United States Court of Appeals
For the First Circuit
No. 01-1791
SEAHORSE MARINE SUPPLIES, INC.,
Plaintiff, Appellee,
v.
PUERTO RICO SUN OIL COMPANY,
Defendant, Appellant.
No. 01-1792
SEAHORSE MARINE SUPPLIES, INC.,
Plaintiff, Appellant,
v.
PUERTO RICO SUN OIL COMPANY,
Defendant, Appellee.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Pérez-Giménez, U.S. District Judge]
[Hon. Daniel R. Domínguez, U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.
Carlos A. Rodriguez-Vidal, with whom Goldman, Antonetti &
Cordova was on brief, for Puerto Rico Sun Oil Company.
Luis A. Oliver-Fraticelli, with whom Fiddler, Gonzalez &
Rodriguez was on brief, for Seahorse Marine Supplies, Inc.
July 9, 2002
COFFIN, Senior Circuit Judge. These appeals are the latest
chapter in a decade-long conflict between appellant/cross-appellee
Puerto Rico Sun Oil Company ("Sun Oil") and appellee/cross-
appellant Seahorse Marine Supplies, Inc. ("Seahorse"). The dispute
arose at the end of a long relationship between the parties, during
which Sun Oil had provided fuel, predominantly diesel, to Seahorse.
Seahorse sued Sun Oil, invoking the protections of the Petroleum
Marketing Practices Act ("PMPA"), 15 U.S.C. §§ 2801-41, and
contending that Sun Oil improperly terminated the parties'
relationship in violation of that statute. Seahorse prevailed at
trial, and Sun Oil now challenges the district court’s finding of
subject matter jurisdiction, the jury instructions, the admission
of certain expert testimony, and the denial of a motion for a new
trial. Seahorse cross-appeals and disputes the sufficiency of the
evidence as to its purported failure to mitigate damages. We
affirm in all respects.
I. Factual Background
Sun Oil, an oil refinery operating in Yabucoa, Puerto Rico,
and Seahorse, a marine supplies distributor and ship
repair/maintenance service, began their business relationship in
1983, when Seahorse started selling Sun Oil's unbranded fuel oil.1
On July 23, 1988, the parties executed a trial franchise agreement
expressly governed by the PMPA. Pursuant to that agreement, Sun
1
"Unbranded" and "branded," terms of art in the petroleum
industry, refer to whether fuel is sold under the trademark of the
refiner.
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Oil authorized Seahorse to use and display Sun Oil's trademark for
the purpose of identifying and advertising the source of the
product. In April 1989, Sun Oil terminated the trial franchise
agreement pursuant to the terms of the PMPA. The parties
negotiated during the following several months, and on September
30, 1989, entered a one-year agreement permitting Seahorse to
continue to sell the same fuel products under Sun Oil's trademark.
The agreement did not specifically mention the PMPA, but it
provided that it was "subject to interpretation and enforceability
under the laws of the Commonwealth of Puerto Rico and the laws of
the United States of America."2
As that agreement neared its end date, the parties agreed to
extend the agreement while they negotiated its renewal, and they
continued in that fashion through September 1991. On September 18,
2
Sun Oil argues that the September 1989 agreement reflected
an intentional change from supplying fuel for use by vehicles on
land (and thus was covered by the PMPA) to supplying fuel for
marine uses (and thus allegedly was not subject to the PMPA).
The record reveals no support for this contention. Although
Sun Oil attributes the termination of the trial franchise agreement
to Seahorse's lack of interest in serving land use vehicles, the
notice of termination under the PMPA gave as the sole reason for
termination the explanation that the agreement "was drafted only to
cover a trial relationship." There is no evidence of any
discussion concerning land versus marine end use. Indeed, Sun Oil
wrote merely that a new agreement would be negotiated, involving a
new term, agreed upon price changes, and a new termination
provision, all subject to the PMPA.
Contrary to Sun Oil's argument that the new agreement covered
no motor fuels for automotive use other than diesel fuel --
impliedly suggesting fuels different from those in the earlier
agreement -- the fuels and the quantities were identical. In fact,
the two contracts are substantially identical in all respects, with
the following exception. In place of a clause specifically
referencing the PMPA, there was the more comprehensive clause
quoted in the text. Neither party has contended that there was any
discussion concerning this substitution.
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1991, Sun Oil changed its price posting method from a weekly
pricing formula to a daily one.3 In November, Sun Oil began
rationing the fuel it would sell to Seahorse. It later stopped all
delivery of its product to Seahorse on credit. In January 1992,
Seahorse stopped buying fuel from Sun Oil. On February 17, Sun Oil
sent Seahorse a letter demanding that Seahorse discontinue use of
Sun Oil's trademark. The parties' relationship ended, this
litigation ensued, and a short time later Seahorse shut down its
operations.
II. Procedural Background
Seahorse filed suit on March 12, 1992, invoking the
protections of the PMPA and alleging wrongful termination or
nonrenewal of its franchise by Sun Oil. On May 7, Sun Oil filed a
motion to dismiss, challenging subject matter jurisdiction on both
diversity and federal question grounds. The district court (Pérez-
Giménez, J.) granted the motion to dismiss on diversity grounds,
but concluded that subject matter jurisdiction was present under a
"liberal construction" of the PMPA. Specifically, the district
court concluded that the PMPA's definition of "motor fuel" includes
"maritime and industrial motor fuels, used by any type of motor
vehicles, including trucks and boats, in public roads or any type
of way, including the seas." On November 29, the district court
denied Sun Oil's request for reconsideration, or, alternatively,
3
The parties hotly contest the impact of this change. Sun
Oil posits that it should have made Seahorse more profitable, but
Seahorse asserts that it negatively and irreparably damaged its
business.
