Hemphill Corporation v. Air X Hemphill, L.L.C.. et al.

Hemphill Corporation sued Air X Hemphill, LLC; Air X Group; Air X Limited, Inc., Eads & Associates of Oklahoma, Pendleton Company, AXH Air Coolers, LLC, Ken Jones, Dave Watkins, Rick Grapengater, Billy Hammer, Nick Breese, Sr. and James Pendleton declaratory judgment and breach of contract theories.

The Pre-Trial Ordered (121 pages in length) entered by the Court before trial provided in part, as follows:


2. GENERAL STATEMENT OF FACTS:

On or about June 7, 2003, Plaintiff, Hemphill Corporation, now Hemphill, LLC ("Plaintiff'), and Defendant, Air-X-Hemphill, L.L.C., now AXH Air-Coolers, LLC ("AXH'i entered into a master purchase agreement. The master purchase agreement provided that Plaintiff would produce and manufacture air-cooled heat exchanger products for AXH, and AXH was responsible for the thermal design, sales and marketing of the air-cooled heat exchangers. The master purchase agreement was terminated as of May 31, 2005. A dispute between Plaintiff and Defendants arose and Plaintiff filed this lawsuit. Plaintiffs claims against Defendants and Defendant AXU's claims against Plaintiff are set forth below.

3. PLAINTIFF'S CONTENTIONS:

A. In 2001, Plaintiff began negotiations with Air-X, Ltd., and its associates, which consisted of the Air-x Group, to enter into a joint venture agreement for the manufacture of air-cooled heat exchangers.

B. The Air-x Group was created by certain individuals and entities, including, but not limited to, Jones, Eads and Pendleton, for the purpose of entering into an agreement with Plaintiff to manufacture air-cooled heat exchangers.

C. On June 4, 2001, the Air-x Group executed a Letter of Intent to form a new Oklahoma Limited Liability Company using the name Air-X-Hemphill, L.L.C. in order to contract with members of Air-x Group, as representatives of AXH.

D. On June 18, 2001, the Air-x Group created AXH.

E. On June 7, 2003, Plaintiff entered into a joint venture agreement with AXH. Jones, on behalf of AXH, executed a written master purchase agreement wherein AXH, which was comprised of the individuals and entities that formed the Air-x Group, agreed to purchase air-cooled heat exchangers exclusively from Plaintiff.

F. In late 2004, AXH began taking actions to open its own manufacturing facility. Those actions were in breach of the written master purchase agreement and were breaches of the fiduciary duties that AXH owed Plaintiff pursuant to the joint venture agreement and written master purchase agreement. On or about February 10, 2005, AXH informed Plaintiff that the master purchase agreement would be deemed terminated as of May 31, 2005.

G. AXH also breached the joint venture agreement and written master purchase agreement by engaging in the following conduct:

1. Taking Plaintiffs employees and driving Plaintiff out of business by recruiting and soliciting Plaintiffs employees; and

2. Haming Plaintiff's business and reputation by intentionally sabotaging two of Plaintiff's jobs running through its manufacturing plant pursuant to AXH's request

H. AXI-I, by and through the individuals and entities that comprise the Air-x Group, defamed Plaintiff and Plaintiffs business by making untrue statements to Plaintiffs employees and others in the industry.

I. AXH, by and through the individuals and entities that comprise the Air-x Group, interfered with Plaintiff's business relations and prospective business, by making untrue statements to employees and others in the industry, and by intentionally sabotaging two of Plaintiffs jobs running through its manufacturing plant pursuant to AXH's request.

J. Defendant's actions identified hereinabove constitute fraud and deceit, and are violations of Oklahoma's Deceptive Trade Practices Act as the actions were disparaging to the goods, services or business of Plaintiff.

4. DEFENDANTS' CONTENTIONS:

A. Defendants deny Plaintiff's claims and specifically deny the claims ofajoint venture, as Hemphill did not want a joint venture or partnership.

B. Defendants deny any fiduciary obligation to Plaintiff.

C. Defendants admit that AXH entered into a master purchase agreement with Plaintiff, but deny that any other Defendant was or is a party to that agreement. Defendants' contentions in this regard have been conclusively determined by the Oklahoma Court of Civil Appeals.

