ALASKA RENT-A-CAR, INC., Plaintiff-Appellee, v. AVIS BUDGET GROUP, INC., FKA Cendant Corporation; AVIS BUDGET CAR RENTAL, LLC, FKA Cendant Car Rental Group, Inc., FKA Cendant Car Rental Group, LLC, Defendants-Appellants.
No. 10-35137
No. 10-35615
United States Court of Appeals for the Ninth Circuit
Filed March 6, 2013
D.C. No. 3:03-cv-00029-TMB
OPINION
Timothy M. Burgess, District Judge, Presiding
Argued and Submitted
July 25, 2011—San Francisco, California
Filed March 6, 2013
Before: Andrew J. Kleinfeld, Johnnie B. Rawlinson,* and Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Kleinfeld
SUMMARY**
State Law / Daubert / Batson / Attorneys’ Fees
The panel affirmed the district court‘s judgment, following a partial summary judgment and a jury trial, in an action alleging breach of a settlement agreement, and remanded for the district court to reduce the prejudgment interest award.
COUNSEL
Christopher Landau (argued), Stephen S. Schwartz, Kirkland & Ellis LLP, Washington, D.C.; Howard S. Trickey, Matthew Singer, Jermain, Dunnagan & Owens, P.C., Anchorage, Alaska, for Appellants.
Susan Orlansky, Jeffrey M. Feldman, Feldman Orlansky & Sanders, Anchorage, Alaska, for Appellee.
KLEINFELD, Senior Circuit Judge:
Several state law questions arise in this appeal, and three federal law questions, whether expert testimony should have been excluded under Daubert1, whether disallowance of a peremptory challenge was Batson2 error and if so whether it was harmless, and whether Alaska “English Rule” attorneys fee awards3 may be awarded in a diversity action where Alaska is the forum state but another state‘s law governs the dispute.
FACTS4
Alaska Rent-A-Car‘s predecessor began doing business as an Avis licensee in 1956, three years before Alaska attained statehood. Most other Avis licensees had a defined territory in a locality, not an entire state, within which they had the exclusive right to rent cars on behalf of Avis. Avis reasonably considered Alaska different.
In its 1959 agreement, the Alaska Avis licensee was entitled to operate in the “entire State of Alaska,” about 20% of the entire United States, but a negligible percentage of the
It is additionally agreed: (a) That Alaska conditions of terrain and weather as well as changing and cyclical economic conditions may result in customer demands for quick service in new and even temporary locations or camps. It is understood that Licensee may utilize his floating fleet to meet such demands, with full reporting of such circumstances to Avis.
Avis bought a company called Agency Rent-A-Car in 1995. Some of Avis‘s licensees claimed that Avis was breaching their license agreements by operating another rental car company in their territories. To protect itself against these claims, Avis sued thirteen of its licensees, and sought class certification, to obtain a judgment that its purchase of Agency Rent-A-Car and its changed operations did not violate licensee rights. Avis and named defendants settled in 1997, without ever litigating to class certification or judgment. Our case arises out of that settlement, which allows Avis to purchase additional rental car companies, but requires that “the sales, marketing and reservation activities, operations and personnel of and for the Avis System will not
Avis bought Budget Rent-A-Car out of bankruptcy in 2002. It then restructured its central operations, putting the Avis and Budget marketing teams under unified management, creating a single team to answer calls to both Avis and Budget reservation lines, and combining the Avis and Budget national corporate sales forces. The obvious threat from these actions to Avis‘s licensees was that Budget would bleed off some of their customers and potential customers. People typically rent cars online or by telephone from a national site or 800 number, and governments and big corporations typically negotiate with the national entity, because they typically rent cars for use away from home.
Alaska Rent-A-Car sued Avis claiming that Avis had indeed breached the settlement agreement, causing Alaska business to be switched to Budget Rent-A-Car, its local competitor. The district court granted a partial summary judgment, establishing that Alaska Rent-A-Car was a party to the settlement agreement, and that Avis had breached the
ANALYSIS
I. Was Alaska Rent-A-Car a promisee under the settlement agreement?
The question whether the 1995 settlement agreement included Alaska Rent-A-Car was decided by partial summary judgment, so we review de novo.6 Avis argues on appeal that Alaska Rent-A-Car was not a party.