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for certification of an immediate appeal under 28 U.S.C. § 1292(b).
The case was subsequently transferred to Judge Domínguez.
On February 16, 1995, Seahorse filed a motion for partial
summary judgment based on Sun Oil's alleged failure to provide the
PMPA's requisite notice to terminate the relationship. That motion
was referred to a magistrate judge, who recommended that it be
denied and concluded that
there exists a plethora of evidence in the form of
communications between the parties (which includes
letters and faxes), which could lead a reasonable trier
of fact to conclude that Seahorse was on actual notice of
the particulars required by the Act, and that additional
written notice would have been an exercise in futility as
it would [have] merely equat[ed] with an elevation of
form over substance.
(Internal quotations omitted.) On August 7, 1997, the district
court rejected the magistrate judge's recommendation that summary
judgment be denied. Instead, it concluded that because Sun Oil's
February 17, 1992 letter to Seahorse did not comply with the Act's
notice requirements, Sun Oil was strictly liable to Seahorse under
the PMPA.
On August 21, 1997, Sun Oil moved to alter, amend or clarify
the August 7 order, and, inter alia, again requested that the court
certify the order for interlocutory appeal under 28 U.S.C.
§ 1292(b). On December 30, 1997, the court reversed its prior
grant of summary judgment, finding that a reasonable jury could
conclude that Seahorse voluntarily had abandoned its relationship
with Sun Oil, but left intact the finding that if there was no
voluntary abandonment, Sun Oil was liable. The district court also
certified the jurisdictional question for appeal to this court.
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Despite this certification, we denied Sun Oil's petition on
February 27, 1998.
Trial began on October 4, 1999 and continued through December
21. The court limited the triable issues to (1) whether Sun Oil
had terminated or non-renewed, or whether Seahorse had voluntarily
abandoned, the franchise; and (2) if Sun Oil had terminated or non-
renewed, the amount of damages to which Seahorse was entitled.
On November 2 and 3, 1999, the court held a hearing under
Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993), and Kumho
Tire Co. v. Carmichael, 526 U.S. 137 (1999), regarding Sun Oil's
challenges to Seahorse's expert testimony. The court concluded
that the expert testimony was admissible and its strength should
hinge on the jury's credibility findings.
The jury concluded that Sun Oil had illegally terminated or
non-renewed the parties' relationship and awarded Seahorse $2.5
million.4 On December 30, 1999, the district court entered
judgment pursuant to the verdict. The court later denied a variety
of post-judgment motions and reentered judgment on March 30, 2001.
Sun Oil and Seahorse subsequently timely filed their respective
notices of appeal.
III. Subject Matter Jurisdiction Under the PMPA
At the outset, Sun Oil challenges the district court's
conclusion that it possessed subject matter jurisdiction over this
case. The district court concluded that Congress contemplated
4
The jury concluded that Seahorse was damaged in the amount
of $3 million, but that Seahorse had failed to mitigate $500,000 of
those damages.
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protection for distributors like Seahorse in contractual
relationships with refiners like Sun Oil. We review that
determination de novo, Bull HN Info. Sys., Inc. v. Hutson, 229
F.3d 321, 328 (1st Cir. 2000), and conclude that subject matter
jurisdiction is present.
The PMPA is a remedial statute, and as such, "merits a
relatively expansive construction," C.K. Smith & Co. v. Motiva
Enters., 269 F.3d 70, 76 (1st Cir. 2001). We are mindful, however,
that the statute is in derogation of common law rights, and
therefore "should not be interpreted to reach beyond its original
language and purpose." Id. (quoting Chestnut Hill Gulf, Inc. v.
Cumberland Farms, Inc., 940 F.2d 744, 750 (1st Cir. 1991)).
With these principles in mind, we turn to the text of the
statute, as the "starting point for interpretation of a statute is
the language of the statute itself." Kaiser Aluminum & Chem. Corp.
v. Bonjorno, 494 U.S. 827, 835 (1990) (internal quotation marks
omitted). We give effect to the statute's plain meaning "unless it
would produce an absurd result or one manifestly at odds with the
statute's intended effect," Parisi by Cooney v. Chater, 69 F.3d
614, 617 (1st Cir. 1995); see also United States v. Puerto Rico,
287 F.3d 212, 217 (1st Cir. 2002); Arnold v. United Parcel Serv.,
136 F.3d 854, 857-58 (1st Cir. 1998), and we interpret the plain
language "in light of the purposes Congress sought to serve." See
Arnold, 136 F.3d at 858 (citing Dickerson v. New Banner Inst.,
Inc., 460 U.S. 103, 118 (1983)). Under the PMPA,
[t]he term "franchise" means any contract--
(i) between a refiner and a distributor,
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(ii) between a refiner and a retailer,
(iii) between a distributor and another distributor, or
(iv) between a distributor and a retailer,
under which a refiner or distributor (as the case may be)
authorizes or permits a retailer or distributor to use,
in connection with the sale, consignment, or distribution
of motor fuel, a trademark which is owned or controlled
by such refiner or by a refiner which supplies motor fuel
to the distributor which authorizes or permits such use.
15 U.S.C. § 2801(1) (emphasis added).
"Motor fuel" is defined as "gasoline and diesel fuel of a type
distributed for use as a fuel in self-propelled vehicles designed
primarily for use on public streets, roads and highways."
