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LIGHTNING LUBE, INC. v. WITCO CORP.

September 2, 1992

LIGHTNING LUBE, INC., etc., Plaintiff, and Counterclaim Defendant, v WITCO CORPORATION, et al., Defendants, Counter-claimants and Third-party Plaintiffs. v RALPH VENUTO, et al., Third Party Defendants


The opinion of the court was delivered by: WILLIAM G. BASSLER

BASSLER, DISTRICT JUDGE:

 On May 1, 1992, a jury returned a verdict against the defendant Witco Corporation ("Witco") in favor of the plaintiff Lightning Lube, Inc. ("Lube") for $ 11.5 million dollars in compensatory damages and $ 50 million in punitive damages. Witco renews its motion for judgment as a matter of law and in the alternative moves for a new trial.

 For the following reasons, Witco's motions shall be granted in part and denied in part.

 1. BACKGROUND.

 The background and procedural history of this case have been well documented in prior Opinions and Orders of this Court. *fn1" *fn2" This action arises out of a contract dispute between plaintiff Lightning Lube, t/a Laser Lube ("Lube or Lightning Lube") and its principal, third-party defendant Ralph Venuto, and defendant counterclaimant third-party plaintiff Witco Corporation ("Witco") *fn3" over the supply of oil to Laser Lube by Witco's Kendall Refining division and the financing of lube dispensing equipment and lifts. Lube further alleged that Kendall and co-defendant Avis ("Avis") *fn4" entered into a joint venture to create a vertical monopoly in the quick lube market. At the time of trial, four claims remained in the case: (1) breach of contract; (2) fraud and misrepresentation (3) intentional interference with contracts and prospective contractual advantage and (4) punitive damages. *fn5"

 2. DISCUSSION.

 I. THE STANDARDS.

 A. The Standards Governing Judgment as A Matter of Law.

 Federal Rule of Civil Procedure 50(b), as amended Dec. 1, 1991, provides:

 Whenever a motion for 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 the entry of judgment, a party who has moved for a directed verdict may move to have the verdict and any judgment entered in accordance with the party's motion for a directed verdict . . . . A motion for a 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 reopen the judgment and either order a new trial or direct the entry of judgment as if the requested verdict had been directed . . . .

 The 1991 Amendment retains the concept of the former rule that the post-verdict motion is a renewal of an earlier motion made at the close of the evidence. See Comment to 1991 Amendment. Thus, a prerequisite for a motion under Rule 50(b) is that the moving party must first have moved for judgment as a matter of law (formerly directed verdict) at the close of all evidence. Fineman v. Armstrong World Industries, Inc., 774 F. Supp. 225, 230 (D.N.J. 1991) (quoting 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)). In fact, "it 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 judgment as a matter of law, the moving party must renew his motion for directed verdict at the close of all the evidence." Id.

 In this case, Witco moved for judgment as a matter of law both at the close of plaintiff's case and at the close of all the evidence. The Court reserved decision.

 When ruling on a motion for judgment as a matter of law, the trial judge must determine whether the evidence and all justifiable inferences most favorable to the prevailing party afford any rational basis for the verdict. Id., (quoting Bhaya v. Westinghouse Elec. Corp., 832 F.2d 258, 259 (3d Cir. 1987), cert. denied, 488 U.S. 1004 (1989) (citations omitted)).

 In determining whether the evidence is sufficient the court is not free to weigh the evidence or to pass on the credibility of witnesses or to substitute its judgment of the facts for that of the jury. In other words, the fundamental principle is that there must be a minimum of interference with the jury. 9 Charles A. Wright & Arthur A. Miller, Federal Practice and Procedure § 2524, at 543-545 (1971), see also 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). Nevertheless, a scintilla of evidence is not enough to withstand a motion for judgment as a matter of law. See Denney v. Siegel, 407 F.2d 433, 439-40 (3d Cir. 1969).

 Moreover, it is well settled that the party against whom a motion for "J.N.O.V." is made must be given the benefit of every legitimate inference that can be drawn from the evidence. 9 Charles A. Wright & Arthur A. Miller, Federal Practice and Procedure § 2528, at 564 (1971). Some courts say that an inference is legitimate only there the evidence offered makes the existence of the fact to be inferred more probable than the nonexistence of the fact, and they warn that any lesser test would permit the jury to rest its verdict on speculation and conjecture. But the Supreme Court itself has suggested that a case may not be taken away from the jury merely because "a measure of speculation and conjecture is required."Id. at 565 n.19, 566-67; see also Lavender v. Kurn, 327 U.S. 645, 653 (1946). It is with this high standard in mind that I consider this motion.

