Unpublished Disposition, 877 F.2d 64 (9th Cir. 1989)

MEMORANDUM^* 

After two trials in the district court, a jury awarded

plaintiff Frank B. Bohannan damages of $550,000. Bohannan

appeals from an order granting a new trial after he had won

a jury verdict of $1.1 million in the first trial. The

defendant Korea Wonyang Fisheries appeals from the district

court's orders denying summary judgment, directed verdict,

and judgment notwithstanding the verdict. We have

jurisdiction under 28 U.S.C. § 1291 and we affirm.

FACTS

This case involves a joint Korean-American fishing operation. In 1979, Korea Marine Industry Development Corporation ("KMIDC") entered into a joint fishery agreement with Fish Producer Associates, Inc. ("FPA"). The contract had a three-year term. FPA was to produce, "through the efforts of independent American fishermen," the fish which KMIDC would process. Among other obligations, KMIDC was to pay for the fish.

In 1980, KMIDC, FPA and Korea Wonyang Fisheries Co., Ltd. ("KWF") signed a letter of intent and a contract concerning the addition of KWF to the KMIDC-FPA joint venture. These agreements are referred to as the KWF-FPA contract. Frank B. Bohannon was one of the American fishermen hired by FPA to catch fish and deliver it to KMIDC and KWF. When the fishing season was over, Bohannon sued FPA, KMIDC and KWF for damages he claimed he suffered because the defendants allegedly failed to provide him with adequate processing capacity. His claims were founded on breach of contract and negligent misrepresentation.

The case went to the jury on both theories. The jury returned a general verdict for Bohannan of $1.1 million. KWF moved for a new trial. It argued that it owed no contractual obligation to Bohannan, and as a result it was not liable on the contract claim. It also argued that Bohannan had not provided any evidence of out-of-pocket losses, and therefore, the negligent misrepresentation claim was fatally flawed.

The district court granted KWF's new trial motion. It reasoned that because the verdict was a general verdict, it could not be determined whether the jury had found for Bohannon on the contract claim or on the negligent misrepresentation claim; and since out-of-pocket losses were a necessary element of the negligent misrepresentation claim (according to the district court's interpretation of Washington law), and Bohannon had presented no such evidence, the verdict could not stand.

In the next trial, the case was submitted to the jury only on Bohannon's breach of contract claim. The jury returned a verdict in Bohannon's favor for $550,000.

ANALYSIS

Bohannon advances two arguments for reversal of the district court's order granting KWF's motion for a new trial following the first trial. Bohannon argues that the district court erred in interpreting Washington law as requiring him to prove out-of-pocket losses in support of his negligent misrepresentation claim. He also argues that, even assuming he failed to present such evidence in support of the negligent misrepresentation claim, the jury had before it Bohannon's contract claim and there was ample evidence on that claim to support the jury's $1.1 million verdict.

We review the district court's denial of a motion for new trial for abuse of discretion. Bulgo v. Munoz, 853 F.2d 710, 714 (9th Cir. 1988). We "may affirm on the basis of any evidence in the record that supports the trial court's judgment." Southwestern Publishing Co. v. Simons, 651 F.2d 653, 656 n. 2 (9th Cir. 1981) (as amended), cert. denied, 455 U.S. 1018 (1982).

Assuming the district court properly interpreted Washington law as requiring proof of out-of-pocket losses to support Bohannon's negligent misrepresentation claim, we conclude that the district court acted well within its discretion in ordering a new trial. See Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1373 (9th Cir. 1987) (suggesting that appellate courts should order a new trial when one of two alternate theories of liability is unsupported by substantial evidence); see also Brocklesby v. United States, 767 F.2d 1288, 1294 (9th Cir. 1985), cert. denied, 474 U.S. 1101 (1986).

Even if the district court misinterpreted Washington law on the out-of-pocket loss issue, the proper remedy still would have been to order a new trial. Bohannon failed to present any evidence of out-of-pocket losses. Nevertheless, the district court gave the jury an out-of-pocket loss instruction. Under these circumstances the court's instruction was likely to confuse the jury. See Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826 F.2d 837, 846 (9th Cir. 1987) ("Incorrect instructions given in a civil trial require reversal unless the jury's verdict is more probably than not untainted by the error."); see also Bulgo v. Munoz, 853 F.2d 710, 714 (9th Cir. 1988) (instructions as a whole must assure that the jury fully understood the issues).¹ 

We affirm the district court's order granting a new trial following the first trial.

