American Trim, L.l.c. v. Oracle Corporation

*The Honorable David M. Lawson, United States District Judge for
the Eastern District of Michigan, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0289P (6th Cir.)
File Name: 04a0289p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
AMERICAN TRIM, L.L.C.,
Plaintiff-Appellee,
v.
ORACLE CORPORATION,
Defendant-Appellant.
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No. 02-4186
Appeal from the United States District Court
for the Northern District of Ohio at Toledo.
No. 99-07265—James G. Carr, District Judge.
Argued: April 21, 2004
Decided and Filed: September 1, 2004
Before: SUHRHEINRICH and GIBBONS, Circuit Judges;
LAWSON, District Judge.*
_________________
COUNSEL
ARGUED: James D. Thomas, SQUIRE, SANDERS &
DEMPSEY, Cleveland, Ohio, for Appellant. James E. Burke
2 American Trim v. Oracle Corp. No. 02-4186
III, KEATING, MUETHING & KLEKAMP, Cincinnati,
Ohio, for Appellee. ON BRIEF: James D. Thomas, Harris
A. Senturia, SQUIRE, SANDERS & DEMPSEY, Cleveland,
Ohio, Andrew L. Frey, MAYER, BROWN, ROWE & MAW,
LLP, New York, New York, Robert L. Bronston, MAYER,
BROWN, ROWE & MAW, Washington, D.C., Dorian Daley,
Karen P. Scarr, ORACLE CORPORATION, Redwood City,
California, for Appellant. James E. Burke III, Steven C.
Coffaro, KEATING, MUETHING & KLEKAMP, Cincinnati,
Ohio, for Appellee.
_________________
OPINION
_________________
JULIA SMITH GIBBONS, Circuit Judge. Plaintiff-
appellee American Trim, LLC (“American Trim”) brought
suit against defendant-appellant Oracle Corporation
(“Oracle”), alleging claims of breach of contract, breach of
express and implied warranties, negligent misrepresentation,
and fraudulent inducement stemming from Oracle’s sale of a
software package to American Trim. Following a denial of
Oracle’s motion for partial summary judgment, the district
court divided the case into three parts: In Phase I, the jury
would decide the liability issues relating to American Trim’s
misrepresentation and fraud claims. If American Trim
prevailed in Phase I, the jury would determine damages in
Phase II. In Phase III, the jury would hear American Trim’s
breach of contract claims. After a trial on the merits, the jury
found for American Trim in both Phase I and Phase II and
awarded $3,000,000 in compensatory damages and
$10,000,000 in punitive damages. American Trim then
moved to voluntarily dismiss its contract claims under Federal
Rule of Civil Procedure 41(a)(2). The district court granted
this motion after construing it as a motion for leave to amend
the complaint by deleting the contract claims. Oracle filed a
motion for a new trial, or, in the alternative, remittitur, and a
motion for judgment as a matter of law. The district court

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No. 02-4186 American Trim v. Oracle Corp. 3
1All facts are taken from the trial record unless otherwise noted.
denied these motions. Oracle appeals, arguing (1) the district
court erred when it denied its motion for judgment as a matter
of law on American Trim’s fraud claims; (2) the district court
abused its discretion by dividing the trial into three phases;
(3) the compensatory damages were excessive; (4) Oracle was
entitled to judgment as a matter of law on the issue of
punitive damages; and (5) the ratio of punitive to
compensatory damages violated due process. For the
following reasons, we affirm the judgment of the district
court.
I.
American Trim was formed in 1996 as a joint venture
between Alcoa, Inc., and Superior Metal Products, Inc.1 It
manufactures and sells component parts to automobile and
appliance manufacturers, including Ford, General Motors,
Whirlpool, and General Electric. These manufacturers
require their suppliers, like American Trim, to process their
orders electronically using Electronic Data Interchange
(“EDI”). EDI enables companies to exchange information,
such as orders and shipment status, between different
computer systems (e.g., between manufacturers and
suppliers). Alcoa and Superior Metal Products both had
separate EDI systems, but these systems could not
communicate with each other, and the Superior Metal
Products system was not Y2K compliant. In late 1996,
American Trim began the process of acquiring an enterprise
resource planning (“ERP”) software system that would
provide the integrated EDI technology American Trim
needed. ERP software consists of numerous application
programs that perform a broad variety of functions, such as
financial accounting, human resources, payroll,
manufacturing planning, and EDI.
4 American Trim v. Oracle Corp. No. 02-4186
Oracle is a supplier of business software. It licenses a suite
of ERP software called “Oracle Applications.” In the 1990s,
Oracle worked with Radley Corporation, another software
vendor, to offer EDI capabilities to automotive businesses.
(Appellant’s Br. at 5.) In 1996, Oracle initiated plans to
develop software that would integrate Radley’s EDI
automotive software, CARaS (“Computer Aided Release
Accounting System”), with Oracle ERP software in order to
allow “automatic data exchange without the need for
customized integration.”
Hank Atwell, American Trim’s manager of information
systems (“I/S”), put together a list of twenty-five leading
software vendors who were candidates to provide a new
integrated system, and then narrowed that list down to six
vendors, including Oracle. Craig Rogers, American Trim’s
EDI expert, testified that EDI was a “critical determinant” in
including or eliminating participants in the selection process.
