Blizzard Energy v. Alexandrov

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NOT DESIGNATED FOR PUBLICATION

No. 118,656

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

BLIZZARD ENERGY, INC.,
Appellee/Cross-appellant,

v.

VALENTIN ALEXANDROV, JACOB GITMAN and
BERND SCHAEFERS,
Appellants/Cross-appellees,

v.

FRANZISKA SHEPARD,
Appellee/Cross-appellant.


MEMORANDUM OPINION

Appeal from Barton District Court; STEVEN E. JOHNSON, judge. Opinion filed April 19, 2019.
Affirmed in part and dismissed in part.

Michael P. Whalen, of Law Office of Michael P. Whalen, of Wichita, for appellants/cross-
appellees.

Jeffrey R. King, of Post Anderson Layton Heffner, LLP, of Overland Park, for appellees/cross-
appellants.

Before BRUNS, P.J., MALONE and POWELL, JJ.

PER CURIAM: After an eight-day trial, a jury found that defendants Bernd
Schaefers, Valentin Alexandrov, and Jacob Gitman had committed fraud upon Blizzard
Energy, Inc. (Blizzard) and Franziska Shepard; it awarded Blizzard and Shepard
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$3,825,000. Schaefers, Alexandrov, and Gitman appeal, arguing: (1) there was
insufficient evidence to sustain a fraud claim against them; (2) there was insufficient
evidence to support the finding that Gitman personally committed fraud; and (3)
inconsistency in the jury verdicts requires a new trial. Shepard and Blizzard cross-appeal,
arguing that the district court erred in dismissing their shared claim of negligent
misrepresentation and asking this court, if it grants a new trial, to reinstate that claim. For
the reasons stated in this opinion, we affirm the district court's judgment and dismiss the
cross-appeal as moot.

FACTUAL AND PROCEDURAL BACKGROUND

Background

Schaefers was born in Germany and moved to the United States permanently in
about 1995. German was his native language, but he also spoke English. In 2005 or 2006,
Schaefers met American businessman David Baskett and began investing in Baskett's
companies and otherwise working with him. Baskett eventually gave Schaefers
ownership shares in two of his companies: TTE International (TTE), which did business
with the American military, and International Emergency Services (IES), which was
intended to develop and offer amphibious airplanes for fighting wildfires.

In 2010, Schaefers moved to Santa Maria, California, where he lived with and
worked alongside Baskett and engineer Dick Hulme until 2014 or early 2015; the men
worked out of a building Baskett owned. In 2010 or 2011, Schaefers met Franziska
Shepard, whose husband was a former investment partner with Baskett. Shepard was a
native of Austria, but she had lived in the United States since 1958 and in California
since 1967. Shepard was a successful entrepreneur and had invested since the early 1970s
in projects, including manufacturing dollhouses, developing breast implants, building
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offices, building residential and assisted living care for senior citizens, and other real
estate endeavors.

In April 2011, Alexandrov began working in Baskett's office space and assisting
Baskett on a project involving firefighting aviation. Alexandrov had been born in Kiev,
and his native language was Ukrainian, but he also spoke English, some German, and
"basic Arabic." After resigning from the Russian military in 1994, Alexandrov came to
the United States, where he worked for Coca-Cola and obtained his master of business
administration degree. After graduation, Alexandrov cold-called companies known to do
business with Russians, and in that context he met Baskett. Although Alexandrov and
Baskett had only occasional contact over the next 13 years, Alexandrov began working in
Baskett's office space in 2011, and that is where he met Schaefers. Baskett did not pay
Alexandrov for his work, but he gave him shares in TTE and IES.

That summer, Alexandrov and Baskett attended a firefighting conference in Idaho,
where they met Gitman. Gitman was born in the Soviet Union and spoke fluent Russian,
Ukrainian, and Kyrgyzstan, in addition to English and a little Turkish, Polish, Spanish,
and Portuguese. Gitman held a degree in mining engineering and a degree in physics of
solids from a school in Moscow, and he had been a professional engineer in Russia.
Gitman had lived in the United States since 1990 or 1991.

During a break in the firefighting conference, Gitman told Alexandrov and Baskett
that he partly owned an operating pyrolysis plant in Crimea, Ukraine, and he had
extensive knowledge about pyrolysis. Pyrolysis is the process by which feedstock is
brought to a high temperature without oxygen and transformed into another product.
More specifically, tire pyrolysis—which uses scrap tires or waste tires as feedstock—
anaerobically heats tires until they decompose. The vapors created in this process are
funneled through a pipe into other equipment where they cool and condense, while the
carbon and wire are left in the crucible. Some hydrocarbon vapor condenses into a liquid,
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which is called pyrolysis oil, and what does not condense is syngas, which is used as part
of the fuel for the furnaces. Once the furnace cools and pyrolysis is complete, a carbon
black system separates the wire in the tires from the carbon, which is ground to make
carbon black. According to Gitman, his Crimea plant converted tires into gasoline, diesel
fuel, and heating oil.

The three men "had a couple of dinners together" and decided that Gitman was a
"concept guy," while Alexandrov and Baskett were "business people." Believing they
would make a good team, they decided to cooperate in a pyrolysis business venture in the
United States. Gitman emailed Alexandrov additional information about pyrolysis and
Alexandrov began to educate himself, looking for scrap tires and researching pyrolysis
equipment manufacturers around the world. Gitman did not send Alexandrov any
documents describing exactly how the pyrolysis process worked, and he did not send any
plant design documents. Alexandrov later testified that he learned that pyrolysis had been
used in the 1990s, but all the pyrolysis plants in the United States went bankrupt because
they were not using tires as the feedstock.

Using some of the information and photographs of the Crimea plant he had
received from Gitman, as well as information he found through his research, Alexandrov
prepared a PowerPoint presentation (the Presentation) about the tire pyrolysis proposal;
he took the presentation to a Clean Business Investment Summit (the Summit) in Santa
Barbara, California, on August 12, 2011, with the intent of soliciting investors for their
tires-to-fuel project. Schaefers gave Alexandrov information to put into the presentation
and he eventually reviewed the presentation, but not thoroughly. Similarly, Gitman
looked at the financial information in the Presentation but he didn't review it as
"Alexandrov put it together." Around the time of the Summit, Schaefers met Gitman.

On August 15, 2011, TTE International—of which Baskett, Schaefers, and
Alexandrov were all shareholders—entered into a 50/50 partnership agreement with
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Gitman's company, Agro-Energy, to develop a pyrolysis plant in the United States. This
joint venture was called California Renewable Energy Center, LLC (CREC), because
they planned to build and operate the plant in California.

