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Hinz v. Neuroscience, Inc.: CONTRACT | CIVIL PROCEDURE - Rule 50(b) 'renewing' R.50(a) sufficently particular under Rule 7; JaML after jury verdict regarding damages

1The Honorable Bobby R. Baldock, United States Circuit Judge for the Tenth
Circuit, sitting by designation.
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 07-2694/2699
___________
Dr. Martin Hinz; Neuroresearch *
Clinics, Inc., *
*
Appellants/Cross-Appellees *
* Appeals from the United States
v. * District Court for the
* District of Minnesota.
Neuroscience, Inc.; Gottfried *
Kellermann, *
*
Appellees/Cross-Appellants. *
___________
Submitted: April 14, 2008
Filed: August 22, 2008
___________
Before GRUENDER, BALDOCK,1 and BENTON, Circuit Judges.
___________
BENTON, Circuit Judge.
In this diversity case, Dr. Martin Hinz and Neuroresearch Clinics, Inc.
(collectively Hinz) sued Neuroscience, Inc. and Gottfried Kellermann (collectively
Kellermann) for breach of contract. A jury returned a verdict for Hinz, awarding
2The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.
-2-
,989,373 in damages. The district court2 reversed the damage award on
Kellermanns motion for judgment as a matter of law. The court denied Hinzs
motions for permanent injunction, pre- and post-judgment interest, and attorneys fees
and costs. Hinz appeals. Kellermann cross appeals, claiming the court erred in
allowing parol evidence to interpret the contract. Having jurisdiction under 28 U.S.C.
1291, this court affirms.
I.
Hinz developed the D5 product series, including D5, D5 Extra, and D5 Mucuna
to treat neurotransmitter dysfunction. The primary ingredient in D5 Mucuna was
Mucuna pruriens; the primary ingredients in D5 were L-Dopa (from standardized
Mucuna pruriens) and 5-HTP.
Hinz and Kellermann reached a Joint Working Agreement on October 14, 2001.
The agreement permitted Kellermann to distribute Hinzs products in exchange for
paying Hinz a royalty rate of 43 percent per product.
In August 2002, Hinz and Kellermann created Neuroscience, Inc. to develop
and sell amino acid supplement products. Neuroscience distributed and marketed
Hinzs products, including D5 and D5 Mucuna. Neuroscience agreed to pay Hinz a
royalty rate and salary, in addition to business expenses. On November 30, 2002,
Kellermann terminated the joint business relationship. Kellermann stayed with
Neuroscience, while Hinz started Neuroresearch Clinics, Inc. Within weeks,
Neuroscience contacted all the customers in its database to persuade them to stay with
it. About 80 percent of the customers were contacts brought to Neuroscience by Hinz,
while the remaining 20 percent were contacts Hinz and Kellermann established
-3-
together. After the split, Neuroscience sold Hinzs products, without paying him a
royalty rate.
In January 2003, Kellermann sued Hinz; Hinz countersued. The dispute was
settled during a court-mediated settlement conference on May 23, 2003. The
settlement was memorialized in a written agreement. As relevant, the agreement,
effective September 1, 2003, required Kellermann to:
permanently discontinue the promotion, sale and use of the following
tradenames, trademarks and products using said tradenames and trademarks:
Cysreplete, NeuroReplete, RepleteExtra, D5, D5 Extra, D5 Mucuna, The
Replete Program, and L-tyrosine in combination with 5-HTP,
permanently discontinue the promotion, marketing and sale of the D5 product
series, and
make no further use of any trademarks and amino acid formulations
specifically prohibited by this agreement for which [Hinz] had been paid
royalties in the past.
Four months later, Hinz sued Kellermann for breach of the settlement
agreement, alleging Kellermann was selling products containing the ingredients
Mucuna pruriens and Mucuna pruriens in combination with 5-HTP. Before trial, the
district court ruled that the settlement agreement was ambiguous on its face. It
permitted Hinz and Kellermann to introduce parol evidence to interpret the terms of
the contract. The jury found a breach of contract, awarding ,989,373 in lost-profit
damages.
