In this diversity action, the jury awarded plaintiffs Keith Collins and K-B Trucking Co. ("K-B") actual and punitive damages on their fraudulent misrepresentation claims against defendants Riss International Corp. ("Riss") and World Leasing, Inc. ("World Leasing"). Defendants argue on appeal that (1) Collins was not a proper plaintiff; (2) certain documentary evidence was erroneously admitted; (3) there was insufficient evidence of fraud; and (4) there was insufficient proof of damages. Plaintiffs in their cross-appeal contend that the district court erred in granting defendants' motions for directed verdicts on plaintiffs' breach of warranty and conversion claims. We affirm in part and vacate in part, and remand.

* Facts

In July 1978, Midway Trucking Co. ("Midway") was on the verge of financial collapse. Midway was owned by Billy Moberly and performed local cartage for the Kansas City Terminal of defendant Riss. Later that month, plaintiff Keith Collins and Moberly met with officials of Riss and defendant World Leasing to discuss the award of Riss's local cartage contract and the purchase of tractors from World Leasing. Certain alleged representations made by defendants' representatives to Collins at this meeting concerning the rates, gross income and profitability of the cartage operation, and the cost and quality of the tractors, form the basis of this action by Collins and K-B, the company he formed allegedly on the basis of these representations.

K-B was incorporated on August 2, 1978. Soon thereafter, K-B leased certain tractors from World Leasing with an option to purchase and contracted with Riss to provide local cartage service. On August 14, K-B entered into nine separate lease-purchase agreements with World Leasing. Defendants' Exhibits L through T, V R. 673-752. The optional purchase price of the seven 1973 tractors was $13,000 each, and the optional purchase price of the two 1972 tractors was $11,700 each. On August 14, K-B and Riss also entered into a written cartage agreement. An appendix to the agreement contained a schedule of rates by which K-B would be compensated for performing certain services. Defendants' Exhibit A, V R. 646-49. The contract provided that it would be in effect for one year and that it could be cancelled by either party upon notice.

K-B went out of business less than eight months after its incorporation. On January 16, 1979, Riss informed K-B that it was terminating the cartage contract. Also on January 16, World Leasing picked up its tractors from K-B. K-B ceased operations in March 1979.

K-B brought this action against Riss and World Leasing alleging violation of the antitrust laws, fraud, breach of contract, breach of implied warranty, and conversion.1 I R. 1-10. World Leasing counterclaimed for breach of contract. Id. at 33 (Pretrial Order). At the beginning of trial, Keith Collins was added as a plaintiff. I R. Supp. 1. At the close of plaintiffs' evidence, the district court granted defendants' motions for directed verdicts on the antitrust, breach of warranty and conversion claims, and granted defendants' motion to strike evidence of lost profits. The court denied defendants' motions for directed verdicts on the fraud and breach of contract claims and denied defendants' motion to strike Keith Collins as a plaintiff. At the close of evidence, the court denied defendants' motions for directed verdicts on the fraud and breach of contract claims and denied plaintiffs' motion for a directed verdict on World Leasing's counterclaim.

The jury returned a special verdict in favor of plaintiffs on the fraudulent misrepresentation claim. The jury assessed $48,724 actual damages and $10,000 punitive damages against Riss, and $23,832.84 actual damages and $20,000 punitive damages against World Leasing, for a total award of $102,556.84. ($72,556.84 in actual damages and $30,000 in punitive damages). II R. 267. The jury found in favor of Riss on the breach of contract claim and in favor of plaintiffs on World Leasing's counterclaim. Id. at 267-68. The district court denied defendants' motion for judgment n.o.v., new trial, and remittitur, and denied plaintiffs' motion to alter or amend the verdict or for a new trial on the breach of contract issue. The court entered judgment in accordance with the jury's verdict. Defendants appeal and plaintiffs cross-appeal.

Defendants argue that the district court erred in permitting Collins to be added as a plaintiff prior to trial and in denying defendants' motion to strike Collins as a plaintiff.2 Defendants assert that Collins is not a real party in interest under Fed.R.Civ.P. 17(a).3

Defendants apparently contend that Collins should have been dropped as a plaintiff by the district court upon their motion under Fed.R.Civ.P. 21.4 A district court's denial of a motion to drop a party will not be overturned on appeal absent an abuse of discretion. See United States v. Wyoming National Bank, 505 F.2d 1064, 1067 (10th Cir.1974); see also Intercon Research Associates v. Dresser Industries, 696 F.2d 53, 56 (7th Cir.1982); 7 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1688, at 342 (1972) ("The grant or denial of a motion to bring in or drop a party lies in the discretion of the judge.... The trial court's exercise of discretion will not be disturbed on appeal unless an abuse [of discretion] is shown.").