According to Rogers, one of Oracle’s competitors was
eliminated from the process when it informed American Trim
that it did not have the integrated EDI functionality American
Trim was seeking.
In December 1996, an employee in American Trim’s I/S
department contacted Mike Vandivier, a sales representative
for Oracle, and requested information about Oracle’s
manufacturing software and applications. She told Vandivier
that American Trim wanted an integrated system with EDI
capabilities. Vandivier did not know at that time whether
Oracle could satisfy American Trim’s needs, so he spoke with
other people within the company, including Peter Ciccarelli,
Oracle’s sales manager for the mid-Atlantic region. Ciccarelli
suggested to Vandivier that a product named Oracle
Automotive might work for American Trim. He told
Vandivier to try to get American Trim’s representatives to
come to a demonstration of the product in Detroit.
In March 1997, Oracle sent American Trim a “Statement of
Direction,” which described Oracle Automotive as “an

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No. 02-4186 American Trim v. Oracle Corp. 5
integrated supply chain management solution for . . . suppliers
of the automotive industry.” The Statement of Direction
consistently describes Oracle Automotive in the present tense:
Oracle Automotive supports the key EDI transactions
used within the automotive supply chain. Oracle EDI
Gateway, Radley CARaS, and other transaction software,
provide the necessary components to enable EDI
transmission of automotive documents between trading
partners.
However, the Statement of Direction also notes that:
The features listed in this statement of direction are
planned for Beta release early in calendar Q1 1997 and
are based on Oracle Applications Release 10.7 with
Smartclient. Production release will be achieved as soon
as successful Beta testing is completed.
In the software industry, “Beta release” refers to a stage of
software development in which the software is released to a
limited number of customers for testing and further
development before being released to the general public.
According to Oracle, Oracle Automotive entered Beta testing
in June 1997. Vandivier testified that he was aware in spring
1997 that Oracle Automotive was limited in availability, but
that Ciccarelli told him to proceed with his negotiations with
American Trim because the product would be available by the
time American Trim was ready to implement it.
When Atwell saw the reference to Beta testing in the
Statement of Direction, he asked Oracle if he could see the
software in use at a customer’s site. Vandivier suggested
instead that he attend a demonstration at Oracle’s automotive
center in Detroit because it would be too intrusive to go to a
customer and he “didn’t think [a customer] would give them
a good show.” Atwell testified that he made clear to
Vandivier that American Trim would not be interested in
6 American Trim v. Oracle Corp. No. 02-4186
purchasing Oracle’s software unless Oracle Automotive was
included.
In March 1997, Atwell prepared a Request for
Authorization (“RFA”) for his plan to convert the company
to new software. The RFA recommended the Oracle
Applications system as the “best fit” for American Trim: “The
Oracle Applications contain all of the software modules
necessary to provide American Trim with a single integrated
system. These software modules include Human Resources,
Payroll, Manufacturing, Accounting, Sales & Marketing,
Purchasing, & Quality.”
American Trim sent its I/S group to Troy, Michigan on
April 24, 1997, to see a live demonstration of Oracle
Automotive. The purpose of attending the presentation was
to see the EDI functionality operating before American Trim
actually ordered it. Vandivier opened the presentation by
telling the American Trim representatives that what they were
going to see was “live” and “in production.” During the
presentation, Radley representatives demonstrated Radley
CARaS and an Oracle representative demonstrated certain
modules of Oracle Applications. Jim Butts of Oracle and
John Walczy of Radley gave a slide presentation to illustrate
the Oracle-Radley partnership. The slides, like the Statement
of Direction, described Oracle Automotive in the present
tense, as an existing integrated EDI product. The slides
included (1) a statement that the Oracle Automotive Solution
“fulfills” industry supply chain EDI requirements; (2) a
depiction of the integrated flow of EDI transactions between
Oracle Applications and the Radley CARaS software; and
(3) statements that “Oracle Automotive is . . . [p]owerful
capabilities [sic] through two programs” and that “Oracle
supports, warrants & enhances the complete solution over
time.” (emphasis in original).
After the slide show, Butts conducted a demonstration
showing the integrated flow of EDI transactions directly from
the Radley CARaS component into the Oracle ERP

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No. 02-4186 American Trim v. Oracle Corp. 7
applications. Butts indicated to the American Trim I/S
representatives that what they were seeing was actually
happening and never advised that it was a simulation.
Vandivier testified that, as a result of the presentation, he
thought Oracle had functional EDI capability:
Q: Okay. In terms of the functional EDI capability,
though, you were under the impression that that
functional EDI capability existed in April of ‘97.
A. Yes. I saw it demonstrated along with the people
from American Trim. Now, you know, quite bluntly, I
don’t know exactly what I saw, but I saw transactions
going from a work station to the server and going
through the Oracle system.
Q. You certainly were under the impression it was
actually operating, weren’t you?
A. Yes.
Butts later wrote in an email, “To be honest, if you were an
American Trim person attending that demo, you would have
believed that you were being sold an automotive solution.”
After the Troy demonstration, Vandivier sent a proposed
set of contract documents to American Trim, which included
quotes for the software and for training. The proposals listed
all of the Oracle ERP Applications that the parties had
discussed, as well as Radley CARaS software, but they did
not include Oracle Automotive. Atwell told Vandivier that he
was not going to sign a contract that did not include Oracle
Automotive and Vandivier told him he would give him one.
