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Milan Supply Chain Solutions Inc. v. Navistar Inc.

Court of Appeals of Tennessee, Jackson

August 14, 2019

MILAN SUPPLY CHAIN SOLUTIONS INC. F/K/A MILAN EXPRESS INC.
v.
NAVISTAR INC. ET AL.

          Session: June 19, 2019

          Appeal from the Circuit Court for Madison County No. C-14-285 Roy B. Morgan, Jr., Judge.

         This appeal involves a jury verdict in a commercial dispute pertaining to the quality of trucks purchased by the plaintiff, Milan Supply Chain Solutions, Inc. Contending that the purchased trucks were defective, Milan filed suit against Navistar, Inc. and Volunteer International, Inc., alleging various legal claims, including breach of contract, violation of the Tennessee Consumer Protection Act, and fraud. Although some of Milan's claims were dismissed prior to trial, the remaining fraud and Tennessee Consumer Protection Act claims were tried before a jury. Defendant Volunteer International, Inc. was granted a directed verdict upon the conclusion of Milan's proof and later awarded attorney's fees, but a monetary judgment for both compensatory and punitive damages was entered against Navistar, Inc. The parties now appeal, raising a plethora of issues for our consideration. For the reasons stated herein, including our conclusion that the asserted fraud claims are barred by the economic loss doctrine, we reverse the judgment awarded to Milan. We affirm, however, the trial court's award of attorney's fees in favor of Volunteer International, Inc.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed in Part, Affirmed in Part and Remanded

          Roman Martinez, Washington, D.C, Kevin Jakopchek, Chicago, Illinois, Eugene N. Bulso, Jr. and Paul J. Krog, Nashville, Tennessee, for the appellant, Navistar, Inc.

          Marty Phillips, Adam Nelson, Jackson, Tennessee, Clay Miller, Lawrence R. Lassiter, Dallas, Texas and Donald Capparella, Nashville, Tennessee, for the appellee, Milan Supply Chain Solutions, Inc. f/k/a Milan Express, Inc.

          Roman Martinez, Washington, D.C., Kevin Jakopchek, Chicago, Illinois, Eugene N. Bulso, Jr. and Paul J. Krog, Nashville, Tennessee, for appellee, Volunteer International, Inc.

          Bradley M. Davis, Chattanooga, Tennessee, for amicus curiae Tennessee Chamber of Commerce and Industry.

          Arnold B. Goldin, J., delivered the opinion of the Court, in which Kenny Armstrong, and Carma Dennis McGee, JJ., joined.

          OPINION

          ARNOLD B. GOLDIN, JUDGE.

         BACKGROUND AND PROCEDURAL HISTORY

         Plaintiff Milan Supply Chain Solutions, Inc. ("Milan") is a logistics company that is engaged in the business of hauling refrigerated and dry van commodities across the country. Defendant Navistar, Inc. ("Navistar") is a Delaware corporation that manufactures trucks and other equipment. Defendant Volunteer International, Inc. ("Volunteer") is a Tennessee company that sells and services Navistar trucks and equipment.

         The present dispute arose as a result of Milan's business dealings with Navistar and Volunteer, specifically its purchase of over two hundred Navistar trucks through a series of separate transactions. When Milan purchased its trucks, they were subject to a standard "Limited Warranty"; Milan also purchased "Optional Service Contracts" concerning the trucks. Pursuant to the terms of the "Limited Warranty" and "Optional Service Contracts," Navistar agreed to "repair or replace" parts of the trucks that proved defective. Among other things, however, the documents also provided that no warranties were given beyond those described in the warranty documents and that the warranties of merchantability and fitness for a particular purpose were specifically disclaimed.

         On November 13, 2014, Milan commenced the present litigation by filing a complaint in the Madison County Circuit Court against both Navistar and Volunteer. The complaint alleged that the trucks purchased by Milan were defective and stated that not long after they were purchased, Milan "began to experience numerous breakdowns of the Trucks." Milan asserted that although it had taken the trucks to the "Navistar Network" for repair, it had been repeatedly delayed in getting the trucks back into operation. Milan further charged Navistar and Volunteer with making a number of misrepresentations concerning the trucks. According to Milan, it had been provided with false information regarding the trucks' performance capabilities, fuel economy, and overall fitness for use.