We must look to Kansas law in determining whether Collins is a real party in interest under Rule 17(a). See, e.g., American National Bank & Trust Co. v. Weyerhaeuser Co., 692 F.2d 455, 459-60 (7th Cir.1982); Martin v. Morgan Drive Away, Inc., 665 F.2d 598, 604 (5th Cir.), cert. dismissed, 458 U.S. 1122, 103 S. Ct. 5, 73 L. Ed. 2d 1394 (1982); American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1141 (9th Cir.1981); see also Audio-Visual Marketing Corp. v. Omni Corp., 545 F.2d 715, 718-19 (10th Cir.1976); Hoeppner Construction Co. v. United States, 287 F.2d 108, 111 (10th Cir.1961); cf. Harris v. Illinois-California Express, Inc., 687 F.2d 1361, 1373 (10th Cir.1982). "The forum state's procedural statute or rule defining the real party in interest concept is not applicable, however, because it only governs who may sue in the state courts; under Rule 17(a), the federal courts are concerned only with that portion of state law from which the specific right being sued upon stems." 6 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1544, at 647-48 (1971) (citing American Fidelity and Casualty Co. v. All American Bus Lines, 179 F.2d 7, 10 (10th Cir.1949) ). We therefore must examine whether Kansas law permitted Collins to pursue the fraudulent misrepresentation claim against defendants.

Under Kansas law, "[o]ne who makes a fraudulent misrepresentation or concealment is subject to liability for pecuniary loss to the persons or class of persons whom he intends or has reason to expect to act or to refrain from action in reliance upon the misrepresentation or concealment." Griffith v. Byers Construction Co., 212 Kan. 65, 510 P.2d 198, 199 (1973) (syllabus number 3 prepared by Kansas Supreme Court)5; see also Unified School District No. 490, Butler County v. Celotex Corp., 6 Kan. App. 2d 346, 629 P.2d 196, 207 (1981). Most of the alleged misrepresentations involved here occurred at a July 1978 meeting attended by Collins and Moberly and representatives of Riss and World Leasing. The alleged misrepresentations concerned discussions of the award of Riss's local cartage contract and the purchase of tractors from World Leasing. K-B was incorporated on August 2. The local cartage agreement between K-B and Riss and the lease-purchase agreements between K-B and World Leasing were executed two weeks later.

We hold that Collins is a real party in interest under Rule 17(a). He alleged that the fraudulent misrepresentations were made to him by defendants before K-B was formed and before the cartage agreement and lease-purchase agreements were signed. Collins contended that the misrepresentations induced him to form K-B and to enter into the cartage agreement and lease purchase-agreements.6 We feel that under Kansas law, Collins was a person whom defendants "intend[ed] or ha[d] reason to expect to act or refrain from an action in reliance upon the misrepresentation or concealment."7

Defendants argue that the district court erred in not excluding Plaintiffs' Exhibits 9, 13 and 268 under Fed.R.Evid. 403. Exhibit 9 was a maintenance record of the trucks leased by K-B, including a list of breakdowns, towing charges, and maintenance costs. III R. 449. Exhibit 13 was a weekly compilation of the amount of money paid by Riss to K-B and the amount of money withheld by Riss. Id. at 450. Exhibit 26 was a list of other cartage services that Riss used in January 1979 in addition to those performed by K-B. Id. at 568-70.

Rule 403 provides that "[a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." Fed.R.Evid. 403. Defendants argue that Exhibits 9, 13 and 26 were "unduly cumulative evidence" and that the district court's admission of the exhibits over objection "was prejudicial to defendants and the prejudice substantially outweighed the materiality of the evidence." Brief of Appellants 17. We disagree.

