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Rothermel v. International Paper Co.

Decided: October 26, 1978.


On appeal from Superior Court, Law Division, Essex County.

Fritz, Bischoff and Morgan. The opinion of the court was delivered by Morgan, J.A.D.


In this appeal we are again asked to probe the outer perimeters of the tort known as unlawful interference with contractual relationships or with prospective economic advantage. See, e.g., Leslie Blau Co. v. Alfieri , 157 N.J. Super. 173 (App. Div. 1978); McCann v. Biss , 65 N.J. 301 (1974); Harris v. Perl , 41 N.J. 455 (1964). The alleged tort arose not in the usual context of a broker deprived of a commission for which he had contracted, but rather of a large purchaser of paper who acted as an intermediary between a paper manufacturer and ultimate purchaser, and who claimed as damages loss of profits on resale when the manufacturer elected to eliminate all such intermediaries and brokers in its chain of distribution. The case was tried to a jury of six, and in a general verdict with specific interrogatories plaintiff was awarded $77,000 in compensatory damages. Judgment was entered in the amount of $90,923.24, reflecting an award of prejudgment interest. Defendant manufacturer appeals.

The facts are largely undisputed. Plaintiff Alan F. Rothermel was an intermediary in the sale of kraft paper manufactured

by defendant International Paper Company (International), to Western Electric and Printwrap, Inc. Western Electric used cable wrapping paper, a specific type of kraft paper, for wrapping telephone cables in order to prevent shorts in the telephone wires. Printwrap used ordinary kraft paper in its business of printing wrapping paper for magazines, roofing and siding.

Plaintiff's dealings with Western Electric predated by several years his purchase of cable wrapping paper from International for the Western Electric account. Those years were spent promoting the contracts which later were entered into, and there is no dispute that during those years plaintiff received no compensation for his efforts. After he achieved success, however, he took his compensation for his promotional efforts from the profits derived from those contracts. Defendant takes no particular dispute with the fact that plaintiff did expend substantial effort in this regard but argues that he did so for his own financial benefit, not at its or Western Electric's request. Indeed, Western was not made a party to this suit.

Plaintiff's efforts proved successful when they resulted in a succession of six one-year written supply contracts, renegotiated annually, between International and Western Electric. The first such contract was executed on August 1, 1967 and expired, by its express terms, on July 31, 1968. The last of the six contracts was executed on August 1, 1972 and was scheduled therein to expire on July 31, 1973. Each of these contracts, on a Western Electric form, named plaintiff as International's "merchant representative" through whom invoicing would be done, and the price indorsed on the written contract each year was the price charged by plaintiff to Western Electric. In practice, International invoiced plaintiff at a lower price agreed to by plaintiff and International; plaintiff invoiced Western at the higher price reflected in the International-Western Electric contract. The "spread" between those prices was plaintiff's compensation

which he admitted had been ample.*fn1 Although International invoiced plaintiff as agreed, the paper was shipped directly to Western Electric; plaintiff lacked all facilities for receiving, storing or shipping paper.

The six supply contracts provided for their early termination on 30 or 60 days' notice, subject only to certain limitations not here pertinent; none, however, provided for terms of extension of their duration. Each such contract contained an express stipulation that it represented the entire agreement and could not be modified except by a writing signed by both parties. As noted previously, the contracting parties were International and Western Electric with plaintiff being designated therein as International's merchant representative.

Plaintiff's efforts to develop paper sales to Printwrap predated the first such sale by two or three years during which time he solicited the then president of the company, Russell Buermann. Thereafter, sales of International's paper to Printwrap commenced at the rate of approximately a carload every three months. International never sold Printwrap pursuant to a written term contract similar to its contract with Western Electric. The sales to Printwrap were spot sales made when Printwrap would telephone orders to plaintiff for varying weights of paper and plaintiff would order the requested paper from International. Here, too, International invoiced Rothermel and the spread between the prices charged plaintiff and those he charged Printwrap constituted his compensation for services rendered.

This long-term course of dealing among the four parties, Printwrap and Western Electric as buyers, International, as seller, and plaintiff as intermediary continued until June 1973 when International implemented a change in the method of conducting its kraft paper business. The

testimony, undisputed, was that in 1973 the division of International then known as the "Kraft Paper Business" that serviced Printwrap and Western Electric was operating at a loss. In an effort to achieve profitability, International determined that it would reduce the large number of different paper products it was then manufacturing and would confine manufacturing to those products which could be produced efficiently and economically on existing equipment. Accordingly, during the spring of 1973 International manufactured only 26 different grades of paper instead of the 120 different kinds it had been producing previously.

In connection with the foregoing plan to improve profitability, International determined to cease dealing through brokers and intermediaries, such as plaintiff who, it was felt, produced primarily small customers requiring specialty type products, inconsistent with maximum efficiency in the use of its equipment. Hence, International determined to handle all sales through its own internal sales force which had itself been reduced in number to achieve economy. It would cultivate customers using standard type paper in large amounts, and then only those entering long term contractual commitments. Obviously, neither Western Electric nor Printwrap met International's new conception of a desirable customer. Western Electric had only committed itself on a yearly basis and the paper it needed was of a specialty type, unprofitable to manufacture. Printwrap was only a small customer of International's vast paper production and had no contractual commitment at all.

Plaintiff was notified of these plans on June 7, 1973 at International's office in New York and realized immediately their effect on his income from his sales to Western Electric and Printwrap. International told him that it was eliminating all brokers and intermediaries and would not entertain any business with Western Electric past the July 31st expiration date of its contract with that company. The letter confirming this meeting, dated June 12, 1973, notified

plaintiff that trade discounts on Printwrap paper would be discontinued ...

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