15 U.S.C. § 2801(12) (emphasis added). Building on those
definitions, the PMPA next explains the prohibitions on motor fuel
franchisors, with exceptions not relevant here:
[N]o franchisor engaged in the sale, consignment, or
distribution of motor fuel in commerce may--
(1) terminate any franchise . . . prior to the conclusion
of the term, or the expiration date, stated in the
franchise; or
(2) fail to renew any franchise relationship . . .
[without following the PMPA's requirements].
15 U.S.C. § 2802(a).
The parties contest whether Seahorse is engaged in the
distribution of "motor fuel," as that phrase is contemplated under
the PMPA. Sun Oil contends that the Act was meant to apply only to
automotive filling stations or fuel actually used in motor vehicles
and that applying the PMPA to a marine supplies distributor would
impermissibly broaden its reach. But we must read the statute as
written. The record reflects that Sun Oil distributed to Seahorse
at least 40,000 barrels of diesel fuel monthly. Under the PMPA's
definition of "motor fuel," the fuel at issue need only be "of a
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type" for use by vehicles traversing land. In a sworn statement,
Sun Oil's treasurer defined the diesel fuel Sun Oil distributed to
Seahorse as that which "may be used in ships and vessels and by
owners of chemical plants that have boilers, and also in trucks and
vehicles" (emphasis added). Because the diesel fuel could have been
used for land vehicles, the plain language of the statute covers
the relationship at issue here.5 Sun Oil effectively reads "of a
type" out of the statute, but we are not at liberty to do that. We
therefore refuse to legislate a requirement that franchisees prove
that the fuel was actually used in a self-propelled land vehicle,
instead of a boat, a lawnmower, or any other machine that uses
motor fuel to run.
Sun Oil rests its contrary argument on two grounds. The first
is that the district court, in defining "motor fuel," included that
used by boats as well as trucks, and equated "the seas" with
"public streets, roads and highways." In so doing, Sun Oil argues,
the court improperly relied on the statute's broad remedial purpose
and expanded the reach of the statute. As the preceding text
indicates, our decision does not rest on this interpretation.
5
Diesel fuel was only one of several types of fuel Sun Oil
sold to Seahorse. However, the amount of diesel fuel was
substantial in comparison to the other types. Under the September
1989 agreement, for example, Sun Oil agreed to sell to Seahorse on
a monthly basis at least 40,000 barrels of diesel, 5,000 barrels of
kerosene, and 15,000 barrels each of Nos. 5 and 6 fuel oil.
Because diesel comprised more than half of the sales, our
conclusion is not tantamount to the tail wagging the dog. We thus
conclude that subject matter jurisdiction exists over the franchise
agreement as a whole.
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Sun Oil's second contention is that the PMPA's legislative
history indicates that "the Act was designed to govern
relationships involving automobiles, not ships." It refers to
Senate Report No. 95-731, which accompanied the legislation
resulting in the PMPA and the introductory language describing it,
as providing for
the protection of franchised distributors and retailers
of motor fuel and to encourage conservation of automotive
gasoline and competition in the marketing of such
gasoline by requiring that information regarding the
octane rating of automotive gasoline be disclosed to
consumers . . . .
S. Rep. No. 95-731, at 1, reprinted in 1978 U.S.C.C.A.N. 873, 876
(1978) (hereinafter S. Rep. No. 95-731). The protection of
franchised distributors was the purpose of Title I, which
established "minimum Federal standards governing the
termination . . . of franchise relationships for the sale of motor
fuel. . . ." The requirements regarding gasoline octane ratings
were the subject of Title II. This latter Title II reference to
automotive gasoline, directed to information disclosure, is not
comfortably transferred to Title I to effect a narrowing of the
scope of franchise relationships. It may well be that the
intervention of Congress was triggered by automotive gasoline
franchise relationships. But does the historical origin of
legislation trump its unambiguous language describing a broader
reach? We think not unless such a literal construction would do
violence to the basic policy underlying the statute.
The policy behind Title I was identified in Veracka v. Shell
Oil Co., 655 F.3d 445, 448 (1st Cir. 1981), when then Judge Breyer
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wrote: "The legislative history of the Marketing Act shows that its
basic effort to prevent franchise termination reflects a
recognition of the disparity of bargaining power between franchisor
and franchisee and an effort to prevent coercive or unfair
franchisor practice."
The Supreme Court has cautioned that "reference to legislative
history is inappropriate when the text of the statute is
unambiguous." Dep't of Hous. & Urban Dev. v. Rucker, 122 S. Ct.
1230, 1234 (2002). Indeed, "[w]hen a statute's text is
encompassing, clear on its face, and productive of a plausible
result, it is unnecessary to search for a different, contradictory
meaning in the legislative record." Rhode Island v. Narragansett
Indian Tribe, 19 F.3d 685, 698 (1st Cir. 1994).
Even assuming that the statute could be considered ambiguous,
we find no persuasive contrary signal in the legislative history.
Of the PMPA's three titles, only Title I is germane here because it
is the only one that governs termination of franchises. Its
legislative history establishes that Congress passed the statute to
remedy "the disparity of bargaining power" between franchisors and
franchisees, S. Rep. No. 95-731, at 17, by "establish[ing]
protection for franchisees [of motor fuel] from arbitrary or
discriminatory termination or nonrenewal of their franchises." Id.
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at 15.6 The relationship of Seahorse and Sun Oil comfortably fits
within that statement of purpose.