The exclusion of relevant evidence under Rule 403 is "an extraordinary remedy to be used sparingly." United States v. Plotke, 725 F.2d 1303, 1308 (11th Cir.), cert. denied, --- U.S. ----, 105 S. Ct. 151, 83 L. Ed. 2d 89 (1984); see also United States v. Edwards, No. 84-1633, slip op. at 4 (10th Cir. April 22, 1985); United States v. Thevis, 665 F.2d 616, 633 (5th Cir.), cert. denied, 456 U.S. 1008, 102 S. Ct. 2300, 73 L. Ed. 2d 1303, 458 U.S. 1109, 102 S. Ct. 3489, 73 L. Ed. 2d 1370, 459 U.S. 825, 103 S. Ct. 57, 74 L. Ed. 2d 61 (1982). The decision to exclude (or admit) evidence under this rule is within the sound discretion of the trial court, and will not be reversed by this court absent a clear abuse of discretion. United States v. Edwards, slip op. at 4; Whiteley v. OKC Corp., 719 F.2d 1051, 1057 (10th Cir.1983); Beacham v. Lee-Norse, 714 F.2d 1010, 1014 (10th Cir.1983); United States v. Golden, 671 F.2d 369, 371 (10th Cir.), cert. denied, 456 U.S. 919, 102 S. Ct. 1777, 72 L. Ed. 2d 179 (1982); United States v. Mangiameli, 668 F.2d 1172, 1176 (10th Cir.), cert. denied, 456 U.S. 918, 102 S. Ct. 1776, 72 L. Ed. 2d 179 (1982); United States v. Guerrero, 667 F.2d 862, 867 (10th Cir.1981), cert. denied, 456 U.S. 964, 102 S. Ct. 2044, 72 L. Ed. 2d 490 (1982).9 Moreover, error in the admission or exclusion of evidence is harmless if it does not affect the substantial rights of the parties, and the burden of demonstrating that substantial rights were affected rests with the party asserting error. Fed.R.Evid. 103(a)(1); Fed.R.Civ.P. 61. See Perry v. State Farm Fire & Casualty Co., 734 F.2d 1441, 1446 (11th Cir.1984), cert. denied, --- U.S. ----, 105 S. Ct. 784, 83 L. Ed. 2d 778 (1985).

It is true, as defendants allege, that much of what is contained in Exhibits 9, 13 and 26 was testified to by plaintiff Collins. However, these exhibits also contained useful figures and details that supported Collins' testimony and that may have been helpful to the jury. See X R. 143 (district court admitted Exhibit 26 because it "had some figures that might be helpful," and was not just a narrative of Collins' testimony). Defendants have failed to show that the district court abused its discretion in admitting these exhibits, or that the court's action affected their substantial rights.

Defendants argue that there was insufficient evidence to support the jury's finding that Riss and World Leasing were liable for fraud. Under Kansas law, "[a]ctionable fraud includes an untrue statement of fact, known to be untrue by the party making it, made with the intent to deceive or recklessly made with a disregard for truth, where another party justifiably relies on the statement and acts to his injury." Lentz Plumbing Co. v. Fee, 235 Kan. 266, 679 P.2d 736, 742 (1984); see also Nordstrom v. Miller, 227 Kan. 59, 605 P.2d 545, 552-52 (1980); Scott v. Strickland, 10 Kan. App. 2d 14, 691 P.2d 45, 51 (1984).10 Evidence supporting a finding of fraud must be clear and convincing. See, e.g., W-V Enterprises, Inc. v. Federal Savings & Loan Insurance Corp., 234 Kan. 354, 673 P.2d 1112, 1121 (1983); Nordstrom v. Miller, 605 P.2d at 552; see also Mackey v. Burke, 751 F.2d 322, 328 (10th Cir.1984) (applying Kansas law).11 Defendants contend that there was insufficient evidence to support a finding either that defendants knowingly misrepresented material facts or that plaintiffs justifiably relied on these alleged misrepresentations. We disagree.

A. Knowing Misrepresentation of Material Facts

Under Kansas law, "[w]hen alleged fraud relates to promises or statements concerning future events, the gravamen of such a claim is not the breach of the agreement to perform, but the fraudulent representation concerning a present, existing intention to perform, when such intention is in fact nonexistent." Modern Air Conditioning, Inc. v. Cinderella Homes, Inc., 226 Kan. 70, 596 P.2d 816, 824 (1979); see also Mackey v. Burke, 751 F.2d at 328 (applying Kansas law).

Defendants argue that "[t]here was absolutely no evidence to establish even an inference that Riss and World Leasing knew that the promised events would not occur at the time the representations were made." Brief of Appellants 19. Defendants contend that no misrepresentations of material fact occurred; instead, the evidence indicated that mere "sales puffing" was involved. Id. The alleged promises relied on by plaintiffs--that the rates were "reasonable," that K-B would be "paid on time," that K-B "would make a profit," and that the tractors would be put in "A-1" condition--"did not relate to existing fact but rather referred to some facts which might develop in the future." Id. at 20.

