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MMG Financial Corporation v. Midwest Amusements Park

January 5, 2011

MMG FINANCIAL CORPORATION, PLAINTIFF-APPELLEE,
v.
MIDWEST AMUSEMENTS PARK, LLC, KALGRONVALL, DR. R.C. SAMANTAROY INSTITUTE OF SCIENCE AND TECHNOLOGY, INC.
AND U.S. ACQUISITIONS& OIL, INC., DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Eastern District of Wisconsin. No. 06-C-929-William C. Griesbach, Judge.

The opinion of the court was delivered by: " Hibbler, District Judge.

ARGUED APRIL 16, 2010

Before EASTERBROOK, Chief Judge, FLAUM, Circuit Judge, and HIBBLER, District Judge.

A tangled web of corporate relationships and oral promises lies at the center of this contract dispute. In short, Midwest Amusements Park, LLC (Midwest) purchased 24 go-karts from Team Hurri-cane, Inc. (Team Hurricane), which MMG Financial Corporation (MMG) financed. When the go-karts did not meet Midwest's expectations, it refused to pay for them. This litigation followed.

"The Honorable William J. Hibbler, District Judge for the Northern District of Illinois, sitting by designation.

I.

In early 2005, Kal Gronvall attended a go-kart trade show in Chicago on Midwest's behalf. At the show, *fn1 Gronvall met a salesman of Team Hurricane, Lorne Kelly. Team Hurricane was a joint venture between Cameron Motorsports, Inc. (Cameron Motorsports) and MMG. Kelly promoted go-karts branded by Cameron*fn2 Motorsports, which were manufactured by CRG Spa (CRG), an Italian Corporation. Thus, Cameron branded the go-karts, Team Hurricane sold the go-karts, and MMG financed Team Hurricane's customers' purchases.

Shortly after the trade show, Kelly traveled to Midwest's racetrack in Shawano, Wisconsin, in hopes of selling gokarts to Midwest. Malcolm McMaster, MMG's president and sole shareholder, traveled with Kelly. McMaster, however, attended the Wisconsin meeting as a representative of Team Hurricane, unaware that Midwest intended to finance its purchase.

Kelly touted the "arrive and drive" program, in which the go-karts sold by Team Hurricane would be available for customers to test their racing skills on Midwest's racetrack. Additionally, Kelly implied that as part of the arrive and drive program, Cameron Motorsports would completely assemble the go-karts, break-in the go-karts' engines, supply training materials for Midwest's staff, and provide service for the go-karts. At the conclusion of the meeting, Midwest indicated to Kelly and McMaster that it might be interested in short-term financing for the purchase it would later make.

In April 2005, Midwest ordered 24 go-karts at a purchase price of $89,502.12. Shortly thereafter, Gronvall contacted MMG to discuss financing the purchase. According to MMG, McMaster and Gronvall agreed to a contract to finance the purchase. MMG sent Gronvall a "conditional sales agreement" that documented the parties' oral agreement. That sales agreement identifies Gronvall and USA International Raceway (the name under which Midwest did business) as the buyers, MMG as the finance company, and Team Hurricane as the dealer. The sales agreement specifies a purchase price of $89,502.12, and calls for Midwest to make 24 monthly payments of $4,468.31, which amounts to a steep 24% annual percentage rate.

Gronvall never signed the agreement. Nevertheless, the go-karts arrived directly from CRG several months later. Soon after Midwest received the go-karts, Gronvall voiced several complaints. He complained to Cameron Motorsports and CRG that the go-karts did not perform as expected. Gronvall informed the companies that some of the go-karts "blew-up" upon first being driven and others no longer worked. Cameron Motorsports only grudgingly responded to Gronvall's complaints. Gronvall also complained to MMG that the previously agreed upon interest rate was too onerous.

Gronvall and MMG dickered over a revised interest rate. Gronvall requested that MMG lower the annual percentage rate. MMG responded that it might lower the annual percentage rate to 18% if Midwest caught up on missed payments. Gronvall eventually created and signed a sales agreement that called for a 12% annual percentage rate and conditioned payments on a portion of Midwest's revenue from USA International Race-way. MMG never signed the agreement created by Gronvall, and neither Gronvall nor Midwest made any payments to MMG.

By June 2006, Midwest still had not made any payments to MMG. MMG filed suit, alleging a breach of contract, naming Midwest and Gronvall as co-defendants. Midwest filed a counterclaim, in which it alleged that MMG had breached the finance agreement by failing to pay Cameron Motorsports for the go-karts. Midwest also claimed that MMG breached both express and implied warranties because the go-karts did not function properly. Midwest did not file a third-party complaint against Cameron Motorsports, Team Hurricane, or CRG raising the same breach of warranty claims. The district court granted MMG's motion for summary judgment on Midwest's counterclaim, and MMG's claim proceeded to the jury.

At trial, Midwest and Gronvall denied that they had agreed to any contract with MMG. In the alternative, Midwest raised an affirmative defense, arguing that it was entitled to a set-off because MMG had failed to pay Cameron Motorsports for the go-karts, which in turn caused Cameron Motorsports to refuse to service the malfunctioning go-karts. The parties presented testimony, mostly from McMaster and Gronvall, regarding the details of Midwest's and MMG's agreement (or the absence thereof). Midwest also elicited testimony from Bob Cameron in an attempt to persuade the jury to award it a set-off of any amount it owed to MMG. During Cameron's testimony, Midwest sought to introduce an e-mail that Cameron Motorsports had received from CRG purporting to demonstrate that the gokarts that had been shipped to Midwest had not been paid for. The district court ...


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