After trial, Kellermann moved for judgment as a matter of law, or alternatively
a new trial under Rule 50(b) of the Federal Rules of Civil Procedure. The district
court granted judgment as a matter of law on damages, concluding Hinz provided no
reasonable basis for the calculation of damages. However, the court denied
Kellermanns motion for new trial, ruling it untimely. The court also denied Hinzs
motions for permanent injunction, pre- and post-judgment interest, and attorneys fees
-4-
and costs. Hinz appeals, contending the district court erred in (1) reversing the
damage award because it lacked jurisdiction; (2) concluding there was insufficient
evidence for the damage award; (3) instructing the jury on the measure of damages;
and (4) denying Hinz a permanent injunction, pre- and post-judgment interest, and
attorneys fees and costs. Kellermann cross-appeals, objecting to the use of parol
evidence.
II.
Hinz argues Kellermann failed to comply with the particularity requirement
of Rule 7(b) of the Federal Rules of Civil Procedure in his post-verdict motion. Hinz
thus concludes the district court lacked jurisdiction to enter the amended judgment
reversing the damage award.
At the close of evidence, Kellermann moved for judgment as a matter of law,
explaining orally the basis for the motion. See Fed. R. Civ. P. 50(a). Specifically,
he disagreed with the use of parol evidence and claimed there was insufficient
evidence to prove damages. Post-verdict, Kellermann renewed his motion, stating
simply: we would like to renew our Rule 50 motion for judgment as a matter of law.
See Fed. R. Civ. P. 50(b). Exactly ten days after trial, Kellermann filed motions for
judgment as a matter of law, and alternatively a new trial. See id. The post-verdict
motions did not describe the grounds on which they were based. The next day,
however, Kellermann filed a supporting memorandum detailing the grounds for the
motions. Kellermann attacked the verdict, the use of parol evidence, and other
irrelevant and prejudicial evidence. The district court ruled that for the issues of
damages and parol evidence the motions were timely and stated with particularity.
For the issue of irrelevant and prejudicial evidence, the motion was untimely.
Because the dispute involves the legal jurisdiction of the court, this court
reviews de novo. See Andreas v. Volkswagen of Am., Inc., 336 F.3d 789, 793 (8th
Cir. 2003).
-5-
Rule 7 is a general rule that applies to all motions. Id. It requires a request
for a court order to be made by motion, which shall (1) be in writing, unless made
during a hearing or a trial, (2) state with particularity the grounds for seeking the
order, and (3) state the relief sought. Fed. R. Civ. P. 7(b). The particularity
requirement gives notice to the court and the opposing party, providing the opposing
party a meaningful opportunity to respond and the court with enough information to
process the motion correctly. Andreas, 336 F.3d at 793. However, the particularity
requirement should not be applied in an overly technical fashion when the purpose
behind the rule is not jeopardized. Id. The court may consider closely-filed motions
to determine if notice was properly given and the opposing party had an opportunity
to respond. See id. The court may not consider, though, filings after the filing period
because to do so would allow parties to eviscerate the purpose of the time limitation.
Id. at 794. See Alternate Fuels, Inc. V. Cabanas, No. 06-3794/07-1462, slip op. at
5-6 (8th Cir. Aug 18, 2008).
Here, the district court looked to the Rule 50(a) motion to determine whether
the Rule 50(b) motion was adequate. The court did not consider the supporting
memorandum, though, finding it untimely.
As for the supporting memorandum, a renewed (or post-verdict) motion for
judgment as a matter of law must be filed no later than ten days after the entry of
judgment. See Fed. R. Civ. P. 50(b). Because the supporting memorandum here
was filed after the 10-day limit, this court may not consider it. See Andreas, 336 F.3d
at 794.
As for the district courts consideration of the Rule 50(a) motion, the court did
not err. By definition, a Rule 50(b) motion is a renewal of a prior Rule 50(a) motion
made at the close of the evidence and as such is limited to those issues raised in the
previous motion. Id., citing Fed. R. Civ. P. 50(b); see also Conesco Fin. Servicing
Corp. v. N. Am. Mortgage, Co., 381 F.3d 811, 821 (8th Cir. 2004) (The grounds for
the renewed motion under Rule 50(b) are limited to those asserted in the earlier Rule
50(a) motion.). Kellermanns Rule 50(a) motion attacked the use of parol evidence
-6-
and the damage evidence. The trial transcript indicates Kellermann made the motion
during the trial, particularly stating its grounds and the relief sought. See Fed. R.
