EPAC Technologies, Inc. v. Thomas Nelson, Inc.
398 F.Supp.3d 258
M.D. Tenn.2019Background
- EPAC, a digital-on-demand printer, and Thomas Nelson (publisher) negotiated a highly‑negotiated five‑year Master Services Agreement (MSA) in 2010 under which Thomas Nelson would source certain low‑volume print categories from EPAC.
- After performance began, Thomas Nelson complained of quality problems, invoked the MSA 60‑day cure provision, and ultimately terminated the MSA in April 2011; EPAC sued in 2012 for breach of the MSA and fraudulent concealment (plus two NDA claims later dismissed).
- At a 2019 jury trial, EPAC won on breach of contract (jury awarded $3,000,000) and fraudulent concealment (jury awarded $60,000 compensatory and $12,000,000 punitive); Thomas Nelson moved post‑verdict under Rule 50(b) and alternatively for a new trial.
- The court applied Tennessee law to the fraudulent‑concealment claim (choice‑of‑law findings) and New York law to contract damages (MSA governed by New York law).
- The court granted judgment as a matter of law to Thomas Nelson on fraudulent concealment (no duty to disclose in arm’s‑length commercial relationship), vacating the fraudulent‑concealment awards; it denied judgment as a matter of law and denied a new trial on the breach‑of‑contract claim, leaving the $3,000,000 award intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Thomas Nelson had a legal duty to disclose its parallel negotiations with Lightning Source (fraudulent concealment) | EPAC: confidential exchanges and multi‑year dealings created a confidential relationship so Thomas Nelson had a duty to disclose and intentionally concealed LSI negotiations to obtain EPAC’s pricing/info | Thomas Nelson: parties were sophisticated, arm’s‑length, represented by counsel; no fiduciary/confidential relationship arose, so no duty to disclose | Court: No duty as a matter of law; arm’s‑length commercial relationship precludes confidential/fiduciary duty — Rule 50(b) granted for Thomas Nelson; fraudulent‑concealment awards vacated |
| Whether EPAC was ready, willing, and able to perform under the MSA (anticipatory breach/contract claim) | EPAC: historical timely deliveries and capacity evidence supported that EPAC could perform; Sawyer email referred to buyer volume commitment, not EPAC capacity | Thomas Nelson: EPAC sought to renegotiate volume commitments (Sawyer email), conceding inability to perform; thus EPAC failed to show readiness | Court: Genuine factual dispute; evidence could support jury conclusion EPAC was ready; Rule 50(b) denied for Thomas Nelson |
| Whether EPAC proved lost profits with sufficient certainty and within MSA scope | EPAC: damages expert computed lost profits over five‑year term including categories defined in MSA and an “Other” category; jury award falls between experts’ figures | Thomas Nelson: expert showed "Other" category not covered by MSA; damages speculative and overstated; post‑sale (March 2012) profits unreliable | Court: Competing expert evidence created jury question; $3M verdict within range of expert opinions — contract damages upheld |
| Whether trial errors (parol evidence/fraud claim presentation or adverse‑inference instructions) require a new trial | EPAC: evidence and adverse instruction rulings were proper; defendant waived many objections by not timely objecting | Thomas Nelson: admitting fraud evidence and giving adverse‑inference instructions prejudiced breach‑of‑contract trial and jury | Court: No new trial. Limiting instructions and the permissive nature of adverse‑inference instructions avoid unfair prejudice; no showing jury was misled |
Key Cases Cited
- Rhinehimer v. U.S. Bancorp Invs., 787 F.3d 797 (6th Cir. 2015) (standard for Rule 50 judgment as a matter of law)
- Shah v. Racetrac Petroleum Co., 338 F.3d 557 (6th Cir. 2003) (arm’s‑length commercial dealings do not establish confidential relationship/duty to disclose)
- Adkins v. Wolever, 554 F.3d 650 (6th Cir. 2009) (district courts’ discretion in spoliation sanctions)
- Automated Sols. Corp. v. Paragon Data Sys., Inc., 756 F.3d 504 (6th Cir. 2014) (adverse inference may be an appropriate sanction for spoliation)
- Kenford Co. v. County of Erie, 73 N.Y.2d 312 (N.Y. 1989) (New York approach to lost‑profits damages — parties’ expectations and contract context)
- Freund v. Washington Square Press, Inc., 34 N.Y.2d 379 (N.Y. 1974) (lost profits recoverable when proven with reasonable certainty)
- Domestic Sewing Mach. Co. v. Jackson, 83 Tenn. 418 (Tenn. 1885) (circumstances giving rise to duty to disclose: fiduciary, repose of trust, or intrinsically fiduciary transaction)