However, "Kansas has long recognized the general rule that fraud may be shown by circumstantial as well as by direct and positive proof." Chute v. Old American Insurance Co., 6 Kan. App. 2d 412, 629 P.2d 734, 742 (1981). Accordingly, fraud "may be proved by showing circumstances from which the inference of fraud is natural and irresistible; and if such circumstances are established and they are of such a character as to produce in the mind of the trier of fact a conviction of the fact of fraud, then it must be considered that fraud is proven." Id.

There was sufficient circumstantial evidence to support an inference by the jury that defendants knowingly misrepresented material facts and thereby intended to defraud plaintiffs. For example, plaintiff Collins testified that defendant World Leasing through its agents promised plaintiffs that World Leasing would repair the tractors to get them in "A-1 condition" within thirty days after K-B began operations, and that World Leasing would provide free repairs during that period. See X R. 58-61 (testimony of plaintiff Collins). However, other evidence indicated that K-B began having difficulties with the tractors immediately after beginning business, that World Leasing would not perform any of the promised repairs free of charge, and that plaintiffs had to have the tractors repaired elsewhere. See id. at 117-30. In addition, Collins and his attorney testified that Riss and its agents promised that Riss would timely pay reasonable rates for cartage services performed by K-B, and that K-B would be profitable and would average over $10,000 per week in gross revenues. See X R. 63-64, 130-39; XII R. 426-27. Collins testified that K-B was not profitable and did not have gross revenues of over $10,000 per week, and that Riss did not pay reasonable rates to K-B and did not make timely payments to K-B. See XI R. 189, 232; X R. 30-34, 155-64. Thus an inference of misrepresentation of present facts known to Riss could be drawn.

We cannot accept defendants' view that any promises they may have made with respect to profitability, rates and gross revenues constituted mere sales puffing. Kansas courts have recognized that promises regarding future income and earnings can constitute actionable fraud. See, e.g., Fisher v. Mr. Harold's Hair Lab, Inc., 215 Kan. 515, 527 P.2d 1026, 1034-35 (1974); Hawthorn-Mellody, Inc. v. Driessen, 213 Kan. 791, 518 P.2d 446, 451-53 (1974). An important factor supporting the decision in these cases was the existence of superior knowledge on the part of the promising party. See Fisher v. Mr. Harold's Hair Lab, Inc., 527 P.2d at 1035; Hawthorn-Mellody, Inc. v. Driessen, 518 P.2d at 453. The evidence here similarly supports the finding that defendants' promises relating to income and earnings constituted actionable fraud because defendants had superior knowledge and experience of the local market for cartage services. Although Collins had over fifteen years' experience in the trucking industry, he never before had run his own cartage company. Riss, on the other hand, was knowledgeable about its Kansas City cartage operation and had recent experience with another local cartage company. Moreover, World Leasing had experience in renting trucks for cartage operations. We conclude that there was sufficient evidence to support the jury's finding that defendants knowingly misrepresented material facts.

Plaintiff Collins testified that he relied upon defendants' misrepresentations. XI R. 185-86. Defendants contend that Collins' reliance was not justified. Brief of Appellants 20-27. Defendants point to Collins' knowledge and fifteen years' experience in the trucking industry and argue that his failure to make any inquiry into the records, expenses, income or losses of the company which K-B succeeded as cartage carrier for Riss precludes a finding that his reliance on the misrepresentation was justified. According to defendants, a reasonable inquiry into these records would have given Collins notice of the losses and costs of operation of K-B's predecessor company and thereby prevented him from reasonably relying on the representations made by defendants.

Under Kansas law, " '[a] recipient of fraudulent misrepresentation is justified in relying upon its truth without investigation, unless he knows or has reason to know of facts which make his reliance unreasonable.' " Goff v. American Savings Ass'n, 1 Kan. App. 2d 75, 561 P.2d 897, 903 (1977) (quoting Restatement (Second) of Torts Sec. 540 (Tent. Draft No. 11, 1965)). "[T]he test is whether the recipient has 'information which would serve as a danger signal and a red light to any normal person of his intelligence and experience.' " Id. (quoting Restatement (Second) of Torts Sec. 540 & Comments) (Tent. Draft No. 11, 1965). See also Sippy v. Cristich, 4 Kan. App. 2d 511, 609 P.2d 204, 208 (1980).