D. Plaintiff breached the Agreement by failing to manufacture air-cooled heat exchangers pursuant to the engineering specifications and drawings provided by Defendant AXH, by failing to manufacture heat exchangers that were materially free from defects in material and workmanship, by failing to deliver products manufactured for AXH and for which Defendant AXH had paid Plaintiff, and by manufacturing air-cooled heat exchangers for another entity during the term of the Agreement.

E. Plaintiff has waived its claims.

F. Plaintiff is estopped from asserting its claims.

G. The doctrine of latches precludes Plaintiff from asserting its claims.

H. Plaintiff's breach of the agreement precludes Plaintiff from seeking the relief requested in its Petition.

I. Plaintiffs unclean hands precludes Plaintiff from seeking the relief.

J. Defendants have been damaged by Plaintiff's actions and hold claims against Plaintiff which would offset any claims by Plaintiff.

K. The voluntary payment rule precludes Plaintiff's claims.

L. The uniform commercial code permitted AXH to take the action that it took.

M. Defendants deny that any of the actions complained of by Plaintiff were taken by any authorized representative of Defendants.

5. PLAINTIFF'S CLAIMS:

A. Contract Claims (against Defendant Air-X-Hemphill, LLC, now AXH Air Coolers, LLC, only):

1. Breach of Contract

2. Breach of fiduciary duties

3. Breach of implied duty of good faith and fair dealing

4. Anticipatory Repudiation

B. Violation of Oklahoma Deceptive Trade Practices Act

C. Tort Claims:

1. Defamation

2. Fraud

3. Deceit

4. Interference with Business Relations

5. Interference with Prospective Business Relations/Advantage

D. As a result of the Defendants' actions, Plaintiff incurred actual and compensatory damages in excess of $100,000.

E. As a result of the Defendants' actions, Plaintiff is entitled to Punitive Damages.

F. As a result of AXH's breach of the written master purchase agreement, Plaintiff is entitled to its attorney's fees and costs.

0. Plaintiff objects to witnesses Flo Guthrie and Dee Ray identified on Defendants' Exhibit D that were not listed on Defendants' Final Witness list.

H. Plaintiff objects to Defendants' Exhibit Nos. 48, 84, 236, 237 and 238 listed on Defendants' Exhibit B that were not previously listed on Defendants' Final Witness & Exhibit List andJor were not previously produced by Defendants during discovery.

6. DEFENDANTS' CLAIMS:

A. Defendants object to Plaintiffs claims which were not pled in its petition.

B. Defendants adopt the defenses set forth in Defendants' Contentions in Section 4 herein.

C. Plaintiff has breached the master purchase agreement by failing to manufacture air-cooled heat exchangers pursuant to the engineering specifications and drawings provided by Defendant AXH, by failing to manufacture heat exchangers that were materially free from defects in material and workmanship, by failing to deliver products manufactured for AXH and for which Defendant AXH had paid Plaintiff, and by manufacturing air-cooled heat exchangers for another entity during the term of the Agreement.

D. As a result of Plaintiffs breach of the Agreement, Defendant AXH has suffered damages in excess of $279,306.98. Of this number, $20,240.00 is for five (5) units for which Plaintiff was paid, but did not supply, and $10,826.00 is for two (2) new sections belonging to Defendant AXH which were not delivered to AXH by Plaintiff.

E. Defendants objects to witnesses identified on Plaintiffs witness list (Exhibit C) that were not listed on Defendants' Final Witness & Exhibit List. Defendants object to the exhibits identified on Plaintiffs exhibit list (Exhibit A) not listed on Plaintiffs Final Witness & Exhibit List.

* * *

Plaintiff listed 658 exhibits.

Defendant listed 240 exhibits.

Plaintiff listed 175 potential witnesses to be called during the trial.

Defendant listed 163 potential witnesses to be called during the trial.

The instructions given to the jury by the Court read in part, as follows:

The Plaintiff Hemphill Corporation and Defendant AXH entered into a master purchase agreement on or about June 7, 2003.

The master purchase agreement provided that Hemphill would produce and manufacture air-cooled heat exchangers for AXH pursuant to AXH's thermal design. AXH was responsible for the thermal design, sales and marketing. The Master Purchase agreement was terminated. The Parties agreed to a termination date of May 31, 2005. A dispute between Hemphill and AXH arose concerning the agreement.