Shepard invests

After the Summit, Baskett suggested Shepard as a possible investor for the Project.
Accordingly, Schaefers, Alexandrov, Gitman, and Baskett approached Shepard in August
2011 in the hopes she would invest in their concept of converting scrap tires into fuel
through pyrolysis. According to Alexandrov, they told Shepard that "the technology
[they] had to offer through Mr. Gitman was something new and different that [there was a
good possibility] would make it profitable in the U.S." Schaefers also spoke with Shepard
on the phone, and Baskett provided her with additional information about the anticipated
pyrolysis project. Specifically, Shepard received a copy of the Presentation, which she
sent to her longtime attorney, George Tomlinson, and her longtime accountant, Jeanne
Potter, for their review.

Among other things, the Presentation identified Agro-Energy and TTE
International, Inc. as the joint venture partners in CREC. It identified the "management"
as Gitman, Baskett, Alexandrov, and Schaefers, who was described as a "veteran
entrepreneur with 20 years of expertise in the renewable energy sector." The presentation
stated that it sought "needed funding" of $3,750,000 total, including $2,500,000 for
"capital equipment"; $900,000 for "working capital"; and $350,000 for "site launch." The
Presentation identified revenue sources as gasoline, steel, carbon black, and electricity,
and it asserted that "[o]ne average size tire [equals] 1.3 gallon[s] of fuel," and "there is no
limit for business expansion with our competitive pricing." In fact, the Presentation
projected $4,000,000 in revenue per year with a net profit of $1,700,000 per year. The
final page of the Presentation was a "Project Timeline" that showed three months for
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design and construction of the site, four months for equipment procurement and
fabrication, six months for plant assembly, and then startup and testing.

On August 25, 2011, Shepard met with Baskett and Alexandrov and agreed to
proceed with the tire pyrolysis project and begin forming a new legal entity for the
business venture. Shepard later testified, however, that she did not at that time "fully
agree[] to invest completely in the project"; rather, she was willing to explore the idea
further, based on the proposal that she would fund the pyrolysis plant and the defendants
would provide the necessary technology and engineering. Similarly, Tomlinson later
testified extensively about his part in the ongoing negotiations over the various parties'
roles and responsibilities in the pyrolysis project. In any event, throughout the remainder
of 2011, the parties continued their negotiations and their attempts to define the
parameters of the project and their roles therein.

For example, in November 2011, Shepard requested and received a proposed
business plan called Tires to Fuel Colorado (TTFC) which, as proposed, would "build[]
initially one, and after successful implementation, a series of waste recycling plants, first
concentrating on waste tires[.]" By this point, the geographical focus of the project had
moved from California to Colorado, and the proposed business plan identified two initial
site options in Colorado and represented that "Colorado has the largest stockpiles of
waste tires in the USA." Shepard refused to sign off on that proposed business plan, and
the parties could not agree upon a business structure for an entity to develop the project
or on the proportion of each party's ownership of that entity.

Meanwhile, in late 2011 or early 2012, while researching tire landfills in
Colorado, Alexandrov discovered that Twylia and Marvin Sekavec, who owned a small
tire landfill in Colorado, also owned a much larger tire landfill in Brownell, Kansas.
Alexandrov and Schaefers came to Kansas and stayed with the Sekavecs, who ultimately
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agreed to provide their scrap tires for the project. Thus, the geographical focus of the
project again shifted, this time to Kansas.

Eventually, Shepard decided that before investing in the project, she wanted to
travel to Russia and view the equipment used in tire pyrolysis. Accordingly, in late
January 2012 and early February 2012, Alexandrov, Schaefers, Shepard, and Gitman
traveled to Russia, along with Joseph Lastella and Oleg Svabsky. Svabsky was a
Ukrainian-educated, -trained, and -certified mechanical and electrical engineer with
whom Gitman had worked and who he brought into the project. Lastella was a retired,
formerly-licensed-in-the-United-States, American engineer with many years of
experience whom Schaefers had suggested accompany them to Russia to "look at
equipment and see whether he thought that the manufacturing like welding seams and
quality of steel and so on . . . would be acceptable." During the Russia trip, the group
took samples of the end-products at both plants, which were later tested in certified and
licensed United States laboratories. Alexandrov told Shepard that the test results were
positive, meaning they were encouraging.

The parties' later descriptions of the trip vary, but they visited two pyrolysis plants,
including a plant owned by Zhelezno, the company that later sold them the equipment for
their pyrolysis plant. Shepard paid the travel expenses for herself, Alexandrov, Schaefers,
and either Svabsky or Lastella—which engineer accompanied them on the trip is unclear.
Similarly, after August 2011, Shepard paid for at least some of Schaefers' expenses for
travelling to search for scrap tires and a building site.

The parties never signed a written contract about the pyrolysis project, but on
March 21, 2012, Shepard filed articles of incorporation for Blizzard with the Kansas
Secretary of State's Office. Those articles identified Shepard as Blizzard's sole
shareholder. On May 12, 2012, the parties signed a contract to purchase pyrolysis
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equipment from Zhelezno, and Shepard began disbursing money to pay for equipment.
All the capital investment money for the pyrolysis project ultimately came from Shepard.

The parties' versions of the events underlying this case vary wildly and are not
easily ascertainable from the record. For example, Schaefers maintains that he and
Shepard had a meeting on December 23, 2011, at which they agreed—through a
"handshake deal"—that Shepard would receive 50 percent ownership in the project,
leaving 50 percent to be split between Alexandrov, Baskett, Schaefers, and Gitman.
Shepard adamantly denies that this meeting occurred. They also disagreed over who was
responsible for ordering pyrolysis equipment from Russian manufacturers, who was
responsible for delays in the permitting process, and who was responsible for difficulties
obtaining a Kansas site on which to construct the pyrolysis plant. For purposes of the
present appeal, it suffices to say that as time went on, Shepard became unhappy with the
progression of the project compared to the amount of money she was spending.
Additional facts are provided in the analysis section below as needed.

Shepard's husband experienced serious health problems beginning in May 2012,
which she alleged occupied most of her attention and time. In May 2013, when her
husband had recovered, Shepard began to ask more questions about the progress of the
project, and she learned that the applications for Kansas permits and a required EPA
permit had not been completed, there were no engineering drawings of the type required
to be submitted with permit applications, the Kansas warehouse Blizzard had purchased
was undeveloped and dirty, and the equipment that had been delivered from Russia was
unusable without retrofitting. Shepard felt that the failure to obtain the permits was
inconsistent with the timeline that had been represented to her; she was displeased with
the expense anticipated to bring the equipment into code compliance; and she felt that
many representations made to her were not being actualized, including estimated
timelines on the plant becoming operative.

