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June 20, 1991


The opinion of the court was delivered by: Bissell, District Judge.

I.  FACTS AND BACKGROUND ................................. 228
    A. Standards Governing J.N.O.V. ...................... 229
    B. Plaintiffs' Tort Claims: The Connecticut Act ...... 232
    C. Plaintiffs' Tort Claims: Insufficient Evidence .... 243
        1. Wrongful Conduct .............................. 243
        2. Proximate Cause ............................... 249
    D. Elliot Fineman's Individual Tort Claim ............ 250
    E. Punitive Damage Award ............................. 254
    F. Antitrust Claims .................................. 257
        1. Resilient Market .............................. 259
        2. Monopoly Power in the Resilient Market ........ 259
        3. Use of Monopoly Power ......................... 262
        4. No Monopoly or Dangerous Probability of Success 264
CONCLUSION ............................................... 266


This matter arises pursuant to several motions made by the defendant in light of the jury verdict reached on April 19, 1991. Defendant Armstrong World Industries, Inc. ("Armstrong") has renewed its earlier motion to dismiss all claims of the plaintiff, for judgment notwithstanding the verdict (J.N.O.V.), and for a new trial in the alternative.


Trial in this action took place over nearly three months, generating considerable evidence. Necessarily, then, the following is merely a summary of the background and procedural history. Where relevant to the motions herein, additional facts and evidence will be considered.

Plaintiffs are Elliot Fineman, a New Jersey resident, and The Industry Network System, Inc. ("TINS"), a New Jersey corporation of which Elliot Fineman is the majority shareholder.*fn1 Defendant Armstrong is a large corporation which manufactures, inter alia, floor covering, more particularly "resilient" floor covering often called linoleum in common parlance. In the time period most pertinent to this litigation, Armstrong also manufactured carpeting. Armstrong's products are distributed through independent companies known as wholesalers or distributors who maintain warehouse stocks of such products and use their sales personnel to solicit retailers or others to purchase such products.

In 1982 and 1983, Elliot Fineman and TINS were developing a "video magazine" for the floor covering industry. Essentially, the plan was that TINS would sell the monthly video to floor covering distributors, who would in turn sell subscriptions to the program to retailers. A distributor would sign a "Letter of Intent" to become a TINS distributor, and then Fineman and his staff would run a two or three day training program at the distributors' place of business. This program would teach the salespeople how to sell the TINS magazine and how to improve sales overall. (See e.g. Px. 8001 at 15, TINS brochure describing sales program.)

The video was designed to be similar to a printed magazine, with "articles" on various topics. The plaintiffs described the video as follows:

  The magazine consisted of four parts. The first
  segment featured Al Wahnon, the editor of the
  industry newspaper (Floor Covering Weekly) who
  went behind the scenes of current relevant news
  stories and discussed and analyzed them from the
  floor covering retailers point of view. The second
  section featured plaintiff Fineman talking to
  professionals, such as economists and professors,
  or people whose areas include consumer attitudes,
  styling, design and from time to time sports
  people to discuss motivation. The third segment
  featured senior vice president Gail Farrar who
  travelled on site to retail stores throughout the
  country with a television crew. She interviewed at
  their store those retailers who are doing things
  that are successful, outstanding and helping them
  accomplish key goals. The fourth section featured
  the local TINS Distributor who used that segment
  as a marketing tool. Profits were to be earned
  from the sale of the magazine subscriptions,
  advertising royalties and commissions from the
  sale of video equipment.

(Compl., ¶ 11).

In early 1983, when TINS first launched its magazine, it encountered some difficulties recruiting floor covering distributors to become TINS distributors. Fineman accused Armstrong of exerting pressure on Armstrong distributors to dissuade them from becoming TINS distributors. These accusations resulted in an "Agreement of Settlement" between TINS and Armstrong on January 12, 1984, signed in order to avoid litigation.

In the following months, Fineman solicited at least six Armstrong wholesalers. Of these, three became TINS distributors, one remained ready to do so, and two declined. Fineman and TINS filed the present action on September 14, 1984, alleging that one of the distributors that declined, Stern & Company of Windsor, Connecticut, did so as a result of renewed pressure from Armstrong.*fn2 Plaintiffs contended that TINS was in a precarious financial condition as a result of the earlier wrongful acts of Armstrong such that losing Stern caused the company to fold. Plaintiffs therefore sought damages from Armstrong under various theories, including tortious interference with contract and antitrust violations.