Title II, by contrast, is obviously targeted at automotive
gasoline, as opposed to the broader product, motor fuel. Title II
requires the testing, certification, and posting of octane ratings
for automotive fuel to ensure consumers' ability to compare
different types of gasoline. Title II's legislative history is
replete with references to cars and everyday consumers: "automotive
gasoline," "gasoline," "gasoline retailer," "motorists," and "motor
vehicles." Id. at §§ 19-21, 43-45. The phrase "motor fuel" is not
used at all. That Title II repeatedly uses those terms, while
Title I continually refers solely to "motor fuel," suggests that
Congress sought broad protection for franchisees of motor fuel.7
In sum, we conclude that the relationship between Seahorse and
Sun Oil fits within the plain language of the statute and the
legislative history only buttresses that conclusion. It is up to
Congress to amend the PMPA's definitional section, and the courts
may not usurp that authority.
6
To be sure, the legislative history includes as valid
grounds for termination, a franchisor's withdrawal from a relevant
geographic market area, S. Rep. No. 95-731, at 34, and "the
repeated failure by the franchisee to operate the marketing
premises in a clean, safe, and healthful manner." Id. at 35. These
isolated illustrations, even if construed to refer only to land-
oriented operations, are part of a non-exclusive list of grounds
for termination.
7
Title III adds nothing to our analysis. Its only purpose
is to direct the Secretary of Energy to study the practice of
"subsidization of motor fuel marketing operations with funds or
services derived from other petroleum-related operations." S. Rep.
No. 95-731, at 16.
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IV. Jury Instructions
We review jury instructions de novo, bearing in mind that the
district court's "refusal to give a particular instruction
constitutes reversible error only if the requested instruction was
(1) correct as a matter of substantive law, (2) not substantially
incorporated into the charge as rendered, and (3) integral to an
important point in the case." United States v. DeStefano, 59 F.3d
1, 2 (1st Cir. 1995) (internal quotation marks omitted).
A. Adequacy of Notice
Sun Oil contends that the district court erred in refusing to
instruct the jury on whether the company had given proper notice of
termination "under the circumstances." Although masked as a jury
instruction challenge, Sun Oil's brief makes clear that this is
actually a challenge to the pivotal pre-trial ruling that Sun Oil
had not met the notice requirements of the PMPA.8 Under the law
of the case doctrine, a party may not revisit a substantive ruling
through this type of attack on a jury instruction. See Nat'l Labor
Relations Bd. v. Goodless Electric Co., 285 F.3d 102, 107 (1st Cir.
2002) ("[W]hen a court decides upon a rule of law, that decision
should continue to govern the same issues in subsequent stages in
the same case.") (quoting Arizona v. California, 460 U.S. 605, 618
(1983)). Sun Oil's focus on the jury instruction, rather than on
8
Although Sun Oil devotes several pages of briefing to this
challenge, it neither recites nor points us to the specific
contested instruction. That omission reinforces the transparency
of its jury instruction challenge.
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the district court's underlying conclusion, is perplexing.
Nevertheless, we will indulge the argument.
Sun Oil contends that its February 17, 1992 letter met the
notice provisions "under the circumstances" because Seahorse had
actual notice of the particulars required by the Act. That letter
states in full:
Even though our Supply Agreement expired on September 14,
1990 and we agreed to continue supplying fuel to you
under its terms through [M]arch 15, 1991, Seahorse
continues to use in its operations our trademark and
trade name.
We are hereby requiring you to discontinue using our
trademark and trade name to promote your business and we
would expect that you immediately honor our request.
The PMPA contemplates strict notice for termination or
nonrenewal of a motor fuel franchise:
(a) General requirements applicable to franchisor
Prior to termination of any franchise or nonrenewal of
any franchise relationship, the franchisor shall furnish
notification of such termination or such nonrenewal to
the franchisee who is a party to such franchise or such
franchise relationship--
(1) in the manner described in subsection (c) of
this section; and
(2) except as provided in subsection (b) of this
section, not less than 90 days prior to the date on
which such termination or nonrenewal takes effect.
(b) Additional requirements applicable to franchisor
(1) In circumstances in which it would not be
reasonable for the franchisor to furnish
notification, not less than 90 days prior to the
date on which termination or nonrenewal takes
effect, as required by subsection (a)(2) of this
section--
(A) such franchisor shall furnish notification
to the franchisee affected thereby on the
earliest date on which furnishing of such
notification is reasonably practicable[.] * *
*
(c) Manner and form of notification
Notification under this section--
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(1) shall be in writing;
(2) shall be posted by certified mail or personally
delivered to the franchisee; and
(3) shall contain--
(A) a statement of intention to terminate the
franchise or not to renew the franchise
relationship, together with the reasons
therefor;
(B) the date on which such termination or
nonrenewal takes effect; and
(C) the summary statement [of available
remedies and relief prepared by the Secretary
of Energy].
15 U.S.C. § 2804.
The PMPA's notice provisions mandate strict compliance and
thus cannot be selectively followed by the franchisor. See
15 U.S.C. § 2804(a) ("[T]he franchisor shall furnish notification
. . . ."); S. Rep. No. 95-731, at 39 ("[N]otification . . . must be
provided . . . .") (emphasis added in both); see also Thompson v.
Kerr-McGee Refining Corp., 660 F.2d 1380, 1390 (10th Cir. 1981)
(mandating strict compliance). But cf. Avramidis v. Arco Petroleum
Prods. Co., 798 F.2d 12, 17 (1st Cir. 1986) (declining to require
strict notice of specific date of termination where the franchisees
transformed a definite termination date into a later unspecified
date by securing a preliminary injunction). Our precedent, which
tempers strict compliance only for the most trivial of departures,
is consistent with the notice provisions' underlying purpose of
protecting franchisees from arbitrary or unanticipated
terminations. Failure to follow the rules leaves the franchisee
without clear notice.