KWF appeals from the district court's orders denying its motions for summary judgment, directed verdict, and judgment notwithstanding the verdict ("JNOV"). Only the orders denying JNOV are reviewable. Locricchio v. Legal Services Corp., 833 F.2d 1352, 1358-59 (9th Cir. 1987) (denial of summary judgment not reviewable after trial); id. at 1356 n. 2 (denial of directed verdict not reviewable).

We review

the propriety of a JNOV under the same standard that is applied by the district court. A JNOV is proper when the evidence permits only one reasonable conclusion as to the verdict. [The court views] the evidence in the light most favorable to the nonmoving party and draw [s] all reasonable inferences in favor of that party. A JNOV is improper if reasonable minds could differ over the verdict.

Peterson v. Kennedy, 771 F.2d 1244, 1252 (9th Cir. 1985) (citations omitted), cert. denied, 475 U.S. 1122 (1986); see also Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1370-71 (9th Cir. 1987).

KWF's appeal focuses on Bohannon's contract claim. We first examine KWF's argument that Bohannon was not an intended third party beneficiary of the KWF-FPA contract.

Under Washington law, the " [c]reation of a third-party beneficiary contract requires that the parties intend that the promisor assume a direct obligation to the intended beneficiary at the time they enter into the contract." Del Guzzi Constr. Corp. v. Global Northwest, Ltd., 105 Wash. 2d 878, 719 P.2d 120, 125 (1986) (quoting Postlewait Constr., Inc. v. Great American Ins. Co., 41 Wash. App. 763, 765, 706 P.2d 636, 638 (1985) [hereinafter Postlewait I ], aff'd, 106 Wash. 2d 96, 720 P.2d 805 (1986) [hereinafter Postlewait II]. "Whether a contract creates such an obligation is a question of construction, with the parties' intent 'determined by the terms of the contract as a whole construed in light of the circumstances under which it is made.' " Postlewait I, 706 P.2d at 638 (quoting Grand Lodge of the Scandinavian Fraternity of America, Dist. No. 7 v. United States Fidelity and Guaranty Co., 2 Wash. 2d 561, 569, 98 P.2d 971, 975 (1940)); McDonald Constr. Co. v. Murray, 5 Wash. App. 68, 485 P.2d 626, 628 (1971).

Washington courts examine a broad range of evidence when determining whether contracting parties intended to benefit third parties. As one court explained:

Determination of the intent of the contracting parties is to be accomplished by viewing the contract as a whole, the subject matter and objective of the contract, all the circumstances surrounding the contract, the subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties.

Leija v. Materne Brothers Inc., 34 Wash. App. 825, 664 P.2d 527, 529 (1983) (quoting Stender v. Twin City Foods, Inc., 82 Wash. 2d 250, 254, 510 P.2d 221 (1973)).

The status of Bohannon and other American fishermen as third-party beneficiaries is supported by evidence that: (1) as KWF concedes on appeal, it promised to provide "particular processing vessels, communications equipment, technicians and Korean-English dictionaries" for the benefit of the American fisherman; (2) the contract specified that the foregoing list of obligations was only a list "in part" and was not exclusive; (3) the KWF-FPA documents repeatedly refer to the American fishermen necessary for the venture; (4) there is some evidence that, as a matter of practical construction, KWF and Bohannon acted as though Bohannon was an intended beneficiary.

We conclude there is sufficient evidence to support the jury's conclusion that Bohannon was a third-party beneficiary of the KWF-FPA agreements. See Boise Cascade Corp. v. Pence, 64 Wash. 2d 798, 394 P.2d 359, 360-62 (1964); Grand Lodge, 98 P.2d at 973-76.

KWF also argues that even if Bohannon is a third-party beneficiary, there is no substantial evidence that KWF promised to provide processing capacity to FPA much less the American fishermen. We disagree.

First, KWF admits that it promised to provide certain processing vessels. Indeed, the purpose of adding KWF to the KMIDC-FPA operation was to add processing capacity.

Second, the KMIDC-KWF-FPA letter of intent states that: "K.W.F. agree [sic] to provide vessels as necessary which are defined as follows." The subsequent provisions offer little insight into the scope of this commitment, but the commitment itself offers strong support for Bohannon's construction of the agreement.

Third, the KWF-FPA contract can be interpreted to impose a broad set of obligations including the "supply of adequate communications equipment and those things necessary for a successful fleet operation, which matters are shown in part on that technical exhibit, hereinafter referred to as Exhibit A." Exhibit A includes a long list of items including several vessels which KWF was to provide.