First, Avis argues that Alaska Rent-A-Car could not be embraced by the settlement agreement, because the agreement protected only licensees with “exclusive” license agreements, that is, with exclusive territories within which Avis could not promote competitors to the licensee except to the extent the settlement agreement allowed. This argument is entirely without merit. One reason why is that Alaska Rent-A-Car plainly did have exclusive territories, the designated and permitted locations within the State of Alaska. Were Alaska Rent-A-Car to use the Avis brand to open a counter at the Seattle airport, it would violate its licensing agreement, just as any other Avis licensee would if it opened a counter at the Anchorage airport. The other reason is that we can find no language limiting permission to join in the settlement agreement to licensees with exclusive licensing agreements. The settlement agreement was offered to “all
Avis also makes the more substantial argument that Alaska Rent-A-Car‘s joinder was untimely. What color this argument has arises from the fact that Alaska Rent-A-Car did not send in a signed joinder to the settlement agreement until July 2001, almost four years after the settlement and three and a half years after Avis had sent its licensees a letter inviting them to join in the settlement.
Avis‘s letter was an offer, and Alaska Rent-A-Car‘s response was an acceptance. The parties do not dispute that New York law controls on the timeliness of acceptance, and New York law establishes the usual rule, that acceptance must be within a “reasonable” time.7 Under New York law, reasonableness is normally a question for a jury. However, a court may decide it as a matter of law when rational jurors could reach only one conclusion.8
Three or four years might well be unreasonable in many circumstances, but not in this one. First, the offer stated no time limit on acceptance, though Avis could easily have expressly limited the duration of its offer. The reasonable inference from Avis‘s failure to impose a time limit is that it did not intend for there to be a time limit, because it saw advantage to joinders whenever they came in. Second, four and a half years after Alaska Rent-A-Car joined, eight years
II. Batson.
During jury selection, Avis made peremptory challenges of the only two Alaska Natives on the panel.9 The district court accepted one but denied the other, applying Batson v. Kentucky.10 Avis argues that denial of its peremptory challenge of the second Alaska Native juror, who sat on the trial jury, was a Batson error requiring reversal. We reject the
Since liability was established by summary judgment, the only issue for the jury was whether Alaska Rent-A-Car had proved damages, and if so, how much. Avis had to start off on the wrong foot, that it had made a promise to Alaska Rent-A-Car and broken it. Faced with the problem of justifying a zero or low damages award despite having broken its promise, Avis needed a jury willing to deny an award to the victim of a broken promise. Avis‘s attorney used voir dire to try to avoid jurors who would punish the broken promise even if no damages were proved.
Avis asked prospective jurors whether any of them had “a strong belief or hold a strong opinion that if someone breaks a promise that they should be punished for that by having to pay damages?” The first of the two Native veniremen, Number 6, said she agreed that someone who breaks a promise should be punished by having to pay damages, even if there was no proof of any loss. But at a sidebar, Number 6 said she would nevertheless follow the judge‘s instructions if they were to the contrary. Avis exercised a peremptory challenge against her. Despite a Batson challenge from Alaska Rent-A-Car, the judge allowed Avis to use that peremptory challenge. The judge accepted Avis‘s lawyer‘s representation that he was not satisfied that her feelings, about how damages ought to be awarded for breach of contract regardless of whether actual loss was proved, would not affect her verdict. No issue has been raised in this appeal about allowing that challenge.
The issue goes to the challenge of the other Native venireman, Number 15. When informed that he was almost
Responding to Alaska Rent-A-Car‘s Batson challenge, Avis‘s lawyer said his gut feeling was that Number 15 viewed punishment as appropriate for breach of contract regardless of whether there was any harm. He pointed out that there were no racial issues in this commercial dispute, and said his challenge was not based on race. Alaska Rent-A-Car‘s lawyer and the judge both expressed their confidence that Avis‘s lawyer was not racially motivated (the trial was in Alaska, where the lawyers and judges often have substantial professional experience with, against, and before each other). But the judge disallowed the challenge. The court acknowledged that Avis‘s lawyer had not had sufficient time for a dialogue on voir dire with Number 15, to see whether she would follow instructions about damages despite her views to the contrary, but the court was not satisfied with striking both Native jurors on the record before him.