Several American Trim representatives later testified at trial
that they would not have entered into a contract with Oracle
if Oracle Automotive had not been part of the agreement.
On August 22, 1997, American Trim entered into a
Software License and Services Agreement (“the agreement”)
with Oracle. The agreement listed “Oracle Automotive
CARaS” as one of the applications being sold to American
Trim. Atwell later testified that at the time he thought
8 American Trim v. Oracle Corp. No. 02-4186
American Trim was purchasing Oracle Automotive because
he thought the term was synonymous with “Oracle
Automotive CARaS.” Under the agreement, American Trim
paid Oracle $1,263,613 in license fees, $284,734 in technical
support fees, and $208,200 in training fees, for a total of
$1,756,547. The agreement included an integration clause
and provided for a 15-day “Acceptance Period” in which
American Trim was allowed to cancel the licenses by giving
written notice to Oracle and returning all of the programs.
Prior to delivery of the software, Atwell and Rogers
attended an Oracle Applications User Group (“OAUG”)
Conference in Orlando. The conference materials advertised
an “Automotive Process SIG” meeting, at which attendees
would “hear an update regarding the Oracle Automotive
solution status.” Neither Atwell nor Rogers attended this
meeting. During the conference, Oracle issued a press release
stating that Oracle Automotive would become available with
Oracle Applications Release 11. The record contains no
evidence that this press release ever came to American Trim’s
attention.
American Trim took delivery of the software in October
1997. Oracle delivered twenty-five to thirty CDs, along with
boxes of additional materials American Trim had not ordered.
According to Atwell, “it looked like somebody went through
the warehouse and picked up one of everything they had just
to ship it.” One of the CDs was labeled “Oracle Automotive
1.0.0.0.2 Beta.”
The 15-day Acceptance Period expired on October 13.
American Trim made no inquiry into the status of Oracle
Automotive during that period, and it did not exercise its right
to return the software. In December 1997, when American
Trim started installing the Oracle software for training, it
discovered that Oracle had shipped a different version of the
applications software than American Trim had ordered.
Oracle sent a consultant, Marion Zankowski, to help install
the software they had received in time for American Trim’s

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No. 02-4186 American Trim v. Oracle Corp. 9
in-house training that had been scheduled for the first week of
January. Atwell asked Zankowski to install Oracle
Automotive, but Zankowski told him that he was not
authorized to install it because American Trim had received
it in Beta format. Later that month, Rogers contacted Walczy
to make preparations for training on Oracle Automotive and
the CARaS EDI product. Walczy told him that Oracle
Automotive was not available and would not be available
until March 1998. Rogers later testified that he was “really
shocked” at this news.
On February 10, 1998, Atwell met with Oracle employees
David Synek and Mark Colburn and complained that
American Trim had purchased Oracle Automotive, but had
not received it. Colburn responded that American Trim could
not have purchased Oracle Automotive because “it didn’t
exist.” In a February 18, 1998 internal Oracle email detailing
Atwell’s complaints about the “automotive” solution, a
regional sales manager for Oracle noted that American Trim
“had purchased the Radley software along with the rest of our
ERP suite – this is not at all unusual (as opposed to buying
the complete ‘Oracle Automotive Solution’ which is a good
story [but] is not much more than this as far as I know.)”
Despite what Colburn had told Rogers in January, Oracle
Automotive was not ready in March 1998. Rogers testified
that every month thereafter Oracle would promise that Oracle
Automotive would be available the next month: “Sometimes
they’d say we’re just two weeks away from having it ready.”
In June 1998, American Trim still had not received Oracle
Automotive, and Atwell complained to Colburn in an email:
“I am up against deadlines, and so far all I get is promises and
still no product (Oracle Automotive) that I can use.”
On August 7, 1998, Atwell sent a letter to Oracle requesting
a return of the $1,756,547 American Trim had paid for the
Oracle Applications software, noting that “American Trim
has tried to obtain the Oracle Automotive software without
success since the contract was signed. This delay has caused
10 American Trim v. Oracle Corp. No. 02-4186
2This figure was later ad justed to $4 .4 million.
3Notably, Atwell’s March 1997 RFA stated:
The cost of the Oracle Ap plications is $1,066 ,997 . Oracle’s
suggested training and implementation costs approach
$1,000,000, and include extensive use of outside consultants.
The I/S Team feels that $25 0,000 will cover the training of the
in-house Implementation T eam and eliminate the need for the
high-priced consultants, thus bringing the expertise inside
American Trim .
American Trim LLC to pursue other solutions to our Year
2000 issues, and as a result [we] can no longer utilize Oracle
Applications software.” In response, Butts and Oracle Vice
President John Levey traveled to American Trim’s office for
a meeting on September 22, 1998. According to American
Trim, the meeting became “hostile” and “contentious” when
Butts denied that Oracle had ever sold Oracle Automotive to
American Trim and accused it of fabricating the slides from
the Troy presentation.
Levey followed up on the meeting by offering to pay two-
thirds of the cost of having Oracle Consulting bring one of
American Trim’s plants up on the Oracle system. He
estimated that American Trim would have to pay $99,000 for
the one plant and $3.6 million for the whole company.2
Atwell rejected it:
All the representations to American Trim, including the
literature from Oracle, led us to believe that the Oracle
software constituted an integrated, turn-key system.
