compensate UBS for anything
but all of the actions committed by AEP. Moreover, AEP has failed to cite any cases
supporting the proposition that the compensatory damages were improper under the

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state law claims or the Lanham Act claim.

UBS argues and we agree that punitive damages were appropriate in this case.
The jury made the determination UBS was entitled to punitive damages. They
determined by clear and convincing evidence that AEP acted intentionally,
maliciously, recklessly, or fraudulently, and the trial court agreed. AEP’s claim that
punitive damages were improper is, in our opinion, incorrect. There was an
abundance of proof of fraud, conversion, and other intentional acts by AEP. The
court properly charged the jury as to punitive damages and held a proper hearing
during which the jury heard applicable financial information. There was no error.

As to the attorney’s fees, the court charged the jury as follows:
Under the Lanham Act, if liability exists, the Court may award
attorney fees in an exceptional case. An exceptional case is one
wherein the tortuous actions of the defendant are malicious,
fraudulent, deliberate or willful. If you find that the actions of one or
more of the defendants in this case violated either of the sections in the
Lanham Act referred to above, and that such conduct was malicious,
fraudulent deliberate or willful, you shall so indicate, for the court’s
purpose on your jury verdict form.
The jury indicated on the verdict form UBS had established their case against AEP
for unfair competition and UBS should recover all attorney’s fees. In his
memorandum opinion of 26 April 1996, the trial court concluded there was
overwhelming proof that AEP acted intentionally, deliberately, and with bad faith.
Therefore, the trial court determined this to be an exceptional case under the Lanham
Act and awarded attorney’s fees. We can find no error.

D. The court's instructions as to the directed verdict in favor of UBS
confused the jury

AEP argues the court failed to properly explain to the jury its reasons for
directing the verdict on the breach of contract issue. Specifically, AEP contends the
court’s instructions failed to properly explain the effect of the directed verdict on
Barr’s misrepresentation claim against AEP. We disagree. The court not only
explained why it granted the directed verdict, but made it clear the only issue it
decided was the contract issue between UBS and AEP. The chancery court stated:
I do need to explain one thing to you before we have closing

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 arguments. There is a procedure known as a directed verdict in
which the Court can decide a particular issue or part of a case or all of
the case if the Court determines there are no facts in dispute. In this
case, I have decided that [UBS] has proven its claim against [AEP] on
the contract claim, breach of contract.
The contract, you will recall, was that it required [AEP] to take the
brake shoes to the landfill. They did not get to the landfill, for
whatever reason, which you’ll decide, my conclusion is that that
constitutes a breach of the contract and as a result, that claim, you will
no longer have to decide, that part of the suit.
Likewise, you will not have to decide the part of the suit in which
[AEP] has sued [UBS] for the contract price because having breached
the contract itself, [AEP] is not entitled to recover the contract price.
Other than that, all the other parts of the case will be for you to decide.
It is the opinion of this court that these instructions properly informed the jurors of
their duties. In addition, the verdict form included a space for the jury’s decision in
Barr’s misrepresentation claim against AEP and did not contain any questions
regarding AEP’s and UBS’s breach of contract claims. AEP’s argument is without
merit.

E. The argument of UBS's counsel was erroneous and the conduct of
Lee Barr and his relatives during the course of the trial were
prejudicial to AEP resulting in a verdict based upon passion,
prejudice, and caprice.