This Court conducted a jury trial from January 23, 1991 until April 18, 1991.*fn3 The trial included testimony of more than 50 witnesses, a transcript of a thousand pages, conflicting opinions by expert witnesses, and a set of jury instructions of more than 80 pages. By the end of the trial, the only claims remaining were TINS' and Fineman's claim for tortious interference by Armstrong with TINS' business relationship with Stern and TINS' claims for monopolization and attempt to monopolize under § 2 of the Sherman Antitrust Act. On April 19, 1991, the jury returned a verdict in favor of the plaintiffs on all claims. On the tortious interference claim, the jury awarded $17.7 million to TINS and $2.275 million to Fineman in compensatory damages, and $200 million to TINS in punitive damages. The jury also awarded TINS $19.5 million in compensatory damages on the antitrust claims. Finally, the jury determined that $1.8 million was the "overlap" between the tort and antitrust damages awarded to TINS.*fn4

Armstrong presently seeks judgment notwithstanding the verdict, or, in the alternative, a new trial.*fn5


A. Standards Governing J.N.O.V.

Federal Rule of Civil Procedure 50(b) provides:

  (b) Motion for Judgment Notwithstanding the
  Verdict. Whenever a motion for a directed verdict
  at the close of all the evidence is denied or for
  any reason is not granted, the court is deemed to
  have submitted the action to the jury subject to a
  later determination of the legal questions raised
  by the motion. Not later than 10 days after entry
  of judgment, a party who has moved for a directed
  verdict may move to have the verdict and any
  judgment entered thereon set aside and to have
  judgment entered in accordance with the party's
  motion for a directed verdict. . . . A motion for
  new trial may be joined with this motion, or a new
  trial may be prayed for in the alternative. If a
  verdict was returned the court may allow the
  judgment to stand or may reopen the judgment and
  either order a new trial or direct the entry of
  judgment as if the requested verdict had been
  directed. . . .

Thus, a prerequisite to moving for a J.N.O.V. under Rule 50(b) is that the moving party must have moved for a directed verdict at the close of all the evidence. Associated Business Telephone Systems Corp. v. Greater Capital, 729 F. Supp. 1488, 1502 (D.N.J.), aff'd, 919 F.2d 133 (3d Cir. 1990) (citing Skill. v. Martinez, 91 F.R.D. 498, 515 (D.N.J. 1981), aff'd, 677 F.2d 368 (3d Cir. 1982)). In fact, "[i]t is not enough if a party moves for a directed verdict at the close of their case. Rather, in order to preserve the right to move for a J.N.O.V., the moving party must renew his motion for a directed verdict at the close of all the evidence." (Id., citing United States for the Use and Benefit of Roper v. Reisz, 718 F.2d 1004, 1007 (11th Cir. 1983)).

There are exceptions to the latter requirement, in certain circumstances where, as detailed in Skill:

  (a) there has been substantial, if not literal
  compliance with the rule;
  (b) where manifest injustice will otherwise occur
  since the verdict is totally without legal
  (c) where the trial judge in effect excused the
  failure to renew the motion; and
  (d) where the additional evidence was brief and

(Id., citing Skill, 91 F.R.D. at 515 n. 14). In the present matter, Armstrong made motions for directed verdict at the end of all the evidence. The motions included all of the arguments made in its motions for J.N.O.V. presently being considered.

The plaintiffs, however, strenuously object to the defendant's motion based on the Connecticut Business Opportunity Investment Act ("Connecticut Act") on procedural grounds, claiming that Armstrong has waived this "defense." Specifically, plaintiffs claim that Armstrong cannot rely on the Connecticut Act because the issue was not asserted in its answer as required by Fed.R.Civ.P. 8(c).

The plaintiff's arguments are without merit, for two reasons. First, the defendant specifically raised the Connecticut Act in the Pretrial Memorandum and Order, as follows:

  12. Whether the alleged contract or prospective
  business relationship between Stern and the TINS
  Corporation was unlawful under the Connecticut
  Business Opportunity Act, or was otherwise without
  legal effect, and any alleged interference
  therewith was therefore not a tortious act?