Your letter suggests to the contrary. Are we to
understand that three months of consulting will only be
the beginning? That we could expect as much as twice
the license cost, or $3,400,000, in additional dollars in
consulting fees? If that is the case, why was this not
made known to us long ago and prior to ordering the
Oracle system?3

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No. 02-4186 American Trim v. Oracle Corp. 11
In a follow-up letter, Levey outlined the reasons why
American Trim was not having success with implementing
“the Oracle solution”: (1) American Trim underestimated the
scope of the project; (2) American Trim “did not execute due
diligence in ensuring that the order between American Trim,
LLC and Oracle accurately and completely defined the details
of the solution purchased according to . . . expectations. In
fact, Oracle could have never committed to the terms
currently voiced by Mr. Atwell”; (3) American Trim
“underestimated the core Technical competencies needed to
implement the solution purchased”; (4) American Trim
“elected not to utilize consulting services to assist and/or
manage implementing the project. The need to utilize
consulting services on such a project is common knowledge
within the industry”; and (5) American Trim “elected not to
move forward on the Oracle software modules which do
provide Year 2000 compliance, irrespective of integration
with the Radley CARaS product.”
At the end of 1998, American Trim upgraded its existing
software to make it Y2K compliant and began converting the
entire company to a newer version of a previously existing
ERP system with integrated EDI capability. (Appellee’s Br.
at 20-21.)
In May 1999, American Trim brought suit against Oracle
for fraud, negligent misrepresentation, breach of contract, and
breach of warranty. Oracle filed a motion seeking partial
summary judgment on American Trim’s contract, warranty,
intentional fraud, and punitive damages claims. At the outset,
the district court determined that California law governed
both the tort and contract claims. The court then bifurcated
the tort claims from the contract claims and denied Oracle’s
motion for summary judgment with respect to the fraud
claims, holding the motion for summary judgment with
respect to the contract and punitive damages claims in
abeyance pending trial on the merits. The trial was divided
into three stages: In Phase I, the jury would consider the issue
of Oracle’s liability on the fraud and negligent
12 American Trim v. Oracle Corp. No. 02-4186
misrepresentation claims. If American Trim prevailed on any
claim in Phase I, the jury would consider whether American
Trim was entitled to damages on that claim in Phase II. If
necessary, in Phase III the jury would consider breach of
contract liability and damages.
Oracle objected to the district court’s decision to divide the
trial into three stages. It argued that the tort claims could not
be separated from the contract claims because “[t]he fraud,
breach of contract, and negligent misrepresentation claims are
inextricably intertwined.” The district court disagreed:
I really think that there’s not that much overlap, as I see
it, between the issues that would be tried on the fraud and
negligent misrepresentation because I think that’s a
pretty straightforward issue, was something called Oracle
Automotive promised, and if so, was it delivered, and if
not, that’s the end of the fraud case and could potentially
impact significantly on the contract claims.
The court justified the division of the trial in part because it
had the potential to conserve judicial resources. “Whatever
the outcome of the trial on the fraud and misrepresentation
claims, the case may end once that trial is completed. If
plaintiff prevails, the contract is a nullity. If plaintiff loses,
Oracle may prevail on its pending motion for summary
judgment as to its contract-based defenses.”
Oracle filed a motion for reconsideration of the court’s
issue-separation rulings. It argued that the district court,
subsequent to its initial order separating the trial into three
phases, had changed its earlier ruling and stated for the first
time that the element of causation would not be submitted to
the jury in Phase I. Oracle claimed that it was entitled to
present evidence relating to causation during a trial on
liability for fraud and misrepresentation because causation is
a “liability” issue and the district court’s initial order stated
that tort liability would be tried in Phase I. The district court
denied the motion, noting that it had announced on July 23,

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No. 02-4186 American Trim v. Oracle Corp. 13
2001, that Phase I would consider only whether “something
called Oracle Automotive was promised, and if so, was it
delivered.” The court also emphasized that its decision to
limit Phase I in this way would not deprive Oracle of the
opportunity to meet plaintiff’s proof as to causation and that
causation would still be addressed in Phase II: “Absent proof
of causation, Plaintiff cannot prevail, even if Oracle
deliberately deceived plaintiff as to one or more material
facts.”
Phase I took place from March 5-14. The court instructed
the jury on American Trim’s four theories of fraud under
California law: false promise, intentional misrepresentation,
concealment, and negligent misrepresentation. The jury
found for American Trim on all issues.
After its deliberations in Phase II, the jury returned verdicts
for American Trim and awarded $3 million in compensatory
damages, plus $10 million in punitive damages.
American Trim then filed a motion under Federal Rule of
Civil Procedure 41(a)(2) to voluntarily dismiss its claims for
breach of contract, express warranties, and implied
warranties. The district court granted the motion, construing
it as a motion for leave to amend the complaint under Federal
Rule of Civil Procedure 15(a), and dismissed American
Trim’s contract claims without prejudice.
Oracle filed motions for a new trial and remittitur, and a
renewed motion for judgment as a matter of law. The district
court denied these motions on September 12, 2002, and
Oracle filed this timely appeal.
II.