Plaintiff Hemphill has asserted claims against AXH for breach of contract and the tort of slander. Plaintiff has also asserted a tort claim of slander against defendants AIR-X LIMITED, EADS & ASSOCIATES OF OKLAHOMA, THE PENDLETON COMPANY, and KEN JONES individually.

The Plaintiff Hemphill has asserted a claim for punitive damages on the tort claim of slander. Defendant AXH has asserted a counterclaim against Hemphill for breach of warranty.

Each party disputed the other's claims.

These were the issues the jury was to determine.

Plaintiff and some of the Defendants were corporations and could only act by and through their officers and employees. Any act or omission of an officer or employee while acting within the scope of his or her authority was the act or omission of the corporation.

In a civil lawsuit, such as this one, the law provides which party was to prove certain things to the jury. This is called "Burden of Proof.”

When a party has the burden of proof on any proposition by the greater weight of the evidence, or use the expression "if you find,” or "if you decide”, it means that the jury must be persuaded, considering all the evidence in the case, that the proposition on which such party has the burden of proof is more probably true than not true. The greater weight of the evidence does not mean the greater number of witnesses testifying to a fact, but means what seems to you more convincing and more probably true.

A party seeking to recover on a claim or counterclaim, or a party who raises an affirmative defense has the burden to prove all the elements of the claim or defense. In deciding whether a party has met the burden of proof, juries are to take into account all the evidence, whether offered by that party or any other party.

When a party has the burden of proving any proposition by clear and convincing, it means that the jury must be persuaded, considering all the evidence in the case, that the proposition on which the party has this burden of proof is highly probable and free from serious doubt.

The jury's decision is supposed to be based upon probabilities, not possibilities. It may not supposed to be based upon speculation or guesswork.

The jurors are the sole judges of the believability of each witness and the value to be given the testimony of each. Jurors are supposed to take into consideration the witness's means of knowledge, strength of memory and opportunities for observation. Also consider the reasonableness and consistency or inconsistency of the testimony.

The jurors should also consider the bias, prejudice, or interest, if any, the witness may have in the outcome of the trial, the conduct of the witness upon the witness stand, and all other facts and circumstances that affect the believability of the witness.

The testimony of witnesses who are represented to be skilled in certain areas. Such witnesses are known in law as expert witnesses. Jurors may consider the testimony of these witnesses and give it such weight as they think it should have, but the value to be given their testimony is for the jurors to determine. Jurors are not required to surrender your own judgment to that of any person testifying as an expert or otherwise. The testimony of a/n expert, like that of any other witness, is to be given such value as you think it is entitled to receive.

The Plaintiff was required to prove by the greater weight of the evidence the following in order to recover on the claim for breach of contract:

1. Formation of a contract between the parties;

2. Breach of the contract by the other party; and

3. Damages were suffered as a direct result of the breach.

In this case, the jury needed to decide the meaning of the Master Purchase Agreement. To do this it had to decide what the intent of the parties was when they made their contract.

To decide what their intent was the jury first needed to examine the language of the contract. The jurors were also allowed to consider the circumstances under which the parties made the contract, and what the parties themselves believed the term meant as shown by the evidence.

A contract should be interpreted so that it is reasonable and capable of being carried out, if this can be done without changing the intention of the parties.

If the terms of a promise are uncertain, then jurors should interpret those terms the way that the person making the promise believed the other person understood them when the promise was made.

If jury could not decide the intention of the parties then then it was supposed to interpret the unclear terms in the contract most strongly against the party responsible for the uncertainty.

A contract is breached or broken when a party does not do what he, she or it promised to do in the contract.

When a contract requires both parties to perform at the same time, the party seeking to enforce the contract must show that he, she or it made a tender of performance. A tender of performance is an offer by a party to perform a contract according to its terms without imposing any additional conditions. Also, the party making a tender of performance must be ready and able to perform.

For example: in a case involving a contract for the sale of goods, if the seller sues for breach of contract, the seller must show that it offered to and was ready to deliver the goods; and if the buyer sues for breach of the contract, the buyer must show that it offered to and was ready to pay the agreed price.

A contract is breached or broken, even if the time for performance has not arrived, when one party notifies the other that it does not intend to do what was promised in the contract.

A contract is to be interpreted as a whole, and the overall intention of the parties is controlling over the separate parts of a contract.