         In a subsequently-filed amended complaint, Milan reiterated these same concerns and asserted several legal claims for relief, including breach of contract, breach of express and implied warranties, fraud, and violation of the Tennessee Consumer Protection Act. Although a number of Milan's claims were dismissed prior to trial, including its warranty claims, asserted fraud and Tennessee Consumer Protection Act claims were allowed to proceed to trial before a jury.

         After the close of Milan's proof, the Circuit Court ruled that a directed verdict should be entered in favor of Volunteer. As it explained in a subsequent order memorializing this ruling, the court noted that Milan's former president had specifically testified that Volunteer's representative was an honest and credible man. With regard to Navistar, however, the case was submitted to the jury for a verdict. After deliberating, the jury returned a verdict in favor of Milan, finding, among other things, that Navistar had represented that the trucks purchased were of a particular standard and quality when they were that of another. Pursuant to the Circuit Court's "Order of Judgment," which was entered on the jury's verdict, Milan was awarded over $10, 000, 000 in compensatory damages and $20, 000, 000 in punitive damages.

         Following entry of the "Order of Judgment," various motions and responses to motions were filed by the parties, including a motion for new trial and accompanying memorandum of law by Navistar. Ultimately, the Circuit Court entered a series of orders wherein it denied Navistar's motion for new trial, awarded Milan attorney's fees and discretionary costs against Navistar, and awarded Volunteer attorney's fees and discretionary costs against Milan. This timely appeal followed.

         ISSUES PRESENTED

         The parties raise a number of issues for our consideration in this appeal. In Navistar's appellate brief, it specifically raises the following matters:

1. Whether the trial court erred in holding that Tennessee's economic loss doctrine categorically does not apply to fraud claims.
2. Whether the trial court erred in holding that a commercial truck sold to a company for business use falls within the Tennessee Consumer Protection Act's definition of "[g]oods," Tenn. Code Ann. § 47-18-103(7).
3. Whether the trial court erred in holding that material evidence supported the jury's finding that Milan filed its Tennessee Consumer Protection Act claim within the one-year statute of limitations.
4. Whether the trial court erred in excluding evidence of conspicuous written disclaimers in the parties' agreements.
5. Whether the trial court erred in holding that Tennessee law does not require benefit-of-the-bargain damages to be calculated as of the time of sale.
6. Whether the trial court erred in upholding the jury's award of lost profits in the absence of any proof of lost profits.
7. Whether the trial court failed to carry out its thirteenth juror responsibility when it deferred to the jury's verdict without independently deciding whether it agreed with that verdict.
8. Whether the jury's $20 million punitive damages award was excessive and unreasonable in violation of Tennessee law or Navistar's due-process rights.

         Milan separately raises the following two issues, restated verbatim from its brief:

1. The trial court denied Volunteer's motion for summary judgment on all Milan's misrepresentation-based claims, including Milan's claim under the TCPA, finding that there were "genuine issues of material fact," and Volunteer never claimed that the trucks were not "goods" under the TCPA. Though the trial court ultimately granted Volunteer's motion for directed verdict during the trial, it awarded attorney's fees to Volunteer under the TCPA. Did the trial court err because, having survived a summary-judgment motion, Milan's TCPA claim against Volunteer was not, by definition "frivolous, without legal or factual merit, or brought for the purpose of harassment?"
2. Under Tennessee law, a limited "repair or replace" remedy in a warranty can fail of its essential purpose if there is evidence that the seller is unable to effectively repair the goods. There was ample evidence in the summary-judgment record that whatever repairs Navistar did perform were ineffective, with multiple trucks needing multiple repairs of the EGR system, as well as evidence from Navistar's own internal records showing that it was never able to effectively repair the EGR system. Did the trial court err by dismissing Milan's breach of express warranty claims against Navistar by ruling that a limited "repair or replace" remedy cannot fail of its essential purpose as a matter of law as long as the seller performs repairs when asked and there were triable issues of fact as to whether the remedy failed of its essential purpose?

         For its part, Volunteer separately raises as an issue whether it "is entitled to recover attorney's ...


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