Oracle argues that (1) the district court erred when it denied
its motion for judgment as a matter of law on American
Trim’s fraud claims; (2) the district court abused its discretion
by dividing the trial into three phases; (3) the compensatory
14 American Trim v. Oracle Corp. No. 02-4186
damages were excessive; (4) it was entitled to judgment as a
matter of law on the issue of punitive damages; and (5) the
ratio of punitive to compensatory damages violated due
process.
A. Motion for Judgment as a Matter of Law on the
Fraud Claims
Oracle argues that it was entitled to judgment as a matter of
law on American Trim’s fraud claims because American
Trim’s false promise claim is barred by the parol evidence
rule and there was insufficient evidence to prove actual or
justifiable reliance.
This court normally reviews the denial of a Rule 50(b)
motion for judgment as a matter of law de novo, viewing the
evidence in the light most favorable to the verdict. Gray v.
Toshiba Am. Consumer Prods., Inc., 263 F.3d 595, 598 (6th
Cir. 2001). However, in a diversity case, when a Rule 50
motion for judgment as a matter of law is based on the
sufficiency of the evidence, this court applies the standard of
review of the state whose substantive law governs the matter.
Morales v. Am. Honda Motor Co., 151 F.3d 500, 506 (6th
Cir. 1998). The district court determined that the substantive
law of the state of California governs this action. Under
California law, “[t]he trial court’s discretion in granting a
motion for judgment notwithstanding the verdict is severely
limited.” Hansen v. Sunnyside Prods., Inc., 55 Cal. App. 4th
1497, 1510 (1997). When presented with such a motion, the
court is not permitted to weigh the evidence, or to judge the
credibility of witnesses. Id. A motion for judgment
notwithstanding the verdict may be granted only if it appears
from the evidence, viewed in the light most favorable to the
party securing the verdict, that there is no substantial evidence
to support the verdict. Id. If the evidence is conflicting, or if
several reasonable inferences may be drawn from the
evidence, the motion should be denied. Id.

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No. 02-4186 American Trim v. Oracle Corp. 15
American Trim presented the jury with four different
theories of fraud under California law: (1) Oracle falsely
promised to deliver Oracle Automotive with no intention of
doing so; (2) Oracle intentionally or (3) negligently
misrepresented its ability to provide software with integrated
EDI capability; and (4) Oracle concealed the fact that Oracle
Automotive was not available. Oracle argues that the first
theory, promissory fraud, is barred by California’s parol
evidence rule, and that with respect to the other three theories,
American Trim failed to meet its burden of proving actual or
justifiable reliance.
1. The False Promise Claim and the Parol Evidence
Rule
Oracle’s first argument is that California’s parol evidence
rule prohibits enforcement of pre-contractual promises that
contradict or vary the terms of an integrated written contract.
The parol evidence rule is statutorily defined at California
Civil Procedure Code § 1856(a). It provides that when the
parties to a contract have set forth the terms of their
agreement in a writing that they intend as the final and
complete expression of their understanding, it is deemed
integrated and may not be contradicted by evidence of any
prior agreement or of a contemporaneous oral agreement.
Banco Do Brasil v. Latian, Inc., 285 Cal. Rptr. 870, 885 (Cal.
App. 1991). However, the parol evidence rule does not
exclude evidence “to establish illegality or fraud.” Cal. Civ.
P. Code § 1856(g). This exception is limited in situations
where a plaintiff is alleging a false promise: if “the false
promise relates to the matter covered by the main agreement
and contradicts or varies the terms thereof, any evidence of
the false promise directly violates the parol evidence rule and
is inadmissible.” Banco Do Brasil, 285 Cal. Rptr. at 892
(internal quotes omitted).
Oracle contends that American Trim’s false promise claim
is barred by the parol evidence rule because the contract in
this case “unambiguously specifies the functionality of the
16 American Trim v. Oracle Corp. No. 02-4186
licensed software” and specifically “disclaim[s] any
functionality aside from that described in the documentation
accompanying the licensed software.” As American Trim
notes, however, the parol evidence rule does not apply here
because its false promise claim is based on Oracle’s promises,
contained in the agreement itself, to deliver Oracle
Automotive. The agreement specifies that “Oracle
Automotive CARaS” was being delivered, and Atwell
testified that he took that term to be another name for the
product with EDI functionality that had been demonstrated in
Detroit. Testimony as to the meaning of the term “Oracle
Automotive CARaS” was not barred by the parol evidence
rule because it was “relevant to prove a meaning to which the
language of the instrument [was] reasonably susceptible.”
See Delta Dynamics, Inc. v. Arioto, 72 Cal. Rptr. 785, 787
(Cal. 1968). American Trim’s false promise claim was that
Oracle promised to provide “Oracle Automotive CARaS”
when it entered into the agreement, that “Oracle Automotive
CARaS” referred to the integrated EDI product it was
seeking, and that Oracle failed to provide that product as
promised in the agreement. This claim does not contradict or
vary the terms of a prior written contract because “Oracle
Automotive CARaS” is not defined anywhere in the
agreement. American Trim’s false promise claim therefore is
not barred by the parol evidence rule.
2. Actual and Justifiable Reliance
Oracle next argues that American Trim produced
insufficient evidence of its actual and justifiable reliance. It
contends that American Trim failed to meet its burden of
showing that it believed Oracle Automotive was in production
release and entered into the agreement on that basis.