Sun Oil concedes that the February 17 letter did not
"expressly notify Seahorse of the reasons for termination," and
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that the company neither personally delivered that letter nor sent
it via certified mail. The letter also did not contain the summary
statement, though Sun Oil seems to argue that its prior provision
of the statement to Seahorse at the end of the trial franchise
agreement obviated its duty to provide it again. In short, section
2804(c) contains five specific requirements. Three of the five
were not met. Only the requirements of a writing and that of a
date of termination ("immediately") could be said to have been met.
Sun Oil posits that imposing a strict notice requirement
would elevate form over substance because Seahorse was already on
notice as to why Sun Oil intended to terminate the relationship.
The critical flaw in this argument is that, despite Sun Oil's past
complaints to Seahorse (e.g., about nonpayment and overextension of
credit), its continuing relationship with Seahorse led to the
permissible inference that Sun Oil did not consider any of
Seahorse's transgressions grounds for termination.9 There is a
stark difference between complaints by one of the parties in a
long-term business relationship and that party's intent to
terminate the relationship. Even if Seahorse was delinquent, it
justifiably relied on Sun Oil's inaction.
9
For example, Sun Oil points to a letter it sent to Seahorse
regarding checks that had been returned for insufficient funds.
Nothing in the January 1992 letter suggests that Sun Oil considered
the violation to be critical to the continuance of the business
relationship. Indeed, the letter concludes: "We would appreciate
if you contact your bank and resolve this issue today. It is over
a week that these checks were returned by the bank and not
replaced."
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A review of the caselaw on which Sun Oil relies further
confirms the weakness of its position. As discussed supra, Sun
Oil's February 17 letter failed in multiple respects to comply with
the PMPA's notice requirements. In asserting that its prior
interactions with Seahorse amounted to a de facto notice of its
intent to terminate the relationship, Sun Oil cites numerous
district court cases that dealt only with a franchisor's failure to
include the Secretary of Energy's summary statement of available
remedies from the Federal Register. See, e.g., Shell Oil Co. v.
A.Z. Servs. Inc., 990 F. Supp. 1406, 1416 (S.D. Fla. 1997) (failure
to include summary statement did not render notice invalid);
Grotemeyer v. Lake Shore Petro Corp., 749 F. Supp. 883, 889 (N.D.
Ill. 1990) (same); Martin v. Texaco, Inc., 602 F. Supp. 60, 63
(N.D. Fla. 1985) (concluding that the jury had to determine whether
a franchisor's failure to include the summary statement deprived
the franchisee of notice as contemplated by the PMPA); Brown v.
Magness Co., 617 F. Supp. 571, 574 (S.D. Tex. 1985) (no inadequate
notice for failure to attach summary statement and for delivering
notice to the franchisee's attorney, rather than the franchisee).
Sun Oil's other cited cases are simply inapposite. In Brown
v. American Petrofina Mktg., 555 F. Supp. 1327, 1335 (M.D. Fla.
1983), the court noted "the very close question" of whether actual
notice can trump PMPA notice but declined to resolve the issue. In
Frisard v. Texaco, Inc., 460 F. Supp. 1094 (E.D. La. 1978), decided
soon after the PMPA's passage but before the summary statement was
published in the Federal Register, the court dealt with nearly
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perfect compliance. In that case, the notice was in "writing,
posted by certified mail, stated both the intention not to renew as
well as the effective date of nonrenewal, cited the . . . reason
for nonrenewal, and referred to the future receipt of the summary
statement. . . . [The] letter was not only timely, but complied
with the PMPA in all respects." Id. at 1100 (emphasis added).
Similarly, Desfosses v. Wallace Energy, Inc., 836 F.2d 22 (1st
Cir. 1987), the only First Circuit case cited by appellant, is
easily distinguishable. In Desfosses, the franchisee argued that
the franchisor failed to comply with section 2802(c)(4) (a section
inapplicable here) by failing to notify the franchisee of the
requirements of an underlying lease for the franchisee's property.
Although we suggested that in certain circumstances actual
knowledge of a franchisor's reasons for termination might trump
strict compliance, we concluded that the franchisor had, in fact,
given proper notice under section 2802(c)(4). Id. at 27.
We conclude that the district court's refusal to instruct the
jury on whether Sun Oil had given proper notice "under the
circumstances" was correct as a matter of law. The evidence
plainly shows that Sun Oil failed to follow the strictures of the
PMPA's notice requirements, even if they were read broadly.
Accordingly, we find no merit to this jury instruction challenge.
B. Grounds for Termination
Sun Oil contests the district court's refusal to instruct the
jury on whether the company had sufficient grounds to terminate the
franchise under the PMPA. Sun Oil did not specifically point to
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the contested instruction, but we assume that it is proposed
instruction number eighteen, entitled "PMPA - Grounds for
Termination."
As an initial matter, Sun Oil did not adequately preserve its
objection to this instruction. Rule 51 of the Federal Rules of
Civil Procedure states that an objection to a jury instruction is
waived unless the party "stat[es] distinctly the matter objected to
and the grounds of the objection." Fed. R. Civ. P. 51. Here, the
entire objection stated:
With respect to proposed [instructions] 14, 15, 16, 17, 18,
and 19, . . . [w]e contend that the instructions should be
charged to the jury because they correctly state the elements
of the claims and defenses available under the law purportedly
applicable to this case.