We believe there was sufficient evidence to support the jury's finding that Collins reasonably relied upon defendants' misrepresentations. Collins did not have "reason to know of facts which make his reliance unreasonable," and did not have "information which would serve as a danger signal and a red light." Defendants' criticism of Collins' failure to seek out information about K-B's predecessor company is unpersuasive in light of evidence that the predecessor company's financial records were in a state of "total confusion." XII R. 559. Our conclusion is supported by Kansas cases that have refused to impose a duty to investigate in similar circumstances.12

The jury returned a special verdict on the fraud claim in favor of plaintiffs and against Riss for $48,724 in actual damages and against World Leasing for $23,832.84 in actual damages. II R. 267. Defendants moved for a new trial or a remittitur. Id. at 282. The trial court denied these motions. Id. at 307-11. On appeal, defendants contend that there was insufficient evidence to support the jury's finding of actual damages.13

Kansas follows the "benefit of the bargain" rule in awarding damages for fraud. Under this approach, "in a damage action by a purchaser for fraud inducing the purchase, the measure of damages is the difference between the actual value of the property at the time of the sale and the value it would have had if the representations had been true." Fox v. Wilson, 211 Kan. 563, 507 P.2d 252, 267 (1973); see also Fisher v. Mr. Harold's Hair Lab, Inc., 527 P.2d at 1035-36; Walker v. Fleming Motor Co., 195 Kan. 328, 404 P.2d 929, 932-34 (1965); Perry v. Schoonover Motors, Inc., 189 Kan. 608, 371 P.2d 152, 155-56 (1962); Sippy v. Cristich, 609 P.2d at 210-11. Accordingly, the proper measure of damages for fraudulent misrepresentations concerning the tractors is the difference between the actual value of the lease-purchase agreements and the value of the lease-purchase agreements as represented. The proper measure of damages for fraud in inducing plaintiff Collins to conduct the cartage operation for Riss is the difference between the actual value of the cartage contract and the value the cartage contract would have had if the representations had been true. Defendants contend that plaintiffs failed to present any evidence regarding the represented value of the lease-purchase agreements or the represented value of the cartage contract.

We first consider the sufficiency of the evidence to support the $23,832.84 damage award against World Leasing. Under Kansas law, here the value of the nine tractors as represented can be equated with the purchase price that World Leasing charged K-B, or $114,400.14 See Fox v. Wilson, 507 P.2d at 254 (syllabus number 15 prepared by Kansas Supreme Court) ("In a fraud action where no evidence is introduced by either party to indicate that if the seller's representations had been true the property would have had any different value than the sales price, that price may be utilized as the 'represented' value of the property in assessing damages."). The evidence indicated that the actual value of the tractors was $6,423.24 each, for a total of $57,809.16.15 Accordingly, the $23,832.84 in damages awarded against World Leasing was well within the evidence ($56,590.84).

We next consider the sufficiency of the evidence to support the $48,724 damage award against Riss. The evidence indicated that the actual resulting value of the cartage contract was the $29,000 loss16 suffered by K-B in its few months of operation. See XI R. 188 (testimony of plaintiff Collins). Although this figure as a basis for damages is less than the jury's verdict of $48,724, plaintiffs argue that sufficient evidence supports the jury's full award of $48,724 on two grounds.

First, plaintiffs contend that $55,000 in future profits should be considered as the value of the cartage contract as represented. There is no evidence, however, that Riss represented to plaintiffs that K-B would earn $55,000 in profits in its first year of operation; the evidence only revealed that Riss's agents promised that Riss would timely pay reasonable rates for cartage services performed by K-B, and that K-B would be profitable and would average over $10,000 per week in gross revenues. See X R. 63-64, 130-39; XII R. 426-27. For example, Collins testified that "[b]ased on the $10,000 a week [in revenues] that [Riss] had mentioned, I projected an annualized revenue from Riss, I thought with good control of expenses we might enjoy a 10 percent profit which would generate profits in excess of a thousand dollars a week." X R. 65 (emphasis added). See also XI R. 186-89, 201-04, 222-23. Moreover, Collins admitted in part of his deposition read to the jury that Riss did not promise that K-B would earn a specific amount of profits:

QUESTION: Did anybody say anything about the rate of return you could expect or whether you could expect to make a profit or not?

