FRAUD - TARGET MEDIA PARTNERS OPERATING CO., LLC V. SPECIALTY MARKETING CORP.
Target Media Partners Operating Co., LLC v. Specialty Marketing Corp. [Ms. 1091758, Sept. 6, 2013] ___ So. 3d ___ (Ala. 2013). On second application for rehearing, the Supreme Court of Alabama issued an important opinion upholding a fraud award. This opinion is especially important because the initial opinion reversed the judgment and adopted a principle that if "a fraud claim ... stems from the same general facts as one's breach-of-contract claim, the fraud claim must be based on representations independent from the promises in the contract and must independently satisfy the elements of fraud." That original opinion adopted this principle from a special concurrence of Justice Houston in Hunt Petroleum Corp. v. State, 901 So. 2d 1, 10-11 (Ala. 2004). On first rehearing, the Court withdrew that initial opinion and issued a no-opinion affirmance. On second application for rehearing, numerous amici filed briefs in support of the original opinion. Rather than reinstating the opinion, the Court on second application for rehearing issued a 60-page opinion affirming the judgment, but remanding for a hearing on the remittitur motion, because the trial court had denied the post-judgment motions without holding a hearing. Target Media and Specialty Marketing were "both publishers of magazines directed to long-haul truck drivers and to the truck-driving industry." They contracted for Target Media to perform distribution services for Specialty Marketing. Instead, Target Media "did not comply with the delivery requirements of the 2002 distribution contract from the beginning." Target Media simply discarded most of Specialty Marketing's magazines, some of them "still in the plastic wrap in which they had been delivered" to Target Media's warehouses. The Supreme Court first affirms the denial of Target Media's motion for judgment as a matter of law ("JML") on Specialty Marketing's breach-of-contract claim. The Court next affirms the denial of JML on Specialty Marketing's fraudulent-misrepresentation claim. Rejecting a defense of the statute of limitations, the Court held "that the question of when Specialty Marketing discovered the facts that would have put it on notice of Target Media's and [its vice president Ed] Leader's alleged fraud was a question appropriately resolved by the jury." The resolution of the merits of the misrepresentation claim is important because all of the alleged misrepresentations involved assurances of performance by Target Media. The Court held that there was sufficient evidence "from which the jury could have inferred that Specialty Marketing reasonably relied on these representations to pay Target Media's invoices month after month and to continue its contractual relationship with Target Media." "The jury was free to infer that Specialty Marketing's reliance on all these misrepresentations, including the monthly invoices, was reasonable." In an especially important passage on pages 45-46 of the manuscript opinion, the Court emphasizes the reasonableness of one party's reliance on a contracting party's performance and the unreasonableness of a holding that would require them to assume that the other parties "were all lying ... on a regular basis, despite the lack of evidence that this was the case." "A party to a contract cannot rationally calculate the possibility that the other party will deliberately misrepresent terms critical to that contract." "It is not this Court's job to decide the credibility of or to assign weight to testimony and other evidence of fraud and the reliance that purportedly occurred in this case." The affirmance of the denial of JML on promissory fraud is also important. First, the Court rejects an argument that the verdict against Target Media was inconsistent with the verdict for its vice president, Ed Leader. The Court cited two other principals of Target Media who participated in the discussions with Specialty Marketing and held that the verdicts "are not necessarily inconsistent because [those two] ... also acted as agents for Target Media."