We further contend that the failure to instruct the jury in
this fashion, based on the Court's pre-trial rulings . . . is
incorrect because it precludes defendant from challenging in
the trial of this case the Court's finding that the only
issues to be tried were whether Seahorse abandoned the
relationship with [Sun Oil] or whether [Sun Oil] terminated
the relationship and the damages caused to the plaintiff in
the case of a termination or nonrenewal.
So [] stated, the issues preclude[] trying the issue as to
whether the PMPA was even implicated in this case by finding
as proven that the fuel sold by defendant to plaintiff in the
relationship was motor fuel despite the definition provided in
the PMPA. That even if Seahorse failed to comply with
provisions of the alleged franchise and caused events relevant
to the relationship . . . as a result of which termination or
nonrenewal of the franchise was reasonable, that [Sun Oil] did
not provide sufficient notice under the act to rely on those
breaches and events to preclude liability.
The first two paragraphs include boilerplate language that only
restates the district court's framing of the case and does not go
to the substance of the contested instructions. And the oblique
nature of the third paragraph certainly fails to "state distinctly
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the matter objected to," as required by Rule 51. We thus conclude
that the objection does not meet Rule 51's standard, and we review
only for plain error. Under that standard, Sun Oil must prove
"(1) that there was error, (2) that it was plain, (3) that it
likely altered the outcome, and (4) that it was sufficiently
fundamental to threaten the fairness or integrity or public
reputation of the judicial proceeding." Gray v. Genlyte Group, 289
F.3d 128, 134 (1st Cir. 2002) (quoting United States v. Olano, 507
U.S. 725, 735-36 (1993)).
The court rejected the instruction as inconsistent with its
pre-trial ruling that liability would attach if the jury found a
termination, regardless of the grounds, because of the inadequate
notice. Although the grounds for termination could have been
relevant to the jury's assessment of damages, by indicating the
reasonable period of time for future lost profits, the actual
language of the instruction makes clear that it was yet another
attempt to ask the jury to re-assess the district court's pre-trial
rulings on liability. The district court's refusal to instruct the
jury in this vein was correct as a matter of law.
V. Expert Testimony of Heidie Calero
Sun Oil next argues that Seahorse's damages expert, Heidie
Calero, proffered inherently unreliable evidence that should have
been excluded by the district court under its Daubert/Kumho Tire
gatekeeping function. See Kumho Tire, 526 U.S. at 141; Daubert,
509 U.S. at 592-93.
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Rule 702 of the Federal Rules of Evidence provides the
backdrop for any consideration of expert testimony. That rule
provides:
If scientific, technical, or other specialized knowledge
will assist the trier of fact to understand the evidence
or to determine a fact in issue, a witness qualified as
an expert by knowledge, skill, experience, training, or
education may testify thereto in the form of an opinion
or otherwise, if (1) the testimony is based upon
sufficient facts or data, (2) the testimony is the
product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably
to the facts of the case.
Fed. R. Evid. 702. The Supreme Court's decisions in Kumho Tire and
Daubert guide a district court in determining how to assess the
admissibility of such expert testimony. Pursuant to Daubert, the
district court must perform a gatekeeping function by preliminarily
assessing "whether the reasoning or methodology underlying the
testimony is scientifically valid and [] whether that reasoning or
methodology properly can be applied to the facts in issue."
509 U.S. at 592-93. Several factors may assist the district court
in making its determination: whether the theory/technique can be
and has been tested; whether it has been subjected to peer review
and publication; the known or potential rate of error; and the
level of the theory/technique's acceptance within the relevant
scientific community. Id. at 593-94. Although the approach is
flexible by its nature (after all, expert testimony and the
peculiar facts of each case so demand), the overarching concern is
on the "evidentiary relevance and reliability" of the proposed
testimony. Id. at 595.
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In Kumho Tire, the Court extended its holding in Daubert and
held that the gatekeeping function applies to technical and other
specialized knowledge in addition to scientific testimony. Kumho
Tire, 526 U.S. at 141. The Court stressed that the district court
must have "considerable leeway" in both "how to determine
reliability" and "its ultimate conclusion." Id. at 152-53. The
ultimate credibility determination and the testimony's accorded
weight are in the jury's province. See Mitchell v. United States,
141 F.3d 8, 16-17 (1st Cir. 1998). With these general principles
in mind, we now consider whether the district court abused its
discretion in admitting Calero's testimony. See Kumho Tire,
526 U.S. at 152 (citing Gen. Elec. Co. v. Joiner, 522 U.S. 136,
138-39 (1997)).
A. The tax calculations
Sun Oil first contends that Calero's testimony should have
been excluded because her damages calculation was flawed.
According to Sun Oil, Calero neglected to take into account
Seahorse's failure to pay various taxes. It argues that if
Seahorse had properly accounted for its tax obligations, its
profits (and thus, damages) would have been minimal at best. Sun
Oil inexplicably neither pinpoints the disputed testimony nor
discusses the actual figures that allegedly would have undercut
Calero's testimony. Our review of Calero's testimony provides no
support for Sun Oil's claim: Calero testified that she considered
the provisions of Seahorse's tax exemption decree in conjunction
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with its historical sales.10 From that analysis, Calero concluded
that approximately fifty percent of the sales were for tax exempt
vessels,11 and that the remainder of the sales would require an
assessment of forty-two percent, the normal tax rate. Calero used
those figures to conclude that, even with its tax obligations,
Seahorse would have carried a profit in each of fiscal years 1992
through 1996.