AEP makes the following argument in its brief:
To further compound the ultimate effect of the Court directing a
verdict against Defendant AEP the Plaintiff's counsel made a closing
argument that was highly prejudicial and totally outside of the record
that stated as follows:
I need to talk to you about the damages in this case. We have
proven, we submit, by a preponderance of the evidence, breach of
contract which the Court has directed a verdict on, fraud,
conversion and unfair competition under the Lanham Act by false
designation of origin and trademark infringement without the
quality control of the Plaintiffs. It is for the Plaintiff to determine
that specific quality control. They did so and the Defendants
actions violated the Lanham Act. (emphasis added)

AEP argues the underlined language “was so highly prejudicial and inaccurate the
Court should have granted a new trial in this cause.” It is the opinion of this court
that the language quoted above is not misleading particularly if the underlined portion
is read in conjunction with the rest of the sentence. Once the entire sentence is read,
it becomes clear UBS's attorney was simply stating UBS had satisfied its burden as

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to all of the claims and the court had directed a verdict as to one of those claims.
Such a statement is neither inaccurate nor highly prejudicial.

AEP also contends the actions of Lee Barr and his family prejudiced AEP's
case. Specifically, AEP argues on one occasion Reeves noticed the Barr's carrying
on a conversation with a juror about a mutual friend. AEP claims: “In view of this
verdict an inference can be drawn that this type of improper contact with the jury was
prejudicial to AEP.” We do not believe such an inference can be so easily drawn.
We find nothing in this record to suggest that the jury rendered a verdict based upon
passion, prejudice, or caprice. To the contrary, we are of the opinion the jury verdict
was in all respects fully supported by the evidence.

F. The evidence as to the damages sustained from loss of profit by
UBS was entirely speculative.

“[L]ost or expected profits are recoverable as damages for breach of contract,
provided, they can be proved with reasonable certainty, and are not in fact remote or
speculative.” Morristown Lincoln Mercury, Inc. v. Lotspeich Publishing Co., 42
Tenn. App. 92, 102, 298 S.W.2d 788, 793 (1956). It is undisputed that for purchasers
to obtain BT or Gray-rock linings other than those AEP converted, the purchasers
would have had to purchase the linings through an authorized distributor of UBS. It
is also undisputed that UBS would have manufactured and sold those linings. Thus,
the sales of the linings which AEP converted and which were not recovered displaced
other UBS sales.

UBS presented proof regarding its inventory system at trial. The last
inventory taken prior to the fire was admitted in evidence and inventory documents
were referred to by Halliburton. The testimony revealed that on Saturday there were
51,440 linings to be taken to the landfill and on Wednesday there were approximately
3,200 linings at the front of the building. UBS recovered 19,220 linings from Gedeck
and Barr, but never recovered the remaining 29,020 linings. Additionally, UBS never
recovered 200 pairs of complete heavy duty brake shoes which Barr sold to Russell’s
Trailer Sales. There was clear and competent evidence regarding the average price
per set, the percentage profit, and the net profit per set. This evidence proves with

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sufficient certainty the amount of lost profits. Finally, the court charged the jury as
to the law of lost profits under the Lanham Act. The court specifically instructed the
jury that speculative damages were not permitted. He stated: “You are not permitted
to award a party speculative damages, which means compensation for future loss or
harm which, although possible, is conjectural or not reasonably certain.” The court
charged the jury that UBS had the burden of establishing by a preponderance of the
evidence all facts necessary to prove their claims and damages.

Moreover, we find no merit to AEP’s argument that no consideration was
given to the fact that some linings were at the facility on Wednesday, 28 July 1994.
Halliburton testified that there were approximately 3,200 linings in the facility on 28
July and that UBS’s computation of lost profits assumed AEP took 3,200 linings to
the landfill. The truck drivers testified on behalf of AEP and presented no evidence
to contradict Halliburton’s testimony. AEP’s arguments are without merit.

