Coal Resources, Inc., Cross-Appellants v. Gulf & Western Industries, Inc., Cross-Appellees

WELLFORD, Before CONTIE and Cir Judges, MORTON, cuit and Senior District Judge.* CONTIE, Judge. Circuit rehearing This is the under Rule 40 of the Federal of Appellate Rules Procedure appeal brought both an defendant Industries, Inc. and a cross-appeal brought Coal Re- sources, Inc. court, In the district plaintiff asserted for claims breach of con- tract, common law fraud and violations of the federal securities laws. The defend- ants asserted a counterclaim for fraud. A jury $6,384,000 awarded Coal Resources on claim, $5,666,000 the breach on claim, $5,000,000 common law fraud on claim, $11,000,000 the securities in punitive $350,000 damages attorney’s and fеes. subsequently accepted remittitur under which it would receive $12,050,000 “in full of all jury awards.” granted The district court also Gulf (cid:127)& Western’s motion for JNOV on the securi- ties claim. original

In its opinion, the hearing panel affirmed judgment on the securities issue, judgment reversed the on the other claims remanded those claims for a new trial. 738 F.2d 438. Coal Resources petition then filed a rehearing for and/or suggestion banc, for rehearing en primarily arguing panel ignored had Morton, Tennessee, Judge, *The Honorable L. Clure sitting by Senior designation. trict United States District Court for the Middle Dis- original opinion re- although the note that regarding the stipulation at trial parties’ frauds a foot- panel had to the statute of proof and not ferred burden note, judgment the rever- any justifying reason the reversal of articulated The of contract award. and common law fraud of the breach of contract sal breach parties rehearing granted upon panel statute claims was based supplemental Gulf & filed briefs. frauds. rehearing, it did on on contends Western judgment it is entitled either appeal, that II. of law claims or matter on all as a has contended reasons set For the of those claims. retrial litigation that it is throughout this entitled below, that the JNOV on we conclude forth law on judgment as a matter of the Ohio affirmed, law claim should securities plaintiff’s law fraud claim. common the common law theory promissory Specifi- is one of fraud. that the be reversed and fraud claim should alleged is cally, Gulf & Western to have the claim should be