Given Calero's plain testimony and Sun Oil's failure to
meaningfully point out any discrepancy in the record, we cannot
conclude that the district court abused its discretion in allowing
Calero's testimony. Moreover, to the extent that Sun Oil sought to
prove that Calero's tax calculations were flawed, it followed the
proper course of action by rebutting that testimony with its own
expert. See Daubert, 509 U.S. at 596 ("Vigorous cross-examination,
presentation of contrary evidence, and careful instruction on the
burden of proof are the traditional and appropriate means of
attacking shaky but admissible evidence."). The well known adage
that reasonable people can disagree applies here full force. That
the jury found in Seahorse's favor does not mean that the district
court erred in admitting the testimony.
10
Calero reviewed more than 16,000 daily invoices over a
period of three years to assess Seahorse's average tax exempt
sales.
11
According to Calero's testimony, the vessels were only
ninety percent tax exempt, leaving a ten percent tax liability.
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B. Future Damages
Calero's forecast of damages over a ten-year period, however,
is more troublesome. Sun Oil contends that the ten-year period was
overly speculative because the initial agreement was for only a
one-year period, the longest renewal period was for four months,
and the entire PMPA relationship lasted only two and one-half
years. It further maintains that due to Seahorse's misconduct,
there was no reasonable basis to believe that the agreement would
extend so far into the future. See, e.g., Irvine v. Murad Skin
Research Labs., 194 F.3d 313, 321 (1st Cir. 1999) ("Absent adequate
factual data to support the expert's conclusions his testimony was
unreliable."); Wallace Motor Sales, Inc. v. American Motor Sales,
780 F.2d 1049, 1062 (1st Cir. 1985) ("[T]here is a distinction
between proof which allows the jury to make a 'just and reasonable
inference' of damages and proof which only provides a basis for
'pure speculation or guesswork.'") (quoting Bigelow v. RKO Radio
Pictures, Inc., 327 U.S. 251, 264 (1946)); see also Boucher v. U.S.
Suzuki Motor Corp., 73 F.3d 18, 22 (2d Cir. 1996) ("Admission of
expert testimony based on speculative assumptions is an abuse of
discretion.").
We need not decide whether this time period was unduly
speculative. Given the jury's ultimate award, the district court's
admission of Calero's testimony would have been harmless error at
best. The jury evidently grasped the disparity between Calero's
long-term forecast of $10.7 million and the reality of Seahorse's
situation, and discounted Calero's forecast accordingly by awarding
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only $800,000 in lost profits and $2.2 million in going concern
damages.12 Indeed, the jury's award not only fell far short of the
ten-year estimate, but of the five-year estimate and that of the
four years following the close of Seahorse's operations as well.
Therefore, although the district court may have erred by allowing
Calero to forecast for ten years, it would have been only harmless
error, and is therefore not a basis for granting a new trial. The
district court did not err in admitting the balance of Calero's
testimony because Calero took into account Seahorse's historical
performance, in conjunction with the performance of others in the
industry and the overall Puerto Rico economy, in calculating
Seahorse's damages.13
VI. Denial of Motion for New Trial
A district court's refusal to grant a new trial is reviewed
only for manifest abuse of discretion. See Diefenbach v. Sheridan
12
As noted above, the jury concluded that Seahorse failed to
mitigate $500,000 of its damages.
13
We also reject Sun Oil's argument that Calero relied on
erroneous assumptions in calculating damages. According to Sun
Oil, Calero assumed that Sun Oil was obligated to give Seahorse
preferential fuel prices and that Seahorse was the only distributor
that was allowed to use the Sun Oil logo and trademark. Calero
testified, however, that her estimate of damages relied neither on
a finding that Seahorse was entitled to the lowest price nor that
Seahorse was Sun Oil's exclusive distributor.
Sun Oil also challenges Calero's damage calculations for
fiscal year 1991-92. The company provided neither meaningful
record references nor caselaw in support of this argument, and it
therefore is waived. See United States v. Zannino, 895 F.2d 1, 17
(1st Cir. 1990) ("[I]ssues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are deemed
waived.").
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Transp., 229 F.3d 27, 32 (1st Cir. 2000); United States v. Dumas,
207 F.3d 11, 14 (1st Cir. 2000). The court may order a new trial
only "if the verdict is so clearly against the weight of the
evidence as to amount to a manifest miscarriage of justice." Cigna
Fire Underwriters Co. v. MacDonald & Johnson, 86 F.3d 1260, 1263
(1st Cir. 1996). Sun Oil challenges both the liability and damages
findings of the jury. We cannot find merit in either challenge.
A. Liability
The first question the jury faced was whether Sun Oil
terminated, or Seahorse voluntarily abandoned, the franchise
relationship. Seahorse's theory was that Sun Oil's unilateral
change in pricing structure and subsequent actions, culminating in
Sun Oil's February 17, 1992 letter, amounted to an illegal
termination. Sun Oil attacks the jury finding of termination by
arguing that the evidence shows that it had grounds to terminate
its relationship with Seahorse, and that, in any event, Seahorse's
mismanagement and failure to adjust to changing market conditions
forced it to abandon its relationship with Sun Oil in January,
1992.
Sun Oil argues that the evidence overwhelmingly demonstrated
that Seahorse's failure to respond to the volatile oil market and
to the change in pricing structure forced the franchisee to
voluntarily abandon the relationship. Sun Oil cites to Seahorse's
"Analisis de Venta Isla y Barcos" -- its invoice/sales register --
to argue that Seahorse's fuel sales actually increased during the
two months after the new pricing structure went into effect. Sun
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Oil thus argues that the jury had no basis for concluding that the
change in pricing formula brought on Seahorse's eventual demise;
instead, the only conclusion permitted by the evidence is that
Seahorse's problems were fully attributable to Seahorse's own
mismanagement.