G. There was no proof in the record to support the jury's verdict of
$25,000.00 in favor of Lee Barr

It is AEP’s contention that the trial court erred in not granting it a new trial or
a remittitur because the jury’s verdict “was totally speculative and not founded on any
evidence in the record.” “Courts are encouraged to exercise caution in ordering a new
trial based on the size of a jury verdict and should, if at all possible, utilize the remedy
of remittitur.” Thrailkill v. Thrailkill, 879 S.W.2d 836, 840 (Tenn. 1994). The
chancery court correctly denied Plaintiffs’ motion for a new trial on this issue,
however; it is the opinion of this court that the chancery court should have entered
a remittitur. When reviewing a jury award approved by the chancery court this court
follows the standard of review set forth in Rule 13(d) of the Tennessee Rules of
Appellate Procedure. Id. at 841, 843; see Benson v. Tennessee Valley Elec. Coop.,
868 S.W.2d 630, 640 (Tenn. App. 1993). That rule provides:
(d) Findings of Fact in Civil Actions. Unless otherwise required by
statute, review of findings of fact by the trial court in civil actions shall
be de novo upon the record of the trial court, accompanied by a
presumption of the correctness of the finding, unless the
preponderance of the evidence is otherwise. Findings of fact by a jury
in civil actions shall be set aside only if there is no material evidence
to support the verdict.
Tenn. R. App. P. 13(d) (West 1996).

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 “The proper measure of damages for fraud is that the injured party should be
compensated for actual injuries sustained by placing him or her in the same position
he or she would have been had the fraud not occurred. A plaintiff who alleges fraud
bears the burden of proving damages.” Harrogate Corp. v. Systems Sales Corp., 915
S.W.2d 812, 817 (Tenn. App. 1995) (citations omitted). The evidence revealed the
following. Barr purchased the grade-all given to Reeves pursuant to the trade
between Reeves and Barr for approximately $10,500.00. Barr testified the value of
the grade-all was between $25,000.00 and $30,000.00. Reeves valued the grade-all
at $18,000.00. Pursuant to the trade, Barr received certain tools and $16,000.00 from
the sale of a tow motor and the brake linings. Finally, Barr and his daughter testified
that the Barr’s and eight employees worked many hours removing items from the
facility. In addition, Barr testified that he incurred additional damages when the
frame to one of his trucks broke under the weight of the linings.

Thus, assuming the grade-all was worth $30,000.00, Barr lost $14,000.00 from
the trade and incurred certain other expenses. The problem is neither party has cited
any portions of the record which evidence the amounts of these other expenses.6
From Barr’s testimony we know that he and his family gave up their time, he had
employees to compensate, and had to pay for truck repairs. The problem is that
neither this court, the chancery court, nor the jury knew the value of these expenses.
In other words, Barr’s damages were $14,000.00 plus “X,” and the jury determined
“X” equaled $11,000.00. It is the opinion of this court that there is no material
evidence in the record to support this finding and the chancery court erred in not
entering a remittitur.

H. The court failed to charge the jury with AEP's request number
four.

AEP’s final argument is the court should have granted it a new trial because
it failed to charge the jury with AEP’s fourth request. AEP argues its fourth request
“would have in part given some explanation of the Courts [sic] action in directing the
verdict.” It is the opinion of this court that any error on the part of the chancery court

6
“This Court is not under any duty to minutely search a voluminous record to locate and examine matters
not identified by citation to the record.” England v. Burns Stone Co., 874 S.W .2d 32, 35 (T enn. App. 1993 ).

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in failing to charge the jury with AEP’s fourth request is harmless. To explain, given
our conclusion as to AEP’s other issues, it is clear the chancery court’s instructions
to the jury sufficiently explained the jurors’ duties. Thus, it was not necessary to
provide any further explanation. If there were any error, it was harmless and not a
basis for a new trial. See Tenn. R. App. P. 36(b).

IV. Conclusion

Therefore, it results that the judgment of the chancery court is affirmed in part,
reversed in part, and remanded. On remand, the chancery court shall enter a remittitur
reducing the award to Lee Barr by $5,000.00. Costs on appeal are taxed to
defendant/appellant, American Environmental Protection, Inc., and
defendant/appellee, Lee Barr.

____________________________________
SAMUEL L. LEWIS, JUDGE

CONCUR:

_____________________________________
HENRY F. TODD, P.J., M.S.

_____________________________________
BEN H. CANTRELL, J.

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