Actual and justifiable reliance are elements of each of
American Trim’s fraud claims. See Firoozye v. Earthlink
Network, 153 F. Supp. 2d 1115, 1128 (N.D. Cal. 2001);
Kremen v. Cohen, 99 F. Supp. 2d 1168, 1175 (N.D. Cal.
2000); Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal.

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No. 02-4186 American Trim v. Oracle Corp. 17
Rptr. 2d 861, 863-64 (Cal. App. 1991). Actual reliance
occurs when a misrepresentation is an immediate cause of a
plaintiff’s conduct, which alters his legal relations, and when,
absent such representation, he would not, in all reasonable
probability, have entered into the contract or other
transaction. Engalla v. Permanente Med. Group, Inc., 15 Cal.
4th 951, 976 (1997). Actual reliance must also be justifiable,
i.e., reasonable. Wilhelm v. Pray, Price, Williams & Russell,
231 Cal. Rptr. 355, 358 (Cal. Ct. App. 1986).
In this case there was substantial evidence to support the
jury’s conclusion that American Trim actually and justifiably
relied on Oracle’s misrepresentations that Oracle Automotive
was available for purchase and entered into the agreement on
that basis. Several American Trim employees testified that
American Trim would not have entered into the contract with
Oracle were it not for Oracle’s representations about Oracle
Automotive’s availability. Oracle argues that Atwell’s
testimony demonstrates that there was no actual reliance
because he stated that he “wasn’t really concerned” whether
Oracle Automotive was in pre-production (Beta) release and
that Oracle Automotive was “not a major issue” as late as
January 20, 1998. There is a substantial difference between
being concerned about whether Oracle Automotive was in
Beta release and whether it was in release at all.
Furthermore, the level of concern Atwell displayed upon
learning of Oracle’s fraud after the contract was signed is not
relevant to the issue of whether American Trim actually relied
on the misrepresentation when it entered into the agreement,
and in any case, at the time when Atwell said that Oracle
Automotive was “not a major issue,” Oracle was still
promising that it was going to deliver the product in March
1998. Butts’s own testimony demonstrates that American
Trim’s reliance on Oracle’s representations at the Troy
presentation was reasonable: “To be honest, if you were an
American Trim person attending the demo, you would have
believed you were being sold an automotive solution.”
18 American Trim v. Oracle Corp. No. 02-4186
B. The District Court’s Decision to Divide the Trial
into Three Phases
Oracle contends that the district court’s procedural and
associated evidentiary rulings caused it to suffer “substantial
prejudice.” In particular, it argues that the district court’s
separation of the fraud and contract claims deprived it of the
opportunity to present a meaningful defense. Oracle’s
“theory of the case” was that American Trim knew the actual
status of Oracle Automotive at the time it bound itself to the
agreement, and that, even if it did not, the current availability
of Oracle Automotive was immaterial to its purchase
decision. According to Oracle, Atwell understood, no later
than the delivery to American Trim of a Beta version during
the acceptance period, that Oracle Automotive remained
under development. “Atwell nevertheless decided to continue
with the project to install Release 11 (with the Oracle
Automotive functionality) when it became available, since
American Trim had no need for immediate availability of
Oracle Automotive.”
Federal Rule of Civil Procedure 42(b) allows a district
court to “separate trial of any claim . . . or of any separate
issue” to promote convenience and economy or to avoid
prejudice. A district court’s decision to do so is within its
sound discretion and “will be affirmed unless the potential for
prejudice to the parties is such as to clearly demonstrate an
abuse of discretion.” In re Bendectin Litig., 857 F.2d 290,
308 (6th Cir. 1988).
Contrary to Oracle’s contention, a review of the record in
this case indicates that it had every opportunity to present all
relevant arguments in Phases I and II of the trial. For
instance, Oracle conducted an extensive cross-examination of
Atwell in which he stated that Oracle Automotive was “not a
major issue” in January 1998. Oracle introduced evidence
that (1) Atwell was told he needed to spend money on
consultants but did not; (2) Atwell failed to complain when he
received the Beta version of Oracle Automotive; (3) Atwell

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No. 02-4186 American Trim v. Oracle Corp. 19
did not raise the issue of the missing integration piece until
February 1998; and (4) Atwell’s job was in jeopardy in July
1998 because he did not have Oracle Automotive. At closing
argument in Phase I, counsel for Oracle told the jury: “You
also see from their own documents what we told them. We
told them that you also need a consultant. You heard Mr.
Atwell say, we didn’t spend money on a consultant. . . . Mr.
Atwell claims that he wanted something called Oracle
Automotive and that he understood from the demonstration in
Troy it was live and real. When it’s delivered in September
of 1997, if you believe his testimony, and you see Oracle
Automotive beta, what do you do? That’s when you claim
fraud.”
Oracle also argues that the district court’s separation of the
issue of causation from Phase I prejudiced its ability to
present its defense that American Trim had not acted in
reliance upon its alleged false representations when it entered
into the agreement. Oracle confuses the issue of whether the
representation was the cause of American Trim’s conduct in
entering into the transaction, which was in fact discussed in
detail in Phase I, with the issue of whether Oracle’s
misrepresentation caused American Trim to suffer any
damages, which was at issue in Phase II. In Phase I, the jury
heard testimony from numerous witnesses that American
Trim would not have entered into the contract if it had known
at the time that Oracle Automotive was not in fact available.