If possible, each part of a contract must be used to help interpret the other parts, but if one part is wholly inconsistent with the general intention of the parties, it should be rejected.

By agreeing to perform work in a contract, a person promises to use reasonable skill, care, and diligence and that the work will be done in a workmanlike manner and be reasonably fit for its intended use.

A party is relieved of the duty to perform a contract if the other party to the contract:

1. By acts or conduct, indicated an intent not to enforce the contract so that a reasonable person would think that performance of the contract was no longer required.

The relationship of agency is created from the conduct andlor agreement of the parties showing that one is willing for the other to act for him or her subject to his or her control and that the other consents to so act. An agency relationship may arise under such circumstances even when the parties may not have intended to create one. The person who acts for another is called the agent and the other is called the principal.

An agent is acting within the scope of his/her authority if he is engaged in the transaction of business that has been assigned to him by his principal, or if he is doing anything that may reasonably be said to have been contemplated as part of his agency. It is not necessary that an act or failure to act must have been expressly authorized by the principal.

In addition to the express authority conferred on him/her by his/her principal, an agent has the authority to do such acts that are incidental to, or reasonably necessary to accomplish, the intended result.


In addition to the express authority conferred on him by his principal, an agent has the implied authority to do such acts as are usual and customary in the business, and of which the principal has knowledge or should have had knowledge.


When a principal by its words or conduct has caused another reasonably to believe that the principal has authorized his/her/its agent to take certain action on the principal's behalf, though in fact the principal may not have done so, such words or conduct constitute apparent authority, and as to the other person are the same as if the principal had authorized such action.

When one person acts or purports to act as an agent for another, but does so without authority, and the person for whom he/she acted thereafter confirms such action, by words or conduct, with knowledge of all the material facts, such words or conduct are a ratification of the act, and are the same as if it had been authorized originally.

If the principal ratifies any part of the act, it ratifies all of it.

Knowledge, or notice possessed by an agent while acting within the scope of his/her authority, is the knowledge of, or notice to, his/her principal.

If a jury finds that an individual was the agent of a Party and that the individual was acting within the scope of his authority as the agent of a Party at the time of the occurrence, then any act or omission of that individual at that time was in law the act or omission of a Party.

An employee is a person who,, by agreement with another called the employer, acts for the employer and is subject to its control. The agreement may be oral or written or implied from the conduct of the parties.

The general rule is that an employment contract is terminable at will, which means that either the employer or the employee has the right to terminate the employment at any time for any reason or no reason at all without liability to the other for doing so.

An employee is acting within the scope of his employment if he is engaged in the work which has been assigned to himlher employer, or is doing that which is proper, usual and necessary to accomplish the work assigned to him by his employer, or is doing that which is customary within the particular trade or business in which the employee is engaged.

If the jury decided for Plaintiff on its claim for breach of contract, then it was supposed to then fix the amount of its damages. This is the amount of money that is needed to put Plaintiff in as good a position as it would have been if the contract had not been breached. In this case, the amount of damages should be determined by determining the amount of money that would put Plaintiff in a position it would have been in had AXH complied with the provisions of the Master Purchase Agreement.

If the jury decided for Defendant on its claim for breach of contract on the counterclaim, it was to then fix the amount of Defendant's damages. This is the amount of money that is needed to put Defendant in as good a position as would have been if the contract had not been breached. In this case, the amount of damages should be determined as follows: The amount of the counterclaims the jury finds to have been breached.

Recovery of damages is not allowed for any losses that the aggrieved party reasonably could have avoided.

In order to award damages to Plaintiff or Defendant, the jury must be satisfied by the greater weight of the evidence that the parties did in fact suffer a loss which was caused by the breach. Once the jurors are satisfied that the party did suffer such a loss, the jury should award damages even if the jurors are uncertain as to the exact amount. The amount of damages does not have to be proved with mathematical certainty, but there must be a reasonable basis for the award.

In fixing the amount of money that will reasonably and fairly compensate the aggrieved party, jurors are supposed to consider that a party whose property is injured must exercise ordinary care to minimize existing injuries and to prevent further injury. If any injury results from a failure to exercise such care, damages cannot be recovered for such loss.

