On Appeal From the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 82-4846.
Before: Gibbons, Chief Judge, Mansmann, Circuit Judge and McCUNE, District Judge.*fn*
This appeal grows out of a suit by Louis J. Orlando, Jr. against Billcon International, Inc. (Billcon), Automated Business Products, Inc. Currency Counting Consultants, Inc. (Wayne Pa.), Ronald Brunner, currency Counting Consultants, Inc. (Montebello, CA.), and Paul Brunner, alleging violations of section 1 of the Sherman Act, 15 U.S.C. § 1 (1982), and common law causes of action for breach of contract and interference with present and prospective contractual and business relations. The district court granted a directed verdict in favor of Currency Counting Consultants, Inc. (Wayne, Pa.) and Ronald Brunner. The remaining claims were submitted to the jury which rendered a special verdict on interrogatories. The jury found that none of the defendants had violated section 1 of the Sherman Act. On the common law claims, it found: a) that Billcon had breached its contract with Orlando, awarding him $175,000 in compensatory damages; b) that Billcon interfered with Orlando's prospective economic and business relations, awarding him $82,000 in compensatory damages; c) that Orlando is entitled to punitive damages from Billcon on the interference claim, awarding him $125,000 in punitive damages. After a judgment was entered on the special verdict, Billcon moved for a judgment notwithstanding the verdict and for a new trial. The district court granted the judgment notwithstanding the verdict on the jury's award of compensatory and punitive damages on the interference claim, but denied both motions on the breach of the contract claim. Billcon appeals from the $175,000 judgment for breach of contract. Orlando appeals from the grant of the judgment notwithstanding the verdict on the interference claims for compensatory and punitive damages. We will affirm the judgment on the breach of contract claim and reverse the judgment notwithstanding the verdict on the interference claims.
Billcon, a California corporation, is in the business of distributing coin and currency counting equipment. Orlando began distributing Billcon currency counting equipment in the greater Philadelphia area in 1978. Although Orlando's initial agreement with Billcon was oral, the parties entered into a written dealer sales contract on April 15, 1980. This agreement provided that Orlando would use reasonable efforts to sell Billcon products in an area based in Philadelphia, including all territory within a 100 mile radius, and that Orlando would purchase Billcon products according to an attached schedule. The schedule called for purchases of $15,000 per month. The agreement also provided that failure to purchase in accordance with the schedule would be a material breach. Paragraph 10 provided:
If either party hereto shall breach any material provision hereof, the other party hereto shall give the breaching party written notice of such breach and such breaching party shall have 30 days following the date of the sending of such notice to remedy such breach. If such breach is not remedied in such 30-day period, the Agreement shall automatically terminate following the expiration of such 30-day period.
The agreement was to be in effect until January 31, 1981. But paragraph 16 provided that "the parties hereto agree to negotiate in good faith for an extension hereof on corresponding terms and conditions."
There is evidence that Billcon determined in November, 1980 that Orlando would be terminated as a dealer. Although Orlando's purchases were running at $8000 a month rather than $15,000, no notice was given pursuant to paragraph 10. No negotiations for an extension pursuant to paragraph 16 occurred. On November 5, 1980, prior to the January 31, 1981 expiration date, Billcon's president wrote, to Orlando that Billcon would arrange after May of 1981 to take Orlando to Japan to visit the factory where the machines were made. The letter asked for long-range sales forecasts. It included the observation that "I know that you are going to totally dominate our competition in the money processing field in the coming months and years ahead." Billcon continued, after January 31, 1981, to fill orders from Orlando. On May 6, 1981, Billcon's national sales manager wrote to Orlando:
I know that we keep telling you that we are coming out to see you, but this time I really mean it. Hopefully, this months as I have a new contract for you and Lou to sign, and I would like to see your operation.
Between January 31, 1981 and August 4, 1981 Billcon continued to treat Orlando as if he was a dealer, filling his orders and reassuring him that a new contract would be forthcoming. On August 4, 1981, however, with no prior notice, Billcon wrote to Orlando.:
This letter is to inform you that due to unacceptable levels of your Company's sales of BILLCON products during your last contract period, BILLCON INTERNATIONAL, INC., does not intend to enter into a new contract of any kind for 1981 with TIME, DATE AND NUMBER.
Our basic policy is to accept orders only from sales organizations with which we have contracts. As a result of our not renewing any relationships with your Company, your order received by us July 31, 1981 is not being accepted.
There is evidence from which the jury could find that the reason asserted by Billcon in its August 4, 1981 letter for not extending Orlando's dealership contract was not true. After the termination letter, Ronald Brunner opened an office in Orlando's territory under the name Currency Counting Consultants, Inc. of Pennsylvania. Ronald Brunner did not have a dealership contract, but obtained Billcon equipment from his brother, Paul Brunner, president of Currency Counting Consultants, Inc. of California, which had such a contract. The jury could find that the reason for Orlando's termination was that Billcon decided to give his territory to the Brunners.
Under the terms of their dealer contracts, the Brunners were free to sell both in territories other than their own designated geographic areas, and to other resellers. Orlando attempted, after receiving the August 4, 1981 termination letter, to continue his business by purchasing Billcon equipment from other dealers. In response, Billcon's national sales manager requested that both Ronald Brunner and Automated Business Products, Inc. obtain the serial numbers of the equipment sold by Orlando so that Billcon could trace Orlando's source of supply. Billcon thereafter threatened the dealers supplying equipment to Orlando with cancellation. Moreover, on November 30, 1981 Billcon's sales manager took steps to have its legal counsel write to Reuben H. Donnelly Co., the publisher of the Philadelphia Area Yellow Pages, to demand that it decline Orlando's listing offering Billcon products for sale. On December 5, 1981 Billcon's counsel sent a letter to Reuben H. Donnelly Co. making this demand. About a week later Billcon wrote to Reuben H. Donnelly Co. authorizing it to accept a listing from Currency Counting Consultants, Inc. of Pennsylvania as the "authorized sales outlet for BILLCON products in the Greater Philadelphia area." When this letter was sent, Ronald Brunner's company had no dealership contract with Billcon and was, like Orlando, acquiring equipment through another dealer.
As a result of Billcon's efforts, the jury could find that both the supply and the sales end of Orlando's business were adversely affected. Late in 1982 Orlando acquired the distributorship of a Japanese manufactured ...