The trial structure did not require the jury to decide an
identical question in each of the first two phases of the case,
as Oracle contends. Moreover, the tort and contract claims
were not the same and were properly divided. As the district
court noted,
Fraud and breach of contract (and defenses related to the
claim of breach of contract) are distinct claims: one
relates to the contract’s formation, while the other relates
to its performance, and fraud in a contract’s formation
can defeat its enforceability. Likewise, whether a false
promise was intentionally made and relied on are distinct
20 American Trim v. Oracle Corp. No. 02-4186
issues from the question of whether an intentionally false
promise caused harm, and, if so, the amount of such
harm.
The court did not abuse its discretion when it divided the trial
into three separate phases. Oracle was given an opportunity
to present fully its “theory of the case” with respect to the
fraud claims, and the jury rejected it. The district court’s
separation of issues caused no prejudice to Oracle.
C. Compensatory Damages
Oracle next argues that the compensatory damage award of
$3 million “exceeds the maximum that a jury could
reasonably find to be compensatory for the plaintiff’s loss,”
and that the district court erred by failing to grant a new trial
or remit the award “to the maximum supportable level.”
As a general rule, this court has held that “a jury verdict
will not be set aside or reduced as excessive unless it is
beyond the maximum damages that the jury reasonably could
find to be compensatory for a party’s loss.” Farber v.
Massillon Bd. of Educ., 917 F.2d 1391, 1395 (6th Cir. 1990).
A trial court is within its discretion in remitting a verdict only
when, after reviewing all the evidence in the light most
favorable to the prevailing party, it is convinced that the
verdict is clearly excessive; resulted from passion, bias, or
prejudice; or is so excessive or inadequate as to shock the
conscience of the court. Id. If there is any credible evidence
to support a verdict, it should not be set aside. Id.
In Phase II, Oracle presented the jury with the following
summary of its damages:

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No. 02-4186 American Trim v. Oracle Corp. 21
Cost of Oracle System $1,849,447.00
Training and
Implementation Costs
for Oracle System
$32,744.09
Cost of Renewing MDSS
License
$72,000
Prejudgment Interest
@ 6% $581,914.93
@ 7% $691,275.75
Total (with 6% interest) $2,536,106.02
Total (with 7% interest) $2,645,466.84
American Trim’s witnesses also testified about additional
damages not itemized in the above summary, including:
approximately $140,000 in wages and related expenses in
connection with the employee hours American Trim
employees spent training on Oracle software and $50,000 of
microcomputer equipment American Trim had upgraded
specifically to work with Oracle software. Additionally,
American Trim’s treasurer, Dana Morgan, testified that he
took a “conservative” approach to calculating their
compensatory damages. American Trim also introduced
testimony about its “intangible losses” caused by the amount
of wasted time and effort it expended on Oracle, including
testimony from Rogers that American Trim had “lost a year-
and-a-half in a critical, important project” and that time was
“as important as money.”
22 American Trim v. Oracle Corp. No. 02-4186
The district court concluded that there was an adequate
evidentiary basis for the compensatory damage award, and we
agree. There is at least some credible evidence to support the
jury’s $3,000,000 verdict. Therefore, the district court did not
abuse its discretion when it refused Oracle’s request to set it
aside or reduce it as excessive.
D. Motion for Judgment as a Matter of Law on
Punitive Damages
Oracle also contends that American Trim failed to meet its
burden of proof on its claim for punitive damages. In
particular, it argues that American Trim failed to prove by
clear and convincing evidence that Peter Ciccarelli was a
managing agent who authorized or ratified the fraud against
it.
In order to hold a corporation liable for punitive damages
based on fraud under § 3294(b) of the California Civil Code,
a plaintiff must show by clear and convincing evidence that
an officer, director or manager authorized or ratified the
fraud. Cal. Civ. Code § 3294(b). An agent or employee acts
in a managerial capacity whenever the degree of discretion
permitted the agent or employee in making decisions is such
that the agent or employee’s decisions will ultimately
determine the corporation’s business policy. Mitchell v.
Keith, 752 F.2d 385, 390 (9th Cir. 1985) (quoting Egan v.
Mut. of Omaha Ins. Co., 620 P.2d 141, 148 (Cal. 1979)). In
order to demonstrate that an employee is a true managing
agent under § 3294(b), a plaintiff seeking punitive damages
must show that the employee exercised substantial
discretionary authority over significant aspects of a
corporation’s business. White v. Ultramar, Inc., 981 P.2d
944, 951 (Cal. 1999). The critical inquiry is the degree of
discretion the employee has in making decisions that will
determine corporate policy, not the employee’s particular
level in the corporate hierarchy. Egan, 620 P.2d at 149.

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No. 02-4186 American Trim v. Oracle Corp. 23
In this case, there was sufficient evidence for the jury to
find both that Ciccarelli was a managing agent for Oracle and
that he authorized or ratified the fraud against American
Trim. As Oracle’s Application Sales Director for the mid-
Atlantic region, Ciccarelli had a sales quota of $70,000,000.
He was responsible for fifty employees, including all the sales
representatives in his region and their supervisors. See White,
981 P.2d at 954 (holding that a zone manager responsible for
supervising eight retail stores and sixty-five employees who
had “substantial discretionary authority over vital aspects” of
the corporation’s business, including “managing numerous
stores on a daily basis, and making significant decisions
affecting both store and company policy,” was a managing
agent). Oracle’s 2000 annual report described the company
as a “feudal operation” run by a group of autonomous general
managers, who set their own prices, invented their own
policies and procedures, and ran their own computer systems.