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Accordingly, in August 2013, when the plant was still not operational, Shepard
informed Schaefers that she was no longer involved with Blizzard or the pyrolysis
project. Alexandrov disputed the assertion that Shepard similarly terminated him from the
project. He asserts that on September 3, 2013, Shepard gave him a deadline to choose
between Schaefers and her. Alexandrov did not respond by the deadline, so they parted
ways. In any event, Alexandrov, Gitman, and Schaefers ended their formal relationship
with Blizzard in August and September 2013.

Legal proceedings

On February 13, 2015, Alexandrov, Gitman, and Schaefers sued Shepard and
Blizzard in California state court, alleging "1) breach of fiduciary duty; 2) constructive
fraud; 3) conversion; 4) breach of oral agreement; 5) declaratory relief; 6) accounting; 7)
imposition of resulting trust; and 8) imposition of constructive trust." They sought
compensatory damages, disgorgement, constructive and resulting trusts, an equitable lien,
an accounting, and punitive damages. On March 19, 2015, they dismissed their claims
against Blizzard.

While that case was proceeding in California, Blizzard sued Alexandrov, Gitman,
and Schaefers in Kansas state court, alleging against them collectively claims of (1)
fraudulent inducement, concealment, and/or representation, or negligent
misrepresentation; (2) breach of oral contract; (3) violating the Kansas Uniform Trade
Secrets Act; and (4) conversion. Blizzard sought injunctive relief, the return to Blizzard
of certain schematic designs, money damages, attorney fees, costs, and expenses.

Schaefers and Alexandrov separately responded pro se to the Kansas action, but
both purported to name Shepard as a third-party defendant; both brought counterclaims
and third-party claims against Blizzard and Shepard respectively for breach of fiduciary
duty, constructive fraud, conversion, unjust enrichment, and bad faith misappropriation;
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and both brought third-party claims against Shepard individually for breach of oral
agreement and defamation. Alexandrov and Schaefers also both sought declaratory
judgment (1) dissolving any partnership between themselves, Shepard, and Blizzard; (2)
recognizing that they each hold a 12.5 percent ownership interest in Blizzard and/or the
Blizzard pyrolysis project; and (3) recognizing that they each hold a 12.5 percent
ownership interest in any profits of Blizzard and/or the pyrolysis project since its
inception. In addition to the declaratory judgment, they requested monetary damages,
dismissal of Blizzard's Kansas petition, injunctive relief, back pay, attorney fees, costs,
and expenses. Blizzard filed its answer and affirmative defenses to the counterclaims.

In December 2015, the Kansas district court ordered the parties to show cause why
this case should not be dismissed as a matter of comity since it appeared that litigation
was already proceeding in California. In response, Blizzard informed the district that the
California case had been dismissed in July 2015 on the basis of forum non conveniens.
Blizzard attached to its response the California state district court order dismissing the
California action "without prejudice to [Alexandrov, Gitman, and Schaefers] pursuing an
action in the District Court for Barton County, Kansas, should they so desire." The
Kansas court retained the case.

Thereafter, on December 30, 2015, with the district court's permission, Gitman
filed an untimely pro se answer to Blizzard's petition. Although Gitman, Schaefers, and
Alexandrov continued throughout trial to represent themselves pro se and file individual
motions when required, their arguments were generally united. Thus, they collectively are
referred to hereinafter as Defendants unless assessment of individual positions or
arguments is necessary.

In February 2016, the district court granted Defendants' motions to join Shepard as
a third-party defendant. Shepard filed her answers to the claims against her, and she
asserted third-party counterclaims against Defendants for (1) "fraudulent inducement,
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concealment, and/or misrepresentation, or negligent misrepresentation"; and (2) securities
fraud. Shepard sought monetary damages of over $1 million. Blizzard amended its
petition to add a claim of unjust enrichment and to remove its claim of breach of oral
contract; Shepard later removed her securities fraud claim.

At a motions hearing on February 24, 2017, the district court granted summary
judgment against Defendants on their claims of libel and granted dismissal of all claims
of fraud in the inducement, as well as any "cause of action for any type of fiduciary
relationship here." The written journal entry from that motions hearing reflected that the
district court had granted summary judgment in favor of Blizzard and Shepard on the
claims against them for breach of fiduciary duty, constructive fraud, and conversion and
had dismissed Blizzard's and Shepard's claims for fraudulent inducement. Accordingly,
the claims that went to trial were (1) Blizzard and Shepard's claims of "fraudulent
inducement, concealment, and/or misrepresentation, or negligent misrepresentation"; (2)
Blizzard's claim of unjust enrichment; and (3) Defendants' claims against Shepard for (a)
breach of joint venture and (b) unjust enrichment.

Jury trial

The jury trial began on Monday, June 12, 2017, with voir dire and opening
arguments. Over the rest of the first week of the trial, Blizzard and Shepard, who are
collectively referred to hereinafter as Plaintiffs, presented their case to the jury. Plaintiffs'
trial strategy appeared to be pointing out to the jury all of the multitude of statements and
representations Shepard claims Defendants made to her from their first meeting in August
2011 through the termination of their business relationship in August or September 2013,
including alleged misrepresentations or untruths in the Presentation. Plaintiffs
characterized the Defendants as having "planned and schemed to utilize [Shepard's]
money to develop a technology to convert tires to fuel" with the intent to "take it on the
road . . . where they could make money off the technology that [Shepard] paid for."
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Plaintiffs asserted that Defendants represented that they already had the necessary
technology, but they did not. In addition, Plaintiffs argued that Defendants lied about the
cost of the project, lied about their competence, lied about their experience, lied about the
expected output from pyrolysis, lied about anticipated revenue, lied about the timeline to
production, and lied about the expected profit.

Plaintiffs presented testimony from Schaefers; Alexandrov; Gitman; Shepard;
Tomlinson; Great Bend building inspector Lee Schneider; and consulting engineer
Charles Schneider, whom Shepard hired after she removed Defendants from Blizzard,
and who testified extensively about the safety hazards posed by the pyrolysis equipment
in the state it was delivered from Russia and the cost of bringing that equipment up to
code. Plaintiffs also played for the jury a video recording of the 2016 deposition of Ethan
Begg, a professional engineer who was retained by Blizzard in August 2012 to guide
Blizzard through the Kansas air and waste management permitting process. Along with
his interactions with Blizzard through that process, Begg also testified about the time he
worked for Blizzard and his impression that Schaefers was not experienced in drafting
contracts or in permitting.