(Pretrial Memo, Defendant's Legal Issues at 93). In this Court and the Third Circuit, the Pretrial Order governs the ensuing litigation.

  Under Federal Rule of Civil Procedure 16, the
  pretrial order "shall control the subsequent
  course of the action unless modified by a
  subsequent order." When entered, the order limits
  the issues for trial and takes the place of the
  pleadings covered by the pretrial order. See
  Basista v. Weir, 340 F.2d 74, 85 (3d Cir. 1965);
  Hoagburg n, Harrah's Marina Hotel, 585 F. Supp. 1167,
  1175 (D.N.J. 1984). Indeed, the pretrial
  order operates to preserve a claim or defense that
  would normally be waived by proceeding to trial.
  See United States v. Hougham, 364 U.S. 310, 316 [81
  S.Ct. 13, 17, 5 L.Ed.2d 8] (1960); reh'g denied,
  364 U.S. 938 [81 S.Ct. 376, 5 L.Ed.2d 372] (1961);

  v. Carruth, 583 F. Supp. 613, 615 (E.D.Tenn.),
  aff'd, 734 F.2d 14 (6th Cir. 1984); United States
  v. Texas, 523 F. Supp. 703, 720 (E.D.Tex. 1981).

Benvenuto v. Connecticut General Life Insurance Co., 643 F. Supp. 87, 88 (D.N.J. 1986). See also Petree v. Victor Fluid Power, Inc., 831 F.2d 1191, 1194 (3d Cir. 1987) ("The finality of the pretrial order contributes substantially to the orderly and efficient trial of a case" and "supersedes the pleadings"). Because Armstrong included this claim in the Pretrial Order, it did not waive its right to assert this legal theory, and the plaintiffs had sufficient notice thereof.

Plaintiffs' reliance on cases such as Kilbarr Corp. v. Business Systems, Inc., 679 F. Supp. 422 (D.N.J. 1988), aff'd, 869 F.2d 589 (3d Cir. 1989), is misplaced. In Kilbarr, the defendants attempted to raise an issue for the first time after the matter had been tried, heard on appeal, and then remanded. In contrast, defendant herein raised the issue in the pretrial order and again by motion for a directed verdict at the close of the evidence.

Similarly, the present matter is distinguishable from Bradford-White Corp. v. Ernst & Whinney, 872 F.2d 1153 (3d Cir.), cert. denied, 493 U.S. 993, 110 S.Ct. 542, 107 L.Ed.2d 539 (1989), in which the defendant did raise the defense in its answer, but failed to file motions or present argument on the defense until after the jury reached a verdict and the judgment was entered. (Id. at 1154). The trial court refused to consider the defense because it was a "new issue, not raised at trial, premised on a noncontrolling decision which was reported prior to trial." (Id. at 1154-1155). In affirming, the Third Circuit made it clear that the defendant did not attempt to establish the affirmative defense before or at trial, and therefore it would be "grossly unfair to allow a plaintiff to go to the expense of trying a case only to be met by a new defense after trial." (Id. at 1161). In the present matter, the defendant raised the issue of the Connecticut Act in the Pretrial Order of June 5, 1990, presented evidence concerning the issue, and made a motion to dismiss at the end of all the evidence based thereon. There is no waiver here.

The second reason for considering the Connecticut Act in the present matter concerns the burden of proof. The plaintiffs bore the burden of proving each of the elements of the tortious interference claim. One of these elements, as more fully described below, is proof that TINS had a reasonable expectation of economic advantage in its relationship with Stern. In the context of the Connecticut Act, this required the plaintiffs to prove that the Act did not render any expectation tenuous or otherwise unreasonable. Thus, the plaintiffs miss the point by asserting that Armstrong failed to establish the "defense" of the Connecticut Act, because the issue is not a defense at all. It is, therefore, this Court's determination that Armstrong's motion for J.N.O.V. is appropriate in all procedural respects.

