Filed: Apr. 10, 2013
Latest Update: Mar. 28, 2017
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 11-1995 ALLFIRST BANK, Plaintiff – Appellee, v. PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD., Defendants – Appellants. No. 11-2018 ALLFIRST BANK, Plaintiff – Appellant, v. PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD., Defendants – Appellees. Appeals from the United States District Court for the District of Maryland, at Baltimore. Marvin J. Garbis, Senior District Judge. (1:01-cv-02527-MJG; 1:01-cv-02991-MJG) Argued:
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 11-1995 ALLFIRST BANK, Plaintiff – Appellee, v. PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD., Defendants – Appellants. No. 11-2018 ALLFIRST BANK, Plaintiff – Appellant, v. PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD., Defendants – Appellees. Appeals from the United States District Court for the District of Maryland, at Baltimore. Marvin J. Garbis, Senior District Judge. (1:01-cv-02527-MJG; 1:01-cv-02991-MJG) Argued: D..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1995
ALLFIRST BANK,
Plaintiff – Appellee,
v.
PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD.,
Defendants – Appellants.
No. 11-2018
ALLFIRST BANK,
Plaintiff – Appellant,
v.
PROGRESS RAIL SERVICES CORPORATION; RAILCAR, LTD.,
Defendants – Appellees.
Appeals from the United States District Court for the District
of Maryland, at Baltimore. Marvin J. Garbis, Senior District
Judge. (1:01-cv-02527-MJG; 1:01-cv-02991-MJG)
Argued: December 5, 2012 Decided: April 10, 2013
Before MOTZ, KING, and DIAZ, Circuit Judges.
Affirmed in part, vacated in part, and remanded by unpublished
opinion. Judge Diaz wrote the opinion, in which Judge Motz and
Judge King joined.
ARGUED: Paul Mark Sandler, SHAPIRO, SHER, GUINOT & SANDLER,
Baltimore, Maryland, for Appellants/Cross-Appellees. Lawrence
J. Gebhardt, GEBHARDT & SMITH, LLP, Baltimore, Maryland, for
Appellee/Cross-Appellant. ON BRIEF: Robert B. Levin, John J.
Lovejoy, SHAPIRO, SHER, GUINOT & SANDLER, Baltimore, Maryland;
Kirk McAlpin, Jr., CUSHING, MORRIS, ARMBRUSTER & MONTGOMERY,
LLP, Atlanta, Georgia, for Appellants/Cross-Appellees. Ramsay
M. Whitworth, GEBHARDT & SMITH, LLP, Baltimore, Maryland, for
Appellee/Cross-Appellant.
Unpublished opinions are not binding precedent in this circuit.
2
DIAZ, Circuit Judge:
This is an appeal and cross-appeal from the district
court’s judgment in favor of Allfirst Bank (“Allfirst”) for
breach of contract. Progress Rail Services Corporation
(“Progress”) and Railcar, Ltd. (“Railcar”) contend that the
district court erred in finding that an oral agreement modified
a prior written agreement between the parties and erred further
when it granted Allfirst damages for breach of the oral
modification. On its cross-appeal, Allfirst contends that the
district court erred in its calculation of damages due to the
court’s refusal to consider expert testimony. As we explain, we
affirm in part, vacate in part, and remand.
I.
A.
Progress and its wholly owned subsidiary, Railcar, sold
Allfirst 996 railcars for $13,220,351 on November 30, 1998. 1 To
memorialize the sale, the parties executed three documents,
which they refer to collectively as the Portfolio Transaction:
1
Although the transaction was formally a sale of railcars,
its substance reveals that Allfirst actually loaned Progress and
Railcar $13 million. The loan was to be repaid with interest
from the proceeds of rent paid by the lessees for the use of the
railcars. Structuring the transaction as a sale allowed
Progress and Railcar to book a gain of $6,000,000 and remove the
depreciated railcars from their balance sheet inventory.
3
the Assignment Agreement (signed by all parties), the Service
Agreement (signed by Allfirst and Progress), and the Guaranty
(also signed by Allfirst and Progress). Because the railcars
were leased to various railroads, the Assignment Agreement
provided for Progress and Railcar (collectively, “Defendants”)
to assign their rights in the leases to Allfirst. Defendants
became Allfirst’s agents in administering the leases,
negotiating renewal or replacement leases, and ultimately
selling the railcars. If a lease terminated before the end of
the Portfolio Transaction’s five-year term, Allfirst could
direct Defendants to sell the railcars in lieu of negotiating a
new lease. Any railcars still on the books at the end of the
five-year term would also be sold, with Allfirst having a right
of first refusal to buy them at a fixed purchase price.