judgment on contract in million the lease- promised invest $3.9 new, for a trial. and remanded vacated knowledge holds with that would not promise. promise perform the This was I. in included the written not contract. further, proceeding Before we integration an clause. contract contains points were cor emphasize several which opinion first rectly decided our making that a Although it is clear First, require no further discussion. which present promise no inten contractual with acquisi the our conclusion that we reaffirm promisso performing of it constitutes tion question not a secur tion Ohio, Appraisal ry fraud see Dunn Co. meaning the federal secu ity within the of Inc., Systems Honeywell Information Weaver, laws. See Marine Bank v. rities 877, Cir.1982) (6th (construing 687 F.2d 883 559-60, 1220, 102 S.Ct. 1225- 455 U.S. law); Ohio Tibbs v. National Homes Con (1982). Accordingly, 71 L.Ed.2d 409 281, 287, Corp., App.2d struction 52 Ohio properly granted court JNOV to district (1977), 369 N.E.2d 1218 and that extrinsic law claim. the securities always admissible to show evidence is Second, again we hold that Coal Resources fraud, promissory see Globe Steel Abrasive recovery. a double On the breach obtained Co., 101 v. National Metal Abrasive Co. claim, sought contract Coal Resources of Cir.1939) (6th (construing F.2d position it would placed that have law), argues that a Ohio had the fulfilled achieved contract been theory may not promissory fraud be used the common law Gulf & Western. On upon impose par additional a claim, promissory fraud Coal Resources containing ty to a written an inte monetary sought to value obtain According gration clause. defend Kentucky leasehold interests ant, entitled Coal Resources was to show disposed of Gulf & Western had which through extrinsic evidence that &Gulf Thus, be returned. Coal Re cannot which intention, had no time the monetary equivalent achieved the sources into, performing contract was entered through promisso its contract rescission promises it had made in the written clear, however, theory. It ry fraud acquisition agreement. The defendant plaintiff not have a contract both a contends, earnestly that Coal Re same and rescinded at the time. enforced sources not entitled to show that Gulf Resources has obtained double Since Coal performing & Western had no intention of damage recovery, the award review promises reflected in which were not Third, our cannot stand. we reaffirm hold agreement. written Zegeer ing testimony that the of witnesses First, agree with defendant. concerning damages for fraud We and Owens Finally, early discussing promissory speculation. cases fraud was inadmissible we distinguishable, situ- The Dunn case is arising under Ohiolaw involved claims how- ever, ground opinion that the does promises in which the that the de- ations integration an not indicate that clause was wrongfully рresent fendants had no inten- dissent, involved. Unlike the we are un- performing were included in the willing to assume large that because a cor- Steel, respective contracts. Globe su- See poration Dunn, integra- was involved in Rietzke, Monaghan App. Ohio pra; tion clause must been included in the contrast, (1949).1 In 89 N.E.2d purpose integration contract. The of an promise by Gulf & Western to invest $3.9 stating agree- there are no part million in the leaseholds was not understandings ments or par- between the acquisition agreement. ties other than those reflected in the writ- Second, case, is, cоurse, prevent the Dunn which at first ten contract either party relying upon rep- glance appears support Coal Resources’ statements during negotiations resentations made Dunn, position, distinguishable. were included the final computer system defendant sold a To permit promissory to use a orally defendant plaintiff. theory in fraud order to add terms to an promised approximately to convert four contract, integrated as Coal Resources at- plaintiff’s programs hundred of the so that here, tempts to do completely defeat system, they be used the new could purpose of an clause. We agreement only stated that two written although hold that Coal Resources was en- fifty programs hundred would be convert- prove through titled to extrinsic evidence subsequently ed. The defendant refused that Gulf & Western had no intention when programs to convert all four hundred and the of performing prom- contract was made plaintiff promissory the sued under a fraud ises that acquisition were included in the theory. This court held that the defendant agreement, Coal Resources was not enti- having had defrauded the in had tled to show that Gulf & Western never performing promise no intention of the to intendеd to invest million in the $3.9 lease- programs convert all four hundred when indicated, holds. As has been the latter ‍​‌​​​​​​‌‌​‌​‌‌‌‌​‌‌​​‌​‌​​‌‌​‌‌​‌‌​‌​​‌​​‌‌​​​​‍promise that was made. This was true promise part acquisition was not of the though promise even the to the convert agreement.2 fifty programs additional one hundred Since Gulf & is judg- Western entitled to agreement. not reflected in the written of promissory ment a matter Hence, proposition Dunn stands for the claim, fraud we need not address the issue may that a defendant be held liable for jury of the whether instructions on that having present perform- had no intention of proper. claim were Nor we need reach the ing promise a made outside the of terms a question, previ- in which was addressed our agreement. opinion, written ous of Coal Resources’ burden of case, App.2d (if the promise Tibbs 52 Ohio ment. Gulf & Western's it was fraud, promissory made) 369 N.E.2d defined its to $3.9 invest million the in leaseholds inapposite facts are here. The court held in promise performance was a of future rather concerning quality Tibbs that statements the of representation a past present than of indicated, or materi- qualifications engi- materials and the of certain purpоse al fact. hasAt been the "puffing” neers constituted mere and were not integration preclude an clause is to reliance representations Accordingly, of fact. the court upon promises performance of future that have promises did not address the issue of whether not been in included the contract. Since this containing which are not reflected in a contract case does not involve a claim of in fraud the integration subject an clause be the of a inducement, holding possibly our cannot do vio- promissory fraud action. subject. Similarly, lencе to Ohio on law the our holding does not conflict with those in other dissenting opinion correctly 2. states an that See, Williams, e.g., states. Stone v. 358 S.W.2d integration party clause does not bar a (Tex.Civ.App.1962)(integration pre- clause demonstrating in fraud the inducement. This proof promises irrelevant, cludes however, collateral point con- is because this case writing). tained does not involve a the claim of fraud in induce- develop properties the to agreement4 We neither reaffirm on claim. proof reasonably diligent fashion. opinion’sanalysis of reject prеvious nor question. correctly argues duty diligent perform implied that an III. contract exists where the generally ance has also contended Gulf by assignor or seller price received an to be rehearing that it is entitled and on appeal upon the of future amount dependent is matter of law on judgment