Civ. P. 7(b). Kellerman provided the district court and Hinz with notice, and Hinz
had a fair opportunity to respond. Because the Rule 50(a) motion satisfied the
particularity requirement, the Rule 50(b) motion was also sufficient. See Andreas,
336 F.3d at 794; see also Conesco, 381 F.3d at 821 (If colloquy between counsel and
the trial court fleshes out the motion, it may provide the opposing party with the
requisite notice.).
The district court had jurisdiction to enter an amended judgment reversing the
damage award.
III.
Applying the same standard as the district court, this court reviews the grant of
judgment as a matter of law de novo, viewing the evidence most favorably to the
nonmoving party and drawing all reasonable inferences in its favor. Liberty Mut. Fire
Ins. Co. v. Scott, 486 F.3d 418, 422 (8th Cir. 2007). If the evidence viewed
according to this standard would permit reasonable jurors to differ in the conclusions
they draw, judgment as a matter of law cannot be granted. Id., quoting Matrix
Group Ltd., Inc. v. Rawlings Sporting Goods Co., 477 F.3d 583, 593 (8th Cir. 2007).
However, when the record contains no proof beyond speculation to support the
verdict, then judgment as a matter of law is appropriate. Liberty Mut., 486 F.3d at
422; Fed. R. Civ. P. 50(a)(1). In a diversity case, this court applies the substantive
law of the forum state to determine if this standard was satisfied. Warren v. State
Farm Firm & Cas. Co., 531 F.3d 693, 698 (8th Cir. 2008).
To prove damages, Hinz must demonstrate by a preponderance of evidence that:
(a) profits were lost, (b) the loss was directly caused by the breach . . ., and (c) the
amount of such causally related loss is capable of calculation with reasonable certainty
rather than benevolent speculation. B & Y Metal Painting, Inc. v. Ball, 279 N.W.2d
813, 816 (Minn. 1979). [T]here can be no recovery for damages which are remote,
-7-
conjectural, or speculative. Jensen v. Duluth Area YMCA, 688 N.W.2d 574, 579
(Minn. Ct. App. 2004), quoting Carpenter v. Nelson, 101 N.W.2d 918, 921 (Minn.
1960). But damages need not be proved with certainty; it is legally sufficient that a
reasonable basis for approximating loss is shown. Jensen, 688 N.W.2d at 579.
Hinz claims he presented sufficient evidence for the damage award, including
that (1)Hinz and Kellermann are competitors in a two-player market, (2) Kellermann
marketed his products in direct competition with Hinzs, (3) Kellermanns success and
sales; and (4) Hinzs sales. Hinz alleges this evidence demonstrates that his profits
would have been greater if Kellermann did not breach the contract. Specifically, Hinz
insists that from September 2002 to August 2003, before the settlement agreement, he
had a 88.2 percent growth rate in actual revenues. For the three years after the
settlement agreement, the growth rate was 28.4 percent (September 2003 to August
2004), 10.5 percent (September 2004 to August 2005), and 18.8 percent (September
2005 to August 2006). Hinz concludes he would have maintained a growth rate of
88.2 percent in the three years after the settlement agreement, but for Kellermanns
breach.
This evidence, however, is insufficient; it does not provide a reasonable basis
for approximating loss. Most importantly, Kellermann was selling products with
Mucuna pruriens, even during the September 2002 to August 2003 period, when Hinz
realized the 88.2 percent growth rate. Therefore, the declining growth rate was not
due to Kellermanns activities alone. How much of the decline is due to Kellermanns
activities was left to speculation. See Polaris Indus. v. Plastics, Inc., 299 N.W.2d
414, 419 (Minn. 1980) (stating no reasonable basis to determine damages when
plaintiff did not segregate the losses due to the breach from the losses due to all of
the other variable and imponderable factors . . . .); see also B & Y, 279 N.W.2d at
816. Second, Hinz did not introduce his or Kellermanns customer lists, or show
which customers Kellermann sold breaching products to that were Hinzs former or
prospective customers. Third, the growth rate includes all of Hinzs products. It is
not limited to products that competed directly with the breaching Kellermann
products. This is relevant because Hinzs products that competed directly with the
3Because this court affirms the district courts ruling reversing the damage
award, Hinz is not entitled to pre- or post-judgment interest. See Minn. Stat.