In order for Plaintiff to recover from Defendants, or any of them, on its claim of slander/defamation, Plaintiff must plead and prove the following:

1. That Defendants, or any of them, made a false and unprivileged statement;

2. That the false and unprivileged statement was of or concerning Plaintiff;

3. That the false and unprivileged statement was published to a third party;

4. That the false and unprivileged statement caused Plaintiff to suffer damages.

The unprivileged statement is one made outside the context of this lawsuit.

A statement is slander/defamatory if it is a false statement concerning a fact, not an opinion, and: 1) it tends to directly injure the Plaintiff in respect to his occupation; or 2) it by natural consequences causes actual damage to Plaintiff.

If jury finds in favor of Plaintiff, and grants it actual damages, then the jury must also find by a separate verdict, whether one or more Defendants acted in reckless disregard of the rights of others on Plaintiffs slander/defamation claim.

Plaintiff has the burden of proving this by clear and convincing evidence. By that I mean that you must be persuaded, considering all the evidence in the case, that the proposition on which the party has this burden of proof is highly probable and free from serious doubt.

The conduct was in reckless disregard of another's rights if one or more Defendant was either aware, or did not care, that there was a substantial and unnecessary risk that their conduct would cause serious injury to others. In order for the conduct to be in reckless disregard of another's rights, it must have been unreasonable under the circumstances, and also there must have been a high probability that the conduct would cause serious harm to another person.

If jury finds that one or more Defendants acted in reckless disregard of the rights of others on Plaintiffs slander/defamation claim, you may award punitive damages against that Defendant or Defendants in a later part of this trial. If you find that a Defendant did not act in reckless disregard of the rights of others on Plaintiffs slander/defamation claim, you may not award punitive damages.

The Court made rulings on the admissibility of evidence during the trial. Those rulings were based on Oklahoma's rules of evidence and have no bearing on the merits of the claims of any party. The jurors were instructed that they should not allow these rulings to influence your decisions about the facts in any way.

The decision in this case was supposed to be based wholly on the evidence, the jurors' common sense and the instructions given by the Court, rather than on sympathy, sentiment or prejudice. It is your duty under oath as a juror to make your verdict speak the truth.

Every rule of law needed to resolve the issues between the parties is contained in these instructions. Jurors should not use or allow to be used in your deliberations any other rules of law of which they may be aware as a result of sitting on other cases or from other sources. The instructions should be considered as a whole and you should not give undue emphasis to some instructions and ignore others.

Proper forms of verdict were furnished to the jury. They were to use the form that correctly expresses their findings upon the issues of fact.

In closing arguments the attorneys reviewed the evidence and told the jury the inferences that they believed should be drawn from the evidence. They were also allowed to discuss with the jurors how they believed the jury instructions related to evidence that was introduced. The jurors were admonished by the Court to remember, as instructed at the beginning of this trial comments and arguments of counsel are not evidence in the case and if they believed the evidence introduced is different from counsel's recollection, the jurors' recollection should control.

The law provides that jurors should now listen to and consider the arguments of counsel, which are a proper part of the case.

The jurors were instructed that when they have arrived in the jury room they should first choose one of the jury as a foreperson and then begin deciding the case. They were instructed that they must not use any method of chance in arriving at their verdict, but rest it on the opinion of each juror who agrees with it. The forms of all possible verdicts were sent to the jury room with them, along with these written instructions of the Court. They were also instructed that if all twelve (12) agreed on a verdict, they should select the one (1) correct form of verdict and only your foreperson alone should sign it; if they did not all agree, but at least nine (9) or more of do, then only those nine (9) or more agreeing should each, individually, sign the verdict form. They were instructed to notify the Bailiff when they arrived at a verdict so that they might return it in open court.

FITZGERALD, MARY: CASE CALLED FOR JURY TRIAL ON 10-8-2013 THROUGH 10-29-2013. BOTH SIDES PRESENT IN OPEN COURT AND ANNOUNCE READY FOR TRIAL. PLAINTIFF PRESENT AND REPRESENTED BY GARY RICHARDSON. DEFENDANT PRESENT AND REPRESENTED BY BRIAN RAYMENT.

THE JURORS ARE CALLED AND SWORN TO QUALIFICATIONS. THE JURY IS IMPANELED AND EXAMINED FOR CAUSE. THE JURORS ARE ACCEPTED FOR CAUSE.