Plaintiffs also presented testimony from Dr. Richard J. Lee, a physicist. Lee and
his company, RJ Lee Group, had been involved in tire pyrolysis since about 2000 and, in
2007 or 2008, a subsidiary of RJ Lee Group had successfully commercialized a tire
pyrolysis process that they had developed. RJ Lee Group holds six patents involving tire
pyrolysis. Lee explained that he was not the first person to try tire pyrolysis in the United
States and that, when he began investigating tire pyrolysis, about 70 patents had been
filed related to tire pyrolysis, and 50 to 75 tire pyrolysis companies had started, two or
three of which produced product qualified for commercial use. He also testified that it
was not reasonable to represent that a pyrolysis plant could be brought from theory to
operation with commercial sales within 9 or 10 months; he believed that "time line's off
by somewhere between one and two years."
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Lee opined that it was not a realistic representation to assert that the second year
of operation would bring a $1.9 million profit; rather, "they'll be lucky if they're [paying
their expenses] at the end of the second year." He also asserted that the November 2011
proposed business plan did not "accurately represent the types and quality of products
that could be produced by the plant." He testified that the financial projections provided
in that business plan and other associated documents were not at all reasonable, and the
timelines provided were not realistic. After Lee's testimony, Plaintiffs rested their case.

When the trial resumed on Monday, June 19, 2017, Defendants called Shepard;
Gitman and Alexandrov also testified again. Over the next three days, Defendants told
the jury their version of events, which was that Shepard had provided capital to develop
the pyrolysis process with the promise of 50/50 ownership in the pyrolysis project, and
she investigated for nine months before investing any capital. Defendants argued that as a
savvy businesswoman, Shepard understood that there was an inherent risk in the project,
they had communicated with her honestly throughout the process, and her claims that she
had been misled were lies.

Defendants also presented testimony from their expert, Anthony Cangelosi, an
experienced appraiser who had conducted business valuations and financial forensic
evaluations for more than 15 years. Cangelosi testified that as of August 31, 2013, he
valued Blizzard at $10,810,000, and he explained the process by which he came to that
valuation. Defendants also presented a forensic expert, Larry Stewart, who testified that a
signature on one of the documents submitted into evidence by Plaintiffs appeared to have
been forged using another document. This forgery testimony was apparently presented to
show the jury that Plaintiffs were untrustworthy and not credible.

Defendants rested their case and, during the jury instruction conference, the
district court dismissed Plaintiffs' negligent misrepresentation claim. The parties agreed
on jury instructions, and the claims were submitted to the jury at 11:21 a.m. on June 22,
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2017. At 3:55 p.m., the jury rendered its verdict: it found in Plaintiffs' favor on Plaintiffs'
fraud claims, and awarded Plaintiffs $3,825,000 in actual damages. The jury rejected
Blizzard's claim for unjust enrichment and the defendants' claims against Shepard for
breach of joint venture and unjust enrichment.

On July 12, 2017, Michael Whalen filed an entry of appearance as counsel for
Defendants. On July 29, 2017, Defendants filed a motion for judgment notwithstanding
the verdict or, in the alternative, a new trial on the fraud claims against them. The motion
concentrated on the special verdict form, arguing that inconsistencies in the jury's
answers required granting the motion. Specifically, the jury answered "yes" to question
A(1), which asked whether Defendants "committed fraudulent acts by concealment or
representation against Blizzard and Ms. Shepard," but answered "no" to question A(4),
which asked whether "the conduct of [Defendants] in committing fraudulent concealment
or fraudulent representation was willful, fraudulent, or malicious." Blizzard and Shepard
opposed the motion for judgment notwithstanding the verdict.

On July 31, 2017, the district court filed an approved journal entry of judgment but
ordered the judgment stayed until the posttrial motions could be resolved. On September
11, 2017, the district court held a hearing on the posttrial motions. Defendants asserted
their inconsistent verdict argument and argued that there was insufficient evidence to
support the fraud verdict. Plaintiffs disagreed. On September 14, 2017, the district court
filed its journal entry denying Defendants' posttrial motions. Defendants timely appealed,
and Plaintiffs timely cross-appealed.

WAS THERE SUFFICIENT EVIDENCE OF FRAUD BY THE DEFENDANTS?

Defendants argue that there was insufficient evidence to support the jury's verdict
that they had committed fraud. A claim of fraud "'must be established by clear and
convincing evidence." Bank of America v. Narula, 46 Kan. App. 2d 142, 158, 261 P.3d
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898 (2011). "'The elements of fraud are "an untrue statement of fact, known to be untrue
by the party making it, made with the intent to deceive or with reckless disregard for the
truth, upon which another party justifiably relies and acts to his or her detriment."'" In re
Marriage of Kidane and Araya, 53 Kan. App. 2d 341, 346, 389 P.3d 212 (2017).

The extremely broad nature of the asserted basis for Plaintiffs' fraud claim is
evident from the jury instructions:

"A. For their claims of Fraudulent Concealment and/or Representation against
Defendants, Blizzard and Ms. Shepard allege:
"1. In their oral and written communications with Ms. Shepard both before and
after the formation of Blizzard, Mr. Alexandrov, Mr. Gitman, and Mr. Schaefers each
made false representations to Ms. Shepard regarding:
 The types, quality, quantity, and value of products that could be produced by
the pyrolysis plant they proposed;
 Their experience, competence, ability, skill, and knowledge in the
development, engineering, construction, start-up, and operation of a tire
pyrolysis plant and its processes;
 The results of the laboratory tests performed on samples of products
allegedly produced by plants using similar equipment in the Ukraine and
Russia;
 The profitability of the proposed plant;
 The time frame within which the proposed plant would receive all necessary
permits, be assembled and constructed, and become operational; and
 The nature of the equipment they suggested be purchased for the plant and
whether that equipment would be capable of becoming operational and in
compliance with applicable codes and regulations.
"2. Many of these representations were contained in the Business Plan dated
November 2011 that Defendants provided to Ms. Shepard. Defendants knew these
representations were false, made them intentionally and/or recklessly without knowledge
of their truth, or made them without exercising reasonable care as to their truth.
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"3. Defendants also concealed material information from Ms. Shepard with
actual knowledge that the information was not within Ms. Shepard's knowledge or ability
to discover.
"4. Moreover, Defendants made false representations to Ms. Shepard, and
concealed material information from Ms. Shepard, regarding the companies and
contractors they suggested Blizzard use to supply certain equipment and/or services.
"5. Defendants made these false representations and material concealments with
the intent of causing Ms. Shepard and then Blizzard to pursue, invest in, and fund the
construction of the pyrolysis plant, and they also sought to profit personally from
Blizzard's use of the companies and contractors they suggested.
"6. In reliance on Defendants' representations, Ms. Shepard formed Blizzard and
invested millions of dollars into Blizzard, part of which Blizzard then spent for the
purchase of certain equipment and use of certain contractors for the construction of the
plant. Ms. Shepard and Blizzard otherwise would not have done so had Ms. Shepard
known the full truth of the representations made to her by Defendants.
"7. Blizzard and Ms. Shepard are seeking damages jointly and severally from
Defendants for $2,202,659.36 invested in Blizzard by Ms. Shepard and spent by Blizzard
as of September 2013 (the time that Ms. Shepard advised Defendants that they were no
longer to be involved with Blizzard). Blizzard and Ms. Shepard also are seeking as
damages $3,701,474.95 spent by Blizzard from September 2013 to the present on
contractors to redesign and modify the equipment purchased at Defendants' instruction,
and on additional equipment and materials, in order to make the plant functional,
operational, and in compliance with applicable codes and regulations. Moreover, Blizzard
and Ms. Shepard are seeking punitive damages for Defendants' willful, wanton,
fraudulent, or malicious conduct."