as a buyer. assignee profits obtained Coal Resources’ of contract claim. breach Chattem, Inc., F.2d Bailey See theory is three-fold. of contract Cir.1982) breach (6th (citing general principles alleged First, to have Gulf & law). present That of contract situation dеvelop obligation to implied an breached to re here Coal Resources was because reasonably diligent fash- leaseholds prof multiple of Gulf Western’s ceive a & Second, alleged to & Western is ion. Gulf during years first after the its two duties, imposed certain acquisition agreement. have breached De signing leases, Virginia fact, which spite hold that this we acquisition agree- in the expressly obligation assumed de implied theory is plaintiff’s Third, alleged to & Western is ment. central fective as a matter law. Of promises pay express acquisition importance have breached is the fact that the $500,000 part 1977 as agreement on June contained price, permits recla- all of to obtain contained stating bonds, agreements work under perform parties’ mation reclamation monthly royalties standings. import The clear of this clause pay minimum party properties question. neither bound to dis lessors is that obligations not contained charge According plaintiff’s expert wit- Accordingly, duty development Zegeer, diligent ness properties reasonably dili during two-year Virginia properties implied gent may not be under fashion multiple period generally acceptеd acquisition agreement. required mining principles3 would have deep mining mean, install & to how Gulf Western This conclusion does not washing facility. ever, equipment and a new coal entitled to that Gulf & Western is during year plain Zegeer judgment testified that the first matter of on the as a law multiple period, Gulf Western of claim. As & tiff’s entire breach contract indicated, washing facility, the coal had Coal Resources’ claim should have been built parties agreed The in the deep engaged mine and is three-fold. installed one would mining produc- pre-trial Total final order that Ohio law strip opеrations. coal 275,000 acquisition construction Zegeer tons. control the of tion would have been $6,384,000 during jury’s second award of further testified gen a of contract claim was year multiple period, Gulf & West- breach held that deep eral This court has should installed second verdict. ern involved, court production have where state law is a district mine. Total coal 400,000 (Tr. 856-57). general as would Coal should construe verdict tons been Ma & the state courts. See Keet v. Service Resources contends since Gulf (6th Co., Inc., 138, 472 140 steps, of these F.2d Western took none chine Ohio, Cir.1972). acquisi- it is that the implied duty under the assumed breached parol theory implied duty discus- of an of evidence rule is irrelevant to the 3. Coal Resources’ theory. upon this diligent development sion of rests was re- what generally quired under ac- of Gulf & Western duty implied 4. WhetherGulf & Western had an mining upon cepted principles and not &Gulf Virginia leases the lease under the to parol promise Western’s to invest million $3.9 diligent be holds in fashion will be discussed coal-bearing Accordingly, properties. in the low. rules, prevailing interpretation all Under jury decided issues those of an Hence, although agreement Coal party’s governed by favor. Id. of laws upon rely implied not obli- state where the was made or is agree- gations arising acquisition from the performed. to be Import See Soviet Ex ment, & is not entitled to Gulf Western port, Tire Inc. v. General International judgment as a matter of law on the breach Co., (6th Cir.1978) (construing F.2d of claim if other contract Coal Resources’ law); Banci, Ohio Arsham v. 511 F.2d recovery theories of are valid. (6th Cir.1975)(construing Ohio law); Kirchwehm, Alropa v. 138 Ohio St. One of Resources’ alternate theo- (1941). Virgin 33 N.E.2d 655 Since the ries is Gulf & ex- Western breached ia leases per were made and are to be $500,000 promises pay to June press on Virginia, Virginia formed law controls permits to and reclаmation obtain bonds, interpretation.5 their perform reclamation work and to royalties pay monthly minimum the les- Second, Gulf when properties question. ‍​‌​​​​​​‌‌​‌​‌‌‌‌​‌‌​​‌​‌​​‌‌​‌‌​‌‌​‌​​‌​​‌‌​​​​‍Since sors expressly imposed by assumed the duties promise express breach of an contractual Virginia leases, it assumed both the obviously cognizable legal theory ais obligations imposed by language since Coal Resources introduced evidence any those leases and Virginia duties that support its claim that Gulf & Western implies law as a matter law in lease express breached the above mentioned situations. We emphasize this case promises, Gulf we hold that & Western is presents questions: first, two distinct entitled a matter law subject whether Gulf & Western was these claims. implied acquisition agree- duties under the Coal Resources’ other breach second, ment and whether Gulf & Western theory & that Gulf Western did subject to such duties under the Vir- imposed not fulfill duties were which ginia leases. we have held that Virginia leases and which were ex integration prevents obligations pressly & assumed Gulf Western implied being acquisition under the acquisition agreement. proceeding Before agreement, we hold that further, preliminary points two mеrit atten clause is irrelevant analysis First, Virginia tion. ques controls the Virginia leases because Gulf & Western tion of what & Western’s duties, expressly express assumed all Virginia were under leases. Since the law,6 implied arising under district court this case located in those leases.7 Ohio, required apply it was Ohio’s con flict of argues laws rules. Gulf & correctly Klaxon Co. v. Stentor Co., Inc., Manufacturing Virginia Electric implies obligation 313 U.S. law no 487, 1020, (1941). 61 S.Ct. 85 L.Ed. reasonably diligent development 1477 of the 5. This conclusion is not inconsistent with the cause Coal Resources is not the lessor. Gulf & parties’ stipulation that Ohio law controls the Halliday, Western cites v. Obenshain 504 interpretation acquisition of the 946, (E.D.Va.1980) F.Supp. (construing 956 Vir- law); Center, ginia Shopping Richmond Inc. v. law, mineral, gas 6. Under Ohio all oil and leases Co., 135, 142, Wiley N. Jackson 220 Va. 255 implied develop include an covenant to the land (1979) Co., Valley S.E.2d Landscape 518 Inc. Glen-Gery reasonable fashion. Ionno v. Rolland, 259-60, 257, v. (1977). 218 Va. 237 S.E.2d 120 131, Corp., (1983); 2 Ohio St.3d N.E.2d 443 504 proposition cases These stand for the 119, Griffith, Beer v. 61 Ohio St.2d N.E.2d 399 parties that incidental beneficiaries who are not (1980). 1227 The Ionno and are cases Beef standing to a no to sue to enforce case, implied duty irrelevant to the issue in this the apply contract. This rule does not here however, Virginia because the controls con- party acquisi- because Coal Resources is Virginia struction of the leases. agreement in which Gulf & Western ex- argued Gulf & Western has that Coal Re- pressly promised discharge to the duties im- standing sources has sue no to for breach of the posed by Virginia the leases. expressly duties that the former assumed be- 450 kind that injury of a development caused of this case. the facts under leaseholds provision in assumption of duty the implies such a Virginia law