Once it is determined that the motion is procedurally correct, the next question is the applicable standard. This standard has been given various formulations, although they are substantially similar. "When deciding a motion for judgment notwithstanding the verdict, the trial judge must determine whether the evidence and justifiable inferences most favorable to the prevailing party afford any rational basis for the verdict." Bhaya v. Westinghouse Elec. Corp., 832 F.2d 258, 259 (3d Cir. 1987), cert. denied, 488 U.S. 1004, 109 S.Ct. 782, 102 L.Ed.2d 774 (1989) (citing Berndt v. Kaiser Aluminum & Chemical Sales, Inc., 789 F.2d 253 (3d Cir. 1986)). See also E.E.O.C. v. State v. Delaware DHSS, 865 F.2d 1408, 1414 (3d Cir. 1989). In other words, the court must determine whether a reasonable jury could have found for the prevailing party. Newman v. Exxon Corp., 722 F. Supp. 1146, 1147 (D.Del. 1989), aff'd, 904 F.2d 694 (3d Cir. 1990) (citing National Controls Corp. v. National Semiconductor Corp., 833 F.2d 491, 495 (3d Cir. 1987); Aloe Coal v. Clark Equipment Co., 816 F.2d 110, 113 (3d Cir.), cert. denied, 484 U.S. 853, 108 S.Ct. 156, 98 L.Ed.2d 111 (1987); Marsh v. Interstate and Ocean Transport Co., 521 F. Supp. 1007, 1008 (D.Del. 1981)). It has also been said that "the court must find, as a matter of law, that the prevailing party failed to adduce sufficient facts to justify the verdict." Grace v. Mauser-Werke Gmbh, 700 F. Supp. 1383, 1387 (E.D.Pa. 1988) (citing Link v. Mercedes Benz of North America, Inc., 618 F. Supp. 679, 693 (E.D.Pa. 1985), aff'd in part 788 F.2d 918 (3d Cir. 1986)). Yet another way of enunciating the standard is as follows:

  It is well established that judgment
  notwithstanding the verdict may be granted only
  if, as a matter of law, the record is critically
  deficient of that minimum quality of evidence from
  which a jury might reasonably afford relief.

National Freight v. Southeastern Pa. Transp. Auth., 698 F. Supp. 74, 76 (E.D.Pa. 1988), aff'd, 872 F.2d 413 (3d Cir. 1989) (citing Danny Kresky Enterprises Corp. v. Magid, 716 F.2d 206, 209 (3d Cir. 1983)).

The role of the Court is quite limited when considering a motion for J.N.O.V. "[T]he Court may not weigh evidence, pass on the credibility of witnesses, or substitute its judgment of facts for that of the jury." National Freight, 698 F. Supp. at 76 (citing Blair v. Manhattan Life Insurance Co., 692 F.2d 296, 300 (3d Cir. 1982)). Thus, "[a]lthough a court in viewing the evidence of record may have reached a different conclusion from that reached by the jury, that alone is not reason to enter judgment n.o.v." Newman, 722 F. Supp. at 1147.

The defendant herein seeks J.N.O.V. on the basis that no reasonable jury could have found for the plaintiffs on each element of each claim. It also renews a motion to dismiss both plaintiffs' tort claims due to the Connecticut Act which this Court treats as a motion for J.N.O.V., although it primarily rests on legal questions, as described more fully below. The latter motion will be considered first.

B.  Plaintiffs' Tort Claims: The Connecticut Act

The Connecticut Act requires certain types of businesses to register with the Banking Commissioner of Connecticut prior to selling business opportunities in that State. Armstrong contends that TINS was not so registered prior to its dealings with Stern, that it should have been, and that its failure rendered the relationship with Stern unenforceable, and in fact illegal. Armstrong then argues that the claim for tortious interference therewith is invalid pursuant to the terms of the statute, and so it is entitled to J.N.O.V. as to both TINS' and Fineman's tortious interference claims.

In order to understand fully Armstrong's argument, some additional facts are necessary. As stated above, Elliot Fineman solicited Stern and Company of Windsor, Connecticut to become a TINS distributor in the spring of 1984. TINS provided Stern with a brochure captioned "The Industry Network System, Stern & Company, Inc., May 24, 1984." (Px. 8001). This brochure described the sales training program that TINS would provide to Stern if Stern became a TINS distributor. It also provided a chart entitled "Preferred Distributor Annual Income Stream" showing the income to be earned by Stern from distributing the TINS Magazine and other videos. These figures included distributor profits on sales of RCA televisions and video equipment, sold for use with the TINS Magazine as a result of an arrangement between TINS and RCA. Also available were bonuses paid to Stern and its employees for each subscription sold.