The jury heard evidence, however, that the change in pricing
formula caused irreparable harm. Seahorse elicited testimony that
Sun Oil set out to destroy Seahorse's business by denying Seahorse
the benefit of weekly price protection, while offering it to
Seahorse's customers. Thus, Seahorse's customers began purchasing
directly from Sun Oil at more favorable prices. This, Seahorse
argues, led to its decline and eventual demise. Moreover, although
Seahorse's sales had increased for two months after the pricing
structure change, the overall sales during that period had dropped
markedly from the prior year.
Having reviewed the evidence, we cannot say that the district
court abused its discretion in refusing to grant a new trial on
liability. The evidence established that the jury reasonably could
have concluded that beginning with the change in pricing structure,
and continuing with its refusal to allow Seahorse to purchase fuel
on credit, Sun Oil took steps to end its relationship with
Seahorse, without following the PMPA's requirements.
B. Damages
Sun Oil also disputes the district court's refusal to grant a
new trial on damages, arguing that Seahorse failed to establish
through reliable, non-speculative evidence, that Sun Oil caused it
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to suffer any damages. First, Sun Oil says that there was no
evidence that Seahorse was profitable. We have already concluded
that Seahorse's expert, Heidie Calero, presented admissible
evidence of Seahorse's profits. Sun Oil contested that evidence
with testimony from its own expert, Carlos Baralt, who testified
that Seahorse would not have been profitable under his assessment
of Seahorse's various tax obligations. The jury's award of only a
fraction of Calero's estimate confirms that the jury took into
account the testimony of both experts in making its determination.14
Lastly, Sun Oil asserts that the damages award is not
supported by the evidence because Seahorse's financial records
contained some incorrect data. Specifically, it challenges the
reliability of Seahorse's Analisis de Venta Isla y Barcos. Sun Oil
does not explain the alleged deficiencies, but Seahorse asserts
that Sun Oil's claim rests on the incorrectness or absence of
approximately 170 of the Analisis's 11,000 transactions. At trial,
after Seahorse was alerted to the missing transactions, Calero
recalculated the damages and lowered her estimate by $600,000. Sun
Oil did not respond to this argument in its reply brief. It seems
to us that Calero's recalculation corrected any supposed
deficiencies in the initial assessment of the records.
14
Also, Sun Oil argues that the damages were speculative
because there was no evidence that the relationship would have
lasted as long as Calero had estimated. As we already have
concluded, however, Calero's long-term forecast was inconsequential
because the jury clearly did not adopt it.
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VII. Seahorse's Mitigation of Damages
Finally, we turn to Seahorse's cross-appeal, in which it
contends that the district court erred in denying its motion to
amend or alter judgment regarding its failure to mitigate damages.
As the district court noted, Seahorse's motion was technically a
renewed motion for judgment after trial under Fed. R. Civ. P.
50(b). The district court's denial of a Rule 50(b) motion must be
sustained "unless the evidence, together with all reasonable
inferences in favor of the verdict, could lead a reasonable person
to only one conclusion, namely, that the moving party was entitled
to judgment." PH Group Ltd. v. Birch, 985 F.2d 649, 653 (1st Cir.
1993). Seahorse cannot meet that high burden.15
Seahorse first contends that Sun Oil never meaningfully
presented the mitigation of damages defense, and thus waived it.
The record, however, shows otherwise. Sun Oil initially raised
Seahorse's failure to mitigate damages as an affirmative defense in
its answer to the complaint, and again raised it in the parties'
proposed pre-trial order. At trial, Sun Oil questioned Alberto
Dapena, Seahorse's president, as to various alternatives Seahorse
could have taken to stave off Seahorse's close of operations. We
15
Sun Oil asserts that Seahorse has waived its mitigation
claim because it did not object to the jury instruction regarding
mitigation of damages immediately after the jury was charged, as
required by Fed. R. Civ. P. 51. Seahorse points out, however, that
the challenge was not only to the jury instruction, but also to the
district court's ultimate finding under Fed. R. Civ. P. 50 that
there was sufficient evidence to sustain the jury's finding.
Because we conclude that the mitigation award was adequately
supported by the evidence, we do not consider whether Seahorse
waived its right to appeal.
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thus conclude that Sun Oil pressed this argument before and during
trial.
As to the substance of its argument, Seahorse points to
Dapena's testimony that after Sun Oil changed the pricing formula,
he attempted to locate other fuel suppliers to ensure Seahorse's
continued operation. Dapena also requested that Sun Oil release
part of a letter of credit that it held so that Seahorse would be
able to buy fuel from other suppliers. Finally, Seahorse asserts,
it continued to sell Sun Oil's fuel until Sun Oil terminated that
right in the February 17 letter.
Notwithstanding Dapena's actions, we agree with Sun Oil that
it presented sufficient evidence to sustain the jury's mitigation
finding. On cross-examination, Sun Oil questioned Dapena about a
February 28, 1992 memorandum he had written to Seahorse's board of
directors, in which he placed the blame for Seahorse's demise
squarely on Sun Oil. In that writing, Dapena proposed that a
number of alternatives were available to Seahorse to limit its
damages. On cross examination, Sun Oil garnered that Seahorse
chose not to take action on them. For example, Seahorse could have
temporarily closed the company in order to reorganize or could have
filed for bankruptcy, with or without intent to resume operations
at a later time. We thus conclude that the district court did not
err in leaving intact the jury's determination that Seahorse failed
to mitigate its damages.
Affirmed. Seahorse to recover one half of its costs.
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