PEREMPTORY CHALLENGES WERE MADE AND 2 JUROR WAS EXCUSED FOR CAUSE. 14 JURORS WERE ACCEPTED AND SWORN TO TRY THE CASE.

FILE MINUTE:

PEREMPTORY CHALLENGES

PLAINTIFF: 3 JURORS DEFENDANT: 3 JURORS

THE FOLLOWING JUROR WAS EXCUSED FOR CAUSE: 2

THE FOLLOWING JURORS ARE ACCEPTED AND SWORN TO TRY THE CAUSE: 12

ALTERNATES: 2

OPENING STATEMENTS ARE MADE. 35 WITNESSES SWORN. RULE WAS INVOKED. COURT REPORTER LISA FOSTER. BRENDA COALWELL ON 10-25-2013. PLAINTIFF PRESENTS EVIDENCE AND RESTS. DEFENDANS MOVES TO DISMISS ALL OF PLAINTIFF'S CLAIMS. COURT DENIES DEFENDANT'S MOTION AS TO 1) BREACH OF CONTRACT, 2) BREACH OF GOOD FAITH AND FAIR DEALING WHICH IS PART OF BREACH OF CONTRACT. COURT GRANTS DEFENDANT'S MOTION TO DISMISS AS TO 1) BREACH OF FIDUCIARY DUTY. COURT FINDS AS A MATTER OF LAW THERE WAS NO JOINT VENTURE AS CONTRACT CONTROLS AND IT IS CLEAR AND CONVINCING THAT THE PARTIES ENTERED INTO A MPA NOT A JOINT VENTURE. 2) FRAUD AND DECEIT CLAIMS AS THERE IS NO FIDUCIARY DUTY. 3) OKLA DECEPTIVE TRADE PRACTICES ACT- NO EVIDENCE. COURT FINDS PLAINTIFF'S CLAIMS OF ANTICIPATORY REPUDIATION, INTERFERENCE WITH BUSINESS RELATIONSHIPS AND INTERFERENCE WITH PROSPECTIVE BUSINESS CLAIMS ARE PART OF THE BREACH OF CONTRACT CLAIM. COURT TAKES UNDER ADVISEMENT PLAINTIFF'S DEFAMATION AND CIVIL CONSPIRACY CLAIMS. COURT DISMISSES ALL OTHER TORT CLAIMS AGAINST INDIVIDUALS DEFENDANT EXPECT AXH.

DEFENDANT PRESENTS EVIDENCE AND RESTS. DEFENDANT RENEWS ITS MOTION ON BREACH OF CONTRACTSLANDER/DEFERMATION AND CIVIL CONSPIRACY. COURT OVERRULES BREACH OF CONTRACT AND SLANDER/DEFERNATION. COURT GRANTS DEFENDANT'S MOTION TO DISMISS ON CIVIL CONSPIRACY CLAIM. PLAINTIFF MOVES FOR DIRECTED VERDICT ON DEFENDANT'S COUNTERCLAIM. COURT OVERRULES.

THE JURY IS INSTRUCTED AS TO THE LAW. CLOSING ARGUMENTS ARE MADE. THE SWEARING OF THE BAILIFF IS WAIVED AND ON 10-29-2013 AT 11:00 AM, THE JURY RETIRES FOR DELIBERATION IN CUSTODY OF THE BAILIFF. ON 10-29-2013 AT 3:00 PM., THE JURY RETURNS INTO OPEN COURT WITH THEIR VERDICT, WHICH IS READ IN OPEN COURT, ORDERED RECORDED AND FILED, AND IS TO WIT:

WE, THE JURY, IMPANELED AND SWORN IN THE ABOVE ENTITLED CAUSE, DO, UPON OUR OATHS, FIND THE ISSUES IN FAVOR OF THE PLAINTIFF IN THE SUM OF $10,000,000.00. AND PLAINTIFFS ON DEFENDANT COUNTERCLAIM AND DEFENDANT ON PLAINTIFF'S SLANDER/DEFORMATION.

ALL JURORS CONCURRING, SIGNED THE FOREPERSON. JURY DISCHARGED.


WITNESSES SWORN: 35


ALL PER JOURNAL ENTRY TO BE SUBMITTED BY PLAINTIFF'S ATTORNEY WITHIN THIRTY (30) DAYS.