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Publicker Industries Inc. v. Roman Ceramics Corp.

decided: June 26, 1981.

PUBLICKER INDUSTRIES, INC. AND CONTINENTAL DISTILLING CORPORATION
v.
ROMAN CERAMICS CORPORATION PUBLICKER INDUSTRIES, INC., APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA D.C. Civil No. 76-3279

Before Adams, Rosenn and Hunter, Circuit Judges.

Author: Rosenn

Opinion OF THE COURT

This contract action presents the question whether the seller, Roman Ceramics Corporation, must seek breach-of-contract relief from Continental Distilling Corporation, with whom Roman shares a common state of incorporation, or whether, on the contrary, Roman is entitled to full relief from Publicker Industries, Inc., a party whose citizenship is diverse from Roman's. If the former route is necessary, the case must be dismissed for lack of subject matter jurisdiction. If, on the other hand, the latter course is permissible, then the case is properly before the federal courts under 28 U.S.C. ยง 1332 (1976), and we must address the further question whether the district court awarded Roman the proper measure of damages. Except for a slight modification in the amount of damages awarded, we affirm the judgment of the district court.

Our inquiry must proceed within the confines of our decision in a prior appeal of this same case. See Publicker Industries, Inc. v. Roman Ceramics Corp., 603 F.2d 1065 (3d Cir. 1979). Because the factual background of this case is set out there in some detail, we recount the facts in abbreviated form. In January 1976 Roman, negotiating with individuals who were officials of both Continental and its parent, Publicker, agreed to sell them 40,000 ceramic "liberty bells."*fn1 In return Roman was to receive $2.50 per bell. By September, Roman had become unhappy with the buyers' failure to move ahead with the transaction, and failure to provide shipping instructions to deliver the bells.*fn2 Publicker thereupon entered into settlement negotiations with Roman and paid Roman $40,000 to be applied on account of settlement of the January deal. Some time afterward, however, Publicker called the settlement off and, together with Continental, brought this diversity suit against Roman in federal district court for restitution of the $40,000. Roman counterclaimed for the unpaid balance of the January purchase price. Continental was ultimately dismissed from the suit due to its and Roman's common Delaware citizenship. The district court then entered judgment against Publicker.

I.

We begin with the liability question. The seeds of furor over this issue were sown by the district court's brief recitation of the theory upon which it originally held Publicker liable on the contract:

I will note for the record that thus far I have spoken of the plaintiffs (Publicker and Continental) interchangeably, and I did that deliberately. I rule that on the present record there is no basis for distinguishing between the two. There is nothing in the record to show that they are indeed separate entities, that they are not alter egos for each other. Because of the way they worked interchangeably throughout this transaction, I treat them as one in the same; and the finding on the counterclaim is against both plaintiffs. (*fn3 )

On appeal to this court we noted that there was no evidence to support application of the traditional alter ego theory to pierce the corporate veil. 603 F.2d at 1069-70. However, we went on to acknowledge that a legal framework for imposition of liability upon Publicker

might be provided by the principles of agency, in that it might be concluded that Publicker and Continental created mutual agencies in one another with respect to their dealings with Roman....

Under the agency theory, ... it could be argued that Continental, acting both on its own behalf and under apparent authority from Publicker, bound Publicker as well as itself to the January contract with Roman.

Id. at 1070. However, because the district court made no findings under an agency theory and because we could not discern any other ground upon which an alter ego theory could be made applicable to this suit, we remanded "to allow the trial judge to make the necessary findings and to explain the legal underpinnings of his determination." Id. at 1071.

Upon remand the parties presented additional evidence to support their theories on the proper scope of Publicker's liability under principles of agency. In light of the additional evidence, the district court resolved the liability question in Roman's favor. It found that the principal actors for the buyer in the transaction were acting as officers, employees, and agents of Publicker rather than Continental. In support of this conclusion, the district court noted that the letters from the various buyer representatives comprising exhibit D-8 were designed to give the reader "the clear impression that Publicker Industries was the main force in this situation." Secondly, the court noted that when Roman demanded some sort of action in response to buyer's nonperformance of the January agreement, it was Publicker that initially shouldered the burden of setting things straight. "If Publicker didn't have an interest in this transaction it doesn't make any sense at all in this abortive attempt to settle the transaction."

The court then suggested that Publicker's interest in the transaction encompassed the entire scope of the relief sought by Roman the expectation that Roman was seeking to protect in this suit was identical, in economic impact, to the expectation that Publicker had admittedly created in the aborted settlement attempt. Finally, Judge Fullam noted that the original complaint filed by Publicker and Continental for recovery of the $40,000 had expressly alleged that it was Publicker that had agreed to buy the defective bottles, and that had paid the $40,000 on account of the settlement. The complaint also, he noted, had alleged that "Publicker and/or Continental were and are selling Liberty ...


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