549.09; 28 U.S.C. 1961.
-8-
breaching products could have sustained the same growth rate over the time period,
and thus, Kellermanns breach would not affect Hinz. See Faust v. Parrott, 270
N.W.2d 117, 121 (Minn. 1978) (stating on remand that the plaintiff may recover
damages only if the profits they lost are a direct result of defendants competitive
activities). Fourth, Hinz did not introduce evidence of the market industry or the
relative growth rate of the market over the time period. Because this is a relatively
new market, it is hard to discern how much of a growth rate is expected. For example,
Hinz had a growth rate of 172.2 percent in September 2001 to August 2002. Whether
172.2, 88.2 or 18.8 is typical of the market was uncertain and speculative. See
Cardinal Consulting Co. v. Circo Resorts, Inc., 297 N.W.2d 260, 267 (Minn. 1980)
(recognizing it is more difficult to prove loss of prospective profits to a new business
than to an established one).
Based on the evidence, Hinz did not present a reasonable basis for calculating
damages. The district court did not err in reversing the damage award. See Polaris,
299 N.W.2d at 419.3
IV.
Hinz argues the district court erred by excluding from the jury instructions the
concept that other proper measures of damages for Kellermanns breach included
Kellermanns profits and the royalty rate paid to Hinz.
This court reviews for abuse of discretion the decision to give certain
instructions. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 720 (8th Cir. 2008).
This court determines whether the instructions, taken as a whole and viewed in light
of the evidence and applicable law, fairly and adequately submitted the issues in the
-9-
case to the jury. Id. Reversal is only warranted if a partys substantial rights are
prejudiced by instructional error. Id.
Under Minnesota law, damages for breach of contract are traditionally
measured by the nonbreaching partys loss of expected benefits under the contract.
Cherne Indus., Inc. v. Grounds & Assocs., 278 N.W.2d 81, 94 (Minn. 1979). See
also B & Y Metal Painting, Inc. v. Ball, 279 N.W.2d 813, 816 (Minn. 1979); Faust
v. Parrott, 270 N.W.2d 117, 120 (Minn. 1978). In limited circumstances, the
defendants gain may be useful in determining the plaintiffs loss. See B & Y, 279
N.W.2d at 816. In those circumstances, the plaintiffs profit margin [is] only applied
to that portion of the defendants gross income that derived from the plaintiffs former
or prospective customers. Id.
As relevant here, the district court instructed the jury on damages stating:
To be clear: The measure of damages in this case is not the amount
of profits that Dr. Kellermann gained by breaching the settlement
agreement. The measure of damages is the amount of profits that Dr.
Hinz lost because Dr. Kellermann breached the settlement agreement. .
. .
The district court did not err. The applicable law and the evidence in this case
demonstrate the proper measure of damages is Hinzs loss profits, not Kellermanns
gain. Hinz did not introduce any evidence of the portion of Kellermanns gross
income derived from Hinzs former or prospective customers. In fact, he did not
introduce a customer list, evidence of which customers bought which product for what
purpose, or evidence showing which Kellermann customers were former or
prospective customers of Hinz. Therefore, it would have been improper to instruct the
jury that the measure of damages is the amount of profits that Kellermann gained. See
B & Y, 279 N.W.2d at 816.
Moreover, it would also have been improper to instruct the jury that a proper
measure of damages is the royalty rate previously paid to Hinz. As Hinz indicates:
-10-
the law, aiming at compensation, . . . considers it fair to hold a defendant for damages
which as a reasonable man he ought to have foreseen as likely to follow from a
breach. Franklin Mfg. Co. v. Union Pac. R. Co., 248 N.W.2d 324, 325 (Minn.
1976). Because royalty payments were specifically excluded in the settlement
agreement (Hinz and Kellermann expressly agreed to terminate the Joint Working
Agreement, which required royalty payments to Hinz), it is unfair to instruct that
Kellermann, as a reasonable man, ought to have foreseen them as a likely result from
the breach.
The instructions, taken as a whole and viewed in light of the evidence and
applicable law, fairly and adequately submitted the damage issue to the jury. The
district court did not abuse its discretion.
V.