As a result of the presentation made by representatives from TINS, Stern signed a "Letter of Intent" to become a distributor on May 24, 1984. The letter provided that "Stern & Company, Inc. wishes to accpet [sic] appointment as Distributor of The Industry Network System (TINS) with marketing rights" to TINS Magazine "in the primary trading areas of [Stern] . . . at a fee of $16,000" plus expenses associated with the sales training program. (Px 1100A). Stern paid a deposit of $4,000 that day.

TINS alleged that Stern breached its contract and demanded payment of an additional $4,000. By letter dated June 29, 1984, Stern's attorney Steven M. Gold informed Mr. Fineman that Stern did not owe and would not pay, taking the position that the "Letter of Intent" was invalid and unenforceable. (Dx. 1003). The premise for this claim was that the Connecticut Act required businesses to register their offerings with the Banking Commissioner, which TINS had not done. So, claimed Mr. Gold, the "Letter of Intent" was invalid and TINS was potentially subject to the authority of the Commissioner. Violations could result in fines, imprisonment, and various forms of equitable action such as appointment of a receiver. The final result was an exchange of mutual releases of all claims between TINS and Stern in August 1984.

Armstrong argues in support of its motion for J.N.O.V. that the "Letter of Intent" was properly voided by Stern based on the Connecticut Act, relying upon its legislative history and statutory language. As a result, the "Letter of Intent" between Stern and TINS could not be the basis of any claims, including those made by plaintiffs herein. Thus, Armstrong seeks J.N.O.V. dismissing all the tortious interference claims of the plaintiffs.

This Court agrees with Armstrong, although under a slightly different analysis, that it is entitled to a directed verdict on all of plaintiffs' state-law tort claims. This Court had reserved decision on this question, preferring to permit the case to go to the jury in order that all parties, this Court and any reviewing court would have the benefit of a jury verdict on all claims presented to it, a procedure clearly contemplated by Rule 50(b). Now, however, defendant's motion must be addressed as a motion for J.N.O.V. It will be granted for the reasons which follow.

This Court determined, on directed verdict motions at the end of the plaintiffs' case, that New Jersey law governs the plaintiffs' tort claims. In so doing, this Court recognized that for these pendent claims, this Court must apply New Jersey's conflict of laws rule, which embodies a "governmental interest" approach to choice of law questions. Veazey v. Doremus, 103 N.J. 244, 248, 510 A.2d 1187 (1986). Under that analysis, the determinative law is that of the state with the greatest interest in governing the particular issue. See, e.g., White v. Smith, 398 F. Supp. 130, 134 (D.N.J. 1975); McSwain v. McSwain, 420 Pa. 86, 94, 215 A.2d 677, 682 (1966). Particularly in light of the fact that plaintiffs are New Jersey residents and the repercussions of the alleged injuries were felt here, this Court reiterates its view that New Jersey substantive law governs the plaintiffs' claims for tortious interference with prospective economic advantage. Therefore, in determining whether the plaintiff provided sufficient evidence to withstand the motion for J.N.O.V., this Court looks to New Jersey law to determine the necessary elements of the claim.

The New Jersey courts have relied on the Restatement (Second) Torts for the definition of the cause of action. (See e.g. Norwood Easthill Assoc. v. N.E. Watch, 222 N.J. Super. 378, 385, 536 A.2d 1317 (App. Div. 1988)). In the present matter, the relevant Restatement section is § 766B:

  § 766B Intentional Interference with Prospective
  Contractual Relation
  One who intentionally and improperly interferes
  with another's prospective contractual relation
  (except a contract to marry) is subject to
  liability to the other for the pecuniary harm
  resulting from loss of the benefits of the
  relation, whether the interference consists of
  (a) inducing or otherwise causing a third person
  not to enter into or continue the prospective
  relation or
  (b) preventing the other from acquiring or
  continuing the prospective relation.

As suggested by the Restatement, it is no defense to such a claim that the contract interfered with is not enforceable because

  contracts which are voidable by reason of the
  statute of frauds, formal defects, lack of
  consideration, lack of materiality, or even
  uncertainty of terms, still afford a basis for a
  tort action when the defendant interferes with
  their performance.