Although was intended to agreement by acquisition price to be received the the contraсt where acknowledge pur- the depend- We completely prevent. assignor or seller the may to provision have been production pose ob- profits or upon future ent diligent- buyer, Home Western would assignee or see that Gulf & by the insure tained Combs, Virginia properties so that develop 204 ly Coal Co. Smokeless Creek (1963); substantial 571, would receive 561, Shen- Resources 132 S.E.2d Coal Va. multiple. If that were Coal Co. under the & Anthracite sums andoah Land however, (1895), intent, they could more it Hise, parties’ 23 S.E. 92 Va. placing a speci- by duty easily where a have effectuated imply such а does not diligent development paid by requiring amount must be fied minimum acquisition percent- to a in the text of the buyer properties in addition assignee or parties’ likely, the profits production. agreement Home itself. More age of future obliga- Smokeless, assumption of placing Va. at intent Creek agreement acquisition case is like the present provision The S.E.2d 399. tions Although Resources insure that Gulf & Western latter situation. was to damages ‍​‌​​​​​​‌‌​‌​‌‌‌‌​‌‌​​‌​‌​​‌‌​‌‌​‌‌​‌​​‌​​‌‌​​​​‍proximately West- multiple of Gulf & liable for all to receive a be held was (including leaseholds loss profits from the Coal Resources ern’s obtained suffered multiple) if Gulf & two-year period, payments under the over a (or $2,057,522 obliged pay when the leaseholds failed also was if obligations) closed and discharge other lease acquisition $500,000 the leases. 1977. Since then terminated on June the lessors another regardless short, Re- paid against which Coal were to be the event these amounts during profits seeking protect itself Western’s of Gulf & sources reasonably obligations pro- dili- duty through assumption multiple period, no implied may the termination of gent development have been vision If during multiple period. Virginia leasеs law. intent, however, then parties’ that were argument that it Gulf & Western’s $6,384,000 damages could not have been a matter of law judgment is entitled alleged breach by Gulf & Western’s caused undermined, express when the obligations provision assumption of Virginia leases is con language of the developing diligently the leaseholds. require leases the les All of the sidered. Kentucky leases were termi- diligent, mines in a work develop the see to during two-year multiple period nated in accordance with the manner manlike paying ceased because mining practice. Coal good standаrds 2768), (Ex. 531, App. at royalties minimum through introduced evidence damages maximum amount of contract Western nei Zegeer that Gulf & witness Resources claimed connection that Coal developed nor diligently ob ther mines Kentucky properties was substan- with the failing ei mining practice good served $6,384,000. tially less than deep mines or build a new to install ther during the two- leases were not terminated facility. Accordingly, Gulf & washing coal circum- year multiple period. Under these as a not entitled Western is stances, Resources could not have suf- Coal on the breach of matter of law $6,384,000 resulting from damages fered claim. of leases. termination Western is not entitled Gulf & law, it unclear what We hold that is a matter of we vacate judgment protect parties intended to two kind of harm the of contract for the award for breach through of the as First, against the inclusion we are uncertain whether reasons. obligations acqui alleged sumption dis- failure to Gulf & Western’s remand, reasonably diligent agreement. On extrinsic ev- sition charge obligation its question.8 diligent be admissible on this losses idence will and that a miner would not the of fact If finder determines profits during made two-year mul- assumption of clаuse was tiple period. in that Gulf & did breached not leaseholds, develop diligently Virginia IV. and if the finder of fact further decides points Several other merit brief purpose that the of the clause to in- discussion. Coal Resources’ claim for diligently that Gulf & sure Western would breach of contract predominately involves properties those so that Coal Re- unliquidated damages. law, Under Ohio sources would receive pay- substantial pre-judgment interest is not on available multiple, ments under the then an award unliquidated claims, subject to certain ex for breach of contraсt like the one under ceptions not relevant here. See Roth Steel permissible. review here would be On the Products v. Sharon Corp., Steel 705 F.2d hand, other if the clause was intended to (6th Cir.1983); 140 n. 9 Braverman protect damages re- Spriggs, 68 App.2d 58, Ohio 426 N.E.2d 526 sulting terminated, being from the leases (1980). We modify previous decision, our recovery may only then be had for those however, in order to indicate that if Gulf & damages proximately resulting from the Western is determined to be liable at retrial Kentucky termination of the lease. The failing pay $500,000 for on June damages record reflects that those would 1976, failing permits to obtain and reclama $6,384,000. be substantially less than failing tion bonds and perform reclama A second reason that for ‍​‌​​​​​​‌‌​‌​‌‌‌‌​‌‌​​‌​‌​​‌‌​‌‌​‌‌​‌​​‌​​‌‌​​​​‍award work, then the may district court as breach of contract must be vacated is that pre-judgment sess interest on damages testimony of witness Tuck was exclud resulting from these breaches if the court holding ed. We adhere to the previ our finds resulting that the damages liq were opinion Stagg’s ous that witness expert uidated.