Among other things, the Service Agreement required Progress
to maintain the railcars in a condition to allow them to be
leased at the “Minimum Net Rent,” an amount defined in the
Assignment Agreement and due to Allfirst each month. J.A. 1013,
1102. Progress was required to make all repairs throughout the
lease term unless the lessee assumed that obligation. Even so,
it was Progress’s responsibility to enforce the lessee’s repair
duty. After Allfirst was paid the Minimum Net Rent each month,
any surplus would first go to Progress as reimbursement for
4
service fees, with any remainder to go to a joint account to be
held for subsequent shortfalls in rental payments.
In the separate Guaranty, Progress made two commitments to
Allfirst. First, Progress guaranteed that Allfirst would
receive the Minimum Net Rent for each railcar for three years.
If the actual rent Allfirst received for a railcar fell short of
this amount, Progress agreed to pay the difference. Second,
Progress guaranteed that when Allfirst sold or scrapped a
railcar, Allfirst would receive that car’s Stipulated Loss Value
(“SLV”), listed in the Assignment Agreement. If the sale
proceeds were less than the SLV, Progress agreed to pay the
difference. The SLV of each car decreased over the five-year
term of the deal.
Progress’s two guaranties to Allfirst were subject to a
total limit of 9.995% of the amount Allfirst paid for the
railcars under the Assignment Agreement, plus interest. This
limit was to be reduced by Progress’s payments to Allfirst under
the Guaranty, including payments for the difference between a
railcar’s SLV and sale price, and for the difference between the
Minimum Net Rent and the actual rent received. As an example,
the Guaranty limit as of November 1998 was approximately
$1,265,903. If a railcar’s actual earned rent fell short of its
Minimum Net Rent by $1000, Progress would pay that difference to
Allfirst and then deduct $1000 from the Guaranty limit, reducing
5
its total potential liability to Allfirst under the Guaranty to
$1,264,903.
B.
Of the 996 railcars sold to Allfirst, 400 were subject to
leases that expired at various times in 1999. It became
apparent to the parties that the railcars would require
extensive repairs before they could again be leased. In some
cases, the potential repair costs exceeded what the railcars
could earn in rent. As a result, when the leases ended, Railcar
elected to “park” most of the cars, while continuing to remit
monthly rent payments to Allfirst. 2
On February 10, 2000, Allfirst and Railcar met to discuss a
number of financing transactions, including the Portfolio
Transaction. At the meeting, Eugene Martini, who was then
Railcar’s CEO, described the condition of the 400 railcars with
expired leases and offered to pay Allfirst the SLV for each car,
scrap them all, and remove them from the Portfolio Transaction.
Martini said that Railcar would absorb the resulting losses.
Allfirst accepted the offer, but this agreement was never
reduced to writing.
2
We do not know why Railcar assumed Progress’s
responsibility under the Guaranty agreement to make the rent
payments.
6
Following the meeting, Railcar began scrapping the
railcars. Railcar at first absorbed the losses on its books,
without attempting to reduce the Guaranty limit. In the spring
of 2001, however, Railcar, now led by Jim Smallwood, took the
position that the Portfolio Transaction documents were
controlling and that any oral agreement made by Martini at the
February 10 meeting was unenforceable. Railcar asserted instead
that the Guaranty limit should be reduced by the difference
between the SLV and the scrap value for each of the 400 scrapped
cars. This meant, according to Railcar, that it had paid
Allfirst in excess of the Guaranty limit and was entitled to a
$1,350,000 refund. In addition, for the twelve remaining
railcars subject to the February 10 agreement, Railcar paid
Allfirst only the scrap price for eleven and paid nothing for
the remaining one.
Beginning on August 1, 2001, Defendants stopped making
regular monthly rent payments. In addition, many of the
remaining railcars could no longer be leased due to maintenance
issues or were not re-leased after their initial leases ended.
When this litigation commenced, 483 railcars were still on the
books. Allfirst sold these remaining railcars for scrap value
after trial.
7
C.