Harris v. Perl, 41 N.J. 455, 461, 197 A.2d 359 (1964) (citing Prosser, Torts § 106 at 726 (2d ed. 1955)). Thus, for example, the Harris Court determined that a buyer was responsible for tortious interference with prospective economic advantage to the broker even where no broker contract had been completed. (Id. at 462, 197 A.2d 359). The Court said that "[t]he economic facts and the expectations of fair men with respect to real estate brokerage are clear enough. The role of the broker is to bring buyer and seller together at terms agreeable to both, and both know the broker expects to earn a commission from the seller if he succeeds." (Id.) That expectation was therefore protected.

Although there is a cause of action for tortious interference with respect to an unenforceable contract in some situations, this rule is not without limitations. These limitations depend on the nature of the relationship with which the defendant interfered. For example, in Borbely, the court granted the defendant's motion for J.N.O.V. on plaintiff's tortious interference claim because it determined that the contracts in question were terminable at will. Since the defendant had the right to terminate them at will, it could not be said that termination was wrongful. (547 F. Supp. at 976).

Prosser has also identified some of the limitations on the claim:

  Virtually any type of contract is sufficient as
  the foundation of an action for procuring its
  breach. It must of course be valid, in force and
  effect, and not illegal as in restraint of trade,
  or otherwise opposed to public policy, so that the
  law will not aid in upholding it.

(Prosser, Torts, § 129 at 994 (5th ed. 1984)) (emphasis added). In other words, that a contract is unenforceable is not a bar to a tortious interference claim, but that a contract is invalid as opposed to public policy is. As one court faced with a contract void due to violation of a licensing statute put it, plaintiff's "analogy to the statute of frauds is not apt, for that statute does not make the transaction illegal for lack of writing but merely denies the aid of the court in enforcing it." Tanenbaum v. Sylvan Builders, Inc., 50 N.J. Super. 342, 355, 142 A.2d 247 (App. Div. 1958), modified on other grounds, 29 N.J. 63, 148 A.2d 176 (1959). This is as it should be, because the reason that the law protects otherwise unenforceable contracts from tortious interference is that "[i]n a civilized community, which recognizes the right of private property among its institutions, the notion is intolerable that a man should be protected by the law in the enjoyment of property once it is acquired, but left unprotected by the law in his efforts to acquire it." (Harris, 41 N.J. at 462, 197 A.2d 359) (quoting Brennan. v. United Hatters of North America, 73 N.J.L. 729, 65 A. 165 (E. & A. 1906)). This policy is not served where the contract is illegal or void as against public policy.

Thus, although not required to prove that their relationship with Stern was an enforceable contract, TINS and Fineman had to prove that they had a reasonable expectation of economic advantage arising from that relationship. As the comments to the Restatement say, "[t]he relations protected against intentional interference . . . include any prospective contractual relations . . . if the potential contract would be of pecuniary value to the plaintiff." (Restatement (Second) Torts § 766B, Comment c) (emphasis added). As a matter of law, this requirement was not met in the present matter, because of the impact of the Connecticut Act.

The relationship between Stern and plaintiffs may be characterized as a prospective contract. Accordingly, if the question before the Court was its validity as between Stern and plaintiffs, this Court would apply Connecticut law because in contract cases, New Jersey courts apply the law of the place where the contract is made, "unless the dominant and significant relationship of another state to the parties and the underlying issues dictates that this basic rule should yield." Ramsbottom v. First Pennsylvania Bank, 718 F. Supp. 405, 407 (D.N.J. 1989) (quoting State Farm Mutual Auto. Ins. Co. v. Estate of Simmons, 84 N.J. 28, 37, 417 A.2d 488 (1980)); see also McFadden v. Burton, 645 F. Supp. 457, 465 (E.D.Pa. 1986). The assessment of the significant relationship should "encompass an evaluation of important state contacts as well as a consideration of the state policies affected by, and governmental interest in, the outcome of the controversy." Ramsbottom, 718 F. Supp. at 407 (quoting State Farm, 84 N.J. at 37, 417 A.2d 488). Under this analysis, Connecticut law would apply to determine the validity of the "Letter of Intent" primarily because it was to be fully performed there, but more importantly, because Connecticut's law concerning business opportunities represents the dominant and significant policy of protecting its residents in commercial dealings.