This Batson issue is difficult because of the explicit finding that Avis‘s lawyer did not act with a racial motivation. The court did not expressly find the evil to which
Batson applies to civil as well as criminal cases.12 Avis was entitled to its peremptory challenge unless it exercised it in a manner violative of Batson. The troubling issue here is step three of the three-part Batson test (prima facie case, race-neutral explanation, finding of pretext).13 Were it not for the express agreement by the judge and counsel that Avis‘s lawyer, whom they likely all knew, was not personally motivated by ethnic discrimination, pretext would strongly suggest itself. Venireman 15 said just what two unchallenged non-Native jurors said, so “comparative juror analysis”14 would support an inference of “purposeful racial discrimination.” And when Avis‘s lawyer saw that time was running out, he chose to question Number 15 instead of another venireman.
We are nevertheless not persuaded that the district court erred. We review application of Batson law to facts
Objective analysis is also more reliable than subjective analysis. A judge, like any person, is ill-equipped to see into
Even if there were error, we held in United States v. Lindsey19 that an erroneous denial of a peremptory challenge does not require automatic reversal. We held that Rivera v. Illinois20 overruled our holding in United States v. Annigoni21 that denial of a peremptory challenge required reversal, and stated that “the Rivera Court directly undercuts our precedent by determining that the erroneous denial of a peremptory challenge may indeed be subject to harmless-error review.”22 We concluded that Rivera allowed us to “apply the standard of review that is appropriate under the circumstances of the district court‘s error.”23 In Lindsey, we applied plain error
The right to peremptory challenges in civil cases exists by virtue of
This case involved nothing bearing on race or ethnicity. Number 15 was not challenged for cause, and the feelings she expressed about damages were substantially identical to at least two other jurors’ feelings. The district court allowed Avis‘s attorney to use his third peremptory challenge on another juror if he wished, but counsel waived the opportunity, thereby allowing three people with the same uneasiness about breach without damages to stay on the jury instead of two. The verdict was unanimous. We are unable to see any way that “substantial rights,” that is, rights affecting the substance of the case as opposed to the procedural right to three peremptory challenges, could have been affected by erroneous denial of this challenge.
III. Daubert.
Each side put on testimony of an expert witness on damages. Avis objected under
The task, for both sides, was to figure out how much business and how much profit Alaska Rent-A-Car had lost on account of Avis‘s breach of the settlement agreement. Avis had breached when it bought Budget Rent-A-Car out of bankruptcy in 2002 and then merged much of the two companies’ national sales and marketing staffs into one.
As in any damages case, the calculation had to address a hypothetical world that never existed, one in which other things remained the same but the breach had not occurred. To calculate damages from the breach, as opposed to damages from competition, Alaska Rent-A-Car‘s expert witness compared Avis‘s and Budget‘s experience with Alamo-National‘s (Alamo) experience after Cerberus bought Alamo out of bankruptcy at around the same time. His theory was that Alamo and Budget both got infusions of capital and management enabling them to compete, but differed in that Cerberus did not rent cars through any other company, and Avis did, through Budget. Thus Alamo could not benefit from merging sales and marketing activities because Cerberus had no other car rental company, but Budget could. His
Budget rebounded much faster than Alamo. The witness in effect treated the faster rebound of Budget as attributable to the breach of the settlement agreement. He used Alamo‘s national rate of rebound as a rough approximation of how Budget, had it not had the benefit of the breach, would have performed in Alaska. He then projected how much market share Budget gained each year due to the breach. He testified that he used Alamo‘s national rate of rebound as an approximation for how Budget in Alaska would have performed. He reasoned that the rental car market is a national market, and that national rebound rates would not be skewed by idiosyncratic local factors.
According to Alaska Rent-A-Car‘s witness, Alamo‘s national market share dropped 35% after it went into bankruptcy, slowly recovering after Cerberus bought it. Budget was in bankruptcy a shorter time, and recovered faster after Avis bought it. The witness, saying that he wanted to be conservative in his estimates, assumed that Budget would have lost 32.5% of its market share (slightly less than Alamo) had Avis bought it out of bankruptcy but not breached the settlement agreement.