Defendants sued Allfirst in the Superior Court of Fulton
County, Georgia, alleging that Progress had overpaid Allfirst
under the Guaranty and seeking a refund of $1,350,000. Allfirst
removed the case to the United States District Court for the
Northern District of Georgia and also filed a separate breach of
contract action against Defendants in the United States District
Court for the District of Maryland. 3 Allfirst claimed that it
had received neither the Minimum Net Rent nor the actual rent
collected since August 1, 2001, and therefore the Defendants
were in default under the Portfolio Transaction. Allfirst
sought damages for the default, including the past due Minimum
Net Rent for each railcar, the cost of unperformed repairs, lost
rents for off-lease cars that sat idle until they were scrapped,
and the difference between the scrap price received for each
railcar and the amount the car could have been sold for had it
been properly maintained. Defendants counter-claimed in the
Maryland suit, seeking the alleged overpayment under the
Guaranty, as well as other damages. After the initial suit was
transferred to the District of Maryland, the cases were
consolidated.
3
The Portfolio Transactions documents provided that they
were to be interpreted according to, and governed by, Maryland
law. J.A. 1026, 1098, 1105.
8
During a seventeen-day bench trial, Allfirst presented the
testimony of two experts regarding the market for railcar leases
and sales. Allfirst’s experts testified that the railcars still
subject to the Portfolio Transaction after August 1, 2001, could
have been leased had they been properly maintained. Each expert
offered a range of rent prices they believed the cars could have
fetched on the open market. Depending on the type of car, the
length of the lease, and the type of the lease, their estimates
ranged from $50 to $375 per month. The experts also testified
as to the estimated value of the railcars had they been in
serviceable condition at the end of the Portfolio Transaction’s
term. These estimates ranged from $1500 to $11,000 per railcar,
depending on the car type and its condition at sale. 4 Defendants
countered with expert testimony asserting that there was
“virtually no demand” to lease one type of railcar. J.A. 545.
In its memorandum of decision, the district court held that
Railcar and Allfirst created a valid, enforceable contract at
the February 10 meeting, in which they agreed that Railcar’s SLV
payments to Allfirst would not reduce the Guaranty limit. As a
4
Although the Service Agreement required that Progress
maintain the railcars in a condition to allow the cars to be
leased at the Minimum Net Rent, J.A. 1102, fluctuations in the
market could change the condition a car would need to be in to
earn that amount of rent. Therefore, the condition of the cars
at sale could vary, depending on the market.
9
result, the court denied Progress’s claim for $1,350,000 and
awarded Allfirst damages for the difference between the scrap
price and the SLV of the twelve scrapped railcars for which
Allfirst had not yet received full payment.
Turning its attention to Allfirst’s affirmative claims for
damages, the court held that Defendants were liable to Allfirst
for various unperformed repair obligations and missed rent
opportunities related to specific leases. The district court,
however, rejected Allfirst’s assertion that it was due
additional compensation for general missed rent opportunities
for all remaining railcars not subject to the February 10
agreement. The court reasoned that Allfirst had not presented
sufficient evidence to support this component of its damages
claim. Similarly, the court rejected Allfirst’s claim for
additional damages for the difference between the sale price of
the remaining railcars had they been properly maintained and the
actual sale price, finding that estimates of the cars’ potential
fair market values were not sufficiently reliable because they
were made more than a year prior to the date the cars were to be
sold under the Assignment Agreement.
10
After resolving other issues, the court entered final
judgment in favor of Allfirst for $3,379,061.00. 5 Both parties
appealed.
II.
The issues before us are whether Railcar and Allfirst
created a valid, enforceable oral agreement at the February 10
meeting, and whether the district court erred in denying
Allfirst’s additional claim for damages for lost rents and
sales. We consider each contention in turn.
A.
We first consider Defendants’ assertion that the district
court erred in enforcing the oral agreement reached between
Allfirst and Railcar at the February 10 meeting.
In general, we review the district court’s rulings on legal
issues de novo. We affirm factual findings unless they are
clearly erroneous. Nelson-Salabes, Inc. v. Morningside Dev.,
LLC, 284 F.3d 505, 512 (4th Cir. 2002).
Defendants urge that although the issue of contract
formation is typically a question of fact, Maryland law dictates
5
This sum reflects the amount awarded for the SLV of the
twelve scrapped cars for which Allfirst had not been paid, plus
additional sums not contested on appeal.
11
that when material facts are not in dispute, the issue of
whether a contract exists is a question of law subject to de
novo review. Allfirst, on the other hand, asserts that the
contract issue here is a question of fact, and that therefore
the “clearly erroneous” standard should apply.