Similarly, in closing argument, Plaintiffs asserted: "They told her they had
technology they didn't have, that they could do something that they couldn't do, when
they could do it, how they could do it, what it would cost to do, and all of those things
were wrong." Plaintiffs identified various instances they characterized as
misrepresentations, and they referred specifically to the Presentation Defendants gave to
Shepard in August 2011:

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"[Defendants] said they had proven technology and engineering expertise with Mr.
Gitman's company, and then they had all this successful business development
management experience. . . . [T]hey testified that all these members had lots and lots of
experience. As you saw, I poked holes in Mr. Schaefers' experience. It's very little, and
he's never made a dime for anything regarding the renewable energy sector. We talked
about Mr. Gitman's real experience and so on.
"Next page, Page 8, produces high quality fuel. Well, I think you guys all know
about that as well as these other things that it supposedly could do. Page 9, all they
needed was 3.75 million. Clearly, that's not what ultimately happened. Page 11, produces
gasoline carbon black. Well, no. Page 10, . . . [o]ne tire produces 1.3 gallons of fuel. You
know, they just sucked that off the internet.
". . . [T]hen let's go to the revenue representations. They say, you know,
[Shepard], if you would just invest in this company, you could get revenue of four
million dollars a year based on gasoline at $3.30 a gallon. Well, there's no way they can
produce any of this, and then the ridiculous time frame that they talked about how fast
they could get it up and the chart that shows the timing, which is that chart right there,
also couldn't be done."

Plaintiffs also directed the jury to the proposed business plan Defendants had sent
to Shepard; Plaintiffs emphasized that "the most important deception of all" was
Defendants' claim that they had "technology" to make the project work. Plaintiffs pointed
out that Defendants presented no expert to explain or identify that "technology," while
Plaintiffs presented experts who testified "it's absolutely not possible to do what
[Defendants] claimed. It is not scientifically possible to do what they claimed."

"'When a verdict is challenged for insufficiency of evidence or as being contrary
to the evidence, it is not the function of the appellate court to weigh the evidence or pass
on the credibility of the witnesses. If the evidence, with all reasonable inferences to be
drawn therefrom, when considered in the light most favorable to the prevailing party,
supports the verdict, it will not be disturbed on appeal.' [Citations omitted.]" Wolfe
Electric, Inc. v. Duckworth, 293 Kan. 375, 407, 266 P.3d 516 (2011).

18

The jury was instructed on a misrepresentation theory of fraud and a theory of
fraud through silence:

"Instruction No. 8[:]
"The essential elements required to sustain an action for fraud are:
"1. That false or untrue representations were made as a statement of existing and
material fact.
"2. That the representations were known to be false or untrue by the party making
them, or were recklessly made without knowledge concerning them.
"3. That the representations were intentionally made for the purpose of inducing
another party to act upon them.
"4. That the other party reasonably relied and acted upon the representations
made.
"5. That the other party sustained damage by relying upon them.
"A representation is material when it relates to some matter that is so substantial
as to influence the party to whom it was made."

"Instruction No. 9[:]
"The plaintiff claims fraud through silence on the part of the defendant. To
constitute fraud by silence the plaintiff must prove:
"1. The defendant has knowledge of material facts which plaintiff did not have
and which the plaintiff could not have discovered by the exercise of reasonable diligence;
"2. The defendant was under an obligation to communicate the material facts to
the plaintiff;
"3. The defendant intentionally failed to communicate to plaintiff the material
facts;
"4. The plaintiff justifiably relied upon the defendant to communicate the
material facts to the plaintiff; and
"5. The plaintiff sustained damages as a result of the defendant's failure to
communicate this to the plaintiff.
"A fact is material if it is one to which a reasonable [wo]man would attach
importance in determining her choice of action in the transaction in question.
19

"A party is justified in relying without investigation upon another to
communicate the facts material to a transaction unless she knows or has reason to know
of facts which make her reliance unreasonable[.]"

As stated above, the jury found in Plaintiffs' favor on their fraud claim, and
Defendants now challenge that verdict. Defendants contend that there was insufficient
evidence that Plaintiffs justifiably and reasonably relied on any claims by Defendants,
and that the evidence, especially Shepard's business experience, demonstrates that
Plaintiffs assumed any risk of investing in the project. In response, Plaintiffs argue that
there was sufficient evidence to support the jury's finding of fraud.

At trial, Plaintiffs identified countless statements they asserted could support their
fraud claim against Defendants. Defendants now ask this court to reweigh the evidence
against them as it relates to some of these statements. But this court does not reweigh
evidence and it need not examine the viability of every possible statement from which the
jury could have found fraud. Instead, this court must affirm if substantial competent
evidence presented at trial shows that Shepard, in investing in the pyrolysis project,
justifiably relied on any untrue statement of material fact made by Defendants; that
Defendants knew that statement was untrue and made it with the intent to deceive
Shepard or they made the statement with reckless disregard for the truth; and Shepard's
reliance led her to act to her detriment. See In re Marriage of Kidane and Araya, 53 Kan.
App. 2d at 346 (setting forth elements of fraud). Moreover, during this review, this court
must view the evidence in the light most favorable to Plaintiffs and draw all reasonable
inferences in their favor.

In 2011, Alexandrov prepared the Presentation based in part on his own
knowledge and in part on information he gathered from Schaefers and Gitman, and
Schaefers reviewed the Presentation. Schaefers understood that the purpose of
Alexandrov attending the Summit was to solicit investors for a tires-to-fuel project. After
20

the Summit in August 2011, Baskett told Alexandrov that Shepard might be interested in
the pyrolysis project, so Alexandrov sent her an email; attached to the email was the
Presentation, "maybe with some small changes." The Presentation was admitted into
evidence at trial and referred to extensively.