This Court has already determined that Connecticut law does not apply to determine the rights and liabilities as between Armstrong and plaintiffs. However, the reasonable expectation of economic advantage arising from the Stern-TINS relationship necessarily requires this Court to consider the nature of that relationship, under the law which governed it: that of Connecticut. This requires a careful scrutiny of the Connecticut Act, relied upon by Stern's counsel in declaring void Stern's prospective relationship with TINS, and upon which Armstrong relies in support of one aspect of its motion for J.N.O.V.

The Connecticut Act, Conn.Gen.Stat. § 36-503 et seq., was enacted to police business opportunities which are characterized by "high pressure salesmen who flash in and out of motel rooms and are gone before the investor knows he's been fleeced." Woolf*fn6, The Connecticut Business Opportunity Investment Act: An Overview, 54 Conn.B.Journ. 415, 416 (1980) (quoting 12 Continental Franchises Rev. No. 10 at 1 and 2 (June 11, 1979)).*fn7

Mr. Woolf described the Act as follows:

  In general, the Act requires sellers who plan to
  sell business opportunity investment programs to
  register such programs with the banking
  commissioner. Sellers of business opportunity
  investment programs are also required to provide
  prospective purchaser-investors with information
  necessary to make an informed decision before they
  make payment to the seller. In certain
  circumstances, sellers of these programs are also
  required to represent that the
  purchaser-investor's investments are secured in
  such a way as to actually provide security in the
  form of a bond or trust account. Finally, the Act
  prohibits representations which tend to mislead
  prospective purchaser-investors.

(Id.) (footnote omitted).

The Connecticut Act applies to "sellers" of "business opportunities." The Act defines "seller" as "a person who is engaged in the business of selling or offering for sale business opportunities." (§ 36-504(4)). The definition of "business opportunity" is, in relevant part:

  (6) "Business opportunity" means the sale or
  lease, or offer for sale or lease of any products,
  equipment, supplies or services which are sold or
  offered for sale to the purchaser-investor for the
  purpose of enabling the purchaser-investor to
  start a business, and in which the seller
    (C) that the seller guarantees, either
  conditionally or unconditionally, that the
  purchaser-investor will derive income from the
  business opportunity; or that the seller will
  refund all or part of the price paid for the
  business opportunity, or repurchase any of the
  products, equipment, supplies or chattels supplied
  by the seller, if the purchaser-investor is
  unsatisfied with the business opportunity; or
    (D) that the seller will provide a sales program
  or marketing program to the purchaser-investor.

(§ 36-504(6)).

TINS' presentation brochure, coupled with the Letter of Intent, described above, make it clear that the distributorship arrangement for sale of the video magazine is within parts (C) and (D) of the definition. First, TINS guaranteed bonuses upon sales, (see Px. 8001 at 18), and represented particular figures which Stern would earn if it signed up as a distributor. (See e.g. Tr. 2.100-101 (Fineman)).

Second, TINS' training program is a marketing program within part (D), as is clear from the stated goals:

  1. Train Distributor Sales Personnel to
  effectively present and close a promotional
  offering such as TINS.
  2. Train the sales force in successful sales
  techniques which they will utilize in their
  day-to-day business dealings to produce
  dramatically improved results.

(TINS' brochure, Exh. Px. 8001 at 15).

The plaintiffs, however, argue that becoming a TINS distributor did not enable Stern to "start a business," thus TINS is not a seller within the meaning of the Act. (Plaintiffs' Opp. at 9). Relying on Eye Associates, P. C. v. IncomRx Systems, Ltd., 912 F.2d 23 (2d Cir. 1990), plaintiffs argue that whether or not the TINS program was offered to start a business is a question of fact concerning the intent of the parties, about which there is no evidence. The plaintiffs' reliance is misplaced. The Eye Associates court, on appeal from a grant of summary judgment, reviewed the contract and other evidence to determine whether any issues remained. Based on such evidence, the court determined that such issues did remain and so remanded the matter. The court did not hold, as plaintiffs herein suggest, that intent fully governs the question of whether or not the TINS program was offered to "start a business."

In fact, Banking Commissioner Woolf has stated that:

Woolf, supra at 419.