Fourth, the KWF-FPA contract states that: "It is the obligation of KMIDC to provide adequate processing capacity to meet program requirements. If for any reason, the above designated vessels [owned by KMIDC or KWF] are not available for the program, KMIDC or KWF shall provide alternate processing capacity to commence the program." While KWF correctly points out that its part of the promise only refers to the commencement of the venture and that KMIDC's obligation appears broader, the language is at least sufficiently ambiguous to permit the jury to conclude that the contract imposed a continuing obligation on KWF.

KWF next contends Bohannon failed to offer sufficient evidence to support an award of damages for lost profits. We disagree.

State law determines the correct measure of Bohannon's damages. See Klicker v. Northwest Airlines, Inc., 563 F.2d 1310, 1316 n. 10 (9th Cir. 1977) (dicta); see also Magna Weld Sales Co. v. Magna Alloys and Research Pty., Ltd., 545 F.2d 668, 672 (9th Cir. 1976) (applying state law). Under Washington law, lost profits are recoverable when the fact of damage is proven with "reasonable certainty." Golf Landscaping, Inc. v. Century Constr. Co., 39 Wash. App. 895, 696 P.2d 590, 594 (1984). "Where the court is convinced substantial damages have been incurred, even though the exact amount in dollars is incapable of proof, the injured party will not be denied a remedy in damages because of lack of certainty." V.C. Edwards Contracting Co. v. Port of Tacoma, 83 Wash. 2d 7, 514 P.2d 1381, 1386 (1973) (citing Professor Corbin and other authorities). Indeed, the Washington Supreme Court has indicated that: "If a court believes profits would have been made if there had been no breach by the defendants, recovery has been allowed where 'the amount of profits prevented is scarcely subject to proof at all.' " V.C. Edwards, 514 P.2d at 1386-87.

In Reefer Queen Co. v. Marine Construction and Design Co., 73 Wash. 2d 774, 440 P.2d 448, 452 (1968), the plaintiff was the corporate owner of a fishing vessel. The plaintiff sued the manufacturer of the vessel's winch for damages caused by the winch's defective manufacture. The faulty winch had forced the plaintiff to miss eleven days of fishing. The primary witness testifying on the issue was the owner of the plaintiff corporation who testified as an expert witness. The court stated that: "Under the evidence here, the owner was ?? management of plaintiff corporation and possessed a background in the fishing industry, including personal fishing experience. The weight accorded to his testimony was a matter to be resolved by the jury." 440 P.2d at 452. There was additional testimony reviewing the activities and catches of other fishing boats in the same general area and at the same time as the plaintiff fished. The Reefer Queen court upheld the award of lost profits noting that once the cause of loss was "clearly established, a liberal rule for the determination of the amount of damage was permissible." Id. at 453.

Reefer Queen controls the result in this case. The kind of testimony, witnesses and proof offered on the lost profit issue were similar. KWF's arguments about the various environmental and technical factors about which Bohannon failed to offer evidence go to the weight of his testimony rather than to the fact of lost profits. Cf. Alpine Indus., Inc. v. Gohl, 30 Wash. App. 750, 637 P.2d 998, 1002 (1981) ("The alleged deficiencies in the expert testimony identified by Gohl relate to the weight and credibility of that testimony."), amended, 645 P.2d 737 (1982). This case is much more similar to Reefer Queen than to any of the Washington cases rejecting or reducing damages awarded for lost profits.

Both of the cases cited by KWF which rejected or reduced damages for lost profits are clearly distinguishable. See Larsen v. Walton Plywood Co., 65 Wash. 2d 1, 390 P.2d 677, 687, amended, 396 P.2d 879 (1964); O'Brien v. Larson, 11 Wash. App. 52, 521 P.2d 228, 230 (1974). Indeed, both decisions fall into a single category of cases. See Golf Landscaping, 696 P.2d at 594. In these cases, " [t]he lost profits relate not to the particular contract [s] involved, but to other contracts [the plaintiff] had not yet entered into but which he anticipated receiving." Cf. Golf Landscaping, 696 P.2d at 594. Estimates based on anticipated new business is necessarily more conjectural than Bohannon's estimate which was based on an agreed target of 81,700 metric tons for the American fishermen.

CONCLUSION

The district court did not err in granting KWF's motion for a new trial following the first trial. Bohannon presented sufficient evidence under Washington law to support the $550,000 verdict on his breach of contract claim. Therefore, we affirm the district court's judgment in its entirety.

AFFIRMED.