This court reviews for abuse of discretion the denial of a permanent injunction.
See Kennedy Bldg. Assocs. v. CBS Corp., 476 F.3d 530, 533 (8th Cir. 2007).
Because injunctions are intertwined with the remedy under substantive state law, we
look to [Minnesota] law on this issue. See Kelly v. Golden, 352 F.3d 344, 353 (8th
Cir. 2003).
In Minnesota, the party seeking the injunction must establish that his legal
remedy is not adequate, . . . and that the injunction is necessary to prevent great and
irreparable injury. Cherne Indus., Inc. v. Grounds & Assocs., 278 N.W.2d 81, 92
(Minn. 1979) (internal citation omitted). The injury must be of such a nature that
money damages alone do not provide adequate relief. Morse v. City of Waterville,
458 N.W.2d 728, 729-30 (Minn. Ct. App. 1990), rev. denied (Minn. Sept. 28, 1990).
[T]he burden is on the moving party to establish the material allegations.
Hideaway, Inc. v. Gambit Invs. Inc., 386 N.W.2d 822, 824 (Minn. Ct. App. 1986).
Denying Hinzs motion for a permanent injunction, the district court stated:
The only injury Hinz has identified in this action is lost profits, which are obviously
-11-
compensable with money damages. Hinz has not shown that he has suffered, or will
suffer, any other type of injury. Based on the record, this court agrees. Because
Hinz fails to show irreparable injury, he is not entitled to a permanent injunction. See
Morse, 458 N.W.2d at 729 (The failure to show irreparable harm is, by itself, a
sufficient ground upon which to deny a[n] . . . injunction.); Villars v. Provo, 440
N.W.2d 160, 162-63 (Minn. Ct. App. 1989) (upholding denial of injunctive relief
when plaintiff failed to show money damages would be inadequate and identify the
harm she would suffer if injunctive relief was denied).
The district court did not abuse its discretion in denying the permanent
injunction. See Kennedy Bldg. Assocs., 476 F.3d at 534 (A district court abuses its
discretion when it bases its decision on a legal error or a clearly erroneous finding of
fact.).
VI.
This court reviews for abuse of discretion the district courts denial of attorney
fees. See Ollis v. HearthStone Homes, Inc., 495 F.3d 570, 576 (8th Cir. 2007).
Under Minnesota law, attorney fees are permitted if authorized by contract or statute.
Intl Bhd. of Elec. Workers v. City of St. Cloud, 750 N.W.2d 307, 316 (Minn. Ct.
App. 2008).
Here, the settlement agreement authorized them (emphasized added):
To the extent it becomes necessary for the Defendant [Hinz] . . . to seek
Court enforcement of this provision of the Agreement, and the
Defendant prevails, Plaintiff (including Gottfried Kellerman . . . or any
other entity substantially owed or controlled by Plaintiff or Gottfried . .
.) agrees to pay all attorneys fees and all costs . . . .
The question is whether Hinz prevails under the settlement agreement. Prevails
is not defined in the agreement. However, under Minnesota law, a breach-of-contract
4Because this court affirms the district court, it need not address Kellermanns
cross-appeal.
-12-
claim fails as a matter of law without a showing of damages. Evelyn I. Rechtzigel
Trust v. Fid. Natl Title Ins. Co., 748 N.W.2d 312, 321 (Minn. Ct. App. 2008);
Jensen v. Duluth Area YMCA, 688 N.W.2d 574, 578-79 (Minn. Ct. App. 2004) (A
breach of contract claim fails as a matter of law if the plaintiff cannot establish that
he or she has been damaged by the alleged breach. . . . There can be no recovery for
damages which are . . . speculative.) (citations omitted). See also Despatch Oven Co.
v. Rauenhorst, 40 N.W.2d 73, 80 (Minn. 1949) (affirming judgment against party
who could demonstrate only nominal damages arising from an alleged breach of
contract).
As discussed, Hinz did not provide a reasonable basis for his damages, and thus,
his breach-of-contract claim fails as a matter of law. See Jensen, 688 N.W.2d at 578-
79. Because he did not prevail under Minnesota law, he is not entitled to attorneys
fees and costs. The district court did not abuse its discretion.
VII.
The judgment of the district court is affirmed.4
______________________________
 

 
 
 

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