 B. The Standards Governing a Motion for a New Trial.

 A trial court should grant a motion for a new trial when, in its opinion, "the verdict is contrary to the great weight of the evidence, thus making a new trial necessary to prevent a miscarriage of justice." Fineman v. Armstrong World Industries, Inc., 774 F. Supp. 266, 269 (D.N.J. 1991), (quoting Roebuck v. Drexel University, 852 F.2d 715, 736 (3d Cir. 1988)).

 The standard for granting a new trial is substantially less demanding than that for judgment as a matter of law. 9 Charles A. Wright & Arthur A. Miller, Federal Practice and Procedure § 2531, at 575 (1971). In fact, contrary to the lack of discretion that a trial court has when ruling on a motion for judgment as a matter of law, when a trial court rules on a motion for a new trial it is vested with wide discretion. Id. This discretion is exemplified by the fact that in ruling on a motion for a new trial the trial court is permitted to consider the credibility of witnesses and weigh the evidence. Id. Such deference is appropriate because it is the district court that was able to observe the witnesses and follow the trial in a way that an appellate court cannot replicate by reviewing the record. Roebuck v. Drexel University, 852 F.2d 715 (3d Cir. 1988) (citing Semper v. Santos, 845 F.2d 1233, 1237 and n.35 (3d Cir. 1988)).

 The discretion of the court, however, is not unlimited. When a motion for a new trial based on the weight of the evidence is granted, the court has:

 Fineman, 774 F. Supp. 266 (D.N.J. 1991), (citing Williamson v. Consolidated Rail Corp., 926 F.2d 1344, 1352 (3d Cir. 1991) (citation omitted)). Thus, as with a motion for judgement as a matter of law "[a] District Court may not substitute its own judgment for that of the jury simply because the court might have come to a different conclusion." Id. (quoting Grace v. Mauser-Werke Gmbh, 700 F. Supp. 1383, 1387 (E.D. Pa. 1988)). Nor does a dispute over credibility justify a new trial. Consumers Power Co. v. Curtiss-Wright Corp., 780 F.2d 1093, 1097 (3d Cir. 1986) (citation omitted).

 A motion for a new trial may be granted on a number of grounds:

 Although Fed. R. Civ. P. 59 does not enumerate the grounds for a new trial, the following have been recognized as general grounds for a new trial: the verdict is against the clear weight of the evidence; damages are excessive; the trial was unfair; and that substantial errors were made in the admission or rejection of evidence or the giving or refusal of instructions.

 Northeast Women's Center, Inc. v. McGonagle, 689 F. Supp. 465 (E.D. Pa. 1988), aff'd in relevant part, 868 F.2d 1342 (3d Cir. 1989).

 II. THE COMPENSATORY DAMAGE CLAIMS.

 A. The Claim for Fraud and Misrepresentation.

 The jury awarded $ 1,000,000 to the plaintiff on its claim for fraud and misrepresentation with respect to Witco's failure to disclose its intent to enter into the quick lube business as a competitor of Lube. It also awarded $ 1,000,000 with respect to the claim that Witco had no intention to honor the agreement it formed with Lube at the time the agreement was made. On the claim for fraud and misrepresentation with respect to the source of oil, the jury found that all of the elements of fraud were satisfied but found that Lube suffered no damages.

 In order to prove a claim for fraud, plaintiff must prove the following five elements:

 (1) Defendant made a false representation of fact;

 (2) Defendant knew or believed that the representation was false;

 (3) Defendant intended to deceive the plaintiff;

 (4) plaintiff believed and justifiably relied upon the statement and was induced to take action upon it, and

 (5) As a result of plaintiff's reliance upon such statements, it sustained damages.

 Jewish Center of Sussex County v. Whale, 86 N.J. 619, 624 (1981). Moreover, plaintiff bears the burden of proving its case by a preponderance of the evidence. Williams v. Witt, 98 N.J. Super. 1 (App. Div. 1967) see also Richard J. Biunno, Current N.J. Rules of Evidence, Comment 5 to Evid. R. 1(4) at 53 (Gann 1990) (citing 9 Wigmore on Evidence (3d ed. 1940), § 2498 at 325; In re Evans, 227 N.J. Super. 339, 347 (Law Div. 1988)).