ANSWER: Only the statement, that [Riss's agent] made about we could expect a gross in excess of $10,000 a week.

QUESTION: But [Riss's agent] didn't state or imply anything about profitability?

ANSWER: I don't recall that he did, no.

XIII R. 724-25. In a later portion of the deposition, Collins admitted that Riss's agent did not assure him that K-B would earn a specific percentage of profits, but he contended that Riss had implied that K-B would be profitable:

QUESTION: So no specific percentage of profitability was assured to you?

ANSWER: That's correct.

QUESTION: But you're saying that profitability was assured to you?

ANSWER: Implied.

QUESTION: Implied, O.K. It wasn't a specific expressed representation, then?

ANSWER: Nobody said I'm going to make ten percent on my investment.

Id. at 733. The $55,000 in lost profits was thus based on Collins' speculation that he could anticipate a 10% profit on the gross revenues promised by Riss.

Lost profits may be recovered in a fraud action "where the evidence permits reasonable conclusions about the losses, but not where it is mere speculation." D. Dobbs, Handbook of the Law of Remedies 601 (1973). See also Crues v. KFC Corp., 729 F.2d 1145, 1151 (8th Cir.1984) (in action for fraudulent misrepresentation in connection with purchase of restaurant franchise, evidence of profits from other franchises admissible under benefit of the bargain theory to draw a "rational estimate" of anticipated profits from franchise). The general rule, however, is that "[i]n the case of claims for lost profits due to fraud, ... it is usually said that where the business in which such profits are allegedly lost is a new or unestablished one, losses are necessarily too speculative and recovery is denied." D. Dobbs, supra, at 601. See also Fredonia Broadcasting Corp. v. RCA Corp., 569 F.2d 251, 259 (5th Cir.), cert. denied, 439 U.S. 859, 99 S. Ct. 177, 58 L. Ed. 2d 167 (1978).17

The admissibility of Collins' speculation that he anticipated a 10% profit on the gross revenues promised by Riss, for a total of $55,000 in anticipated profit in the first year of operation, was contested in the trial court. At a motions hearing out of the presence of the jury, counsel differed over whether Collins' speculation of $55,000 in anticipated profits was admissible. The trial court questioned counsel about the "general rule which is that where business has no track record [and] you have absolutely no evidence of even businesses like it, that loss of profits is not an element of damage." XIII R. 743. Plaintiffs' counsel argued that the rule was applicable under a breach of contract theory, but not under a fraud theory. Id. at 744. The trial court responded:

Well, I think what you are doing, you are just getting in the back door what you can't get in the front door and using as an excuse the fraud concept, and I don't think that is the way the fraud concept can be used. It is the benefit of the bargain.

In [Collins'] mind he was hoping to make $55,000 maybe, but the facts are that what he got here as against what he was promised just in bare dollars and cents, not profit. He had no track record. He had no experience, even, in this business to even--this [$55,000] is just a figure that somebody has pulled out of the air, so far as the evidence is concerned.

Although the court noted that "the law is clear as a bell that you can't have lost profits when you don't have anything to show that you have had any experience in the business that would justify profits," the trial judge stated that "I realize what [plaintiffs] are arguing is that [defendants] were guilty of fraud and had everything been as they represented, that [Collins] would have made this kind of profit in his own mind, for whatever that's worth." Id. at 751. The court admitted into evidence Exhibit 56, I R. Supp. 6, which contained a series of figures including the $55,000 profit anticipated by Collins, XIII R. 751, but admonished the jury that "the Court has stricken from your consideration any evidence as to future lost profits by K-B Trucking. Any projections that Mr. Collins made, that has been stricken now from your consideration." Id. at 761.

We conclude that evidence that Collins anticipated a $55,000 profit cannot be used to sustain the $48,724 damage award against Riss. There is no evidence that Riss represented that K-B would earn $55,000 in profits, and any conclusions regarding the lost profits would be speculative in light of the absence of evidence to support the lost profits claim.19 Accordingly, we must examine plaintiffs' second argument in support of the jury's damage award against Riss.

Plaintiffs further argue that because the amount of admissible evidence of damages against World Leasing (approximately $56,000), plus the evidence of damages against Riss to compensate for plaintiffs' loss ($29,000), without consideration of lost profits, is a figure (approximately $85,000) greater than the combined damages awarded by the jury against both defendants (approximately $73,000), the full jury award against both defendants should be sustained.20 We disagree.