It is settled Maryland law that the existence and terms of
an oral contract, when disputed, are for the trier of fact to
determine. Weil v. Free State Oil Co. of Md., 87 A.2d 826, 829
(Md. 1952). When the parties present no dispute of material
fact, however, the issue of contract creation is a question of
law. See Weaver v. ZeniMax Media, Inc.,
923 A.2d 1032, 1051
(Md. Ct. Spec. App. 2007); Mitchell v. AARP Life. Ins. Program,
N.Y. Life Ins. Co.,
779 A.2d 1061, 1068 (Md. Ct. Spec. App.
2001) (“[I]f there are no genuine disputes of material fact,
then the reviewing court must determine if the trial court
reached the correct legal result.” (internal quotations
omitted)).
In this case, the parties disagree as to the terms of the
oral agreement, the basis for the agreement, and the capacity in
which Railcar acted in carrying out the agreement. Because the
parties dispute the material facts of the alleged agreement, we
find that the questions regarding the existence and the terms of
the contract are questions of fact. We therefore will not
12
reverse the district court’s determination unless we find it
clearly erroneous.
B.
With that standard of review firmly in mind, we turn to
Defendants’ argument that the district court erred in finding
that Allfirst and Railcar created an enforceable oral contract,
including an agreement not to deduct Railcar’s SLV payments from
the Guaranty limit.
According to Defendants, the two parties could not have
created a valid contract because the Guaranty was not discussed
at the February 10 meeting and because the parties disagreed
afterward, both internally and with one another, about the
effect of the oral agreement on the Guaranty. Defendants also
note that although Progress’s rights and obligations were
affected by the contract, it was not a party to the agreement,
did not offer to take the loss on the scrapped railcars, and did
not consent to assuming an increased obligation under the
Guaranty. Relatedly, Defendants argue that enforcing the oral
agreement in these circumstances allows Allfirst to reap a
windfall.
Allfirst responds that the February 10 arrangement was a
side agreement between Allfirst and Railcar that did not affect
Progress’s rights or obligations under the Guaranty. As a
result, Allfirst argues, Defendants’ complaint that Progress was
13
not party to the oral agreement is irrelevant. We agree with
Allfirst.
The “[c]reation of a contract requires an offer by one
party and acceptance by the other party.” Cochran v. Norkunas,
919 A.2d 700, 713 (Md. 2007). “Acceptance of an offer is
requisite to contract formation, and common to all
manifestations of acceptance is a demonstration that the parties
had an actual meeting of the minds regarding contract
formation.” Id. “[I]n other words, to establish a contract the
minds of the parties must be in agreement as to its terms.”
Mitchell, 779 A.2d at 1069 (citation omitted).
We conclude that the district court did not clearly err in
finding that Allfirst and Railcar created a valid, enforceable
oral contract regarding the disposition of the 400 railcars.
Martini testified that in proposing to scrap the railcars and
pay the SLV, Railcar was offering to absorb the loss. Martini
echoed this statement in his subsequent memo to Smallwood, which
also supports the district court’s finding that Railcar offered
to make payments to Allfirst that would not reduce the Guaranty
limit. John Cook, an Allfirst executive present at the February
10 meeting, also stated that Railcar offered to take the loss in
removing the railcars from the transaction, and Cook thanked
Railcar representatives for “not making [their] loss [his]
14
loss.” J.A. 256-57. Finally, the parties acted in accordance
with the agreement for nearly a year.
It is true that certain evidence--including other
statements made by Martini at trial and an internal memo
suggesting Allfirst’s uncertainty about the effect of Railcar’s
payments on the Guaranty limit--weighed against finding a valid
contract. We are mindful, however, of the deference accorded to
the district court as the finder of fact at a bench trial.
Because sufficient evidence was presented to support the court’s
view of the facts finding the existence of a contract, we
decline to disturb that ruling.
Nor are we persuaded by Defendants’ argument that the
February 10 agreement was not valid because Progress was not
party to it. The oral agreement between Allfirst and Railcar
did not alter Progress’s obligations to Allfirst under the
Guaranty, and so Progress was not a necessary party. 6 Prior to
the February 10 agreement, if a railcar was scrapped for less
than its listed SLV, Progress was required to pay Allfirst the
difference between the SLV and the scrap price. This amount was
deducted from the Guaranty limit, reducing Progress’s potential
6
For this reason, the agreement did not violate Maryland’s
Statute of Frauds provision requiring that modification of
guaranties be in writing. See Md. Code Ann., Cts. & Jud. Proc.
§ 5-901(1).