The Presentation included the assertion "The team members have strong strategic
and operational experience across different sectors," and it specifically represented that
Schaefers was a "veteran entrepreneur with 20 years of expertise in the renewable energy
sector." These assertions were addressed in great length at trial. Schaefers testified that he
thought this information had been provided by him; Alexandrov testified that he obtained
the information from Schaefers and placed it in the Presentation without independently
investigating its veracity. Schaefers' curriculum vitae (CV), which was admitted at trial,
included the heading "Entrepreneurial Activities," under which was the similar statement:
"Energy and renewable energy investments since 1988."

Evidence presented at trial showed that from 1988 to 1992, Schaefers was an
investor in Schick KG, a German R&D company involved in recycling carbon dioxide
and in uses of algae. The carbon dioxide project was cancelled because of the German
coal industry's reluctance to discuss publicly carbon dioxide emissions at that time, and
the algae project "stalled" in 1992 when lead scientist Joseph Schick died. Thereafter,
Schaefers was involved in "a city development project with the city of Cologne"; he
owned a ski resort in Vermont; he tried to buy a movie studio; and he pursued various
real estate opportunities. He testified at trial that none of these business ventures had
anything to do with pyrolysis or converting tires to fuel.

From 2006 to the present, Schaefers was founder and CEO of BKS Energy, LLC
(BKS), which pursued the conversion of algae to food and fuel. He acknowledged at trial
that he had testified in a pretrial deposition that he had never made any money with BKS
except from Blizzard, but he asserted that he had forgotten about a contract BKS had with
21

the city of Fresno "to enhance the gasses that would come out of the sewer system, and
these gasses could be put into liquid fuels." Schaefers did not testify about a timeframe
for the Fresno contract.

The next renewable energy project Schaefers became involved with was in 2005
or 2006, when he invested $3 million into Baskett's ultimately unsuccessful idea to build
an ethanol plant in Santa Maria. Schaefers agreed at trial that "there was a 13-year gap
between when [he] did the previous [renewable energy] project and when American
Ethanol came up." Yet he also testified that he did not think that he ever told Shepard that
he never had a business in the renewable energy sector, he never told her about the "15-
or 13-year gap" in his involvement in renewable energy businesses, and he never told her
that he had never made money in the renewable energy sector.

For her part, Shepard testified that Schaefers had never told her that he had never
made any money in the renewable energy sector, nor did he tell her that "there were great
big gaps in time in the instances where he actually did something in the renewable energy
sector." Shepard also testified that when she received the Presentation, she understood
that Defendants were presenting her with the information in the hopes that she would
invest and provide capital for the pyrolysis project. In deciding to invest, she relied on the
representations in the Presentation. When asked at trial whether "knowing what you
know now about the defendants and what the project was and stuff, would you have
invested with them," Shepard answered, "Absolutely not, and I regret that I didn't do a
better job possibly in checking Mr. Schaefers' background."

Although Defendants argue on appeal that, as an experienced businesswoman,
Shepard should have investigated their assertions and claims before relying on them, this
court has long recognized:

22

"'"A recipient of a fraudulent misrepresentation is justified in relying upon its truth
without investigation, unless [she] knows or has reason to know of facts which make
[her] reliance unreasonable" . . . [T]he test is whether the recipient has "information
which would serve as a danger signal and a red light to any normal person of [her]
intelligence and experience."' [Citations omitted.]" Sippy v. Cristich, 4 Kan. App. 2d 511,
515, 609 P.2d 204 (1980).

When considered in the light most favorable to Plaintiffs and with all reasonable
inferences drawn in their favor, substantial evidence presented at trial supports a
conclusion that the representation that Schaefers was a "veteran entrepreneur with 20
years of expertise in the renewable energy sector" was untrue. Further, Schaefers'
knowledge of his own entrepreneurial and work history, as well as Alexandrov and
Gitman's failure to in any way investigate the veracity of the representation, support the
conclusion that Defendants knew the representation was false or recklessly disregarded
that possibility. The representation was intentionally made in a presentation specifically
designed to solicit investments. Shepard justifiably relied on the representation about
Schaefers' experience in the renewable energy sector. She testified that Schaefers'
representation, in part, caused her to invest; she testified that she would not have invested
if she had known the truth about Schaefers' experience; and the evidence supported a
finding that Shepard sustained damage by investing, as she submitted receipts and
invoices to the jury showing the expenses she incurred by investing in the project. We
conclude there was sufficient evidence to sustain a fraud claim against the Defendants.

WAS THERE SUFFICIENT EVIDENCE TO SHOW THAT GITMAN
PERSONALLY COMMITTED FRAUD?

Defendants also contend that there was insufficient evidence to support a finding
that Gitman personally committed fraud, pointing to evidence supporting the conclusion
that he never communicated directly with Shepard. Plaintiffs respond that the evidence
23

shows that Shepard communicated with Gitman extensively, albeit mostly through
interpreters, and that there was sufficient evidence to support the jury's verdict.

As already set forth above:

"'When a verdict is challenged for insufficiency of evidence or as being contrary
to the evidence, it is not the function of the appellate court to weigh the evidence or pass
on the credibility of the witnesses. If the evidence, with all reasonable inferences to be
drawn therefrom, when considered in the light most favorable to the prevailing party,
supports the verdict, it will not be disturbed on appeal.' [Citations omitted.]" Wolfe
Electric, 293 Kan. at 407.

A claim of fraud "'must be established by clear and convincing evidence." Bank of
America, 46 Kan. App. 2d at 158. "'The elements of fraud are "an untrue statement of
fact, known to be untrue by the party making it, made with the intent to deceive or with
reckless disregard for the truth, upon which another party justifiably relies and acts to his
or her detriment."'" In re Marriage of Kidane and Araya, 53 Kan. App. 2d at 346.

Defendants claim that the evidence showed that Gitman never made any
statements to Shepard directly, so he could not have committed fraud. They base their
argument on Shepard's trial testimony that she "did not know that [Gitman] spoke
English." Twice during the Russia trip, she "said good morning and how are you, and he
just stood there. [And] when there was a question, he always referred to Mr. Alexandrov,
and he did all the translation." Shepard also testified: "I never talked to Mr. Gitman
because I didn't know that he spoke English, and he never spoke in English with me, and
he said he told me all those things. I never had a conversation with the man."

Defendants' reliance on this testimony is fatally undermined by Gitman's own
testimony at trial to the opposite. Gitman testified that he had been surprised by Shepard's
testimony that she did not know he spoke English, as they had "spoke[n] a lot and [they]
24

had a lot of like social conversations." He referred to a conversation he had at a restaurant
in Great Bend during which Shepard heard him speaking English. He also described a
Skype conversation involving Shepard during which he "pitch[ed]" some technology
ideas, and he testified that he had spoken with Shepard "[f]rom the very beginning." The
jury could have found Gitman more credible than Shepard on this point, and this court
does not reweigh evidence or determine the credibility of witnesses. See Wolfe Electric,
Inc., 293 Kan. at 407.