We are dealing with separate judgments against two distinct defendants. Plaintiffs ask that we use the evidence of damages against one defendant on a fraud claim to support a damage award against another defendant on a separate fraud claim. Plaintiffs do not direct us to any authority to support its argument, see Brief of Appellees 39-40, and we know of no principle of law that authorizes such a practice where joint and several liability is neither alleged nor proven. Accordingly, we conclude that there is sufficient evidence to support the jury's award of $23,832.84 in actual damages against World Leasing, but that there is insufficient evidence to support the jury's award of $48,724 in actual damages against Riss.

Having decided that there was sufficient evidence to support the jury's finding that World Leasing and Riss were liable for fraud, as well as sufficient evidence to support the $23,832.84 actual damage award against World Leasing, we next must determine what relief is appropriate in light of our holding that there is insufficient evidence to support the $48,724 damage award against Riss. We believe that a remittitur is appropriate in these circumstances.

Federal law governs the decision whether a remittitur should be granted in a diversity case. See, e.g., Donovan v. Penn Shipping Co., 429 U.S. 648, 649-50, 97 S. Ct. 835, 836-37, 51 L. Ed. 2d 112 (1977) (per curiam); West v. Jutras, 456 F.2d 1222, 1225 n. 6 (2d Cir.1972); 19 C. Wright, A Miller & E. Cooper, Federal Practice and Procedure Sec. 4511, at 179 (1982). "Under federal law, whether the trial court properly refused to grant remittitur or a new trial on the ground of an excessive damage award is tested by an abuse of discretion standard." Garrick v. City and County of Denver, 652 F.2d 969, 971 (10th Cir.1981); see also Goldstein v. Manhattan Industries, Inc., 758 F.2d 1435, 1447-48 (11th Cir.1985); Brown v. Skaggs-Albertson's Properties, Inc., 563 F.2d 983, 988 (10th Cir.1977). We conclude that, in light of the insufficiency of the evidence to support the damage award against Riss, the district court abused its discretion in refusing to order a remittitur and alternatively direct a new trial on the issue of the proper amount of damages to be awarded against Riss if plaintiffs refused to accept the remittitur.

Although there are a number of approaches in setting the amount of the remittitur,21 we believe the facts of this case require that we fashion a remedy based on the maximum amount of damages that is reasonably supported by the evidence in the record. See, e.g., Goldstein v. Manhattan Industries, Inc., 758 F.2d at 1448 ("[A] remittitur order reducing a jury's award to the outer limit of the proof is the appropriate remedy where the jury's damage award exceeds the amount established by the evidence."); Dixon v. International Harvester Co., 754 F.2d 573, 590 (5th Cir.1985) (employing a " 'maximum recovery rule' " to determine the size of the remittitur "by reducing the verdict to the maximum amount the jury could properly have awarded"); Caldarera v. Eastern Airlines, Inc., 705 F.2d 778, 784 (5th Cir.1983) (same).

Accordingly, we remand the case with directions that the trial court enter a remittitur order for acceptance of a judgment reducing the damage award against Riss to $29,000, or otherwise for a new trial on the issue of damages against Riss.22

In their cross-appeal, plaintiffs argue that the district court erred in granting defendants' motions for directed verdicts on plaintiffs' breach of warranty and conversion claims. Brief of Appellees 40-47.

In considering a motion for a directed verdict, " '[t]he question is not whether there is literally no evidence supporting the party against whom the motion is directed but whether there is evidence upon which the jury could properly find a verdict for that party.' " Hurd v. American Hoist and Derrick Co., 734 F.2d 495, 499 (10th Cir.1984) (quoting 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2524, at 943 (1971) (footnote omitted) ). "We must view the evidence in the light most favorable to plaintiffs as the party against whom the motions were made." Mackey v. Burke, 751 F.2d 322, 325 (10th Cir.1984); see also Downie v. Abex Corp., 741 F.2d 1235, 1238 (10th Cir.1984).

Kansas law provides that "[w]here the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose." Kan.Stat.Ann. Sec. 84-2-315. In granting defendants' motion for directed verdict on plaintiffs' breach of warranty claim, the district court held that Sec. 84-2-315 did not apply to the lease-purchase agreements. XII R. 543-44. In their trial brief, plaintiffs had argued that although the lease-purchase agreements in form were leases, in effect they were installment sales contracts subject to the warranty provisions of the Uniform Commercial Code. See I R. 97-100 (citing Atlas Industries, Inc. v. National Cash Register Co., 216 Kan. 213, 531 P.2d 41 (1975)). The district court rejected this argument and held that "[t]he Kansas cases that [plaintiffs] rely on are distinguishable." XII R. 544.