15
obligation to Allfirst. After the February 10 agreement, if one
of the 400 railcars was scrapped, Railcar would send the SLV to
Allfirst, and then Railcar would collect only the scrap price
from Progress after Progress scrapped the car. The February 10
agreement did not require Progress to pay Allfirst the SLV, nor
did Progress do so. J.A. 316-17. Because Progress did not pay
Allfirst the SLV, Progress had no right to deduct the SLV amount
from the Guaranty limit. Accordingly, the February 10 agreement
did not alter Progress’s obligations to Allfirst, and thus it
does not matter that Progress had no say in it. 7
Finally, we reject Defendants’ contention that affirming
the district court’s ruling allows Allfirst to reap a windfall,
in that it received the SLV from Railcar without deducting it
from the Guaranty limit. To begin with, any benefit received by
Allfirst is not a “windfall,” but is instead the result of a
mutually beneficial agreement between it and Railcar. The
evidence at trial showed that Railcar believed that paying the
SLV would maintain both its standing in the relatively small
railcar industry and the goodwill of its longtime customer,
7
Defendants attempt to avoid this conclusion by asserting
that Railcar was acting as Progress’s agent in remitting the SLV
payments to Allfirst. Defendants, however, did not raise this
agency argument until their reply brief, which means they waived
it. See, e.g., Hunt v. Nuth, 57 F.3d 1327, 1338 (4th Cir.
1995).
16
Allfirst. As a result, both Allfirst and Railcar benefited from
the February 10 agreement.
Second, Progress too enjoyed a tangible benefit from the
oral agreement. Without it, Progress would have been on the
hook to Allfirst for the Minimum Net Rent for each railcar
through the end of the Minimum Lease Term. The February 10
agreement, however, allowed Progress to avoid this cost.
We therefore reject Defendants’ claim of error on appeal.
III.
We next consider the cross-appeal wherein Allfirst contends
that the district court erred in failing to award it additional
damages for rental payment and sale price shortfalls, pursuant
to the Guaranty.
“The calculation of damages is a finding of fact and
therefore is reviewable only for clear error, but to the extent
those calculations were influenced by legal error, review is de
novo.” United States ex rel. Maddux Supply Co. v. St. Paul Fire
& Marine Ins. Co., 86 F.3d 332, 334 (4th Cir. 1996). In
addition, the weight accorded to an expert’s testimony is a
matter for the trial court’s discretion. Am. Milling Co. v. Tr.
of Distribution Trust,
623 F.3d 570, 573-74 (8th Cir. 2010).
17
A.
The district court rejected Allfirst’s request for
additional rent damages because it found “the testimony
inadequate to establish any reliable estimate of rental that
could have been earned from hypothetical leases.” J.A. 953.
Specifically, the court determined that “[t]he evidence did not
establish industry utilization rates, average fleet operability,
bad faith on the part of Defendants, or any other basis for
awarding Allfirst damages based upon theoretically available
rental opportunities.” J.A. 953.
We consider Allfirst’s claim for additional rents to be
akin to one seeking lost profits, and so we look to relevant
Maryland law on that subject. To recover lost profits under
Maryland law for breach of contract, a plaintiff must show that
(1) the breach by the defendant was the proximate cause of the
plaintiff’s loss, (2) the defendant could reasonably foresee,
when it executed the contract, that a loss of profits would be a
probable result of a breach, and (3) the amount of lost profits
can be proved with reasonable certainty. M & R Contractors &
Builders v. Michael, 138 A.2d 350, 353, 355 (Md. 1958). “Losses
that are speculative, hypothetical, remote, or contingent either
in eventuality or amount will not qualify as ‘reasonably
certain’ and therefore recoverable as contract damages.” Hoang
18
v. Hewitt Ave. Assocs., 936 A.2d 915, 935 (Md. Ct. Spec. App.
2007).
We conclude that the district court abused its discretion
by summarily rejecting Allfirst’s expert testimony regarding
rent damages. The testimony of Allfirst’s experts showed that
the railcars could have been leased had they been kept in
serviceable condition. Both experts also provided a range of
rents that each car could have earned through November 30, 2003,
depending on several factors. Other than contending that there
was a weak market for one type of car (which an Allfirst expert
accounted for in his report), Defendants’ experts provided no
substantive rebuttal to Allfirst’s evidence on rent damages.
A district court certainly has discretion to reject expert
testimony, see Pittman v. Gilmore, 556 F.2d 1259, 1261 (5th Cir.
1997), but it may not arbitrarily fail to consider it. Am.
Milling, 623 F.3d at 573-74. In this case, the district court
failed to explain why it chose not to credit Allfirst’s
evidence. Although the court stated that the potential lease
opportunities described by the experts were “hypothetical”--one
of the permissible bases for finding that lost profits are not
“reasonably certain”--it did not explain why this was so.