 In other words a civil litigant must establish that a desired inference is more probable than not. If the evidence is in equipoise, the burden has not been met. See Cvelich v. Erie Railroad Co., 120 N.J.L. 414 (Sup. Ct.), aff'd, 122 N.J.L. 26 (E. & A. 1938), cert. denied, 307 U.S. 633 (1939). And the burden is not satisfied by guess or conjecture. For the burden of persuasion to be sustained, the evidence must demonstrate that the offered hypothesis is a rational inference, that it permits the triers of fact to arrive at a conclusion grounded in a preponderance of probabilities according to common experience. Richard J. Biunno, Current N.J. Rules of Evidence, Comment 5 to Evid. R. 1(4) at 54 (Gann 1990) (citing Joseph v. Passaic Hospital Ass'n., 26 N.J. 557 (1958)).

 While a trial judge in deciding on a motion for judgment as a matter of law should not determine whether the evidence preponderates, the Court does not substitute its interpretation of the facts for the jury when it determines that the record is devoid of the minimum amount of evidence from which the jury could reasonably have reached its decision. Motter v. Everest and Jennings, Inc., 883 F.2d 1223, 1228-29 (3rd Cir.), reh'g denied, (Oct. 5, 1989). I have individually analyzed each section of this claim on which the jury found in favor of the plaintiff and I conclude that the evidence is insufficient as a matter of law to sustain the jury's awards on this claim.

 (i) Witco's Plan to Enter the Fast Lube Market.

 The jury found for the plaintiff on the claim that as of May 9, 1986, Witco failed to disclose its intent to enter into the fast lube business as a competitor of Lightning Lube (JQ 18-25). However, upon careful analysis of the record I find that the evidence is insufficient to sustain that conclusion.

 First, plaintiff's argument in support of this claim is premised largely upon the allegation that Witco and Avis formed an agreement to enter into the fast lube business as early as January of 1986. As evidence that the Avis-Witco deal was "in the works" as early as January 1986, plaintiff introduced two draft partnership agreements dated "1/13/86" and "4/14/86" and a set of handwritten notes dated "4/21/86" referring to the "April 14" draft agreement. See PX 18, 18A and 44 respectively. As further support of its argument plaintiff offered the "self-contradicted testimony" of Mr. Golubock (Tr. 1873-74; 2105, 2134-35) and argued that Mr. Golubock changed his testimony only after consulting with counsel (Plaintiff's brief at 15).

 But this evidence alone does not amount to a preponderance of credible evidence necessary to support a finding of fraud. In fact, defendant introduced sufficient evidence so as to render plaintiff's theory of a Avis-Witco conspiracy implausible.

 In an effort to contradict plaintiff's theory that Witco-Avis negotiations were underway as early as January 1986, prior to the date on which Witco and Venuto entered into a relationship, Witco called Mr. Baumel, an attorney from the New York law firm of Bachner, Tally, Pollavoy and Mishin. Mr. Baumel testified that he did not join Bachner, Tally as an associate until May of 1986 (Tr. 6326, 22). He further testified that he prepared the draft partnership agreements (PX 18 and PX 18A) from scratch and the fact that he did not join the firm until May of 1986 demonstrates that the "1/13/86" and "4/14/86" dates typed on the draft agreements were clearly typing errors (Tr. 6326-6330). He further testified that he used the "Letter of Intent" (PX591), dated 12/11/86 as a basis for the draft partnership agreements (Tr. 6327-28; 6338), and that the draft agreements were actually prepared on 1/13/87 and 4/14/87 (Tr. 6328).

 In addition to Mr. Baumel's testimony, the internal dates on the draft partnership agreements themselves contradict plaintiff's theory as they internally bear dates of 1987, while 1986 simply appears on the cover page (PX 18 and 18A). Moreover, a part of PX 18A is a 4/24/87/letter authored by Mr. Baumel that states in relevant part: "I have enclosed two copies of a draft partnership agreement, reflecting additional changes received from our client yesterday."

 Mr. Golubock clearly testified that in 1986 Witco did not have word processing capabilities (Tr. 2105), and explained his earlier confusion to Mr. Kramer's leading question on redirect (Tr. 2134-35).