opinion evidence “cannot be considered the Second, since Gulf & Western is entitled equivalent substantial of a miner’s direct judgment as a matter оf testimony experience as to the actually he promissory claim, fraud had in Coal Resources attempting to mine the seam in may punitive not damages recover question.” at re- See Crown Cork & Seal Co. Third, trial. since jury Pharmaceuticals, Inc., Morton found that Gulf 417 F.2d (6th Cir.1969). not by did establish prepon- While we cannot predict derance whether evidence9 the finder that Coal of fact will Re- be persuaded by guilty fraud, sources was testimony retrial, Tuck’s Gulf & at West- ern testimony his highly re-assert its relevant to both the counterclaim at liability damages retrial. Finally, issues. we do not' Specifically, address the this evidence tends to issues of the effect remittitur, show that Gulf & of the Western acted reasonably propriety comments by plain- accord made generally ance with accepted mining tiff’s during counsel argument stan final dards in not spending more money alleged devel violation of Federal Rule op properties. experi Tuck’s Civil judgment Procedure 36. The ence tends to spending show that more district court on the securities laws claim is money only greater have resulted in promisso- Affirmed. Indeed, extrinsic evidence is admissible in this 9. We reiterate that dowe not address the issue explain any acquisition case to term in the of whether common law fraud Ohio must appeal, proven preponderance On Coal Resources has con- evidence convincing sistently argued clear and jury evidence. The extrinsic evidence neces- case, however, this sary explain pre- was instructed meaning under a of the contract. At ponderance trial, of the evidence standard. Since stipulated to the admissi- test, prevail Gulf & Western did not under that bility (Tr. 618-19). of extrinsic evidence clearly prevailed would not have demanding more standard.