Furthermore, the court provided no explanation or authority for
why an award of additional rent damages needed to be supported
by “industry utilization rates” or “average fleet operability,”
19
J.A. 953, terms that no party introduced, explained, or
otherwise relied on at trial. 8 We therefore vacate the judgment
of the district court as to this component of Allfirst’s damage
claim and remand for further consideration of the issue. 9
B.
Allfirst also asserts that Progress did not properly
maintain the railcars through the end of the Portfolio
Transaction term (November 30, 2003), and that as a result the
cars could only be sold for scrap value. According to Allfirst,
the district court should have awarded it damages for the
difference between the value of the railcars had they been
maintained and their actual sale price.
The district court agreed that Progress breached its
obligation to maintain the railcars, but nevertheless held that
8
The district court also noted that rent damages were not
appropriate because the evidence did not show bad faith on the
part of the Defendants. Such a showing, however, is not
necessary in a typical breach of contract action. See Rumsey
Elec. Mfrs. v. Livers, 77 A. 295, 301 (Md. 1910).
9
There may well be a reasoned basis for the district court
to reject Allfirst’s claim for additional rent damages; we hold
only that we can discern no such basis on this record. In that
regard, we also note that the district court’s brief discussion
of the issue did not address all of the M & R Contractors
factors necessary to award damages for lost profits, nor did it
consider whether Progress’s breach of the Guaranty was the
proximate cause of Allfirst’s damages. We think it appropriate
for the district court to consider these issues--and any others
relevant to the question of lost profits damages--in the first
instance.
20
Allfirst could not collect sale price shortfall damages. The
sole reason provided by the court was that the future estimates
of the railcars’ fair market values provided by Allfirst’s
experts were made more than a year prior to the operative date
and were not “sufficiently reliable.” J.A. 959.
We are constrained to find that the district court also
abused its discretion as to this issue. To begin with, evidence
of lost future expectations may properly be part of the damages
that a party can recover for breach of contract. See Johnson v.
Oroweat Foods Co., 785 F.2d 503, 507 (4th Cir. 1986). In
Johnson, we considered the measure of damages for a breach in
which the contract’s termination date was twenty-one years after
trial. Id. at 505-06. Applying Maryland law, we stated that
such damages could be calculated either (1) by estimating the
future earnings of the business over twenty-one years and
discounting such earnings to calculate their present value, or
(2) by estimating the market value of the business at the
termination date, which in theory should have equaled the
present value of all future earnings. Id. at 507-08.
Here, Allfirst’s experts provided three separate reports
regarding the estimated values of the railcars, dated November
20, 1998, February 28, 2002, and March 1, 2002. Each report
estimated the future value of each railcar as of November 30,
2003. Depending on car type and potential condition at sale,
21
Allfirst’s experts estimated that Allfirst could have received
from $1500 to $11,000 per railcar. As with the claim for
additional rent damages, Defendants presented no testimony to
contradict this evidence.
We readily acknowledge the broad discretion afforded to
district courts in evaluating expert testimony as to future
value, but a district court cannot summarily reject such
evidence simply because the timing of the trial and its
scheduling deadlines prevent a party from providing the court
with estimates made closer to the operative date of the
contract. 10 While the district court did say that the evidence
was not sufficiently reliable, it gave no explanation for this
conclusion, save for the timing of the reports. 11 We therefore
10
The bench trial in this case commenced on May 20, 2003,
and ended with closing arguments on July 11, 2003. The district
court entered its order addressing the damages issue on May 28,
2010.
11
Although Allfirst’s experts did not discount their
estimates to their present value, Defendants did not challenge
the claim on this ground, nor does it appear that the district
court denied it on this basis. Moreover, unlike in Johnson
where the twenty-one-year span of future earnings was
substantial, we are dealing here with a mere twenty-month span
between the date of the last expert report as to value and the
date when the railcars would have been sold. In any event, the
district court may, to the extent necessary, properly account
for this issue on remand when considering the amount of damages
(if any) that Allfirst should be awarded.
22
vacate the judgment of the district court as to this damage
issue and remand for further consideration.
IV.
We hold that the district court did not clearly err in
finding that Railcar and Allfirst created a valid oral contract
at the February 10 meeting. We hold further that the district
court abused its discretion in assessing the merits of
Allfirst’s claims for additional damages. We therefore affirm
in part, vacate in part, and remand for further proceedings
consistent with this opinion.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
23