 Finally, defendant is correct in its argument that it was improper for plaintiff's counsel to request and receive over objection (Tr. 7059-60) a "missing witness" charge, and to argue that to the jury when in fact there was no such witness. Plaintiff's counsel improperly argued in his closing that a Witco secretary who typed the document was a missing witness who the jury should presume would have failed to support Witco's claim (Tr. 7205-06). This "missing witness" was nonexistent so that any such inference or presumption was not based on evidence of record but simply on the unfounded question and summation of Mr. Kramer.

 I am cognizant of the fact that on a motion for judgment as a matter of law, the Court is not permitted to weigh the evidence or pass on the credibility of witnesses. Nevertheless, a scintilla of evidence is insufficient to withstand a motion for judgment as a matter of law. See, Denney v. Siegel, 407 F.2d 433, 439-40 (3d Cir. 1969). Thus, I conclude that plaintiff has failed to offer sufficient evidence so that a jury could legitimately infer that as of May 9, 1986, Witco had formed the intent to enter into the fast lube market as a competitor of Lube and that it fraudulently, and with the intention of deceiving plaintiff failed to disclose this alleged material fact.

 (ii) Witco's Agreement with Avis.

 In December of 1986 Witco and Avis entered into a joint venture and formed a new fast lube chain -- "Avis Lube." PX40. All of the evidence documents that this venture was limited to a real estate partnership. See Order of November 27, 1900 at 7. Nothing in the "Letter of Intent" (PX 591) or the draft partnership agreements establishes Witco as a competitor of Lube (PX 18, 18A). Rather, the agreements provide a vehicle by which Witco would supply the financing for real estate acquisitions and management of real properties on which "Avis Lube Fast Oil Change Centers" would be operated (PX 591).

 By contrast, plaintiff argues that Witco failed to disclose its intention to enter into the quick lube business as a partner of Avis. Specifically, Mr. Venuto testified that prior to the May 1986 meeting, held at Kendall's headquarters in Bradford, Pennsylvania, he was asked by Kendall's Fast Lube Director, Mr. Glady for Lube's financial statements, Venuto's personal financial statements, and all of Lube's Operating and Training manuals (Tr. 2675, 10-14) -- in other words "everything that has to do with my business." (Tr. 2675, 15-16). Plaintiff thus argues that had he been aware of Witco's intention of entering the quick lube market as a competitor of Lube, he would never have disclosed the requested documentation. Plaintiff's argument falls on several grounds.

 First, as discussed in part (i) above, the evidence is inadequate to demonstrate by a preponderance of the evidence that as of May 9, 1986 Witco intended to enter into the quick lube business as a competitor of Lube. Second, even if the evidence was sufficient to place the drafting of the Avis-Witco partnership agreements as early as January 1986, and even assuming the covenant of good faith and fair dealing implicit in any contractual arrangement under New Jersey law, Bak-A-Lum Corp. v. Alcoa Building Products, Inc., 69 N.J. 123 (1976), nothing in the Witco-Lube contract would prevent Witco from financing real estate acquisitions.

 (iii) The Intention to Honor the Agreement at the Time at Which it Was Entered.

 The jury's finding that Witco had no intention of honoring its agreement with Lube at the time it was made (JQ 37) is not supported by the evidence.

 Plaintiff's theory that Witco did not intend to honor the agreement at the time that it was made is premised upon piecing together isolated incidents that occurred after the May 9, 1986 meeting in Bradford, Pennsylvania. But in order to make out an action for fraud, the alleged misrepresentation cannot simply be based upon a promise to perform that is subsequently unfulfilled. Rather the moving party must prove, by a preponderance of the evidence, that at the time the promise to perform was made, the promisor had no intention of fulfilling the promise. See Anderson v. Modica, 4 N.J. 383, 391-92 (1950); Barry v. New Jersey State Highway Auth., 245 N.J. Super. 302, 310 (Ch. Div. 1990). For "mere proof of nonperformance does not prove a lack of intent to perform." Stochastic v. DiDomenico, 236 N.J. Super. 388, 396 (App. Div. 1989), certif. denied, 121 N.J. 607 (1990).

 No evidence supports the claim that Witco had such a fraudulent intention. In fact, the May 21, 1986 memorandum authored by Mr. Corwin (PX 202), expressing displeasure at Witco's agreement with Lube, supports the opposite conclusion -- that as of May 21, 1986 Witco did in fact intend to honor the agreement with Lube. If Witco did not intend to honor the agreement why would Corwin be expressing his displeasure about the potential ramifications of the deal? Thus Witco's motion for judgment as a matter of law on this portion of the claim for fraud and misrepresentation is granted.