452 notwithstanding the terms, by its bound The

ry fraud claim Reversed. thаt there provision contains claim of contract breach is Vacated binding district or statements agreements is Remanded no claim are and that contained except trial. thase parties a new upon court for the ac- into which enters Fraud therein. Judge, concur- MORTON, District Senior be ex- cannot making of a contract tual dissenting part. ring part and by any the law reach of from the cluded opinion. majority I in Part in the contract I concur inserted phrase formal opinion. remainder 1 from the dissent itself. surprised to learn no doubt be Ohio will Niehaus, jurispru- supra (quoting 24 Ohio fraudulent only where is the state it Deceit, 639, Section Fraud and 2d dence can be concealed of contract inducement does not bar 27).1 parol evidence rule The into the integration clause throwing an inducement because fraudulent evidence See, an memorial of written to add to is offered not the evidence Hines, Laboratories, Inc. v. 647 Betz e.g., contract, but of the written vary the terms law); Cir.1981) (Penn, 402, (3d 406 F.2d integra- including the init to avoid toto — Corp. El Con v. Financial Centronics Inc., Laboratories, E.g., Betz tion clause. Cir.1978) 779, (2d F.2d 782 quistador, 573 Jewell, supra, 96 406; Baker v. supra, at Jewell, 573, 96 S.D. Baker (N.Y. law); 77 Machinery 302; Dallas Farm at N.W.2d v. South Bates 299, (1959); 302 N.W.2d 1, 307 Reaves, Tex. Company v. 158 (1941); 170, N.E.2d 551 31 gate, 308 Mass. 233, (1957).2 234 S.W.2d § (1960). Of Corbin, 573 Contracts 3 or a course, integration clause an Of con hold to the course, courts the Ohio specifically disavow- provision contractual Inc., West, v. Haven Park trary. Niehaus allegedly upon relied ing the assurances 584, 24, 586 N.E.2d App.3d 440 2 Ohio were that thase assurances strong evidence National v. First see Walters (1981); incorporation or that their never made 677, Newark, 433 69 Ohio St.2d Bank of and considered the written (1982). 608, follows 611 Ohio N.E.2d Laboratories, Inc., su- Betz See rejected. general rule Machinery Farm 406-407, Dallas prа, has party to a contract one that where mat- supra. Such factors are Company, through it to enter into induced been weigh. Mechan- the trier of fact ters for deceit, misrepresentation of fraud, and adopted such as those matters, formulations istic to material party as the other true only frustrate majority can not become party does defrauded (1949) any Gorham, App. in vain for App. N.E.2d 159 89 Ohio Sparhawk v. 101 In 1. plaintiffs (1956) promises Djubasak those indication that 654 and N.E.2d 1955) (Ohio Ct.App. sought in the written to enforce were included Taylor, N.E.2d Steel, misrepresentations contrary. suрra, parol of fraudulent Globe evidence contracts. To integra- despite presence holding of an en- admitted the district court's reversed contract. Those in the final written alleged promise violate would forcement of representa- prior oral reasoned that courts Monaghan, supra, parole evidence rule. separate agreements collateral constituted tions quitclaim deed document was a the written agreements. A care- apart from the written good and other $1.00 consideration of recited they reading were cases reveals of those ful promise the The valuable consideration. gropings early toward the simply formalistic grantee sought was that the to enforce Niehaus, supra. applied See equitable rule exchange provide support her with life Metzger, Evidence Rule: generally, The Parol Appraisal Co. v. transfer. As for Dunn for the Conquest, Estoppel's 36 Vand.L. Promissory Next Inc., Honeywell Systems, 687 F.2d Information (1983). Rev. 1383 Cir.1982), (6th any can be distin- case something ground it did not guished on the distinguish majority’s attempt the au unlikely, say. highly that a I find original unper opinion is in our cited thorities Honeywell large corporation would not such as Steel Abrasive scrutinized Globe suasive. I have clause in its contracts include Co., 101 F.2d 489 Metal Abrasive Co. v. National (6th of course. a matter Rietzke, Cir.1939) Monaghan v. 85 Ohio goal of all theory contract law: ascertainment liability and under which of they wish to parties’ proceed. enforcement of the true they intentions. If choose fraudulent induce- ment, plaintiffs should be to forced I majority’s ruling also dissent from the rescission, elect between remedies plain- clause bars reformation, damages. asserting tiffs a cause of action based implied on the defendants’ breach of their