Although this section of the annual report describes the
responsibilities of the managers responsible for sales in entire
countries, the district court concluded that the jury was
entitled to infer from this evidence that it was an accurate
portrayal of the kind of authority given to a sales manager
responsible for only a large segment of a country. Ciccarelli
himself testified that he was “authorized to determine and
agree to and approve what solutions [Oracle] would present
to [its] customers to solve their business problems.” It is
worth noting that California does not require evidence that a
purported managing agent was responsible for setting firm-
wide or official policy. See White, 981 P.2d at 956 (Mosk, J.,
concurring) (noting that while supervisor “lacked the
authority to terminate plaintiff without approval of [the
corporation’s] human resources and division manager” and
had no authority to set firm-wide or official policy, she
exercised the authority that necessarily resulted in the “ad hoc
formulation of policy” that adversely affected the plaintiff,
and was therefore a managing agent).
With respect to whether Ciccarelli ratified or authorized the
fraud committed by Oracle, the record clearly indicates that
24 American Trim v. Oracle Corp. No. 02-4186
Ciccarelli told Vandivier to offer Oracle Automotive to
American Trim even though he knew that it was not yet
available. He also testified that he did not know that his sales
team misrepresented the functionality of Oracle Automotive
or that American Trim believed his sales team. Oracle notes
that “[c]orporate ratification in the punitive damages context
requires actual knowledge of the conduct and its outrageous
nature.” Coll. Hosp., Inc. v. Superior Court, 34 Cal. Rptr. 2d
898, 912 (Cal. 1994). However, nothing in the case law
Oracle has cited indicates that Ciccarelli had to have actual
knowledge that American Trim was in fact deceived by the
deception he authorized when he told Vandivier to offer
Oracle Automotive before it was in production.
Viewing the evidence in the light most favorable to
American Trim, there was clear and convincing evidence in
the record to support the jury’s finding that Ciccarelli was a
managing agent for Oracle and that he ratified the acts of his
subordinates.
E. The Ratio of Punitive to Compensatory Damages
Finally, Oracle argues that the punitive damages award is
unconstitutionally excessive under the Due Process Clause of
the Fourteenth Amendment. This argument was raised for the
first time in Oracle’s reply brief, and this court has
consistently held that we will not consider such arguments.
Overstreet v. Lexington-Fayette Urban County Gov’t, 305
F.3d 566, 578 (6th Cir. 2002). Oracle contends that this
“general” rule is not to be applied “where doing so would
result in a miscarriage of justice.” As American Trim notes,
that language is from a different rule of this court, i.e., that we
will not consider arguments raised for the first time on appeal
unless doing so would “result in a plain miscarriage of
justice.” Id. at 578. Oracle actually raised the argument that
the punitive damages award was unconstitutional before the
district court, but chose not to include it in its 67-page
opening brief. Oracle argues that its failure to challenge the
constitutionality of the punitive damages award is excused

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No. 02-4186 American Trim v. Oracle Corp. 25
4In State Fa rm, the Court noted that “single-digit multipliers are
more likely to comport with due process, while still achieving the State’s
goals of deterrence and retribution.” 538 U.S. at 425. We no te that the
3.3-to-1 ratio in this case is single-digit and less than the 4-to-1 ratio cited
in Gore. 517 U.S. at 581 . California courts have also upheld similar
ratios since State Fa rm was decided. See, e.g., Romo v. Ford Motor Co.,
6 Cal. Rptr. 3d 793, 813 (Ca l. Ct. App. 2003) (upholding a punitive-to-
compensatory damage awa rd ratio of 5-to-1).
because the Supreme Court filed its decision in State Farm
Mutual Auto Insurance Co. v. Campbell, 538 U.S. 408
(2003), seven weeks after its opening brief was due.
According to Oracle, State Farm was “an intervening change
in the law subsequent to the filing” of its opening brief that
excused its initial failure to raise the constitutional argument.
However, State Farm did not work a change in the law so
much as it clarified existing law set forth in BMW of North
America v. Gore, 517 U.S. 559 (1996).
Due process prohibits the imposition of grossly excessive
or arbitrary punishments on a tortfeasor. State Farm, 538
U.S. at 416. In Gore, the Supreme Court instructed courts
reviewing punitive damages awards to consider three
guideposts: (1) the degree of reprehensibility of the
defendant’s misconduct; (2) the disparity between the actual
or potential harm suffered by the plaintiff and the punitive
damages award; and (3) the difference between the punitive
damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases. 517 U.S. at 575.
State Farm did not change these factors, and in fact, the court
analyzed the constitutionality of the punitive damages award
at issue in that case using those same three guideposts. 538
U.S. at 418-29. Counsel for Oracle was familiar with Gore’s
guideposts long before the outcome in State Farm was
decided. Indeed, counsel challenged the constitutionality of
the punitive damages award before the district court. Oracle
waived its right to assert the same argument on appeal by
raising it for the first time in its reply brief.4
26 American Trim v. Oracle Corp. No. 02-4186
III.
For the foregoing reasons, we affirm the judgment of the
district court.

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