 (iv) The Representation as to the Source of Oil.

 Although the jury found that plaintiff suffered no damages as a result of Witco's misrepresentation as to the source of oil, there is sufficient evidence from which a jury could legitimately infer that Witco did in fact misrepresent the source of its oil. In fact, there is a wealth of information from which such an inference may be drawn.

 First, plaintiff introduced the "Special Difference" video. PX868. Mr. Venuto, the President and primary stockholder of Lube, testified that in April of 1986 he met with Kendall's Richard Glady at Lightning Lube's headquarters in Brooklawn, New Jersey (Tr. 2627, 12-13). Mr. Venuto testified that he and Mr. Glady engaged in a conversation about the "Special Difference" video (Tr. 2627, 10-25). He testified that Mr. Glady was aware of the fact that he [Venuto] was "going with either Valvoline or Kendall" (Tr. 2628,6) and that Glady was aware that plaintiff "could have gotten Valvoline Oil for $ 2.50 a gallon." (Tr. 2628, 10).

 Venuto continued to testify that at that time, Glady told him that Pennsylvania "had the best crude oil in the world . . . [and] that he would give me [a tape] that I could use in my training classes with [my] franchisees so that they would all understand the quality of this oil." (Tr. 2629, 1-4). He testified that "he [Glady] told me it [the oil] came from Pennsylvania." Id. Venuto also testified that upon watching the "Special Difference Video" he concluded that the oil came form "the St. Mary's Vein." (Tr. 2629,25).

 There is evidence that the "Special Difference" video does not reveal the fact that the Kendall petroleum group purchased oil from various other companies, and from various other states. (Tr. 1998-2006) (testimony of Golubock regarding the various sources of oil) (see also, PX 950).

 Ultimately plaintiff testified that based upon the representations made by Mr. Glady, particularly regarding the source and quality of the oil, he decided to go with Kendall as opposed to Valvoline. Moreover, he testified that based upon these representations he opted to pay a higher price for the oil (Tr. 2632, 23-25; 2633, 19-25), which was passed through to the franchisees.

 Plaintiff also testified that the success of the franchisees was linked to the "right price of oil." (Tr. 2670, 23). He testified that he was not out to make a profit on the oil (Tr. 2671, 4-6) and that he did not provide his franchisees with anything but "operational support and training, and I guarantee leases, and I feel it's no more than right to be able to buy the best that I could buy for these people. And I told them that I would personally guarantee that also." (Tr. 2670, 24-25, 2671).

 Based upon the foregoing, a reasonable jury could legitimately infer that Ralph Venuto did not get what he "bargained for" -- Mr. Venuto entered into a contract with Kendall based upon the representations of Mr. Glady, and he opted to pay a higher price for the oil because he thought he was getting the best "oil in the world." Mr. Venuto was then given a copy of the "Special Difference" video so that he could show his franchisees what they were getting and what he was "guaranteeing." (Tr. 2670, 24-25, 2671).

 (v) The Alleged Cover-Up.

 Finally, plaintiff urges that the existence of an intentional plot to destroy Lube may be inferred from Witco's attempts to cover up its wrongdoing (Plaintiff's Brief in Opposition at 18). And in support of this argument plaintiff cites various instances of contradicted testimony (see examples of contradicted testimony set forth in Plaintiff's Brief in Opposition at 18-19).

 But the evidence simply does not support the conclusion that plaintiff urged upon the jury. No fabricated evidence was introduced. And the jury's disbelief of Witco's witnesses cannot substitute for positive proof of cover-up so as to prove the existence of an intentional act. See Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 894 (3d Cir.), cert. denied, 454 U.S. 893 (1981).

 (vi) Conclusion on the Claim for Fraud and Misrepresentation.

 Based upon the foregoing analysis, I conclude that the evidence is insufficient to sustain a verdict on plaintiff's claims that Witco failed to disclose, as of May 9, 1986, its intent to enter into the fast lube market as a competitor of Lube, and that as of May 9, 1986, Witco did not intend to honor the agreement it had entered into with Lube. Thus, defendant's request for judgment as a matter of law on these claims is granted. With respect to the remaining claim, the misrepresentation as to the source of oil, there is sufficient evidence to sustain the jury's ...


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