We recognize that "[t]he views of a resident district judge on the unsettled law of his state are persuasive and ordinarily accepted." Sade v. Northern Natural Gas Co., 483 F.2d 230, 234 (10th Cir.1973). Nevertheless, we must conclude that the district court erred in holding that Sec. 84-2-315 did not apply to these lease-purchase agreements. Although the statute only applies to the sale of goods and not to leases, Kansas employs the "economic realities" test to determine if a transaction labeled as a lease is actually an installment sale. See Atlas Industries, Inc. v. National Cash Register Co., 531 P.2d at 44-47. One important factor under this approach is whether the lessee at the end of the lease term can exercise the option to purchase for no consideration or for a nominal consideration. See, e.g., Beneficial Commercial Corp. v. Cottrell, 688 P.2d 1254, 1256 (Mont.1984); Western Enterprises, Inc. v. Arctic Office Machines, Inc., 667 P.2d 1232, 1234-36 (Alaska 1983) (per curiam); Diede v. Davis, 661 P.2d 838, 840-41 (Mont.1983); see generally J. White & R. Summers, Handbook of the Law Under the Uniform Commercial Code 880-84 (2d ed. 1980).

The economic realities of the agreements between K-B and World Leasing indicate that the parties intended the transactions to be installment sales rather than leases.23 The "cost of lease contract" was tantamount to a 12 3/4% interest rate applied to the balance after subtracting the down payment from the initial purchase price. See XI R. 339 (former manager for World Leasing stated in deposition testimony read to jury that "cost of lease contract" charge was an interest charge). After the weekly payments for 1 1/2 years, plaintiffs would be entitled to possession without payment of any further consideration in exercising the option to purchase. In these circumstances, we conclude that Sec. 84-2-315 applied to these lease-purchase agreements. However, we hold that the district court did not err in directing a verdict on the breach of warranty claim because we believe that any damages recoverable under Sec. 84-2-315 were subsumed by the fraud claim against World Leasing. See Kan.Stat.Ann. Secs. 84-2-714(2), 84-2-721; see also Coleco Industries, Inc. v. Berman, 567 F.2d 569, 575 (3d Cir.1977), cert. denied, 439 U.S. 830, 99 S. Ct. 106, 58 L. Ed. 2d 124 (1978); Clifford v. River Bend Plantation, Inc., 55 N.C.App. 514, 286 S.E.2d 352, 356 (1982). Hence no additional damages could be recovered on the warranty claim.

Plaintiffs also argue that the district court erred in granting defendants' motion for a directed verdict on the conversion claim. The district court concluded that there was no evidence to support the allegation of conversion. XII R. 543-44. We agree that the evidence revealed that World Leasing held legal title to the tractors at issue and that therefore a conversion claim is unsupported on these facts. See, e.g., Temmen v. Kent-Brown Chevrolet Co., 227 Kan. 45, 605 P.2d 95, 99 (1980); Desbien v. Penokee Farmers Union Cooperative Ass'n, 220 Kan. 358, 552 P.2d 917, 924 (1976).24 Moreover, plaintiff had ceased making payments on the lease-purchase agreements, X R. 178, so that their right to possession had ended.

The judgment of the district court awarding plaintiffs $23,832.84 in compensatory damages and $20,000 in punitive damages against defendant World Leasing on the fraud claim is AFFIRMED. The judgment against defendant Riss on the fraud claim is VACATED and the cause is REMANDED to the district court with directions that an order be entered providing that if, within a reasonable time to be fixed by the district court, plaintiffs accept a reduction of the judgment of compensatory damages against defendant Riss to $29,000, and any reduction of the judgment of punitive damages against Riss deemed to be proper by the district court, with costs and interest as provided in and accruing from the entry of the original judgment, then the judgment as so modified shall be final; otherwise, if plaintiffs do not accept the reduction in the compensatory damage judgment to $29,000 and the reduction, if any, in the punitive damage judgment deemed to be proper by the district court, an order shall be entered granting a new trial on the compensatory and punitive damages on the fraud claim against defendant Riss.25

IT IS SO ORDERED.