## Facts

- Lance and Kathleen Ferris wanted to build a log cabin for retirement and contacted Tennessee Log Homes, Inc. (Tennessee Log) about purchasing a log-home package.
- Tennessee Log referred the Ferrises to its licensed dealers, Vince and Pat Zara.
- The Zaras showed the Ferrises a model cabin and represented that a similar cabin would cost about $325,000 to build.
- The Zaras also represented that Larry Jones would be the builder for the Ferrises’ cabin.
- The Ferrises signed a written purchase agreement for the log-home package.
- The purchase agreement contained a merger clause stating that prior representations were merged into the written agreement and that any representations not contained in the writing “no longer existed.”
- The purchase agreement did not state an estimated total construction cost and did not identify who would build the cabin.
- The Ferrises alleged that the estimate was far too low, that Jones was not the builder, that the construction was shoddy, and that they ultimately spent more than $600,000 to complete the cabin.
- The Ferrises sued Tennessee Log and the Zaras, asserting Kentucky-law claims for fraudulent inducement and promissory fraud based on the precontract statements about cost and builder identity.
- Defendants moved for summary judgment, arguing that the merger clause (and the parol evidence rule) barred reliance on the oral statements; defendants also challenged the admissibility of the Ferrises’ engineering witness under Federal Rule of Evidence 702 and Daubert.

## Issues

1. Whether a merger clause in the purchase agreement barred the Ferrises from using evidence of precontract oral representations to prove fraudulent inducement and promissory fraud under Kentucky law.
2. Whether the summary-judgment record raised triable fact disputes on the elements of fraudulent inducement and promissory fraud (including misrepresentation, intent, reliance, and damages).
3. Whether the Ferrises’ engineering witness could offer opinions under Federal Rule of Evidence 702 and Daubert when the opinions were based largely on inspection, observations, measurements, photographs, and review of plans, informed by engineering experience.

## Decision

- The court denied summary judgment on the Ferrises’ fraudulent-inducement and promissory-fraud claims, holding that the merger clause did not automatically bar proof that the agreement was procured by fraud.
- The court permitted the Ferrises to rely on extrinsic evidence of the alleged cost estimate and builder representation to support their fraud theories, even though those matters were not included in the written purchase agreement.
- The court found that the record contained disputes of material fact sufficient to require a jury determination on whether defendants made actionable misrepresentations or promises without a present intent to perform, and whether the Ferrises reasonably relied on those statements and suffered damages.
- The court rejected the defendants’ Daubert/Rule 702 challenge and allowed the engineering witness to testify, concluding the opinions were based on a reliable, experience-based approach tied to inspection materials and construction documents.
- Because the merger-clause argument and the evidentiary challenge did not warrant judgment as a matter of law, the defendants were not entitled to summary judgment on the fraud case at that stage.

## Legal Principles

- Under Kentucky law, an integration (merger) clause and the parol evidence rule generally do not prevent a party from introducing evidence that a contract was induced by fraud; a contract provision cannot be used as a blanket shield against liability for fraudulent inducement.
- Parol evidence is treated differently when offered to show fraudulent procurement of the agreement (a tort theory) rather than to rewrite or add contractual terms.
- Kentucky promissory fraud may be shown when a defendant makes a promise of future performance with no present intent to perform, intending to induce the plaintiff’s reliance, and the plaintiff reasonably relies to their detriment.
- Summary judgment is inappropriate when a reasonable jury could find for the nonmovant on material elements such as falsity, intent, reliance, and causation.
- Under Federal Rule of Evidence 702 and Daubert, an engineer’s opinions may be admissible when derived from professional experience and methods commonly used in engineering work, including site inspection, visual observations, measurements, photographs, and review of building plans; objections to gaps or alternatives typically go to weight rather than admissibility.

## Conclusion

In *Ferris v. Tennessee Log Homes, Inc.*, the federal district court held that the purchase agreement’s merger clause did not, by itself, bar the Ferrises’ Kentucky fraudulent-inducement and promissory-fraud claims based on alleged precontract statements about the cabin’s cost and who would build it, and the court also allowed the Ferrises’ engineer to testify under Rule 702 because his inspection- and document-based methodology was sufficiently reliable to be heard by a jury.


Ferris v. Tennessee Log Homes, Inc., 2009 WL 1506724 (2009)