Because the revitalized Budget would draw customers from other car rental companies too, not just Avis, the witness picked the Juneau airport to approximate how much of the bite would come out of Alaska Rent-A-Car. Juneau had the advantage of simplicity, because he could examine a market before Budget entered and after Budget entered, to approximate how much business it took from Alaska-Rent-A-
Avis challenges the expert‘s assumptions and comparisons. It argues that differences between Alamo and Budget, such as the much longer duration of Alamo‘s bankruptcy, and many other factors, made Alamo an invalid comparison. Avis also argues that applying a national market share comparison to Alaska overlooked very significant differences in how the national and Alaska markets worked. And it argues that Alaska Rent-A-Car‘s extrapolation from the Juneau market experience ignored the differences between this small market, only 5% of the statewide rental car market, and the market elsewhere in the state, where roads connected towns (unlike Juneau), and doing business more often required a rental car. Of course, Alaska Rent-A-Car‘s expert gave reasons for his use of all these comparisons, such as by pointing out the clarity with which the Juneau market could be examined. Because Budget entered Juneau in 2000, Juneau could clearly show how much business Budget took from Avis there.
[T]he court must assess [an expert‘s] reasoning or methodology, using as appropriate such criteria as testability, publication in peer reviewed literature, and general acceptance, but the inquiry is a flexible one. Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion. In sum, the trial court must assure that the expert testimony “both rests on a reliable foundation and is relevant to the task at hand.”27
The Daubert reliability requirement “is flexible” and ”Daubert‘s list of specific factors neither necessarily nor exclusively applies to all experts or in every case.”29 “The ‘list of factors was meant to be helpful, not definitive’ and the trial court has discretion to decide how to test an expert‘s reliability as well as whether the testimony is reliable, based on ‘the particular circumstances of the particular case.‘”30
Basically, the judge is supposed to screen the jury from unreliable nonsense opinions, but not exclude opinions merely because they are impeachable. The district court is not tasked with deciding whether the expert is right or wrong, just whether his testimony has substance such that it would be helpful to a jury. Avis does not challenge Alaska Rent-A-Car‘s expert‘s credentials and qualifications. Nor does it challenge his general methodology, comparing the unknown to an analogous known experience. Instead, Avis challenges three aspects of the witnesses testimony: using Alamo as the comparator, using the national rather than the Alaska market as a baseline, and extrapolating from the Juneau market to the
IV. Certainty of damages.
The jury returned a unanimous $16 million verdict for Alaska Rent-A-Car, slightly more than the $15,787,182 in damages that Alaska Rent-A-Car‘s expert witness calculated. Avis‘s expert witness offered no total number at all to the jury, just critiques of the other expert‘s assumptions and calculations, with some numbers differing from his for component parts. Avis thus presented the case to the jury as a $16 million or nothing choice. Avis argued in its close that the burden of proof on damages was on Alaska Rent-A-Car, and that its expert was effectively impeached by theirs, so no damages should be awarded.
The district court found, and neither side disputes, that New York law controls on the standard of certainty required for damages for breach of contract. Avis moved unsuccessfully for judgment as a matter of law that damages had not been proved with sufficient certainty or for a new trial. We review denial of a motion for judgment as a matter of law de novo, but draw all inferences in favor of the
Under New York law, in order to recover lost profits Alaska Rent-A-Car must prove that “(1) the damages were caused by the breach; (2) the alleged loss must be capable of proof with reasonable certainty, and (3) the particular damages were within the contemplation of the parties to the contract at the time it was made.”35 “Damages resulting from the loss of future profits are often an approximation. The law does not require that they be determined with mathematical precision. It requires only that damages be capable of measurement based upon reliable factors without undue
New York courts generally reject lost profits for (1) new business ventures as being based on impermissible speculation, such as profits from a contemplated stadium that was never built37 and (2) established businesses projecting
A jury might have been persuaded by the impeachment testimony, rejected Alaska Rent-a-Car‘s expert‘s damages analysis and calculation, and awarded nothing. But it was not, and the jury was entitled to decide. Drawing all inferences in the favor of the non-moving party, as we must, the evidence – including but not limited to the expert testimony – sufficed to establish reasonable certainty for the damages awarded.
V. Attorney‘s Fees
Alaska has, since Congress applied the general laws of Oregon to the Territory of Alaska in 1884, followed the English Rule rather than the American Rule on attorney‘s fees.41 Alaska is the only state that follows the English Rule,42 that the prevailing party is generally entitled to an attorney‘s fees award, though many federal and state statutes
Present Alaska practice is set out in
The United States District Court for the District of Alaska has itself for many years treated
Two issues arise in this case. First, should federal law or state law apply to an attorney‘s fees award? Second, if state law applies, should Alaska law or New York law control?