Similarly, Defendants argue that the Presentation cannot sustain a fraud claim
against Gitman because Gitman testified he looked at the financial information in the
Presentation but didn't review it as "Alexandrov put it together." However, Gitman's
testimony was that he did see the "pro formas that were put together by Mr. Alexandrov
where he said here's how much we need to have, 3.75 million dollars" to fund the
pyrolysis project. Thus, Gitman at the least tacitly approved of some information in the
Presentation submitted to Shepard to solicit her investment. The jury could have
concluded that Gitman's failure to review all of the Presentation, knowing that he was the
holder of the implementing technology, constituted reckless disregard for the truth of the
remainder of the Presentation.

Moreover, a deposition of Gitman dated December 29, 2009, taken as part of a
separate lawsuit in the United States District Court for the Southern District of Florida,
was admitted into evidence and submitted to the jury. In that deposition, Gitman
explained that he knew Bob Miller, who he described as trying "to convert solid waste to
gas and electricity. And one of the main source[s] of raw materials for them was used
tires. So they were trying to de-composite [sic] used tires to produce fuels and electricity
from used tires." Gitman explained that this idea was "not economically visible or viable"
for "ecological issue[s]. When you convert used tires, you have to emit a lot of bad stuff
in the atmosphere."

25

Later, in the same deposition, Gitman was questioned about another plant he had
discussed with a man named David Whetsell in South Carolina: "The plant in South
Carolina was going to use tires as its fuel source; correct?" Gitman replied:

"No. We wanted to do algae system. Tires it is Waste to Energy—it is impossible
in this country. You know how long it would take to get permits in Dade County? . . .
Just to get first reply from [the Florida permitting authority] would take eight months.
First reply. Then you submit application for something like tire conversion system or
what have you, so it's impossible."

At trial, Plaintiffs questioned Gitman about this prior deposition testimony.
Gitman asserted that the statement "was taken out of context" and that he "remembered
[that plant] doing something with tires, but it was burning, not pyrolysis." He maintained
that the 2009 deposition referred to burning tires, not the pyrolysis process pitched to
Shepard. Yet also submitted to the jury here was a transcript of a hearing in the Florida
federal litigation at which Robert Miller testified that he had spoken with Gitman about
pyrolysis but did not pursue pyrolysis at that time. A reading of this evidence could lead
to a reasonable conclusion that Gitman believed in 2009 that converting waste tires to
energy was "impossible" in the United States, for both permitting and ecological reasons.
This belief could support a reasonable conclusion that it was fraudulent for Gitman to tell
Shepard in 2011 that the same process was viable and would likely be profitable.

When considered in the light most favorable to Plaintiffs and with all reasonable
inferences drawn in their favor, the evidence presented at trial supports a conclusion that
Gitman—directly or indirectly—made fraudulent representations to Shepard that she
justifiably relied on to her detriment when investing in the Project. We conclude there
was sufficient evidence to support a fraud claim against Gitman.



26

DOES AN INCONSISTENT JURY VERDICT REQUIRE REVERSAL?

Next, Defendants argue that the jury rendered inconsistent verdicts which require
dismissal of the finding that they committed fraud. Plaintiffs argue first that Defendants
have not preserved this question for appeal because the parties agreed on the wording of
the verdict form. Turning to the merits of the issue, they then contend that the jury's
answers on the verdict form are not inconsistent, when considered in light of the entirety
of the instructions the district court gave the jury.

Preservation

Supreme Court Rule 6.02(a)(5) (2019 Kan. S. Ct. R. 35) requires appellants to
begin each issue in their appellate briefs with "a pinpoint reference to the location in the
record on appeal where the issue was raised and ruled on. If the issue was not raised
below, there must be an explanation why the issue is properly before the court." Kansas
appellate courts have repeatedly held that parties who do not object in the district court to
the verdict form may not raise the issue for the first time on appeal. See Reda v. Lowe,
185 Kan. 306, 314, 342 P.2d 172 (1959) (declining to address a challenge to the wording
of a special question submitted to the jury "since the defendant did not object to special
question No. 13 and must be deemed to have waived it . . . , nor was this point argued
before the trial court on the defendant's motion for a new trial"); Zenda Grain & Supply
Co. v. Farmland Industries, Inc., 20 Kan. App. 2d 728, 757, 894 P.2d 881 (1995)
(holding that the failure to object in the district court to a verdict form submitted to the
jury "prevents an appellant from raising the issue to an appellate court").

Although Defendants filed an appellate brief addressing the issue raised in
Plaintiffs' cross-appeal, they did not respond to Plaintiffs' argument that Defendants may
not raise the inconsistent verdict argument on appeal because they failed to object to the
verdict form in the district court. This court could consider Defendants' failure to respond
27

in their reply brief to Plaintiffs' preservation argument a concession of its validity and
thus decline to address the merits of this issue for failure to comply with Supreme Court
Rule 6.02(a)(5). See State v. Bowen, 299 Kan. 339, 355, 323 P.3d 853 (2014).

The appellate record reflects that the jury instruction conference included
discussion of and proposed changes to the verdict form the district court intended to use,
but there were no objections by either party to the wording of the portions relevant to
Defendants' arguments on appeal. Moreover, the day after the jury instruction conference,
when the district court asked Defendants whether they approved the jury instructions "as
they're now being presented" in the form given to the jury shortly thereafter, Defendants
asked questions about the claims of joint venture and unjust enrichment and did not refer
to the portion of the verdict form now at issue. The record on appeal does not contain
proposed jury instructions or a proposed verdict form submitted by Defendants, so this
court cannot determine whether Defendants proposed the language they now assert led to
the inconsistency in the verdict.

Although they did not respond directly to Plaintiffs' preservation argument in their
reply brief, Defendants did argue in their initial brief that they are not challenging the
verdict form itself, merely the inconsistency of the verdicts rendered, so there was no
need to object to the verdict form in the district court. This argument is disingenuous at
best. In any case, even if the issue is properly before this court, the answers on the verdict
form were not inconsistent and do not require reversal.

Merits

K.S.A. 60-3702(c) states: "In any civil action where claims for exemplary or
punitive damages are included, the plaintiff shall have the burden of proving, by clear and
convincing evidence in the initial phase of the trial, that the defendant acted toward the
plaintiff with willful conduct, wanton conduct, fraud or malice." Moreover, K.S.A. 60-
28

3702(a) states: "In any civil action in which exemplary or punitive damages are
recoverable, the trier of fact shall determine, concurrent with all other issues presented,
whether such damages shall be allowed."