The plaintiff is also in error concerning the evidence in this case. There is considerable evidence showing that the TINS program was supposed to be extremely beneficial, in Elliot Fineman's estimation, to Stern by both increasing floor covering sales and generating income from the sale of products entirely new to Stern: subscriptions to the video magazine, televisions and videocassette recorders. (See e.g. Tr. 2.59-2.60 (Fineman)).*fn9 It is significant, too, that the majority of such evidence comes from the plaintiff Elliot Fineman himself. Thus, under the most reasonable definition of "new business," the TINS program constituted a completely new line of business: the sale of a monthly video magazine for floor covering retailers and the sale of equipment related thereto.

It has been held that the right to sell and market aircraft is a "new business" although the purchaser was already in the business of selling other kinds of transportation vehicles. (See Eye Associates, 912 F.2d at 27 (citing State of Connecticut, Office of the Banking Commissioner, Interpretive Opinion In re Suma, Incorporated, March 25, 1982)).

The evidence adduced at trial makes it clear that Armstrong met its burden of showing that TINS is within the Connecticut Act. The evidence provided by the plaintiffs in particular shows that its distributorship arrangement with Stern would enable the purchaser to modify an existing business in a substantial manner, require a payment of more than $100, and provide a sales or marketing program which would enable the purchaser to derive a profit. (Woolf, supra at 420). Thus, the TINS program is a "business opportunity" within the meaning of the Connecticut Act, §§ 36-504(6)(C), (D).

Overall, the plaintiffs misconstrue the burden of proof in this matter. It was their burden to prove that they had a reasonable expectation of economic advantage in their relationship with Stern, not the defendant's burden to prove that the plaintiffs did not. The defendant made it clear that the Stern-TINS relationship, and the claims against it, were void as a result of the Connecticut Act. Arguing that the evidence at trial irrefutably established that the Connecticut Act was applicable and barred plaintiffs' tortious interference claims, Armstrong moved to dismiss at the close of all the evidence, based on that statute. At that point it was incumbent upon the plaintiffs to seek to reopen their case to overcome such a showing, if they were truly surprised by the motion. No such application was made. The question herein is whether the plaintiffs have succeeded in overcoming the application of the Connecticut Act.

Plaintiffs' other arguments concerning this issue are unavailing. For example, plaintiffs argue that TINS was not a seller within the meaning of the statute because it offered its program to only one investor in Connecticut. (Plaintiffs' Opp. at 10). This argument is specious in light of the uncontroverted evidence that TINS in fact sold its programs to other investors across the country. Restricting the definition of "seller" to one who sells more than one program within the State is unreasonable in light of the statute's avowed purpose of protecting buyers. Under plaintiffs' interpretation, a party could avoid application of the statute by selling to only one investor in the state on an "exclusive" basis, thus leaving the investor beyond the protection of the statute. This is an unreasonable interpretation of the statute, and this Court will not adopt it in the absence of direction from the Connecticut courts.*fn10

Plaintiffs also argue that it is not clear whether TINS' distributorship arrangement for sale of video magazine subscriptions constitutes a "sales program" or "marketing program" within the Act. Plaintiffs rely on the fact that there is no definition within the Act, requiring instead a case by case analysis. (See Eye Associates, 912 F.2d at 28 (citations to legislative history and interpretative statements that the determination is based on a case by case analysis)). However broad or narrow the definition may be, it is beyond contention that one of the avowed benefits of becoming a TINS distributor was its sales training program as described in its brochure. (See above). This program is clearly a "sales" or "marketing" program, as described by the plaintiffs themselves. Furthermore, the video magazine played in open court demonstrates that it is a program designed to enhance the distributor's sales and marketing with its retailers.

Plaintiffs also argue that Armstrong did not prove that TINS failed to comply with the Connecticut Act. Probative evidence on this question comes from the June 29, 1984 letter from Stern's counsel stating that TINS failed to register and therefore its breach of contract claims were not valid. (Dx. 1003). Contrary to the plaintiffs' assertion, this letter was admitted into evidence without any restrictions as to its use, and without objection from plaintiffs' counsel. (See Tr. 7.123). Furthermore, Mr. Fineman testified as follows concerning the letter:

  Q: Do you recall Stern, for its part, had some
  claims against you?
  A: No, Stern had no claims against us. Their
  attorney came up with some kind of law that
  Connecticut required TINS or any company that fell
  in our category to get some kind of clearing with
  the banking commissioner . . .
  Q: Apart from whether you agreed with [your
  attorney] or not, Mr. Fineman, the question is,
  did the ...

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