duty develop purchased to leases

diligent manner. Ohio courts follow the “[ajbsent

rule express provision an to contrary, lease includes an [a mineral]

implied reasonably covenant to develop the

land.” Beer Griffith, 61 Ohio St.2d (1980). hardly 399 N.E.2d 1227 I consider America, UNITED STATES generalized integration used Plaintiff-Appellee, express provision this contract the kind of presumed needed rebut this duty. See Corp., Centronics supra, Financial JOHNSON, Jr., Robert C. 782; Kingsley v. Western Natural Gas Defendant-Appellant. Co., (Tex.Civ.App. 393 S.W.2d No. 84-5477. 1965). parties Whether the intended the duty diligent defendants to assume this United Appeals, States Court of development a question for the trier of Sixth Circuit. fact to decide from all the evidence.3 Argued Feb. 1985. case, reviewing In the history of this I Decided March have concluded that the confusion sur- rounding it arises from the failure to distin-

guish liability theories and the remedies

available under those theories. As the ma- notes,

jority plaintiff may not have a “[A]

contract both enforced and rescinded at the

same time.” principle perfectly That regards seeking

correct as remedies. In liability,

establish party

argue enforced; that a contract should be

or, alternative, should be for I major-

rescinded fraud. am afraid

ity, recognizing the inconsistency of these overlapping damages

theories and the them, sought

claimed under has simplify legal

the trial the issues formalism. same result could be achieved bifur-

cating the trial of of liability the issues

damages. If the trier fact finds that the guilty

defendants were of both fraudulent contract,

inducement and breach of

plaintiffs should then be forced to declare

3. Since I would hold that the obligations defendants had an sume all under the leases is that it implied obligation leases under was made to insure that those assignment, lessors, I need not performed decide whether such plaintiffs' for the not ‍​‌​​​​​​‌‌​‌​‌‌‌‌​‌‌​​‌​‌​​‌‌​‌‌​‌‌​‌​​‌​​‌‌​​​​‍the obligation implied an least, very leases them- benefit. At the the lessors would be my opinion, selves. indispensable party any most reasonable action to enforce interpretation promise obligations. defendants’ as- those Fed.RXiv.P. 19.

Case Details

Case Name: Coal Resources, Inc., Cross-Appellants v. Gulf & Western Industries, Inc., Cross-Appellees

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Mar 4, 1985

Citation: 756 F.2d 443

Docket Number: 82-3443 to 82-3446

Court Abbreviation: 6th Cir.