On the verdict form, the jury answered "yes" to question A(1)—"Do you find that
Mr. Alexandrov, Mr. Gitman, and Mr. Schaefers committed fraudulent acts either by
concealment or representation against Blizzard and Ms. Shepard?"—but answered "no"
to question A(4)—"Do you find that the conduct of Mr. Alexandrov, Mr. Gitman, and
Mr. Schaefers in committing fraudulent concealment or fraudulent representation was
willful, fraudulent, or malicious?" Defendants argue that it was facially and fatally
inconsistent for the jury to find in one section of the special verdict form that they had
committed "fraudulent acts" but find in another section that the same conduct was not
"fraudulent." Defendants' success on this issue depends on this court refusing to look
beyond the plain language of the verdict form; however, the applicable standard of
review requires otherwise.

"A jury's findings on the essential issues submitted by way of special verdicts must be
certain and definite. The findings must not be conflicting or inconsistent. The findings are
to be construed in the light of the surrounding circumstances and in connection with the
pleadings, instructions[,] and issues submitted. If the answers in respect to the controlling
facts are inconsistent, a judgment should not be rendered but a new trial ordered.
[Citation omitted.]" Jenkins v. T.S.I. Holdings, Inc., 268 Kan. 623, 626-27, 1 P.3d 891
(2000).

In addition, "'[s]pecial findings of a jury are to be liberally construed on appeal
and interpreted in the light of the testimony with the view of ascertaining their intended
meaning.'" Calver v. Hinson, 267 Kan. 369, 375, 982 P.2d 970 (1999). "'[I]f one
interpretation leads to inconsistency and another to harmony with the verdict, the latter is
to be adopted.'" 267 Kan. at 376.

29

As Plaintiffs argue on appeal, one reasonable interpretation of question A(4) on
the verdict form was that it was intended to inquire about punitive damages. First, the
district court instructed the jury orally and in writing about the punitive damages claim,
and the court did so distinctly and separately from the elements instructions. After the
elements instructions, the district court instructed:

"In this case, Blizzard and Ms. Shepard claim that Mr. Alexandrov, Mr. Gitman,
and Mr. Schaefers acted in a willful, fraudulent and/or malicious manner toward Blizzard
and Ms. Shepard. . . . If you award Blizzard and Ms. Shepard actual (compensatory)
damages as part of these claims, then you may consider whether punitive damages should
be allowed. Punitive damages may be allowed in the jury's discretion to punish a . . .
responsible party and to deter others from like conduct.
"In order for punitive damages to be awarded, Blizzard and Ms. Shepard must
prove by clear and convincing evidence that Mr. Alexandrov, Mr. Gitman, and Mr.
Schaefers acted in a willful, wanton, fraudulent, and/or malicious manner toward
Blizzard and Ms. Shepard. . . .
"If you determine punitive damages should be allowed, your finding must be
entered on the verdict form."

A separate jury instruction also stated that "Blizzard and Ms. Shepard are seeking
punitive damages for Defendants' willful, wanton, fraudulent, or malicious conduct."
Thus, the jury instructions communicated to the jury that the question of "willful, wanton,
fraudulent, or malicious conduct" was relevant to the determination on punitive damages.
The verdict form itself reinforced that concept.

Question A(1) on the verdict form asked the jury whether it found that Defendants
"committed fraudulent acts either by concealment or representation against" Plaintiffs. If
the answer was "yes," the verdict form instructed the jury to go to question A(2), which
asked whether Plaintiffs "sustained damages as the proximate result of the fraudulent
concealment, or fraudulent representation, by" Defendants. If the answer was "yes," the
verdict form instructed the jury to calculate actual damages in question A(3) and then, in
30

question A(4), asked: "Do you find that the conduct of [Defendants] in committing
fraudulent concealment or fraudulent representation was willful, fraudulent, or
malicious?"

When considered in light of the jury instructions, it is a reasonable interpretation
that questions A(1), A(2), and A(3) went to whether Plaintiffs had proved the elements of
fraud, while question A(4) went to punitive damages, which the jury had been instructed
it had the discretion to award or to not award. Had the jury answered "yes" to question
A(4), the trial would have proceeded to a phase in which the amount of punitive damages
would be determined. By answering "no," the jury showed that it found punitive damages
should not be awarded, a decision within its discretion. Under this interpretation, the
answers to questions A(1) and A(4) on the verdict form were not inconsistent.

Moreover, to the extent that Defendants contend that a finding of fraud
automatically entitles a party to punitive damages because fraud necessarily requires
fraudulent conduct, this court has long rejected the concept of automatic entitlement to
punitive damages. In Trendel v. Rogers, 24 Kan. App. 2d 938, 941, 955 P.2d 150 (1998),
this court held:

"[T]he clear language of the statute [states] that it is the role of the trier of fact to
determine whether punitive damages should be allowed. . . . [T]here is no indication . . .
that the legislature intended for punitive damages to be automatically awarded once the
jury finds the defendant acted willfully, wantonly, or with fraud or malice."

The Trendel court continued by noting the "general rule [that] the jury has
complete discretion in awarding punitive damages and may disregard evidence presented
in favor of such an award." 24 Kan. App. 2d at 941. Stated another way:

"[P]unitive damages may be awarded whenever the elements of fraud . . . arise in a
dispute. However, such an award is not automatically rendered by finding these elements
31

present in a controversy. The plain language of 60-3702 reveals the legislature intended
for the trier of fact to have discretion in determining whether punitive damages should be
allowed." 44 Kan. App. 2d at 942.

When the verdict form is considered in the context of the jury instructions, the
answers to questions A(1) and A(4) are not necessarily inconsistent because the finding
of fraudulent conduct in question A(1) did not require the jury to award punitive damages
in question A(4). Rather, for the reasons explained above, the verdicts were consistent.

DID THE DISTRICT COURT ERR BY DISMISSING THE PLAINTIFFS'
NEGLIGENT MISREPRESENTATION CLAIM?

As cross-appellants, Shepard and Blizzard argue that the district court erred by
granting the Defendants' motion to dismiss the claim against them for negligent
misrepresentation. However, they request relief—the reinstatement of their claim for
negligent misrepresentation—only "[i]n the event that the Court grants Defendants a new
trial." Because Defendants are not entitled to a new trial, as explained above, the cross-
appeal is moot. See Rodarte v. Kansas Dept. of Transportation, 30 Kan. App. 2d 172,
182-83, 39 P.3d 675 (2002). "'The court is statutorily and constitutionally without
authority to render advisory opinions in cases found to be moot.'" 30 Kan. App. 2d at
183. Thus, we dismiss the cross-appeal as moot.

Affirm in part and dismissed in part.