The first question is easily answered. As both parties agree, state law applies. The Supreme Court held in Alyeska Pipeline Service Co. v. Wilderness Society50 that for Erie Railroad Co. v. Tompkins51 purposes, state law on attorney‘s fees is substantive, so state law applies in diversity cases. “[I]n an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney‘s fees or giving a right thereto, which reflects a substantial
The second question, Alaska law or New York law, is more intricate. The rule is that the federal court in which the case is litigated should apply the forum state‘s choice of law rules.54 The parties agree that Alaska choice of law rules apply.
Though federal law establishes that attorney‘s fees law is substantive for Erie purposes, it is not necessarily substantive for choice of law purposes.55 Whether it is substantive or procedural for choice of law purposes depends on how the Supreme Court of the forum state would characterize it. Some state Supreme Courts consider their rules governing
And that too is intricate. The Alaska Supreme Court has never held that
In analyzing Nunapitchuk, we note that Alaska generally follows the Restatement (Second) of Conflict of Laws,62 which says that “[a] court usually applies its own local law rules prescribing how litigation shall be conducted even when it applies the local law rules of another state to resolve other issues in the case.”63 Avis urges us to hold that Rule 82 is not a rule “prescribing how litigation shall be conducted” because the Alaska Supreme Court has said that Rule 82 has a partially compensatory purpose. We reject this argument because Nunapitchuk deemed Rule 82 to be “primarily concerned with . . . an effective and efficient system for the administration of justice” despite its compensatory purpose.64
VI. Prejudgment Interest.
The district court awarded prejudgment interest pursuant to New York law of 9% per annum.65 The court used Alaska Rent-A-Car‘s expert‘s analysis to separate lost profits before judgment, 2003 to 2008, from lost profits projected to occur after the 2009 judgment. The court then applied the New York interest rate to the profits lost before the verdict on a year by year basis (approximately 6 years interest on 2003 profits, 5 years interest on 2004 profits, and so forth). The total interest awarded was $1,478,519.23. The court awarded an additional $57,739.51 as interest on lost profits from the date of the verdict to the date of judgment, plus $86,480.17 in interest on the entire judgment from the date of the verdict through the date of judgment. The parties agree that the $57,739.51 was an error, double counting, and that the judgment should be reduced by that amount.
New York law66 provides for the court to make just such a calculation as the district court made. By statute, prejudgment interest “shall” be awarded for breach of contract.67 The statute provides that where damages “were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.”68 The statutory language does not require juries to determine these various dates or the “single reasonable intermediate date.” Instead, “[i]f a jury is discharged without specifying the date, the court upon motion shall fix the date.”69 The New York practice appears to be for the trial court to make a reasonable calculation based on the evidence, as provided in the statutory language, directing the court to choose a “reasonable intermediate date” or to “upon motion . . . fix the date” implies.
Avis argues that two New York decisions establish that prejudgment interest cannot be awarded on a verdict that includes both past and future damages. These cases, Helman v. Markoff70 and Brandt Corporation v. Warren Automatic Controls Corporation,71 should be distinguished. In Brandt, the plaintiff recovered a general verdict on two theories, one of which was reversed on appeal, so there was no reasonable way to tell whether much or all of the damages were on the invalid theory. In Helman, plaintiff recovered a general verdict on two causes of action, only one of which would allow an award of prejudgment interest. By contrast, in this case, no theory of recovery on which the damages award was based is reversed, and the theory of recovery, breach of contract, is one for which New York requires a prejudgment interest award.
The district court had a reasonable basis in the record for allocating portions of the judgment to different years and calculating interest as it did. Alaska Rent-A-Car‘s expert provided precisely such a breakdown, with a year by year table that the court used. The jury‘s verdict was so close to the expert witness‘s calculation that the court could reasonably infer that the jury accepted the substantial correctness of his testimony, especially since Avis‘s expert witness provided no alternative calculation. Avis‘s alternative, no prejudgment interest, assumes that “the jury may have awarded no damages at all subject to prejudgment interest,”72 an assumption unsupportable on the record.
CONCLUSION
The judgment is AFFIRMED, except that we remand for the district court to reduce the prejudgment interest award by $57,739.51. Costs are awarded to Alaska Rent-A-Car.